Harry S. Dent Jr.'s Blog, page 89

From “King of the Hill” to Wall Street

When I usually tell people the story about how I became a financial analyst, working alongside Harry Dent, one of the most respected economists in the world, I sometimes have a hard time believing it myself.

I grew up about as far from Wall Street as you could get, in a working-class suburb of Dallas, called Garland. If you ever saw the TV show “King of the Hill,” Hank Hill’s hometown was based on mine.

Now none of my family had a financial background, but it’s actually because of my grandfather, a self-taught amateur investor, that I’m doing what I am today.

“What if I’m wrong?” he would always ask when thinking about his investments.

Yes, he was looking to add to his income, but also wanted to be smart about avoiding losses. It’s a philosophy that’s informed my investment strategies to this day, and one that I think can benefit you too… whether you’re in retirement, near retirement, or not.

In fact, that’s why I’m telling you all this, and why we went through the trouble to put together this special video for today’s Economy & Markets.

It basically lays out my life’s journey (up until this point at least) and how I ended up going from a quiet bookworm who was terrible at math to a chartered financial analyst with a Masters from the London School of Economics.

Click here to watch this free video. I hope you enjoy it (picture of my embarrassing Little League baseball card included).

 

 

 

Charles Sizemore

Portfolio Manager, Boom & Bust

The post From “King of the Hill” to Wall Street appeared first on Economy and Markets.

Retirement Worries

Sometimes I like to joke that I plan for my retirement every Wednesday and Saturday… as that’s when they draw numbers for the Power Ball lottery. But hey, as I’m writing, it’s fast approaching a half of a billion dollars!

That would make for a pretty sweet retirement nest egg and you can’t win if you don’t play, right?

As fun as it is to play “what if” to the tune of a hypothetical half a billion dollars, retirement isn’t a joke. But I am in a similar situation that many find themselves in – meaning, I’m getting close enough to smell retirement but not on track to retire comfortably when I thought I might have.

How much do I need to retire? Probably a lot more than I have! According to the September 2014 issue of Federal Reserve Bulletin (yes, that’s exactly as exciting as it sounds!), the average American is well shy of having saved enough for retirement

Under 50% of all American families have a retirement account and the median value of those who have retirement accounts is under $60,000.

You’re probably thinking that many of those families are young and haven’t started saving yet. Well, of those families where the head of the house is aged between 55 and 64 (or those who are very near retirement age), only 59% have a retirement account! In that age group, the median value of the account is just over $100,000.

So, over 40% of those heads of families that are within 10 years of retirement don’t have any sort of retirement savings and will rely solely on Social Security. And more than half of those that have a retirement account have less than $100,000 saved!

The reason I’m focused on that age group is to highlight the trouble America is in since our Social Security program is already in serious trouble, which Rodney detailed in the February issue of Boom & Bust. That, and I happen to fall in that age group. Stats are just stats until you see yourself in them – that’s when the abstract starts to look a lot more real.

Everyone follows their own path in life and mine happened to include three ex-wives and three children. All were very expensive and affected my retirement saving decisions.

The good news for me is that I’m now an empty-nester… free of kids and ex-wives! That means my spending has gone down dramatically and I’m really getting serious about retirement saving!

I’m still behind where I think I should be to have a comfortable retirement, but I’m getting closer, faster. Obviously, it’s been especially helpful being on the other side of kids and divorces, but also important here is bringing a sense of focus to retirement planning.

I haven’t given up all risk and still trade a lot of options but I have given up on the ultra-high leverage of futures trading. I’m nearly maxing out my 401(k) contributions, as Charles Sizemore suggests, but didn’t do so early in my career as he did.

I’ve known Charles for about 10 years and, as I can attest, he puts his money where his mouth is. Some people like to spend their money; Charles prides himself on frugality and saving. At our 2016 Irrational Economic Summit, a few of us were talking by the bar and when it was time to pay up, Charles mysteriously disappeared. Actually, it was no mystery to me!

All joking aside (Charles is a great guy), he’s our “retirement guru” for good reason. He’s always searching for new income and profit opportunities AND making sure he protects what he already has.

It’s no secret that we at Dent Research soon expect a brutal bear market that we believe may last until at least 2023. So, now is not the time to risk retirement dollars in stocks, and you know you’ll make next to nothing in CDs or a savings account.

Well, Charles found income opportunities to help you secure your retirement in what he calls “Private Income Funds.” A “Private Income Fund” was designed for wealthy investors to produce a constant income stream and Charles has adapted them to the needs of the average person.

These investments are similar to bonds in that they deliver a secure stream of income but they deliver 30% more income than bonds and are also like a stock, in that you can buy and sell them when you want. A Private Income Fund can be filled with many kinds of income-producing investments like municipal bonds, debt, REITs, dividend stocks and more.

Charles will make it even easier for you in his new research service… He’ll show you how to boost your income substantially without incurring a huge amount of risk. He’ll give you his top Private Income Fund recommendations right away so you can start collecting your monthly income checks. And he’ll deliver weekly alerts with specific buy and sell recommendations for the model portfolio.

So if you’re scrambling to accumulate enough retirement income to last you through retirement and you worry you just won’t have enough, listen to what Charles has to say in a special, free presentation next week!

Lance Gaitan

Editor, Treasury Profits Accelerator

The post Retirement Worries appeared first on Economy and Markets.

Why Real Estate Will Never Be the Same

[image error]I expected Japan’s 67% drop in residential real estate to rebound substantially, even with its smaller, but still substantial millennial generation. But that hasn’t happened. So, I went digging to find out what was going on.

I’ll admit that this had me stumped for a while… until I began to understand that real estate was different than other consumer sectors of spending. It’s obviously not a consumable like food or clothing. But it’s not like a durable product either, like cars and washing machines. Real estate, with the exception of natural disasters or human insanity (arson, wars, etc.), tends to last forever.

This lead me to the realization that I couldn’t just predict the housing cycle by lagging births 41 years for peak spending there. I also had to subtract the dyers at age 79 (because dyers are obviously sellers!).

Here’s the result in net housing demand, allowing for later retirement in the future. It’s a whole different, and more sobering, picture…

Just look at that!

After this brief bounce in housing demand in recent years, net demand will drop into 2040.

Basically, we don’t need to build more houses for a long time, if ever!

Knowing that, do you want to be a housing developer, or even invest in them?

Yes, residential real estate will never be the same! It most certainly will be nothing like what we experienced into 2005.

The same logic applies to commercial real estate. It gets hit harder in downturns as businesses voluntarily abandon leases and real estate faster than households do (after all, we’re more emotionally attached to our homes!).

Commercial real estate is driven by the combination of new entrants adding to the workforce at age 20 (on average) and leaving the workforce when they retire at age 63 (although that retirement age trends up a bit in a bad economy, as we’ve seen in Japan).

So, look at this chart next chart, which allows for slightly later trends for millennials:

This chart shows that the fundamental trends driving commercial real estate have been trending down since 1981, and more so since 2000, and won’t turn up again until around 2023. Even then, growth won’t be nearly as strong as it was in the baby boom expansion.

However, the trends in commercial real estate aren’t as bad as they are in the residential space because baby boomer retirements peak in 2026 while their deaths don’t peak until around 2044.

Then there’s the retail sector that will be impacted by the natural spending trends reflected in our Generational Spending Wave. Those trends, in the U.S., peaked in late 2007 (just as I predicted a long time ago that they would). Only massive QE has offset those declines and limited the effects… but that can’t continue forever.

But besides the demographic challenges the commercial sector faces, there’s another demon out for blood. Amazon, among many other Internet-retailers, are taking market share from brick-and-mortar stores. Major warehouses skip the retail level and ship direct, don’t use as much real estate space, and certainly not prime/Main Street space. Unless we have some major catastrophe that sees us return to a world with no Internet, I don’t see this trend reversing!

So, what will do well, in an aging and Internet-intensive world with less need for brick-and-mortar real estate?

Cash flow positive and affordable rental residential real estate aimed at the younger millennials and retiring baby boomers.


Vacation and retirement sectors, but only after they crash in the next three years or so, and only into around 2026 or 2027.


Hospitals and healthcare facilities.


Funeral home facilities.


And the very best nursing homes and assisted-living facilities (that won’t peak until around 2050!).

In short, we’ll never see a near non-stop and unprecedented real estate boom like the one from 1933 to 2005 again. Not in our lifetimes. And not in the U.S. Maybe emerging countries like India have a shot at it, but not us.

And we’re heading right into a great real estate crash ahead. Demographically speaking, it’s unavoidable.

 

 

 

 

Harry

Follow me on Twitter @harrydentjr

The post Why Real Estate Will Never Be the Same appeared first on Economy and Markets.

Flipping the Most Common Question in Retirement Planning On Its Head

The most common question I see in retirement planning is: What size nest egg do you need to quit working? Or, what’s your retirement “number?”

It sounds like a reasonable and straightforward question.

The problem is, it’s completely useless.

Like so many things in the financial planning business, the question takes something complex and full of nuance, and effectively dumbs it down to the point where it doesn’t mean anything. And that’s because it misses the bitter truth about retirement: you never know how much you’re going to need.

Some say that to retire successfully you should multiply your final salary by a factor of 10. So, if in your late 60s you expect to be earning $150,000, you’d need $1.5 million to retire.

But does that actually work?

The rule of thumb for a “safe” withdrawal is the “4% Rule.” If you limit your withdrawals to just 4% of your portfolio per year, you have very little risk of depleting your funds and running out of money in retirement.

Well, using the 4% Rule would give you an annual income of $60,000, which might be just fine for you.

Or it might not.

What if you need more than $60,000 to pay your bills? What if the stock market has a major setback early in your retirement and your $1.5 million gets chopped down to $750,000 or less?

You might roll your eyes now, but that’s exactly what happened to millions of people that retired or were planning to retire during the last two bear markets.

This is no way to plan for your golden years. It’s income that pays your bills, not the size of your bank account balance. Focusing on an asset number rather than an income stream is like putting the cart before the horse.

In a raging bull market, this would matter a lot less. In that scenario you could reliably sell off assets along the way to meet your income needs. But in today’s market, that’s a risky proposition. The market is stretched after eight years of nearly uninterrupted bull market, and I’m a lot less comfortable depending on capital gains that might disappear tomorrow.

This is what I recommend you do…

Step #1: Grab a piece of paper. Write down a yearly income number you think you can live on in retirement. Try to be honest and reasonable and let your current monthly expenses be your guide.

Now, once you have that number… add 20% to it. You know as well as I do that expenses always seem to find a way of turning out to be more than you expected.

Step #2: OK, now that you have your “real” income number, start subtracting any “guaranteed” income sources. This includes things like Social Security or any pensions you have.

So, let’s say you need $100,000 to live every year (after adding in your 20% cushion). And let’s assume you expect to get $40,000 per year from Social Security, and another $20,000 from a private pension.

That just leaves you with $40,000 to come up with every year to meet your $100,000 goal. And that’s Step #3.

Of course, with bond yields scraping along at today’s lows, securing a safe $40,000 (or whatever the figure is for you) may seem easier said than done. But it’s really not difficult if you know where to look.

Some people prefer annuities. I’m really not their biggest fan as a savings vehicle, but I see their value as distribution vehicles. With an immediate annuity, you give a block of cash to an insurance company, and they, in turn promise you a guaranteed monthly income for the rest of your life, essentially a one-man pension plan.

The only problem I see with annuities these days is that, with bond yields as low as they are, annuity payouts are a lot lower than they used to be. So if you’re needing a higher yield and seek automatic income, I’ve got just the thing for you.

You might want to consider one of the private income funds that I’m going to talk to you more about very soon. Watch this space for more info. Used the right way, they’ll help you close that income gap with consistent checks arriving monthly.

Then, once you have your income needs met, have fun with whatever’s left in your portfolio.

In other words, take a little risk, or try an active trading strategy. You can use any trading profits for little luxuries like travel, or to buy gifts for the kids and grandkids. And doesn’t that sound nice?

 

 

 

Charles Sizemore

Editor, Peak Investor

The post Flipping the Most Common Question in Retirement Planning On Its Head appeared first on Economy and Markets.

I Can’t Sing, But I Can Still Get Mailbox Money

Everyone likes mailbox money.

It’s the kind of cash that you earn while doing a bunch of nothing. It simply shows up in your mailbox every month. I like the sound of it.

This is different from simple monthly income programs, which can include rental properties. Anyone who has been a landlord will tell you, there’s nothing easy about that life.

No, I want the kind of money that rolls in without additional effort. Musicians, songwriters, authors, and others that create content are familiar with the concept, since they can get paid for many years on a single piece of work.

When you buy an album (or, OK, a digital file with 11 songs), a small piece of the proceeds goes to the artist, songwriters, etc., in the form of royalties, no matter how old the songs are. On a recurring basis, all of their royalties are gathered up and mailed to them in the form of a check.

Voila!

We buy songs, they get money in their mailboxes.

What a life!

I’d like to sign up for this deal, but I have a problem. I can’t sing. I don’t think I’d be a good songwriter. And the content I produce mostly centers on current events.

I’m honored that people read what I write, but let’s face it, no one’s looking up my articles from seven years ago. (But, if you are, shoot me an email and we can chat, royalty-free.) And while I appreciate those who own and rent houses, I’m not up for the landlord game right now.

It might seem like I’m out of luck, but I do have another avenue… and so do you. No matter how well or badly you sing, you can always buy an investment that pays monthly income. And there’s a secret with such investments… they’re not just for retirees!

Every month I get a pop in my investment account from funds that can trade at a premium or discount to their intrinsic value, and often pay a higher yield than a regular bond fund. The difference is these types of funds are leveraged, which pushes up their returns in sideways markets, or even when rates are falling, but acts as a drag when rates are climbing.

About a year ago, many of these investments were very undervalued, with tax-free funds paying more than 9% on a taxable equivalent basis. That was awesome! And they once again appear to be a smart buy right now. Our resident retirement guru, Charles Sizemore, is just about ready to reveal all the details. Stay tuned to this space for that.

And as I said, you don’t have to be a retiree for them to make sense.

I enjoy the steady income these funds produce, and typically they act as a stabilizer in my account, compared to the volatility of other investments. But at the moment I don’t exactly need the income.

Unlike bonds, though, these investments allow me to elect through my brokerage account that all income be reinvested. So instead of capturing cash every month, I can simply build a larger position in the fund. Since this feature can be turned off and on whenever I want, I’ll be able to flip the switch at some point in the future and turn these investments into cash cows.

And to collect the money, I won’t even have to go to the mailbox. Maybe I’ll write a song about that.

 

 

 

 

Rodney

Follow me on Twitter @RJHSDent

The post I Can’t Sing, But I Can Still Get Mailbox Money appeared first on Economy and Markets.

Stockpiling Wood

I remember distinctly the moment when “retirement planning” took on a personal meaning to me.

I was kayaking with my wife along the Myakka River, which runs some 60 miles through the “Old Florida” prairies and wetlands of central Florida, just east of Sarasota.

Along with alligators, the river is teeming with history.

It’s believed Juan Ponce de León was the first European to explore the land, in the 1500s. The Seminole Indians inhabited the area in the 1700s and early 1800s. And then cattle farmers moved in on the fertile region in the late 1800s.

Somewhere along our paddle, we stopped at the abandoned camp of one of the region’s early settlers. All I remember seeing as we pulled our kayaks to shore was a small wooden structure, slightly bigger than an outhouse, and, nearby, an enormous stockpile of firewood.

The pile of wood had to have been 100-times larger than the house itself – it was stunning!

I asked our guide, “what’s with all the wood?”

He quickly answered, “that’s an old-school retirement plan right there.”

That’s when the lightbulb went off for me.

You see… retirement planning is about self-sufficiency!

Whoever settled that camp along the Myakka River hundreds of years ago…

Nobody gave him a pension-and-gold-watch retirement. He didn’t have an employer-match on his tax-advantaged 401(k). Social security… “what’s that?”

According to our guide, this early settler felled trees and split fire wood every single day of his life.

He knew that if he didn’t do it… no one else would do it for him. And further, he knew if he ever got old or injured… he wouldn’t be able to produce firewood… and if he didn’t have enough stockpiled by then… he’d die.

A bit morbid, yes – but honest. He didn’t pretend. He didn’t delude himself into thinking that someone would have his back one day. He just got down to business.

Thankfully, the retirement planning for modern Americans is not as do or die. But sadly, most hopeful retirees haven’t stockpiled nearly enough wood.

Consider the stats…

“Thirty-six percent of American workers age 55 to 64 say they have less than $25,000 in retirement savings.” — Employee Benefit Research Institute

“Fifty-one percent of households are at risk of not having enough savings to maintain their standard of living after retirement.” — The Center for Retirement Research at Boston College

“Sixty-six percent of Americans said their top financial concern was not having enough money for retirement.” — Gallup poll

But beyond the research and statistics, I’ve seen this retirement dilemma first hand. I was working as an advisor for a Fortune 500 financial planning firm throughout the 2008 market crash.

Each week, I met with dozens of families, all of whom were trying to figure out how to get to age 65 with a sufficiently large nest egg.

Most of them were looking to “buy and hold” to get them there. So, suffice to say, the 50%-plus drawdown in their buy-and-hold portfolios was threatening – particularly for those who were just a few years from that golden 65th birthday.

It was saddening to watch. These were good people with good intentions… and they couldn’t figure out how to afford retirement.

Simply put: “buy and hold” let them down!

It’s tragic, really.

Alongside the move from pensions to 401(k)s, the onus of retirement planning was shifted back to the individual. And the only best advice they’ve been able to get for much of this time has been “just buy… and hold.”

Sure, buy-and-hold has worked for some investors, but it’s sorely disappointed others. Consider this chart, which I first shared with attendees of our 2016 Irrational Economic Summit. It shows the total return of buy-and-hold for distinct periods of time.

As you can see, buy-and-hold turned $1 into $11.90 between 1982 and 1999. But between 2000 and present day, buy-and-hold has done little for retirement savers – turning $1 into a measly $1.35.

I’m sure you know by now that we’re not big fans of buy-and-hold here at Dent Research.

Each of us – Harry, Rodney, Lance, Charles, John and myself – have rejected the spoon-fed advice of buy-and-hold… and we’ve each found our own ways to grow our wealth and plan for retirement.

Me…?

I’m a trend-following systems guy – so that’s the type of firewood I’ve been stockpiling for my own retirement.

Harry…?

He’s a big thinker and risk-taker – so he’s found tremendous success building his retirement nest egg through some unconventional means, as he explained here last week.

And Charles…?

He’s a stodgy conservative – so he’s found ways to get automatic checks every month! He’ll be sharing the details with you later this week, so don’t miss it.

The great thing about investing is there are many ways to “win” at it. What’s right for me isn’t always going to be right for you. And that’s OK.

You’ve just got to figure out what works for you… and then get to chopping that firewood! Or collecting those automatic checks…

 

 

 

 

Adam O’Dell

Editor, Project V

Follow me on Twitter @InvestWithAdam

The post Stockpiling Wood appeared first on Economy and Markets.

Not Quite a Stock… Not Quite a Bond

Stock prices are expensive by just about any traditional metric you want to use (and have been for years), yet prices keep edging higher. And it’s doing this in the face of Fed rate hikes and rising long-term bond yields.

It reminds me a little of the late 1990s. Fed Chairman Alan Greenspan warned of “irrational exuberance” in the stock market in late 1996… yet prices continued to get even more irrationally exuberant for another three full years.

Is history repeating itself?

Frankly, we can’t really know that until after the fact. All we can do is look at the options we’re given, and follow the value.

This brings me to just one pocket of the private income fund market that is poised to do well if the market continues to push higher… but not get hurt too badly should the market finally succumb to its high valuations and roll over: convertible bonds.

For the uninitiated, convertibles are bonds that can be converted into company stock at a fixed price, generally well above the current stock price.

Companies issue convertibles over traditional debt or equity for a couple reasons. To start, stock holders tend to get angry (and justifiably so) when a company issues new stock, as this dilutes the existing shareholders and usually pushes the share price lower.

If a company announces that it plans to increase its shares outstanding by, say, 10%, the share price will generally fall by a comparable amount. So, by issuing a convertible, the company is guaranteeing that any share dilution will happen in the future and at a higher price.

Investors should find that a lot less irksome.

Convertible debt also tends to trade at a lower yield, as investors are willing to accept lower current income for the potential future payoff of stock conversion. This keeps the company’s cost of capital down.

For investors, the benefits are obvious.

You get the upside of long-term stock ownership but without the risk. If the stock price soars, great! You convert your bonds to stock and enjoy the profits. But if the stock languishes, you still enjoy the current income stream from the bonds and the peace of mind of knowing that the bond will eventually mature at par value, returning your principal to you.

And should the worst happen – bankruptcy – as a bondholder, you get made whole before the stockholders recover a single red cent.

So, convertibles are a nice hybrid asset class with most of the best attributes of both stocks and bonds.

Alas, it’s not all sunshine and roses. There are a few issues that I have to address.

To start, the companies that issue convertibles tend to be a little on the riskier side. The lower interest payments are particularly valuable to younger, riskier companies in need of growth capital. By buying a fund, you massively lower the risk that a default will torpedo your portfolio, and that makes me comfortable with the asset class. But let’s be clear that we’re not buying AAA-rated Johnson & Johnson bonds here.

The second issue is that of liquidity. Lack of liquidity is a problem throughout the bond market these days, even in the Treasury and muni bond space. (It’s partially an unintended side effect of the Dodd-Frank regulations; due to the restrictions on trading their own accounts, banks have massively cut back their bond trading desks.)

The bonds of smaller companies tend to be even less liquid. Again, by owning these in a fund – and particularly a closed-end fund – this risk is mostly mitigated. Unlike a traditional mutual fund, these types of funds can’t be forced to sell their bonds due to shareholder redemptions. They can generally ride out any minor rough patches.

Convertibles are attractive right now for a couple reasons. To start, they give you equity upside if, as Harry expects, the stock market goes higher over the next several months, or more. But they also have less downside than owning stock funds outright, and they are a nice portfolio diversifier.

I’ve recently recommended a convertible bond fund trading at a deep discount to net asset value… and yielding a fat 9%. So even if the market goes sideways for months, we’re likely to chalk up a respectable return. And if the market continues to push higher, returns of 20% or more over the next year are very possible.

Next week, I’ll reveal much more important and potentially ultra-lucrative income secrets; ones that’ll hand you automatic income every month. Watch this space for more information.

 

 

 

Charles Sizemore

Editor, Peak Investor

The post Not Quite a Stock… Not Quite a Bond appeared first on Economy and Markets.

No One Cares as Much as You

I’m moving. And it’s a royal pain.

Beyond the hassle of physically getting all of our stuff from one state (Florida) to another (Texas), I have to deal with a mortgage lender on the new house. At first, against my better judgment, I called Bank of America.

As I told the guy I spoke with, I’ve hated the bank for the entire 23 years I’ve been with them. There’s been way too many hassles for what should be simple business transactions.

But the local people I’ve dealt with the last few years have been very helpful, so I took a shot, despite my gut.

It lasted three days. By the fifth call to follow up on docs and verify what was going on, I realized that every time I speak with them I have to go through a phone tree.

Yes, I know the guy’s five-digit extension. And yes, after entering, I can verify that’s the extension I want. Then, after he answers, he’s required to recite his mortgage lending number, his name, and that the call is being recorded.

After that, I’m required to prove who I was by reciting my full mailing address and social security number… Every. Single. Time.

I told him that, as much as the bank told me this was a personal banking relationship, I couldn’t help but think that friends don’t operate this way. He said it was just protocol. I said goodbye.

It doesn’t matter how much the bank advertises that it wants to be my “friend,” or that it “knows what I need,” the truth is that it’s just business. Period.

I wish advertising wasn’t so hypocritical, but that’s a story for another day.

Today, the lesson learned – or at least reiterated – is that no one really looks out for you better than you.

No one is as interested in your success as you.

No one will care as much if you fall short of your goals as you.

And no one’s going to be as concerned as you are if things don’t work out the way you planned.

That’s why every one of us must be as diligent as possible when making life choices. And after choosing a spouse, mapping out a secure financial future has to be at the top of the list.

So with the markets looking for direction as President Trump gives Democrats, other world leaders, and even many Republicans heartburn, now is a good time to think about what you own, and why.

When I look in my accounts, I’m happy that I can explain much of what I own, and how I think it will lead to a more comfortable future.

I’ve written on retirement planning a number of times, and my theme remains the same.

I’m more interested in building streams of income, automatic ones if possible, than I am buckets of wealth. Many people think they’re interchangeable. They aren’t. If you end up with a big bucket of money in an account, good for you. But then what? Do you spend it down? And how are you going to build it? Through high-risk investments that might or might not pay off?

I know that sort of thing works for some people, but not me. I like to sleep at night, so I take a different approach.

I have a few life insurance policies with dividend riders that grow tax free. I’m able to borrow against them without taxes as well. When I pass, the insurance proceeds will settle up against anything I’ve borrowed, and then pay out to my heirs outside of probate. This part of my plan falls into the “set it and forget it” category.

I also have an allocation to equities, where I use a proven strategy to grow the value over time. It’s not high risk, but the value does fluctuate with the markets. My goal is to obviously outperform buy-and-hold, which I’ve been able to accomplish. But there is risk.

The last big piece of my plan involves fixed income, which I can use today in the accumulation phase of my plan, and keep using once I get to retirement age and start drawing from my investments.

This is where I use a strategy very similar to what Charles plans to talk to you more about next week, when he reveals important, income-boosting secrets; ones that are designed to hand you automatic checks every month. In fact, it’s modeled on my personal investment approach.

The key to this part of my portfolio is to understand how the investments react to interest rate changes, and then consider what lies ahead. Rising rates hurt certain funds more than others. But falling rates give these funds a bigger bang for the buck. Also, they can trade above or below their estimated value, depending on how investors view them at the time.

Rates have jumped since last summer, dealing these investments a setback. For this reason, investors are shying away, so many of them trade below their estimated value. Because I think rates will trend lower in the months ahead instead of higher, right now is a good time to add such holdings to my portfolio. As I said, Charles will reveal much more next week.

I mentioned that fixed income was the last big piece of my plan, and it is. But I do keep a small amount on the side for high risk, high payoff investments. These tend to be private investments that are illiquid, but could be home runs.

It doesn’t make much sense to get involved in these things, but something in me just calls out to swing for the fences once in a while. To date, I’ve made five such investments. Two lost money, one paid off modestly, and the remaining two are still in play.

It’s a good thing I allocate most of my holdings to more conservative investments. Otherwise, I’d find myself in retirement looking for someone to care about how much I lost along the way.

 

 

 

 

Rodney

Follow me on Twitter @RJHSDent

The post No One Cares as Much as You appeared first on Economy and Markets.

How To Stake A Claim On the World’s Most Premier Real Estate

If I asked you to think of famous buildings in the world, what would come to mind?

The Chrysler and Flatiron buildings in New York?

The Eiffel Tower in Paris?

Maybe even the former Sears Tower in Chicago.

Whatever you can come up with, they’ll likely have three characteristics: their designs are instantly recognizable, locations unmatched, and significance unmistakable. They are timeless monuments to human ingenuity and triumph, as are many trophy properties.

It’d sure be nice to stake a claim to one of those buildings, eh?

Well, it’s harder and easier than you think.

I’m sure it’s no surprise to you then that prime city real estate is priced sky-high worldwide. Buyers are paying so much for commercial buildings that their rental income is just too low. This is typical for the real-estate cycle, but we’re approaching the top of the roller coaster. It all comes rushing down at some point.

But real estate, especially trophy buildings in the most important cities, is still one of the best ways to make fortunes. When economies soften, it’s these buildings that stay rented – and at top rates. Weathering the storm is key, regardless if you’re a regular investor or a billion-dollar CEO managing a brand.

This month’s issue of Hidden Profits bridges that gap, and it contains a sleeper investment opportunity.

The opportunity is new, misunderstood, unfollowed – everything I like! – and because of these juicy characteristics, you can buy the stock today for a mere 67 cents on the dollar. It’s as if, in today’s overpriced financial centers of London, Paris, and Frankfurt, you could buy prime Class A office buildings while everyone is stretching to pay too much!

As you know, I run possible investment opportunities through my six forensic investor tests. And this latest addition to Hidden Profits passes each one with the highest grades of any to date: All A’s and A+’s.

It’s cheap and ignored, while boasting rock-solid fundamentals. And, it pays us not only one or two of the ways we like, but all three! It’s the first Hidden Profits model portfolio stock that checks all three boxes.

Here’s just one way this company “pays us first” – and it’s a doozy.

Think of it this way: when you own buildings and your stock is selling for a fraction of what they’re worth minus debt – their net asset value – do you go out to buy more overpriced buildings? Heck no! You buy your own buildings, on sale, through your own stock.

Well, our hidden profits gem this month has just completed a huge discount stock buyback and has another one going for 15% of the shares at a 33% discount – 67 cents on the dollar of real estate value. Every time it buys a share, it “earns” 33%, instantly.

And that’s on top of a 5% annual dividend, for a total of 20%, all while a 50%-100% pop to a normal value lies ahead.

There’s more. Our jewel is paying down higher interest debt and saving on interest. So, add another 5% or more to the shareholder yield to reach 25%. While we wait for the stock to zoom, management pays us by making our shares worth more.

Want to lay a claim to some of the world’s premier real estate holdings? This might be your best chance.

Good investing,

 

 

 

 

John Del Vecchio

Editor of Forensic Investor

The post How To Stake A Claim On the World’s Most Premier Real Estate appeared first on Economy and Markets.

My Strategy for Retirement: It’s Not Like Yours and Shouldn’t Be!

[image error]I think most of you intuit that I’m not like the normal guy out there. I think outside the box, analyze everything, respect and revere cycles as much as I hate them for their downside and discipline.

The truth is, I’m an entrepreneur, more than I am an economist. In fact, I think economics is mostly a load of B.S., and there are only three classical economists I pay any attention to: Dr. Lacy Hunt, Steve Keen, and Robert Shiller.

As an entrepreneur that just happened to trip onto demographics while consulting to entrepreneurial businesses in the 1980s, I found a profession that was stale and ripe for radical new insights…

That’s how I became a “rogue economist.” And most economists hate me for daring to disrupt their nice, neat and academic “pipe and cloak” club.

The reason I respect Robert Shiller, who is more traditionally academic and now more respected, is that he came up with new indicators that showed that real estate doesn’t appreciate long term when adjusted for inflation… Damn! (The same is true for gold.)

And he adjusted P/E ratios (valuations for stocks) to iron out extreme cycles with a 10-year moving average for earnings… kudos again.

He saw the bubble peaking in late 2005 in real estate, as did I, and he is now worried again about another bubble in stocks.

But back to my story…

Since I am an entrepreneur by nature, I take big risks and I’m enticed by radical innovations that can change the world.

I have no interest in being in “the club.”

I have little interest in traditional asset allocation and balanced risk versus reward strategies.

So, I invested in the late 1990s and early 2000s, when I made the most money from books, speaking and investment – when I was bullish and popular. But those investments were largely in new ventures.

I invested in people who were potentially changing the world in a big way.

I could afford the risk to invest in my passion.

But I didn’t fully understand those risks.

Such new ventures have extreme failure rates. They’re like babies crawling in the streets without parents to protect them! I put most of my money in new ventures and saw almost all of them fail. I finally got it when I talked with a friend who was a major venture capitalist investor. He said: “Harry, we only make it on one out of 11 at best – and we’re the best at what we do.” Well, his one was Oracle… and his returns were way better than mine. It’s what he did… and he got lucky on top of that.

Still, that didn’t stop me. Eventually, that one for me was… my own company! I learned to “stick to my knitting.”

So, now that I’m older and “wiser,” do I still invest more in other new ventures as I approach retirement?

No *bleeping* way! My circumstances are different now, as are my needs. I need more income and lower risk as I get ever closer to retirement.

Of course, I have no intentions of ever retiring. I think the whole concept is complete idiocy. Human beings are not meant to sit idle for decades. Still, I realize that, as I age, I must prepare for a time when either health or something unexpected slows me down. I’m a risk taker, yes! But I’m not stupid.

So, I now have two baskets of assets. The first is a cash hoard. I’ll take 10% and profit from the initial 40% crash in the bubble burst ahead. The rest of that cash I’ll put to work in our array of investment plans for a balance of risk. I’ll start with Adam and Lance and John’s services and then move into the lower risk strategies like Rodney and Charles over time.

The second basket is my one real estate asset that has done better than any new ventures I tried. I’ve been renting my primary home since late 2005, when I forecast the real estate crash. After all, I eat my own cooking.

The only real estate I kept was a 25-acre lot on an island with the best view ever. I kept it both because it was my “get-away” if things get as bad or worse than I expect, but more because it was due for five-acre zoning which has now finally happened. That means I not only have a house worth a lot with almost no debt, but I now have four extra five-acre lots to sell, and they’re each worth 70% of what the original 25-acre lot was worth… oh yeah!

So, my strategy is to get more conservative while still taking some risks. And my real estate will become a cash flow machine through rentals… at least for now.

Then, around 2024/5, when the baby boom peaks in its retirement and vacation-home-buying cycle, I’ll sell my house and those four extra lots. That will greatly increase my nest egg for “retirement.”

You may be wondering about why I’ve got real estate as part of my retirement plan when I believe we’re in for another real estate bust. It’s a good question. And a simple one to answer. I bought this property decades ago, at barrel-bottom prices. Even once real estate prices reset, as I expect them to, I will still have a decent investment on my hands. It’s a win/win on real estate that otherwise would be a horrible investment for most.

So, that’s my retirement plan.

I’ll enjoy paradise, moving between a great San Juan condo and an ultimate vacation home – both with killer views – until well into my 70s. Then my wife and I will move back to Florida, to be close to the best medical facilities anywhere. We’ll steadily get more conservative, building income as much as possible, while still taking some risks. What can I say? Once a risk taker… always a risk taker.

 

 

 

 

Harry

Follow me on Twitter @harrydentjr

P.S. The key component of my retirement strategy is income. Everything I’m setting in place, with the exception of the 20% I’m risking – is designed to feed me more and steady streams of income with every year that passes. And that’s what Charles aims to do for Peak Income subscribers. You’ll be hearing more from Charles about why this is so important over the next couple of weeks, so do yourself a favor: listen to what he has to say.

 

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