Dividends, Gold, Bonds, Annuities, Real Estate and the Trump Rally.

11/27/2016 04:23 pm ET | Updated Nov 27, 2016
Photo by: Michael Vadon.
Mr. Donald Trump. New Hampshire Town Hall on August 19th, 2015 at Pinkerton Academy in Derry, NH.

Dividends, Gold, Bonds, Annuities, Real Estate and the Trump Rally.

Have you ever heard any of these lines from your “financial professional”?

1. Don’t Worry If the Price Drops. You Still Get the Dividend.

2. You Don’t Want to Buy Gold Right Now.

3. Leap Into the Trump Rally!

4. Bonds Are Safe.

5. Money Market Funds Are Our Safest Investment.

6. Annuities are Backed By 100 Years of Quality Service.

7. Now’s a Great Time to Buy Real Estate.

8. You Don’t Want to Perform Surgery On Yourself.

9. Buy & Hold.

Wonder what the truth is?

1. Worry About Dividend-Paying Stocks.

2. Buy Gold Miners.

3. Rebalance/Diversify On the Trump Rally.

4. Bonds are Vulnerable.

5. Money Market Funds now have redemption gates and liquidity fees.

6. Annuities Offer No Plan B. FDIC Insurance doesn’t cover insurance products.

7. Who Can Afford to Buy Real Estate?

8. Brokers are Salesmen, Not Surgeons.

9. Diversify, Keep Enough Safe and Rebalance at Least Once a Year.

And here is additional information on each line of truth.

1. Worry About Dividend-Paying Stocks. When a company gets into trouble, the dividend has to be cut, and you lose money on the share price – a lose-lose situation. One of the most recent examples is Freeport McMoran. On January 1, 2011, Freeport-McMoran stock was trading at $60.00/share. Today, it closed at $16.00. The low was $3.94/share on January 22, 2016. The capital losses are -73-93%. Dividends, which are often under a 4% annual yield, don’t fill in the gap of owning only $7,000 of your original $100,000 investment. To pour salt in the wound, Freeport-McMoran’s dividend was slashed on March 24, 2015 to just $0.05 per quarter, from a quarterly payment of $0.3125 for years. What’s the truth? The higher the dividend, the higher the risk of capital loss and having the dividend eviscerated overnight.

2. Buy Gold Miners. For the past few years, if you asked your broker to buy gold, his/her response might have been, “You don’t want to buy gold.” That should have been what you were told in September of 2011, when gold was at an all-time high, and most brokers (and TV ads) encouraged Americans to buy in to gold. Now that debt and the Dow Jones Industrial Average are back to all-time highs, and gold prices have been slaughtered (gold miners are down over 60% off their highs), the precious metal should be a good hedge against a market downturn. Gold prices and the Dow Jones Industrial Average have a negative correlation. Gold miners are a surer bet than gold coins for many reasons, including that when you purchase new semi-numismatic coins, they have to increase up to 55% in value for you to break even on the purchase. (If you would like to learn more about this, Tweet Natalie Pace and we’ll make it the subject of another blog.)

3. Rebalance/Diversify On the Trump Rally. The only reason to buy in the 8th year of a bull market is if you mistakenly believe that the Wall Street adage is: “Buy high, sell low.” The last two times stocks went 8 years without a correction, the crashes were tsunamis.

The Dow Jones Industrial Average lost more than half in the Great Recession (2008-2009).

Google Finance. Used with Permission.
Performance of the Dow Jones Industrial Average from October 2007 to April 2009.

The NASDAQ lost more than ¾ths in the Dot Com Recession (2000-2002).

(c) Google Finance. Used with permission.
Performance of the NASDAQ Composite Index between March of 2000 and December 2002.

Market timing isn’t a strategy, so don’t cash everything out and stick bills under the mattress. Don’t stick everything into gold either. (You’ll have more luck selling your iPhone, food or a gallon of gas in the Apocalypse.) Modern Portfolio Theory with annual rebalancing, ala my time-proven nest egg pie charts, earned gains in both of the last two recessions and outperformed the bull markets in between. Learn the system in the chapter-a-day program outlined in the audio book of The Gratitude Game. If you want to implement the pie charts before the next market crash, join me at my 3-day Valentine’s Investor Educational Retreat. Call 310-430-2397 and click on the blue-highlighted links to learn more.

4. Bonds are Vulnerable. Investors of Greek bonds, Detroit bonds, many oil bonds, American Apparel bonds, American Airlines bonds, auto manufacturing bonds and more have watched their promises become toilet paper. Credit risk, not interest rate risk, is the problem, and there is far too much debt in the developed world to take this risk lightly. Even a 4% yield could be junk bond territory. It’s time to take a forensic magnifying glass to your holdings. Learn more in my bestselling book, The ABCs of Money, in the “What’s Safe?” section.

5. Money Market Funds now have redemption gates (times when you will have limited access to your cash) and liquidity fees (times when you will be charged to access your cash). FDIC-Insured cash is the 1st step of getting safe. Then, consider safe, income-producing hard assets that you purchase for a good price. There are many to consider. In fact, there are so many options that we now spend one full day at the Investor Edu Retreat helping attendees identify thousands of dollars in annual savings with smarter investing, budgeting and energy choices. The best Return On Investment today and going forward is examining every big-ticket bill that you have, and thinking creatively about how you can slash it by up to 90%. Forever. Until you do that, you are making the billionaires rich at your own expense.

6. Annuities Offer No Plan B if the Company Goes Bankrupt. AIG is one of the largest annuity and life insurance providers in the U.S. If we had let the company go bankrupt in 2008, over 50 million insurance plans (annuities and life insurance) would have circled the drain. FDIC Insurance doesn’t cover insurance products, like annuities. The State Guaranty Plans that do are too severely underfunded to deal with the crisis of a giant insurance company going belly-up. The U.S. Treasury and Federal Reserve bailed out banks and the insurance industry in 2008 (not just AIG). Politicians have put in laws, like Dodd Frank, to prevent future bailouts. In theory, the next time around, companies are supposed to be allowed to fail, rather than be bailed out. Do you want to take that risk?

7. Who Can Afford to Buy Real Estate? On a nationwide basis, real estate prices are back where they were before the big crash a decade ago. Meanwhile, wages have stagnated. The result? Housing has become unaffordable for many Americans. According to Lawrence Yun, the chief economist of the National Association of Realtors, the U.S. has a “nationwide housing problem.” Home buying is out of reach for 90% of the people who live in the San Francisco area. Housing is very expensive in San Francisco, Honolulu, New York City, Washington, Boston, Los Angeles, Denver and Seattle – in other words all of the places with the stronger job markets. Join me on December 13, 2016 at noon ET, when I interview Dr. Yun to get his two cents on how to fix the current housing crisis in America. Click on the link below for additional information.

8. Brokers are Salesmen, Not Surgeons. The ad read, “Looking for a Certified Financial Planner. No market experience necessary. Must have a strong sales background.” Brokers aren’t surgeons, even though that might be the analogy they will use when convincing you to turn over your financial future to them. Have you ever heard the line, “You wouldn’t want to operate on yourself, would you? So why try to manage your own retirement?” Brokers are salesman. According to the Department of Labor, $17 billion is lost every year due to a conflict of interest in the financial services industry, where salesman are paid on commission to sell you products that are not necessarily in your best interest. That’s a nice way of saying that your future could be wiped out by someone who is more concerned about making their mortgage payment than making sure that you have a home and food to eat when you retire.

9. Diversify, Keep Enough Safe and Rebalance at Least Once a Year. Buy and Hold hasn’t worked since the Dot Com Recession (2000) and won’t work going forward, in the high debt/slow growth developed world economies. Modern Portfolio Theory, avoiding the bailouts, adding in hot industries and annual rebalancing earned gains during the last two recessions and has outperformed the bull markets in between. Since 2000, stocks have lost more than half every eight years. Investors that lose that much don’t even make it back to even before they get cut in half again. When a million implodes to a value of $450,000, it takes over a decade to crawl back to even. It took NASDAQ 15 years to return to the highs of 2000.

So, what is the antidote to the market lines and sales pitches that have wiped out homes and nest eggs twice in the last 16 years? Wisdom and right action. Learn The ABCs of Money that we all should have received in high school. Teach financial wisdom to your teens. Start early with your tweens. You can even seed the ground for great money skills with your 5-year old. Call 310-430-2397 to learn more now.


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