Best of BFM: Summary of 11 Newsletters to Help You Live the Life You Want

© 2015 Bourbon Financial Management, LLC ~ All Rights Reserved ~ Info@bourbonfm.com ~ (+1) 312 909 6539 1
Founder’s Words
Best of BFM
Newsletters II
I would like to wish everyone lots of happiness and good health for
the New Year!
Since many of you liked the first edition of the Best of BFM
Newsletters in January 2012 (www.tinyurl.com/BFM-BestOf-I), we
decided to create another one.
Many people are optimistic about 2015 (U.S. Markets up more than
200% since March 2009; up 11 of the last 12 calendar years…).
While optimism is certainly in the air, it’s also more important than
ever to diversify your investments.
That’s where our Best of BFM Newsletters II comes in. Over the
past three years we’ve carefully assembled practical tips you can use
to help you make better, more informed financial decisions.
At BFM, we want to sincerely thank all of our clients in the U.S.,
Europe, and Asia. Thank you for your loyal support and business
throughout the past five years. We truly enjoy working with every
single one of you. Thank you for letting us be a small part of your
life.
Patrick Bourbon, CFA
- Manages $2 Billion
- 20 Years Investment Experience
- 10 Years at UBS
- Masters in Finance
- Masters in Engineering
January 2015

© 2015 Bourbon Financial Management, LLC ~ All Rights Reserved ~ info@bourbonfm.com ~ (+1) 312 909 6539 2
January 2012
Table of Contents
Market Update....................................................................................................................................2
6 Fun Videos........................................................................................................................................2
Your Personal Guide to Peace of Mind....................................................................................2
Let’s be Positive!................................................................................................................................2
Charts of the Markets.......................................................................................................................2
Is Inflation Stealing your Future?...............................................................................................2
Emerging Markets ............................................................................................................................2
U.S. Tax System.................................................................................................................................2
We are Still Positive on Real Estate...........................................................................................2
Real Estate Prices..............................................................................................................................2
Let’s Go Global!..................................................................................................................................2
Let’s Diversify our Investments...................................................................................................2
“Our greatest glory is not in never failing, but in rising every time we fall. ”
Confucius

Introduction
I agree with Claude Rosenberg that investing money has never been a more demanding or sophisticated challenge.
Wildly fluctuating markets, damaging conflicts of interest, compensation linked to commissions and account
activity, lack of fiduciary duty, and a huge number of new investment products have dramatically changed the
character of the investing game, and made the aid of a financial planner a necessity. At the same time, governments
have failed to make sure advisers behave responsibly. Many possess little or no investment sophistication or
credentials. The sad fact is that many times you can’t even believe the information you’ve received. You are left in
the uncomfortable position of taking a salesperson's word to evaluate his or her firm's past record. Blind use of
performance numbers can lead to erroneous conclusions and poor decisions. With higher taxes, higher costs of
healthcare and education, higher market volatility, and higher employment risks, the demand for capital growth has
led to greater need for reliable, independent and unbiased investment advice.
BFM, as a fiduciary which always acts in your best interest, offers you peace of mind and investment strategies. We
are your personal CFO and help you properly analyze some of the promotional tactics used-and abused-by
investment managers so that you are less likely of being misled. We have no claims that we will enable you to make
money easily, but we will give you numerous practical, profit-oriented tips, and a wealth of helpful guidelines to
help you reach your personalized goals as well as a comfortable retirement.
Managing the accounts for a total of more than $2 billion qualifies me to guide you through this investment jungle.
Our goal is to show you how to avoid some common pitfalls that threaten you, and to provide you with the
practical steps you can take to improve your own investment results. A mutual fund that is superior for someone
else may not be the fund that is superior for you!
The knowledge we give you about investing cycles and styles, about fighting herd instincts, about the emotional
side of investing, about developing sensitivities and certain protections against people who sell investment
"products" should prove valuable in all types of decisions. One important way to mitigate surprise is to understand
before investing how you are likely to react to the very human but inhibiting reactions of fear, envy, greed, anger,
worry, and remorse. After all, one obstacle to clients' success is often the client himself!
To celebrate the New Year, we offer you a summary of some of our past newsletters over the past three years.
You will find markets update, fun videos, how to reduce taxes, and our research on real estate, inflation, and
international/emerging markets stocks.
As always, we thank you for your support and welcome your comments.
Patrick Bourbon, CFA

S&P 500 Historical Bull Markets
1928 to Present
Source: Strategas (Oct. 2014)
U.S. vs ACWI (World Index)
Source: Bourbon Financial Management; www.msci.com;
Note: MSCI ACWI captures large and middle capitalization representation across 23 Developed Markets and 23 Emerging Markets countries; MSCI USA Index is
designed to measure the performance of the large and middle capitalization segments of the U.S. market
0
100
200
300
400
500
600
700
1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014
MSCI USA Standard (Large+Mid Cap)
MSCI ACWI Standard (Large+Mid
Cap)
Market Update

 See examples of "cognitive illusions,"
and learn why humans make
predictably irrational decisions.
 Did you know that your vision can
literally “trick” you whenever it can?
That human attention is limited and
that we can’t analyze all the
information we receive?
 The keys to better performance are
autonomy, mastery, and purpose
 Discover the difference between
brokers and fiduciaries
 BFM is a fiduciary (like a dietitian)
 If you want to learn more about
behavioral finance and the role of
Psychology, here is a popular video
(viewed more than 100,000 times!) of a
class of Robert Shiller (Nobel Prize in
Economics 2013).
6 Fun Videos
We’ve carefully assembled practical tips and videos you can use to help you
make better and more informed life decisions.
Video: Selective Attention Test
Video: The surprising truth about what
motivates us
Refer to “We are all Predictability
Irrational - Dan Ariely” on YouTube
link:
We are All Predictably Irrational
See more at:
Newsletter, January 2014
YouTube link:
Behavioral Finance: The Role of
Psychology
Video: Brokers vs. Fiduciaries
Video: Why is a Fiduciary Standard
Important?

Choosing the right financial planner is an
important decision. The most important
factors in selecting a good financial planner
should be expertise, experience, and
integrity.
We are thrilled about the opportunity to
assist you with your financial planning needs
and to become your personal CFO.
BFM helps you diversify your
wealth into selected mutual funds and ETFs
after developing an effective asset
allocation based on your risk profile. BFM
also monitors your portfolio, your needs, the
financial markets and mutual funds activity
throughout the year. BFM makes
recommendations to rebalance portfolios
to maximize opportunities and reduce
risk.
The BFM Process
BFM holistically analyzes your entire
financial life to create peace of mind. We
help you identify your financial goals by
understanding and analyzing your lifestyle.
Learn more about why you need a financial
advisor, what are our responsibilities to you,
and how BFM helps you.
Your Personal Guide to
Peace of Mind
See the entire Newsletter at:
Newsletter, January 2014
Find out more details on:
Why is BFM UNIQUE?
Our fee-only,
transparent RETAINER
pricing model,
our fiduciary duties,
the BFM process,
and the founder’s credentials.
We encourage you to read an article
about Distinction between brokers
and advisors.
You may also be interested in our
Compensation Model and
Our Frequently Asked Questions.

Thanks for your wisdom and for creating the first index mutual fund available to the general
public! Jack Bogle is the founder and retired CEO of The Vanguard Group and one of the
greatest investors. I agree with Jack's approach to investing defined by simplicity and
common sense.
« Thinking Fast and Slow » from Dr. Daniel Kahneman is one of the best books I have ever
read on cognitive psychology, decision-making, and behavioral economics. Dr. Kahneman
has never taken a single economics course but he received the Nobel Memorial Prize in
Economics in 2002!

Let’s be Positive!
We started to be bullish on stocks in January 2009. The stock market had a great rally
between March 2009 and April 2010 (up 80 + %). Like Buffet, Ballmer and Immelt, we
are positive!
"There soon will be more technological advancement and invention than there was during the
Internet era, and that will help drive business growth."
“I am very enthusiastic what the future holds for our industry and what our industry will mean for
growth in other industries.”
“We will see new technologies that move beyond the Internet to tie together computers, phones,
televisions, and data centers to create amazing new products. And the pace of innovation will
increase as technology makes workers more productive.”
-Steve Ballmer, Microsoft
"I’m a huge bull on this country... we won't have a double-dip recession. I see our businesses coming
back almost across the board… It's night and day from a year ago."
“I’ve seen sentiment turn sour in the last three months or so, generally in the media. I don't see that
in our businesses. I see we're employing more people than a month ago, two months ago.”
“The things that worked for the country through a century of two world wars, a depression and
more--all while increasing the standard of living--will work again.”
-Warren Buffett
"Angry political rhetoric is not helpful, and headlines are too focused on finding negative
indicators."
“Business at GE is improving. Signs across the world show growth improving, as evidenced by a
rise in GE's orders.”
“GE is now finding it profitable to build manufacturing and service centers in the United States
rather than overseas, because it is more competitive to do so.”
-Jeff Immelt, GE
See more at Newsletter, Oct 2012
Let's be positive!

Charts of the Markets
Stocks went up for 10 years between 1990 and 2000 (+400%).
We believe in diversification. Even though 2013 was not a good year for bonds (-2%), we
recommend to own some bonds during a period in which interest rates are going up.
Bonds may be expensive but you should be able to gain 2% to 4% per year on average.
See more
Charts at:
Newsletter,
June 2014

Is Inflation Stealing your Future?
As you get closer to retirement, you face
an increasing risk of negative real returns, also
called inflation-adjusted returns. This erodes
your purchasing power and has a negative
impact on your wealth.
Inflation is higher for college tuition, medical
care, food, and energy.
The true inflation may be higher than the
official reported inflation.
While we have no inflation concerns in the
short term, we believe that inflation will come
back in the mid to long term.
Inflation is currently below target in most
OECD countries.
Incorporating inflation protection has a
small cost, but in the event of an inflationary
shock, it should provide valuable protection
by reducing the large loss in purchasing
power that a traditional stock/bond mix is
likely to suffer.
Certain types of investments could protect
you against inflation.
However, their effectiveness, reliability, and
costs vary.
One way to prepare yourself against
inflation is to diversify your portfolio
beyond traditional stocks and bonds
and include real assets (commodities, real
estate, global REITS), inflation-linked
bonds (TIPS), and stocks including
Natural Resources.
Learn more about:
the Consumer Price Index, Impact
of inflation,
how to protect against inflation by
asset allocation, with
the Oct. 2014 newsletter:
Is Inflation Stealing your Future?
A good complementary reading is an article by Gary Halbert:
Is the Government lying to us about inflation? Yes!

As a global investor, BFM acknowledges
that emerging markets are already too
important to ignore and they are a good
source of diversification for portfolios.
Global diversification has been touted as a
superior strategy for equity investors
because investing in stocks in many markets
around the world reduces the concentrated
risks of investing in one market alone.
We believe the fundamental long-term
investment case for EM is good.
There are many reasons to be optimistic
about EM. Also, Emerging markets are
actually creditors to the rest of the world.
Emerging Markets (EM) have:
A growing middle class and domestic
consumer:
EM are growing faster and contribute the
most to the world growth; EM have become
a bigger portion of the world economy and
stock market capitalization
A young and growing population:
EM population is growing fast, and the
working-age population is larger.
Increasing purchasing power:
EM consumer market is growing fast; EM’s
new consumers with low debt are entering
the global market.
Higher returns and not expensive:
EM stocks' returns outperformed advanced
economies; EM stocks do not seem
expensive relative to other countries' stocks;
Low debt: The debt burden of EM is lower.
Emerging Markets
-
Will investing in Emerging Markets (EM) provide a
comfortable retirement and more financial security?
Let’s see the Sept 2014 Newsletter:
Emerging Markets
For more information about
Why portfolios with a portion invested
in EM may be good strategy to reach
long-term goals

 Our goal is to help our clients
understand how additional tax increases
could impact their lifelong investments
and portfolios. We would like to
highlight one of the many tax reduction
strategies available. Additionally the
newsletter provides insights into various
tax related topics by studying historical
data and trends.
 To combat the negative fiscal balance
and reduce the debt burden, the U.S.
government may continue to increase
its revenue stream by raising taxes.
Other states may follow the example set
by California; it has just raised taxes by
30%, retroactively.
 With the continuous down-trend in
income tax rates from a high of 94% in
1944, taxes collected by the U.S.
government as a percent of personal
income are currently at its lowest in
over 50 years.
 Returns for stocks have been positive
for 9 out of the last 10 years. In the last
10 years, U.S. Large Cap stocks were up
7% per year on average, U.S. Mid Cap
stocks up 10%, World stocks up 8%,
and Emerging Markets stocks up 17%.
 2012 was another great year for markets
around the world with U.S. and World
stocks up 13%, Japan +23%, India
+26%, Greece, Germany, Philippines
and Thailand all around 30%, and
returns in Turkey crossing 50%!
 Furthermore, in 2012, the S&P 500 had
a gain of 16.0% (total return). If you
missed the 3 best percentage gain days
last year, the 16.0% gain falls to an 8.4%
gain. Finally, the Russell 2000 closed at
an all-time high in January.
Are you curious to know how the recent tax changes
will affect you?
U.S. Has Too Much Debt and a Negative Fiscal
Balance
Marginal Income Tax Rate from 1913 to 2012
The Dividend Tax Rate Has Converged Down to
the Capital Gains Tax Rate over Time
You will find some information about:
 Tax Loss Harvesting
 Long-Term Capital Gains Tax Rates
Have Been Going Down Since 1978
 Taxes Collected as a % of Personal
Income are the Lowest Since 1950
U.S. Tax System
– How to reduce taxes?
If you want to learn more about
U.S. Tax System,
See more at the Newsletter Feb 2013:
How to Reduce Taxes?

We are still optimistic on the U.S.
housing market:
 Median home prices are up more than
10% after going down 27% between
2007 and 2012.
 The annual increase of the median
home price is the highest on record.
 Buying continues to be cheaper than
renting.
Source: Census Bureau, NAR, JP Morgan
 Home inventories continue to decline.
 Good demographics (household
formation) should drive new demand.
 Housing affordability is still high.
 Prices are still low compared to
household income.
Source: Lincoln Institute of Land Policy, BEA
 Time on the market dropped.
Source: Bloomberg
You will find more information:
 Home Builders are Optimistic
 Prices are Up in Most States
 Home Prices Continue to Increase and
yet, they are Still Well Below Market
Peaks
 S&P Case-Shiller Home Price Indices
 Positive Population Growth Expected
 From 1890 to 2000, Home Prices
Adjusted for Inflation were Almost Flat
We are Still Positive on Real Estate
Learn more about why we are still positive on real estate,
See at Newsletter Oct 2013

 Median home price is down 27% and is
low compared to household income or
new home price.
 Housing affordability is high with
median mortgage payment low
compared to household income.
 Renting seems expensive compared to
buying.
 Home building to home buying ratio is
low even with a positive population
growth.
 Home inventories are lower.
U.S. Housing Follows a More or Less Regular
Cycle
Real Estate Prices
Are we at the Bottom of Real Estate Prices?
Discover a Bullish View!
The real estate crisis has been
one of the trigger elements of
the 2008 financial crisis. Prices
have already fallen by 50% in
some U.S. Cities.
A bullish view of the
housing market:
Housing prices went down
and housing demand has been
very limited due to the
combination of:
See entire Newsletter at
Newsletter, March 2012

U.S. GDP is only 19% of the Global GDP
MSCI EAFE P/E Ratio is Low
Implying Low Valuation
Let’s Go Global!
• 2012 - 2013 should provide
investors with good opportunities
to buy cheap non - U.S. stocks.
• Diversification is important. It is
not the time to sell international
/emerging markets stocks.
• The MSCI EAFE index (index
representing international stocks)
P/E ratio decreased 50% from
2000 to 2012 (after doubling from
1991 to 1999).
• Less than 20% of the World GDP
(Gross Domestic Product) is in
the U.S.
• In the next 10 years, international
/emerging markets’ stocks should
continue to outperform.
The European crisis created lots of
volatility, uncertainty, fear... but also
opportunities. Great companies were
founded during or shortly after a
recession or a market decline.
Government Debt to GDP is much
lower in emerging / developing
economies. U.S. Stocks have more
than doubled since March 2009. In the
meantime, middle-class spending
continues to grow and is expected to
increase six-fold in the Asia-Pacific
Region by 2030. Adding international
stocks to a U.S. stock portfolio will
decrease the portfolio volatility.
See entire Newsletter at
Newsletter, July 2012

Economic History of Major Powers
Is the United States in
Decline?
Let’s Diversify our
Investments
The purpose of this newsletter is to
try to remove some of the home
country bias that many of us living
in the United States may have. Our
goal is to help our clients understand
why a portion of their portfolios is
invested in international financial
markets (20% to 50% of the equities
may be allocated in Europe, Asia,
and Emerging Markets). Not only
do Emerging Markets have much
lower debt levels and a younger
population, international stocks also
seem to be currently cheaper than
U.S. stocks.
We would like to share some data
which may create some long-term
concerns for the U.S. if the situation
does not improve in the future.
The U.S. may be on a declining
performance trajectory in the areas
of Health, Education, and Safety.
Let’s achieve new greatness for
America, but until then, let’s
diversify our investments globally!
GDP, 1950-2050
U.S. Has Too Much Debt and a Negative Fiscal Balance
U.S. Has a Lower Life Expectancy
U.S. Has a Lower Return on Investment on Education
More Information about:
International and Emerging Markets
Stocks, U.S. Median Income and Net
Worth, Health, Education, and Safety.
Please see the entire Newsletter
Newsletter, Oct 2012

About Bourbon Financial Management, LLC
Bourbon Financial Management was formed to provide you with effective and comprehensive
solutions for managing your global wealth. Our disciplined and rigorous approach comes from
our collective knowledge in serving large institutional clients over many years.
Our core investment belief is that asset allocation (equities, fixed income, cash, real estate…) is
the single most important determinant of success in any investment plan. The dominant amount
of risk and return comes not from your choice of individual investments but from your asset
class mix. Bourbon Financial Management focuses our resources on risk management and asset
allocation.
PLEASE SHARE OUR NEWSLETTER: Our newsletter readership is not limited to our
clients. Please tell those you feel may be interested that they can subscribe to their own free copy
of the newsletter at info@bourbonfm.com. Thank you.
BOURBON FINANCIAL MANAGEMENT
Excellence ~ Expertise ~ Ethics
616 W. Fulton St., Suite 411, Chicago, IL 60661
(+1) 312 - 909 - 6539 ~ www.bourbonfm.com
Member of the Financial Planning Association and Academic Affiliate of the National Association of
Personal Financial Advisors

Disclosures
• This material was prepared by BFM, Copyright by Bourbon Financial Management, LLC.
All rights reserved. BFM is a trademark of Bourbon Financial Management, LLC. No part of this
publication may be copied or distributed, transmitted, transcribed, stored in a retrieval system,
transferred in any form or any means-electronic, mechanical, magnetic, manual, or otherwise-or
disclose to third parties without the express written permission of Bourbon Financial
Management, LLC, 616 W. Fulton #411, Chicago IL 60661. The information contained in this
presentation is not written or intended as tax or legal advice, and it may not be relied on for the
purpose of avoiding any federal tax penalties. You are encouraged to seek advice from your own
tax or legal counsel. The content is derived from sources believed to be accurate. Neither the
information presented nor any opinion expressed constitutes a solicitation for the purchase or
sale of any security. BFM assumes no responsibility for statements made in this publication
including, but not limited to, typographical errors or omissions, or statements regarding legal, tax,
securities, and financial matters. Qualified legal, tax, securities, and financial advisors should
always be consulted before acting on any information concerning these fields.
• Investment return and principal value of an investment will fluctuate so that an investor’s
shares, when redeemed, may be worth more or less than their original cost. The views expressed
in this presentation are not intended to be a forecast of future events, a guarantee of future
results or investment advice. Forecasts and predictions are inherently limited and should not be
construed as a solicitation or recommendation or be used as the sole basis for any investment
decision. All investments are subject to risk including the loss of principal.
• The information provided here is for general informational purposes only and should not
be considered an individualized recommendation or personalized investment advice. The
investment strategies mentioned here may not be suitable for everyone. Each investor needs to
review an investment strategy for his or her own particular situation before making any
investment decision. We believe the information obtained from third-party sources to be reliable,
but neither Bourbon Financial Management, LLC nor its affiliates guarantee its accuracy,
timeliness, or completeness. The views, opinions and estimates herein are as of the date of the
material and are subject to change without notice at any time in reaction to shifting market
conditions. Past performance is no guarantee of future results and the opinions presented cannot
be viewed as an indicator of future performance. Examples provided are for illustrative purposes
only and not intended to be reflective of results you should expect to attain.

Best of BFM: Summary of 11 Newsletters to Help You Live the Life You Want

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Best of BFM: Summary of 11 Newsletters to Help You Live the Life You Want