Archive for the Michael Douville Category

Russia: An Emerging Market

Posted in Ezekiel 38-39, Michael Douville, Uncategorized with tags , , , , , , , , , , , , , , on September 17, 2018 by paulthepoke

Featuring: Michael Douville, Paul Lehr

Ezekiel 38:1-3 The word of the Lord came to me: “Son of man, set your face toward Gog, of the land of Magog, the chief prince of Meshech and Tubal, and prophesy against him and say, Thus says the Lord God: Behold, I am against you, O Gog, chief prince of Meshech and Tubal.

For evidence pointing to modern day Russia, see the link below.

https://godinanutshell.com/2017/08/04/ezekiel-38-who-is-magog/

Modern day, 21st century Russians refer to themselves as the ancient Scythians or Magogians. See the link below.

https://paulthepoke.com/2017/08/23/trend-update-putin-netanyahu-meet-in-sochi-russia-august-2017/

https://michaeldouville.com

Russia has an impressive military with Nuclear Weapons, but when it comes to Economic prowess, it is an Emerging Market! It has been only 20 years since Russia collapsed financially and it is still working through the economic disruption. Although blessed with huge Natural Resources, Russia is still very dependent on Foreign Capital to develop it’s mining,  gas and oil fields.  Foreign Capital is needed not only for developing the resources themselves, but the infrastructure to bring them to market.  Global Markets dictate much of Russia’s income as the price of basic materials fluctuate with the Business Cycle. As one of the World’s leading oil producers, Russia has benefited from the recent run up in Oil prices which are expressed in US Dollars. Basic Materials are also expressed in US Dollars, but are very sensitive to demand dynamics; much, much more sensitive. Dollar dependency is a two edged sword for although the demand for the energy component is less elastic, the price can fluctuate wildly.  The price of Natural Resources can plummet as the Global Slowdown intensifies; as with any Emerging Market repayment of Foreign Loans becomes more and more difficult.

The BRICs were the darling of the Investment Community. Now Brazil and India are struggling. China financed much of it’s Capital needs with internal financing through it’s Shadow Banking and while these loans are certainly at risk, they are less visible. Russia has done much better than many Emerging Market Nations, but Russia is still affected by a rising US Dollar and rising Global Interest Rates. The balance of Trade impacts the International repayments. A Global Slowdown is underway and many Emerging Markets are at risk of depleting Dollar Reserves and thus entering a Liquidity Crisis. Which leads to Turkey!

Commodity prices will fall crushing the Emerging Markets which will cause Turmoil throughout the World. Debts will not be paid and alliances will be stretched if not completely broken.

Turkey, along with Argentina and Brazil, is rapidly running out of Dollar Reserves. Turkey imports much more than it exports and as it’s currency declines, purchasing power falls dramatically.  Turkey needs Cash to not only finance Government offices, public utilities,  and to service domestic needs, but any recent Military adventures such as last year’s excursion into Iraq and just recently Syria. Everything needs to be financed. The Credit lines from Western Nations and the US come with restrictions which the Turkish Government seems to be unwilling to accept. Turkey is now in overtures to Russia and China to provide US Dollars to solve it’s Liquidity demands. Currently, Turkey is involved in operations with Russia in Syria; an operation that benefits both Geo-politically, but is adverse to Turkish Allies objectives.  This becomes a very interesting puzzle!

Russia and China can forestall Turkey’s liquidity crisis for awhile; a few months, maybe a year. However, both are still Emerging Markets themselves and a prolonged Global downturn will inevitably affect any extension of Credit.

A Global Downturn has been evident for months. Demand for natural Resources and eventually Energy will fall, slowly at first then much more rapidly. Commodity prices will fall crushing the Emerging Markets which will cause Turmoil throughout the World. Debts will not be paid and alliances will be stretched if not completely broken. There is still time to prepare; payoff debt, build reserves, store things like food, water, and medicine.  As quickly as possible, build a personal cash reserve held outside of financial institutions and as important, build a Financial Lifeboat of Cash Flowing assets.

https://michaeldouville.com

Remember, the reason for Russia’s future invasion of Israel is economic. Russia will seek to take Israel’s resources.

Ezekiel 38:13 Sheba and Dedan and the merchants of Tarshish and all its leaders will say to you, ‘Have you come to seize spoil? Have you assembled your hosts to carry off plunder, to carry away silver and gold, to take away livestock and goods, to seize great spoil?’

 

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Will Turkey Align with Russia?

Posted in Ezekiel 38-39, Michael Douville, Prophecy, Trend Update with tags , , , , , , , , , , , , , , , , , on September 10, 2018 by paulthepoke

Featuring: Michael Douville, Paul Lehr

Ezekiel 38:1-3 The word of the Lord came to me: “Son of man, set your face toward Gog, of the land of Magog, the chief prince of Meshech and Tubal, and prophesy against him and say, Thus says the Lord God: Behold, I am against you, O Gog, chief prince of Meshech and Tubal.

Ezekiel 38:6 Gomer and all his hordes; Beth-Togarmah from the uttermost parts of the north with all his hordes—many peoples are with you.

The brothers of Magog (Meshech, Gomer, and Tubal) appear to point to modern day Turkey.

For more evidence pointing to modern day Turkey, see the link below.

https://godinanutshell.com/2017/08/08/ezekiel-38-who-are-meshech-tubal-gomer-beth-togarmah/

For evidence pointing to modern day Russia, see the link below.

https://godinanutshell.com/2017/08/04/ezekiel-38-who-is-magog/

Modern day, 21st century Russians refer to themselves as the ancient Scythians or Magogians. See the link below.

https://paulthepoke.com/2017/08/23/trend-update-putin-netanyahu-meet-in-sochi-russia-august-2017/

https://michaeldouville.com

No Presidential Decree from Turkey’s de facto ruler will stop the Lira’s decline against the US Dollar.

Nations are no different than Families; each has a credit line. Using credit to enjoy today is always at the expense of tomorrow; maybe at the expense of a lot of tomorrows.

The US Dollar is cycling higher as uncertainty in Financial Markets starts to spread; just Capital looking for Safety! The easy credit and absurdly low interest rates of the last decade have encouraged gorging on Debt across the Villages, Hamlets, Towns, Cities, and Nations of the World. The Joy of Financed Prosperity is ending and the Day of Judgment is coming as the servicing of the Debt now is impeding Prosperity and the Creditors are looking for re-payment. Emerging Markets rely heavily on Debt to finance schools, airports, roads, water sanitation and all of the infrastructure already in place in modern countries. Further, Emerging Markets rely heavily on Foreign Investments for Capital to build retail, restaurants and housing. When local currencies start to decline against the benchmarks such as the US Dollar, these pools of Capital start to leave causing a liquidity problem for local governments and eventually a loss in confidence which can quickly and adversely affect exchange rates. Capital in Argentina, Brazil, India, Greece, Macedonia, Poland and of course Turkey is fleeing to the Safety of the US Dollar and their currency’s purchasing power is declining. Once started, it is very difficult to stop: even Presidential decrees do not work.

                                  JP Morgan Emerging Market Currency Index

Nations are no different than Families; each has a credit line. Using credit to enjoy today is always at the expense of tomorrow; maybe at the expense of a lot of tomorrows. Eventually the credit line is completely spent; maybe an extension or two will postpone the inevitable. However, just as Families, nations can only service so much Debt and then something has to change. Families can declare Bankruptcy or allow a Foreclosure. Nations DEFAULT!!

Before a Nation Defaults, plans must be made for the continuation of the Government and essential services. This is done by securing funding from other sources; sources that previously would not even be considered; desperation changes things! Turkey is running out of Credit! Turkey will not accept constraints imposed by the IMF or creditor Banks and has received an emergency $15 Billion from Qatar.  The Debt must be addressed while the Turkish economy and currency is quickly declining creating a very difficult situation.  Overtures to Russia and China for funding will be a game changer. If the future funding requirements can be obtained, Turkey will be able to default on it’s Debt; geopolitics are also economic realities. Capital is fleeing now, time is short.

Prepare for Turmoil, but also prepare for opportunity! Defaults in Emerging Markets would impact Stocks and Bonds across the Globe.  Reduce or eliminate debt, create personal reserves, stockpile needed medicine, store extra food and water, and keep personal cash handy. The Financial Asset Cycle is ending and Real Assets will rise. Natural Resources, Agriculture, Mining and Minerals, Lumber, Copper, Oil, Aluminum, and most if not all of the basic materials should rise as currencies decline. Things should be accumulate; very conservative Real Estate such as rental houses should do well. It is time to prepare, time to change,  time to prepare for the next opportunity.

 

Currently, American economic sanctions and a strong US dollar are crippling the currencies of Russia, Turkey, and Iran. All of these countries are feeling an economic, monetary squeeze. Ultimately, the reason for the invasion of Israel from the north appears to be economic. Israel is a prosperous country.

Ezekiel 38:13 Sheba and Dedan and the merchants of Tarshish and all its leaders will say to you, ‘Have you come to seize spoil? Have you assembled your hosts to carry off plunder, to carry away silver and gold, to take away livestock and goods, to seize great spoil?’

Is now this time? It is looking like it more and more with each passing day. But, that remains to be seen. Will Turkey Align with Russia? God’s prophet Ezekiel says emphatically “Yes”!

 

Turkish Lira Still Falling: Trouble Ahead!

Posted in Ezekiel 38-39, Michael Douville, Prophecy, Trend Update with tags , , , , , , , , , , , on September 3, 2018 by paulthepoke

Featuring: Michael Douville, Paul Lehr

Ezekiel 38:1-3 The word of the Lord came to me: “Son of man, set your face toward Gog, of the land of Magog, the chief prince of Meshech and Tubal, and prophesy against him and say, Thus says the Lord God: Behold, I am against you, O Gog, chief prince of Meshech and Tubal.

Ezekiel 38:6 Gomer and all his hordes; Beth-Togarmah from the uttermost parts of the north with all his hordes—many peoples are with you.

The brothers of Magog (Meshech, Gomer, and Tubal) appear to point to modern day Turkey.

For more evidence pointing to modern day Turkey, see the link below.

https://godinanutshell.com/2017/08/08/ezekiel-38-who-are-meshech-tubal-gomer-beth-togarmah/

TurkeyTrouble

https://michaeldouville.com

Michael Douville is a syndicated writer for the Wall St. Greek.

Capital is the Life Blood of Business. When Credit is readily available, expansion of existing facilities to increase production becomes possible. With new production, employment expands, a ripple effect and a virtuous spiral starts spreading throughout the Economy. Optimism and Hope prevails as the outlook for the future brightens! Hope and Optimism are being crushed in Turkey!

Monday August 27, 2018, Turkey’s 10 year Bond closed over 21%.  These rates spell doom for the Turkey.

Commercial debt in Turkey is estimated as $330 Billion US Dollars; Us Dollars have become a very precious commodity. The Turkish Lira has been declining for several years, but the US Dollar index DXY seems to have stopped declining and bottomed at 88.5 in February of this year and has been flirting with 97 just 6 months later; a technical target of 103.8 has been suggested by several analysts. The strategy of borrowing in a declining currency and gambling that the decline will hold until time for  repayment has backfired on all of the Emerging Market debtors; Turkey has also lost that bet!  Not only has the Turkish Currency declined, economic conditions have deteriorated swiftly causing a lack of confidence which then results in a Credit Risk Premium for new debt.

The unfortunate reality is Corporate and Sovereign Debt is never retired, just Refinanced; this negative loop has driven rates higher, unsustainably higher.  Monday August 27, 2018, Turkey’s 10 year Bond closed over 21%.  These rates spell doom for the Turkey.

Business will certainly suffer as Credit becomes illusive.  Employment will suffer and Optimism will die. Compounding the loss of credit is the Currency Inflation that will transform any imported Goods or Services such as Oil, electrical and machinery spare parts, medicine, iron and steel plastics, fertilizer, and many industrial components into extremely expensive items; the Turkish Lira has lost 40% this year alone. This currency inflation will affect the populace as the Currency Inflation devastates their buying power. If shoes and jeans, bread and butter, antibiotics and insulin become HYPER EXPENSIVE, expect civil unrest!

 

Turkey has the real possibility of defaulting on it’s debt! Planned, intentional? Probably not! It really does not matter.  Turkey will look for new allies to extend crucial new credit such as Russia and China. New Business allies often become new military allies; overtures to other previously unthinkable Middle East nations such as Iran become thinkable.  Turmoil may be on the Horizon.

Learn the lessons from Turkey! Debt eventually overwhelms everyone and everything! Inflation, even currency inflation, raises the price of real things. Therefore, invest in REAL things, get out of personal debt,  use investment debt judiciously and preferably use a fixed rate. Review your reserves and stockpile things that might become difficult to buy if Turmoil comes to our shores! Maintain and extend cash levels to weather an extended storm!

https://paulthepoke.com/2018/08/13/turkey-sovereign-systemic-trouble/

https://michaeldouville.com

 

Standing at the CRAPS Table… Michael Douville

Posted in Michael Douville with tags , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , on August 27, 2018 by paulthepoke

 

1 Timothy 6:10-11 For the love of money is a root of all kinds of evils. It is through this craving that some have wandered away from the faith and pierced themselves with many pangs. But as for you, O man of God, flee these things. Pursue righteousness, godliness, faith, love, steadfastness, gentleness.

Notice what the verse does not say. It does not say, “Money is the root of all evil.”

It is the love of money that is the problem. Coveting money is the problem. It is the longing and desire and focus. The mental attitude is the issue. Making money in the stock market is not evil. There is nothing wrong with investing. But don’t be greedy…

 

https://michaeldouville.com

Timing is EVERYTHING!!! Investing in Stocks in early 2009 was the perfect time to enter the market. The S&P has enjoyed an unbroken string of positive years for the last 9 years; the second longest in History.  An almost no risk Investment resulting in a 280% increase in the Index including dividend reinvestment; Wow!  If one had the prescience to purchase Facebook, Google, Amazon, Apple, and Netflix in the same period, multiples of the S&P have been gained; 500-900%. WOW, WOW!!

Using a little longer time line, historically, the Casino was not built on winners!

Recently cracks in the Markets are starting to show. First Netflix missed the projected number of new subscribers and also lower revenue, and on July 17, 2018 the stock dropped 14% in after hours trading immediately after the announcement. This was followed one week later July 26th by Facebook’s lower than projected Quarterly and again after hours experienced the greatest loss in history of over $119 Billion Dollars in 24 hours. Just days later, another tech giant, Twitter, lost 21% in value on July 28th.  Wealthy one day; not so wealthy the next. Timing is Everything!

A player at the Casino has had an extraordinary run of luck; an extravagant bet of $100 has become $12,800 in 8 wins at the Dice Pass line. The player is allowing the winnings to accumulate in a double or nothing strategy. The” House” is encouraging another bet. After all historically, the player has won each time. What should the player do?  Using a little longer time line, historically, the Casino was not built on winners!

Timing is Everything! Assess your goals, assess your needs; you do to need to be 100% invested. You do not need to be invested 100% of the time. Maybe the advice should be take some of the winnings off the table!!! Maybe you have enough and it is time to reduce RISK!

https://michaeldouville.com

Old, Sick & Very Broke pt 3 of 3… Michael Douville

Posted in Michael Douville with tags , , , , , , , , , , , , , , , , , , , , , , , , , , , , on August 21, 2018 by paulthepoke

Deuteronomy 28:12 The LORD will open for you His good storehouse, the heavens, to give rain to your land in its season and to bless all the work of your hand; and you shall lend to many nations, but you shall not borrow.

Deuteronomy 23:20 You may charge a foreigner interest, but you may not charge your brother interest, that the LORD your God may bless you in all that you undertake in the land that you are entering to take possession of it.

https://michaeldouville.com

Continuing with the theme of rising interest rates, bad things happen to Stocks as well.

Rising interest rates compete with the dividend rate of stocks. Currently, the S&P pays a total of 1.68% for annual dividends, but accepting market risk. Currently in June of 2018, a 1 year Treasury held to maturity pays 2.34% with almost no risk. That rate has risen from 1.22% just exactly 1 year earlier.  Further, Corporations have been the largest buyer of their own company stock. Executives have realized that by borrowing money to buy company stock, they can reduce the outstanding shares and thereby raise the per share return just by maintaining the same revenue. The Executives bonus is tied to increasing share revenue which increases their bonus share offering. Everyone wins; well the executives win!

The Real Estate turmoil should be contained as a correction in an ongoing Bull Market. It could be severe! It could be scary!

However, as rates rise, it is more difficult and more expensive to borrow funds earmarked for Financial Engineering so less and less buybacks will occur at exactly the same time Central banks are reducing purchases. Share prices are directly related to profits; rising rates will deteriorate those profits. As an aside, $4 Trillion in Corporate Bonds are due to be refinanced in the next 3 years; all will be at much higher rates. Higher rates cause costs of Production, Research and Development, and all CAPEX to rise squeezing viability. Just this one HUGE change should cause the hair on the back of your neck to rise; for 10 years, rates were basically ZERO. Now they are NOT!

Retirees hold 70% of their assets in Stocks.  Prices can go down much faster than they go up. In fact, they can plummet!  This fact has been ignored for years until a 3000 point drop in 2 weeks in February 2018. UH-OH! Wake Up! Historic Margin debt may be one cause of these sharp air pocket declines. Leveraging an Equity position is oh so fun as the market expands to new levels.  A reverse of trend will intensify and magnify the losses. Margin calls will force sales which forces prices down which forces sales. A very bad spiral.

Boomers have watched this Movie before; get out of the way! Take Profits! Remove some portion of the portfolio to safety.

Higher rates will impact the Real Estate asset class as well. Fewer families will be able to afford a home of their own as the Affordability Index is directly correlated to payment levels. Fewer buyers qualifying places pressure on prices. Property in overheated markets will be at risk. Luxury homes will become less affordable.  Already our neighbors to the North are experiencing declining sales in Toronto and Alberta. New York City is starting to feel pressure in the luxury condo market as new units come onto the market already crowded with existing units. The Real Estate Cycle is long; 18.5 years.  The last Real Estate Bubble scorched the Earth when it failed, but that was only 9 years ago. Too early for completion of that cycle.

However, the timing would be perfect for a Real Estate correction which typically occurs 7.5 to 9.5 years from the bottom.  Just as a reminder, the bottom was January 2010, give or take a few months.  Simple math places the Real Estate Cycle in the middle of the Jeopardy Period; perfectly matching the expected Epic completion of both the Stock and Bond Markets.

The Real Estate turmoil should be contained as a correction in an ongoing Bull Market. It could be severe! It could be scary!  It will be a Generational buying opportunity for those with vision and courage; also surviving Capital!!! Remember the Affordability Index that should start to close families out of the buying market. They will become TENANTS!!! Long term TENANTS!! Fortunes will be made!!! Not only huge Capital Gains as the Real Estate Cycle moves out of the correction phase, but CASH FLOW! Increasing CASH FLOW.  More revenue each year, growing earnings. If a little leverage is used, the tenants PAY OFF the Mortgage! Remember the Bengen Rule with 4% fixed for life depleting in 30 years? Throw it out!!! Not only will the rental revenue grow and grow providing more and more cash each month, but the loan is being paid off.  A simple 20% down payment becomes a 100% after 30 years; multiplying by 5 times!!! Rentals are easy! Rentals are Profitable! Rentals are run by Property Managers, NOT you!!!

Consult with your Professional about an Exit Strategy for the Stock and Bond Markets. Take Profits and preserve your Wealth! Move your assets into a different Asset Class that has a much longer horizon for Wealth and Income forever!!!

https://michaeldouville.com

Old, Sick & Very Broke pt 2 of 3… Michael Douville

Posted in Michael Douville with tags , , , , , , , , , , , , , , , , , , , , , , , , , , , on August 6, 2018 by paulthepoke

Ecclesiastes 3:1 For everything there is a season, and a time for every matter under heaven:

Ecclesiastes 3:3b a time to break down, and a time to build up…

 

https://michaeldouville.com

This is a simple thought.  When you are in retirement or getting ready for it, you are “not in it for the long haul”! Getting older can sometimes feel like a chore, but it comes with the added benefit of perspective; asset markets have a cycle.  If you are in your 60’s, you have been through 4 or 5 Business Cycles and know they all end badly. This current Cycle will not be any different. Already, the current expansion is the second longest on record. It is also the weakest expansion ever! In this Cycle, the GDP has never exceeded 2.3% and that is with massive fiscal stimulation.  The Great Financial Crisis scared the authorities and Ben Bernanke embarked on a unprecedented program of Global monetary liquidation forcing the economy to postpone the cleansing of insolvent,  poorly managed, or ill timed investments. In June of 2018, Mr Bernanke now has been quoted as alluding to a Wile E. Coyote moment for the US Economy within the next 12 months as the Business Cycle hits an air pocket for FREE FALL!

Knowing what will happen is not the same as when it will happen!  There certainly is a Timing Component to consider. Leave the Stocks and Bond markets too early and the late stage gains are forfeited, too late and maybe all the gains are lost, or worse! Knowing that the Cycle does and will end gives an incredible advantage. One can watch for signs the Business Cycle is about to complete. Invariably, the Federal Reserve raises rates until a slowdown is well established. Not recognizing the Change in Trend the Fed generally hikes at least 2 or 3 times more until a downward spiral has started leading into the Last Stage of the Business Cycle which is ugly and can be very brutal. The Federal Reserve has been hiking rates for two years and now much more aggressively indicating a 25 basis raise every other Fed meeting.

Retirees typically allocate 20-40% of their portfolio to Bonds and Debt. The cash flow generated by fixed investment is predictable and consistent; Debt is a Stealthy Risk. Rising rates will devastate Bonds. Would not the prudent course of action be to reduce to much shorter duration and raise the quality?

This chart illustrates the drastic change in the pace of the rate increases. “Normalization” is still a long way away. 2.38% June 22, 2018, Credit card debt has already risen from 8% to well over 13% and the consumer has accumulated RECORD CREDIT CARD DEBT!

2 year Treasuries climbing FAST!

The Federal Reserve not only directly influences the short term rates in the US, but sets the tone for the rest of the World.  As rates rise in the US, other Central Banks are still suppressing rates notably the European Central Bank maintaining their policy of buying bonds. However, all central banks have stated they are in the process of tapering their Asset Purchases to Zero!!  The effect is rates are now free to rise and the ascension has started. Further,  this will come as no surprise,  the markets are anticipating increasing rates. The process has started!

As of June 22, 2018, Turkey’s 10 Year Bond was priced at 15.7%.  The Turkish Lire is also rapidly losing value; Turkey has defaulted 6 times in the last 100 years.  Argentina, Brazil, Venezuela, the Ukraine are just a few of the Sovereign Nations in trouble with their debt. Look for Defaults; once started a possible Cascade.

Turkey is in REAL trouble!  US rates are driving rates higher throughout the World.  Higher rates affect 40-60% of all Global Debt currently estimated at $217 Trillion. None of us think about the fact that Governments never pay the principal back or even reduce it, Government Debt is simply refinanced. Think about that!! What will tripling the debt service do to already stretched budgets? Social Services will need to be reduced. Not only those that receive the benefit, but also the providers will be curtailed causing a declining ripple effect throughout the World. When the Central Banks stop buying the debt of the Nations, Municipalities, Towns, Villages and Corporations, who will buy Debt priced a 0.1%, or 1%, or 2 %? Probably no one! Rates are heading up and heading up fast and much higher than anyone thought.

Italy has been in the news and not in a good way! Pay Attention!

As the Federal Reserve unwinds the Debt on it’s balance sheet, long term rates will rise as well.

The Federal Reserve has stated it’s intention to raise rates. Central Banks around the World have joined together to state they also will allow rates to rise.  All Debt including Treasury Notes, Bills, and Bonds lose value when rates rise. The longer the maturity, the greater the loss. Unless one believes this trend is going to reverse , holding debt guarantees a loss unless held to maturity. Bond Funds never mature; probably losses have already started. A rapid rise in rates may cause a rush to exit the asset class.  If Sovereign, Municipality, State, or Corporate bonds begin to default as rising rates and a slowing economy could initiate, there could be a Panic to sell Bonds.

Retirees typically allocate 20-40% of their portfolio to Bonds and Debt. The cash flow generated by fixed investment is predictable and consistent; Debt is a Stealthy Risk. Rising rates will devastate Bonds. Would not the prudent course of action be to reduce to much shorter duration and raise the quality? Maybe reduce the exposure to Debt? One does not need to be fully invested at all times.  Cash flow from other asset classes can easily replace fixed income revenue, potentially grow to double or triple the cash flow, and probably prove to be a much, much safer allocation.

The Bond Market has an incredibly long Cycle of 70 years: 35 years with rates trending up and 35 years with rates trending down.  It appears the Bond Cycle bottomed in July of 2016.  As such, the Risk is very evident. As Turmoil begins in the World, Capital will flow to supposedly safer Assets. US Treasuries should enjoy a short window of lower rates as demand for Treasuries depresses rates.This Window may be short-lived, any adjustable rates should be reviewed for refinance into fixed. Further, for disciplined Investors only; Helocs might be created and the funds saved for a Rainy Day.  When turmoil strikes, the Banks quit lending. Cash becomes KING!

Stocks are a little more complicated. The typical Stock Cycle is 7.5 to 9.5 years. This one is the second longest in recent history.

Stocks and Bonds peak and then roll over,  but it is a process not an event.  The US Stock market is usually the last to suffer.  Turmoil around the world “Pushes” Capital to perceived “Safer” Investments.  Martin Armstrong makes a very impressive case for yet higher prices for US Stocks particularly the Dow and S&P as foreign Capital leaves Europe, Asia, and Emerging Markets and looks for safety.  There may be a limit as eventually events overwhelm and the Stock Cycle completes. Since November 2016, the rise in the Stock market has been nothing short of “Explosive”.

Did the Dow peak in February? As of June 2018, the Dow is just about even for the year;  unless you invested in January!  Retail Brokerages opened record new Stock accounts in January of 2018 as the “Retail” crowd rushed in with maximum FOMO ( Fear Of Missing Out). Private and Institutional money that had entered the S&P and DOW in 2009, were very happy to sell to them!! Timing is very important so is the Asset Class! Wealth is gained by entering an asset class early in it’s cycle. Commodities are still bottoming; Rental Real Estate is approaching mid-point with many years until it completes.

https://michaeldouville.com

Old, Sick, and Very Broke pt 1 of 3… Michael Douville

Posted in Michael Douville with tags , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , on July 30, 2018 by paulthepoke

Proverbs 30:24-25 Four things on earth are small, but they are exceedingly wise: the ants are a people not strong, yet they provide their food in the summer…

Michael Douville is a syndicated columnist for the Wall Street Greek.

https://michaeldouville.com/

Most of my friends are broke! At 66 years old, retirement is certainly in the forefront of their thoughts. “How much longer can or should I work?” How many years will I still be viable and able to pursue my interests? What if my spouse gets sick; or I get sick and then we are no longer able to travel; available time taken up with other issues like Health. Time becomes extremely important; the accumulation of Wealth, not so much.

After 10 to 15 years, the Baby Boomers are back to work. The 75 years and OLDER,  represent the largest segment of workers entering the workforce; 63% will go back to work. Completely broke! A travesty!

It is this balance between having “Enough” and not that becomes startlingly clear as one ages and one approaches the end of a career or the end of one’s working life. Ideally, Investments have been made that have blossomed and grown to replace the W-2 income stream and Financial Freedom is attained. This is almost always a process achieved over a number of years; each year growing and adding income.  However, the sad truth is 51% of American Retirees retire Broke. No planning, no savings, no assets! Even worse, the vast majority of my generation, The Baby Boomers, retire the moment they are eligible for Social Security and do not receive their full benefits; taking less, but taking payments earlier.

Making a “Bad” situation worse, most soon-to-be-retired have absolutely no idea what their monthly expenses are and how much it takes to continue their lifestyle.  There are so many variables to factor in monthly housing costs such as Real Estate taxes that are exorbitantly higher in New Jersey, Illinois, New York, and California which drive up the cost to live enormously. Transportation costs in the suburbs or rural areas are much more than public transit in the urban areas. However, seldom are monthly costs less than $3000 per month and typically closer to $4000 per month; the Department of labor Statistics claims $3700 is the magic monthly cost. Unfortunately, the average “Baby Boomer” retiring in 2018 receives a Social Security check of around $1300 if unmarried and $2200 if your spouse is still alive and collecting as well. This is a very far cry from what is needed. Sadly, 41.9 million retired Americans depend exclusively on Social Security.

If a couple has managed to save $300,000, it places them in the 86th percentile of the entire US Population of 55 years and above! That amount of savings and assets gives a certain degree of comfort. Not enough, not even close enough to provide for the rest of your entire life! You will be BROKE in 10-15 years and looking at any menial job that comes your way just to keep the lights on!

There are formulas and guidelines for Monthly withdrawals. The Bengen Rule was developed by William Bengen as an attempt to account for 30 years of monthly withdrawals from the $300,000 Nest Egg. Although again, variables such as any earnings the Nest Egg may generate or worse any losses it sustains, will certainly affect the longevity of the funds. The general consensus is 4% of the funds per year. not including your home, can be safely withdrawn.  The goal is for the Nest Egg to last for 30 years after which the asset is depleted or very nearly so. The suppression of interest rates coupled with the lack of any Financial Correction of assets has changed the outlook to even lower withdrawls. The new conservative approach is to reduce the monthly Distribution from 4% to 3.3%, the Pfau Rule! The results are the same net effect; after 30 years, hopefully you are dead along with your Spouse as all of the Nest Egg is probably gone!

These withdrawal rates absolutely astound people and are met with disbelief. That $300,000 nest egg will generate $12,000 with Bengen and $9,900 with Pfau! Uh-Oh! Keep in mind, according to the Bureau of Labor Statistics, the average Baby Boomer needs $3700 a month. Social Security provides $2200 until a spouse passes then it reduces to the highest individual benefits of the married couple, still a sizable reduction. With a $2200 Social Security  monthly check and as an honorary member of the Elite having accumulated $300,000, which can deliver $1,000 a month, the benefits are still falling short.  There is a shortfall of $500 each and every month; no frills, no motor homes, no Family vacations with the Grand kids, no college funds, and NO ROOM for Health Issues.  Certain Financial trouble for the survivng spouse.  At the Death of a Spouse, the benefits reduce substantially and that $500 shortfall can easily become $1500+.

After 10 to 15 years, the Baby Boomers are back to work. The 75 years and OLDER,  represent the largest segment of workers entering the workforce; 63% will go back to work. Completely broke! A travesty!

What if you are very lucky? What if you live more than 30 years in retirement? More and more Seniors are living to 100 through Medical Advancements. Will you be living with your children or grandchildren,  a niece or your son or daughter, a person down the street, or maybe a Ward of the State? Will you be subject to someone else’s charity when you are 90 years old?  6.2 million Seniors already live below the poverty line.

Take control of your own Destiny! Life is a Gift given by Almighty God.  You have the ability to change your Life! If you are still working, PAY ATTENTION!! It takes about 7 to 10 years and requires discipline and a Strategy. You can develop Wealth for multi generations that will last for your children, grandchildren, and great-grandchildren and will NEVER DEPLETE. Take your husband or wife and explore Europe, walk the Great Wall of China, paint the landscape of the Dead Sea, or learn to cook in France. Enjoy every minute given to you. It is a simple choice, but it is YOUR choice.

https://michaeldouville.com/

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