Archive for bonds

Wuhan Virus Update, February 2, 2020

Posted in #PaulthePoke, Michael Douville, Pestilence, Prophecy, Trend Update with tags , , , , , , on February 2, 2020 by paulthepoke

Luke 21:11b …and in various places famines and pestilences. -Jesus

Thursday, 1/30/20: The World Health Organization finally declared a global emergency regarding the Wuhan Virus. Dr. Tedros Adhanom Ghebreyesus, Director-General of the World Health Organization is calling “all countries to work together in a spirit of solidarity and cooperation. We are all in this together, and we can only stop it together.”

Click on the link below for the WHO complete statement and declaration.

https://www.who.int/dg/speeches/detail/who-director-general-s-statement-on-ihr-emergency-committee-on-novel-coronavirus-(2019-ncov)

President Trump and the United States declared a public health emergency on Friday, 1/31/20.

“I want to emphasize that this is a serious health situation in China, but I want to emphasize that the risk to the American public is currently low. Our goal is to do all we can do to keep it that way,” Centers for Disease Control and Prevention (CDC) Director Robert Redfield

The Wuhan Virus is starting to make an economic impact on global markets. On Friday, 1/31/20, the Dow Jones Industrial Index in the United States closed down 603.41 points, or 2.1%, to 28,256.03.

The economic impact is likely to be significant considering China’s consumption of goods as measured against the rest of the planet. Chinese financial regulators are set to provide $173 billion of liquidity when markets open on Monday, February 3, 2020.

Michael Douville has weighed in on the impact of the Wuhan Virus as well. The virus may be the tipping point for the global economy. Michael has been monitoring the slowing global economy for at least the last 6 months. Indexes show shipping around the planet is slowing. On Friday, the yield curve in the bond market inverted which indicates a slowing economy. Economic activity is halting across China because of the Wuhan Virus. Michael likes gold, silver, bonds and rental properties. As always, check with your financial consultant. Click on the link below for Michael’s comments on the Wuhan Virus impact.

https://drive.google.com/file/d/1fs9AOcvaWXwGaNRXcAh-DRh8k–hyliH/view

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The following points are from various headlines across the internet. These information points are continually expanding.

  • Companies like Apple, Google, Starbucks, Ikea, and Tesla are closing operations and stores in China.
  • Global airlines are suspending flights in and out of China.
  • The U.S. State Department has alerted Americans not to travel to China.
  • Other countries limiting travel to China include Japan, Australia, Vietnam, Qatar, Turkmenistan, Singapore, New Zealand
  • North Korea and Russia have closed their borders to China.

The New York Times is providing live updates on the Wuhan Virus. The stream is loaded with all kinds of information including an embedded reporter in Wuhan. See the link below.

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There is the following headline out of New Zealand and suppressed death numbers. Coronavirus: China accused of ‘burning bodies in secret’

The New York Post published an article indicating there may be as many as 75,000 already infected. Other news outlets globally are indicating the same.

https://nypost.com/2020/02/01/over-75000-people-in-wuhan-reportedly-may-be-infected-with-coronavirus/

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February 2, 2020: Here is the latest update regarding the spread of the Wuhan Coronavirus… Allegedly… Numbers and data are rapidly changing.

  • 14,549 infected world wide
  • 305 deaths
  • First death reported outside of China in the Philippines
  • At least 60,000,000 people remain quarantined.
  • Virus is now reported in at least 25 countries.

International Economic Update with Michael Douville

Posted in #PaulthePoke, Prophecy, Trend Update with tags , , , , , on August 20, 2019 by paulthepoke

Proverbs 22:3 The prudent sees danger and hides himself, but the simple go on and suffer for it.

Time to wake up! Pay attention! International markets are changing quickly!

In a few days Argentina’s stocks and bonds took a nose dive. In one session, Argentina’s stock market dropped 48%! Could this be the start of dark times? Click the link below for Michael’s update.

http://www.michaeldouville.com

Michael has been warning people for almost 3 years of a shift in Market Fundamentals. It is finally here. Michael is available to speak on your program or help in any way. He can be reached at 480-948-5554 or michael@michaeldouville.com

http://www.michaeldouville.com

Do you have all your money in stocks and bonds? What happens if we see a sharp reduction in the markets. Have you prepared your life boat? Michael talks about alternate ways to make income without worrying about the markets. Check us out at michaeldouville.com. The first consultation is always free. Michael’s Book, How to Create a Real Estate Money Machine and Retire with Income, is available on line. Email Michael at michael@michaeldouville.com

Ecclesiastes 7:12 For the protection of wisdom is like the protection of money, and the advantage of knowledge is that wisdom preserves the life of him who has it.

International Jenga… Michael Douville

Posted in #PaulthePoke, Michael Douville, Prophecy, Trend Update with tags , , , , , , on August 8, 2019 by paulthepoke

Ecclesiastes 7:12 For the protection of wisdom is like the protection of money, and the advantage of knowledge is that wisdom preserves the life of him who has it.

Proverbs 22:7 The rich rules over the poor, and the borrower is the slave of the lender.

Michael has been on the slowing global economic decline for the last year. It appears a domino is about to topple. Are you prepared?

Who will be the one that drops the stack? Will International economic turmoil result in US recession?

http:// http://www.michaeldouville.com

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http://www.michaeldouville.com

Do you have all your money in stocks and bonds? What happens if we see a sharp reduction in the markets. Have you prepared your life boat? Michael talks about alternate ways to make income without worrying about the markets.

Dr. Charles Nenner’s Thoughts June 2019 – An Interview with Michael Douville

Posted in #PaulthePoke, Michael Douville, Trend Update with tags , , , , , , , , on June 18, 2019 by paulthepoke

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

Dr Nenner is not only brilliant, but gracious spending almost an hour of his time discussing current conditions in the Financial World.  As one of the most influential Cycle Researchers in the World, Charles Nenner shared his most recent research and discussed the Cycles of Stocks, Bonds, Interest Rates, and the safer harbor for Income Investors, Real Estate.

Dr. Charles Nenner

As Dr. Nenner repeatedly states all things change. Good times end, Bad times end and everything cycles from Seasons to Interest Rates. Nenner Research indicates the Globe may be about to experience a profound change of Cycle. Soon, the US Business Cycle will be setting a record for expansion surpassing the 120 months of growth experienced in the 1990’s;  setting a record implies this is unusual, as it normally does not  last this long! The expansion is so old and so long many have forgotten that Business Cycles complete, they change! The Business Cycle transitions from Expansion to Contraction slowly, then all of a sudden. Charles Nenner’s research has predicted the slowdown. It is now no longer a prediction, but fact and the Economy of the World is poised to get worse, much worse. Excesses still unresolved from 2009 added to the inevitable malinvestment of the current Cycle presents the potential for a downturn worse than the Great Financial Crisis!!

Excesses still unresolved from 2009 added to the inevitable malinvestment of the current Cycle presents the potential for a downturn worse than the Great Financial Crisis!!

Charles Nenner’s Cyclical Research forecasts declining US GDP in 2019 to a year end level of less than 1%;  GDP for 2020 may be contracting to below 0. Currently,  Industrial Production, Manufacturing and Factory Orders are declining in the US.

Auto sales are falling,

Retail has not recovered from one of the worst Christmas Seasons in 20 years and retail store closings and shopping mall closures are at a record pace. 

 My favorite asset class, Real Estate, is in a mid cycle correction and has experienced 14 months in a row of declining Existing Home Sales with prices in some markets notably New York City, Seattle, San Jose actually beginning to deteriorate. 

Dr. Nenner foresees a Stock Market decline accompanying the softening Economy starting in earnest mid to late July. Unfortunately, Dr Nenner’s Research does not indicate a short drop and quick recovery, but a more prolonged period of slow Economic activity. Those in retirement or approaching retirement should take heed;  an extremely conservative approach or an exit strategy might be discussed with their Investment Advisor.  Losses incurred from a Stock portfolio may require a very long time to recover. Many Baby Boomers do not have that time! Avoiding loss should be the goal, not squeezing out the last dollar of profit. Lose 40% or more and the “Golden Years” are not so golden!

For a free trial offer of Charles Nenner’s newsletter, go to www.charlesnenner.com and mention this interview.

In Prior slowdowns, Investors could transfer Wealth into Bonds when the Stock Market plunged. Charles Nenner sees higher rates from July going forward that will eventually lead to significant losses and much higher rates in just a few years. Dr. Nenner also envisions Global Deflation; Deflation is much more difficult to manage than Inflation prolonging the contraction. Deflation often refers to the destruction of Credit and Debt through non-payment or defaults. Obviously, as Risk of Default or possible Debt restructure rises, Investors demand to be compensated for the Risk and Rates rise. This is counter intuitive to a slowing Economy which speaks to the predicament of Extreme Global Debt.  Individual US Treasury Bonds representing the safest investment in the world issued by the Global Reserve Currency will receive unprecedented demand; Capital seeking safety.  Dr Nenner’s Cycles for the 30 year Treasury Indicate demand pushing Treasuries to possible new low yields.  A bifurcated Bond Market?

Bonds and debt without the implicit guarantee of the US may suffer loss of principal in  a World engulfed in Global Deflation and Contagion.

Bond funds and ETF’s  which unlike simple bonds, never mature could incur losses of 70% or more in a rising rate environment. Further,  Deflation may cause huge losses in lower quality Bonds and Debt instruments. Estimates are as high as $2.5 Trillion in Corporate Bonds could already be just one notch above JUNK!  A recession could double that. Downgrades and Defaults will cause massive Bond losses.

Consistent income will help mitigate the turmoil that is coming.  The S&P dividends yield less than 2% and the risk of monumental loss of value dictates avoidance.  Bonds and Debt instruments are facing the potential of devastating losses as well. The current Income provided is not much more with the 10 year Treasury yielding less than 2.2% in an Inverted Yield environment.  Any increase of Interest Rates will devastate a Bond Portfolio. Fortunately, Real Estate provides consistent, conservative, and monthly Income.

Conservative single family residential rentals provided cash flow month after month through the Great Financial Crisis.  As a separate asset class from both Stocks and Bonds, Real Estate barely correlates with Wall Street;  estimates are in the 8-9% range. Real Estate, although cyclical, is also very Regional in Nature. There are several truly great Real Estate markets in the US that are experiencing both Organic growth and Demographic growth causing demand for Housing. Las Vegas and Phoenix are both exploding adding over 100,000 new residents each in 2018;  one cause is the Exodus from California, a Mega Trend that will last for years. This population increase is creating jobs and an enormous demand for rentals. Dr Nenner believes that investing in Small Units and Entry Level Single Family properties will generate Income through the economic downturn and may prove to be a very prudent investment. Investors will receive useable cash flow while waiting for the Real Estate Market recovery which may bottom as soon as 3rdquarter 2020.  Just beyond the current Real Estate correction is the “Explosive Phase” of the Real Estate Cycle where Fortunes are born! Not just Cash Flow, but much higher prices.

Will rising HOME prices coincide with the 30 year Treasury declining to historical low rates? Will the US experience Negative Rates and barely positive mortgages as our European Cousins? Will Risk expose struggling Corporations, Munincipalities, Counties, States, and maybe even Sovereign borrowers to much higher rates based on Credit downgrades? The next few years promise to be very interesting; is that a Chinese curse????

Rental Cash Flow may be one of the few Income Streams that will be monthly, consistent, and actually grow in a downturn; a fiscal Lifeboat! Risk has entered the Market. As a separate asset class, Real Estate may provide a safer asset for your Wealth. Always discuss with your Financial Advisor before Investing. 

Who Will Be the Catalyst??? Michael Douville

Posted in #PaulthePoke, Michael Douville with tags , , , , , on April 15, 2019 by paulthepoke

Proverbs 27:12 The prudent sees danger and hides himself, but the simple go on and suffer for it.

Will there be a spark that starts an economic fire? The global economy is slowing down with many countries in recession or on the verge of entering into a recession? Will Turkey be the first domino to tumble? Michael gives his thoughts.

http://www.michaeldouville.com

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The Economy is Transitioning, are you ready? Do you have all your money in stocks and bonds? What happens if we see a sharp reduction in the markets. Have you prepared your life boat? Michael talks about alternate ways to make income without worrying about the markets.

http://www.michaeldouville.com

There are times to be Bold and times to be Cautious. We read the tea leaves daily; we do not want to make a Mistake! As a follower of the Business Cycle and a realization that life does not move in a linear fashion, but rather moves through Cycles. Each different cycle has a unique signature and a unique interaction upon other cycles. We leave the detail research to others, but collate and collect the research into a very usable form. The Presentation always incorporates the latest data. It is this edge that helps discern Us from everyone else allowing the deployment of Capital strategically, timely, and in the path of Growth. Our clients have experienced much better than average returns and have avoided costly mistakes due to our Forecasting.

http://www.michaeldouville.com

Is Turkey the “Catalyst” that Breaks the World?

Posted in #PaulthePoke, Ezekiel 38-39, Trend Update with tags , , , , , , , , on April 1, 2019 by paulthepoke

Isaiah 47:11 But evil shall come upon you, which you will not know how to charm away; disaster shall fall upon you, for which you will not be able to atone; and ruin shall come upon you suddenly, of which you know nothing.

Pay Attention!!!

By Michael Douville – I have forecast the Global Slowdown and now that fact has been recognized by virtually everyone. The Globe is slowing so quickly that the World may be entering a period of vulnerability to a sudden downdraft.

To paraphrase the famous question of “how does this happen?”: slowly, then all of a sudden! The economy has been dragged to the edge of a cliff; something just needs to push it over!

https://michaeldouville.com/

The last decade of repressed interest rates has encouraged a Global Debt Binge!

Italy is in Recession, The Netherlands is also. Germany is teetering avoiding a the statistical recession as the 3rdQuarter GDP was -0.2% but the 4thQuarter managed to rise to 0.0%. Revisions later may change the statistics.

The 1stQuarter of 2019 is looking dismal as Global demand for Autos declined and mighty BMW announced it will not make earnings projections. The stock dropped over 6%.  Lower earnings = lower stock prices!

More bad news for Germany as several Economic Indices are severely declining and the European Industrial powerhouse may be heading into further trouble. As Germany’s trading partners suffer, so suffers Germany as the German Economy is certainly Export driven. 

European Interest Rates have been driven into negative returns forcing European Banks to search for better yields in Sovereign and Corporate Debt. Many Spanish, Italian, and German Banks have still not recovered from the Great Financial Crisis and are “woefully unprepared” for the next financial crisis and the currency union is not resilient enough to emerge unscathed from unexpected economic storms” as reported by Christine Legarde.

Which brings us to Turkey! The last decade of repressed interest rates has encouraged a Global Debt Binge! Not only has business and private borrowers indulged beyond their capacity, but Nations across the World have found that it was very easy and expedient to borrow their way to Prosperity!

Turkey is in trouble! The Turkish Economy has officially entered a Recession. Inflation has been unleashed on the population driving prices of everyday goods beyond reach. The Turkish national currency the Lira has lost tremendous value as the Foreign Exchange rate, although improved from the near 7 Lira to the US Dollar, is still vastly devalued at 5.75 Lira to the US Dollar. To make matters worse, the US Dollar is cycling higher. Portending Turmoil!

Debt denominated in US Dollars is now coming due; Billions and Billions of US Dollars are coming due all while the Lira sinks and the Nation of Turkey is gripped by a Recession. Much of this debt is owed to the Banks of Spain, Italy, and Germany;  Banks that are “ill prepared” for Loss!! Banks that are “Systemically Important”!

Could Corporations in Turkey, struggling with Debt Repayment default on their loans? For that matter, could Turkey default on it’s Sovereign Debt? A Turkish default could lead to losses in Systemically Important Banks; losses now, while Europe struggles, would be felt everywhere!!! 

As I have recommended before, build reserves, pay down debt, cut expenses, review vulnerabilities both personal and Business, and discuss with your advisers as to what is Prudent in your Investment Portfolio. If contagion ignites, financing will be restricted; check with your lenders and review loans for refinance and Lines of Credit. Preserve Capital for the huge Opportunities that will surely present themselves. Review rental agreements and maximize tenant quality rather than maximize revenue. Rental cash flows may be the “Life Boat” to sustain the quality of life jeopardized by a Global Recession.

https://michaeldouville.com/

For more detail linking modern day Turkey to ancient Meshech, Tubal, Gomer, and Beth Togarmah, see the link below.

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

Prices Rising in Turkey, Trouble Ahead

Posted in Ezekiel 38-39, Prophecy, Trend Update with tags , , , , , , , on October 8, 2018 by paulthepoke

The Turmoil will not start in the United States, but it will reach our shores.  The warnings are moving from inevitable Global Turmoil to Imminent Global Turmoil!

Michael’s website

The Catalyst will not start in the Equity Markets, but in the Credit and Debt Markets of the World. The Debt Markets dwarf the Equity Markets by a factor of at least 20; the Credit Market is enormous!!  Although the Turmoil will not start in the US, the US Dollar will be the cause! In an effort to Save the World, the Central Bankers reduced rates to zero or below and encouraged borrowing; encouraged squander and massive, pervasive Debt! Global rates have risen from 0.1% to over 3.0% in the US. A thirty fold increase! Thirty times more interest; thirty times more tax money to service the debt. To make matters worse, a gamble was taken; betting the US Dollar would indefinitely decline in value and Debt could be rolled over in cheaper and cheaper Dollars. Historical Cycles were ignored; the Day of Reckoning is coming as the Dollar has reversed and is now getting stronger and stronger. The equation of local currency vs the US Dollar is tipping. Not only is the payment rate trending higher, more local currency is needed to buy a US Dollar; a lot more!

Available Now-Click on Book

Not only Debt repayment will cause Turmoil, but Imports are typically expressed in International measures which is typically the US Dollar. Energy costs will skyrocket in Argentina and Turkey as their respective currencies decline vis-a-vis the US Dollar.  Oil and refined petroleum Products will become very expensive and cause hardship on the local populations. Medicine, machine parts, electronics, replacement parts will all become expensive demanding more and more of free cash flow and eventually a breaking point!

Obviously, as more and more Capital is diverted to servicing Debt and rising costs, the Economy will suffer. It will become a Negative Feed Loop Spiral! Eventually, Debt will be Defaulted affecting the Pension Funds, Hedge Funds, Banks, Mutual Funds, Annuities, Sovereign Wealth Funds, and even small family reserves. Collateral Damage will be a Contagion as Peter can no longer pay Paul who then cannot pay Mark!

Bonds will face not only Market Risk as Interest Rates rise causing a relentless decline in value, but also Credit Risk as Defaults rise and credit Quality lowers.  It is time to review holdings. It is time to re-allocate. The US Dollar cycles; it will trend lower again. Things and Real Assets will rise substantially in the US like they are now in Turkey and India. Real Things should be accumulated now while our Dollar is high. Commodities such as copper, aluminum, steel, asphalt, agriculture, farms, lumber, and residential rentals can be slowly bought. Cash flowing rentals contain these basic materials and will not only protect their value in the future, but protect the owner with an alternative cash stream when Turmoil reaches our shores.

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

Paul the Poke

Habakkuk 1:5 Look among the nations, and see; wonder and be astounded. For I am doing a work in your days that you would not believe if told. -LORD God

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