Archive for correction

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

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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/

Tough Times Ahead…Featuring Michael Douville

Posted in Michael Douville with tags , , , , , on April 2, 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

Economic Indicators from around the world point to Tough Times Ahead. Learn how to prepare for them, especially geared toward Real Estate Investors.

Video was originally posted by Michael on March 8, 2018. He has been talking about a market correction since the summer of 2017…

 

https://michaeldouville.com

michael@michaeldouville.com

 

Living in Economic Extremes…Featuring Michael Douville

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

Hebrews 11:7 By faith Noah, being warned by God concerning events as yet unseen, in reverent fear constructed an ark for the saving of his household. By this he condemned the world and became an heir of the righteousness that comes by faith.

What if Noah had not acted and had not prepared on God’s warning? One can believe God and not act accordingly…

Kentucky 2016 016

Do you have a life boat?

Author: Michael Douville

Trey Smith of God in the Nutshell Productions, author and documentarian, interviews Michael Douville, author, fiduciary and financial advisor, about the economy, stock market and debt.

The interview also has excerpts from noted economic experts like Harry Dent, Zero Hour author and business analyst; Jim Rogers, financial commentator; Peter Elindes, Stockmarket Cycles editor and publisher; Robert Kiyosaki, Rich Dad Company founder and author; and Joe Needham, an investor.

They discuss a correction in the stock market of 40-50% and they also discuss that the US and the World have an unsustainable amount of debt.

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  https://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

 

 

As Good As It Gets…Featuring Michael Douville

Posted in Michael Douville with tags , , on February 5, 2018 by paulthepoke

Proverbs 21:5 The plans of the diligent lead surely to abundance, but everyone who is hasty comes only to poverty.

Michael

Are we headed toward a recession? Many economic indicators are going down. Don’t be caught on the wrong side of a downturn. 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 Douville has been writing about a coming stock market down turn since the Summer of 2017. For those following the blog, Michael has been talking about a market correction for at least the last 8 months. Math don’t lie!!!

The link below was originally posted on 1/31/18 before the recent losses in the stock market. He is not piling on to the “short” band wagon.

Michael talks about alternate ways to make income without worrying about the markets.

Check us out at https://www.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. Contact Michael at michael@michaeldouville.com

 

Return OF Your Investment!…Featuring Michael Douville

Posted in Michael Douville with tags , , , , , , , , on September 27, 2017 by paulthepoke

MichaelProverbs 27:12 The prudent see danger and take refuge, but the simple keep going and pay the penalty.

There are times to be Bold and times to be Cautious. Everything associated with the US Stock Market is distorted! The Stock Market has reached all time record highs, but valuations seem to be overly stretched with historically precarious P/E ratios of over 30+. Current Corporate Profits are suspect due to the liberal use of Non-GAAP accounting procedures which give enormous flexibility to Earnings. In addition, Dividends have been paid with Debt rather than Profits and the use of debt is so pervasive that Margin Debt used to leverage stock purchases is now also at Historic all-time levels and will compound and multiply any downturn in prices. Further, Central Banks have for 10 years, relentlessly pushed the Global Stock and Bond Markets higher, but now are attempting to shrink their balance sheets. The Fed is starting to sell $10 Billion a month for the 4th Quarter of 2017 and will be increasing every quarter through 2018 resulting in $510 Billion of liquidity withdrawal. Removing the constant purchasing of Equities may introduce Selling Pressure creating the unwanted opposite effect.
Trees do not grow to the sky and cycles eventually turn. There comes a time to take profits and re-distribute assets to safer allocations. In December of 2007, Charles Nenner recommended cashing out of the Stock Market and remained out until after March of 2009 avoiding the horrific sell off. He has again recommended to be out of Equities since July 1, 2017 and recommends only “Small Units” that can be rented for a portion of assets. Bill Gross who was known as the Bond King because of his stature with PIMCO, has stated he does not like Stocks and does not like Bonds believing both asset classes are extremely overvalued and risky. Mr Gross recommended Real Assets such as Gold and Real Estate in August of 2016. Real Assets versus Financial Assets are now inverse to Financials having declined for several years; they now appear to have bottomed, but have not yet turned up.
 

As shown on the chart above, a new Commodity Cycle is due to appear. There are many reasons for an increase in prices; a declining US Dollar would be a good pick. Nonetheless, these cycles come with regularity and are inverse to the Stock and Bond Markets. As copper, iron ore, gold, lumber, and land increase, typically, stocks and bonds decline as higher commodity prices are the harbinger to higher interest rates and inflation.

To be Prudent, consider an exit strategy for any precipitous decline in the Markets or Economy. Should the Commodity Cycle begin, the building components of Single Family homes typically thrive causing Capital Appreciation in addition to the consistent monthly Cash Flow and Income. Due to the Hurricane damage in Houston and Florida, Maricopa County in Arizona should be considered as a prime market for investment.

Contact us at 480.948.5554.  Your first consultation is always free and check out our website for more information at

https://michaeldouville.com/return-of-your-investment/

Thank you.

PaulthePoke

Prophecy Watch

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