Today's Market
by Dr Invest

Over the past months, the market continues an upward climb. One would think that we are setting on an economic rocket. While the GDP is expected to grow barely over 2%, growth projections over the next 10 years for the GDP is estimated at only around 1.8%.

The problem is that a double digit growth in commodities in 2013 doesn't reflect the actual weakness in the economy. Analysts have acknowledged that the economy is weak and will be even weaker in 2014 because of increased taxes from Obamacare. Adding to the increase in taxes is the requirement that families purchase medical insurance. Even with subsidies, the poor will see a drain on their total income as they pay something for their health insurance. This means less money per household for consumables. This is why the projection is decreased for overall GDP. When you don't have extra money to spend, you put off buying a car, a washing machine, a television, a computer...etc. The economy never heats up... it can't heat up, because the economy is stagnant.

The greatest fear is that we will return to the STAGFLATION of the 70s. Government stimulus pushes prices higher, but taxation and debt bring recession as people have less to spend. Experimental Economics will result in even larger bubbles and the outcome will result is great sorrow. The poor will become poorer, the middle class will slip into poverty, and the wealthy will become less wealthy. Because people are earning less, state and national government will collect less taxes and pressure will be put upon politicians to tax the wealthy even more.

There is no significant growth in the economy, but rather a significant slowing. Stocks are being priced in at some FUTURE value, but when it is clear that that "future value" cannot be achieve, there will be a sudden sickening sell-off.

Knowing that the economy is deteriorating, I couldn't risk the potential losses that are sure to come. I continue to hold some bond positions and a few stock positions but believe that a downtrend will begin in the first six months of 2014. As I have already said, the economy has deteriorated over the past two years. The government has set new guidelines for the CALCULATION OF INFLATION, the CALCULATION OF UNEMPLOYMENT, and the CALCULATION OF GDP that makes the economy appear more robust that it actually is. Everyone knows that this is simply a "fudging of numbers" and "creative accounting". If you or I did the same kind of accounting, we would be immediately charged for criminal conduct.

SUGGESTIONS

If you are already in a stock position, keep a stop-sell on your positions. For example, if you have seen an increase of 15%, a stop-loss set at 10% might be acceptable for 2013. If the new Fed Chairman keeps stimulating, your stocks could rise even further until a collapse in the market is achieved. If you do not hold stock positions, don't buy them now. Stay away! Stocks are overvalued and overbought. Go buy a good certificate of deposit until the storm passes.

The above information is for entertainment purposes only and should not be used as investment advice.

Today's Market
by Dr Invest

Not much has changed for the small investor. Do you want to get into an already overbought market? Today we broke new highs. What is troubling is that the new highs are not based on any true economic recovery. The volume of stocks bought has been low as compared to the prices of stocks that are soaring. This trend is very disconcerting to many investors.

DEFLATIONARY PRESSURES

The prediction is that retailers will see consumers restricting their purchases this Christmas Season. To spark interest in the consumer, the retailers will have to LOWER THEIR PRICES. This brings deflationary pressures to market. Retailers ask wholesalers for a reduction in prices, wholesalers ask factories for a reduction in prices and so forth. Factories may layoff workers or ask them to make concessions. The workers have less money and begin to look for their own lower priced bargains.

Yes, this is the PRE-STAGFLATION period, where some areas inflate and other deflate. Yesterday, I met with a community board of directors. One of our board members, who serves on a number of local boards, explained how financially troubled several of the non-profit organizations were. I asked for his opinion on the reasons. He said, "Those who give, most often seniors, lost 40% of their investments in 2008. Even after a remarkable rise in the stock market, many have not fully recovered."

When you think about it, you lose 40% of $500K or $200K. Now you have $300K remaining in your nest egg. If you are withdrawing 8% annually for retirement income, that amounts to $120K over a five year period. You lose another 2% to an investment adviser and 3% to inflation which amounts to $75K over a 5 year period. Only half of your $300K is invested in stocks or $150K. Bonds have been tepid. So almost $200K is spent of the $300K. Without going in to the detailed calculations, you might have $400K remaining of the original $500K. At this point you are saying, "I need to save money! I haven't even reached the wealth I had five years ago.

EURO DEFLATIONARY PRESSURES

So analysis released a report today, saying that the ECB (European Central Bank) was under the threat of deflation and could force the bank's hand soon. The rate of inflation had slowed unexpectedly to just 0.7%, the lowest rate in four years, tripping a vicious cycle of falling prices, wages, and output.

While we in the U.S. are in a little better position, a deflationary cycle in the EURO would definitely effect our own economy. This is the danger of stimulus. You can either heat-up the economy or have liquidity that no one can access. We have plenty of liquidity in the U.S. , but no one can borrow it!  Those who can access the liquidity don't need it.

STAY ALERT

Go back to the previous two articles. I expect that a clear direction will emerge in the next three months. I am not ready to accept the risks and have been out of stocks for the past year. Regardless the gains, the potential losses could break you. Presently, I am waiting for a decline in stock prices and an entry point where stocks are not overvalued.

(Note: the above information is for entertainment purposes only and not to be used as investment advice.)

Today's Market
by Dr Invest

If you have been following this blog, you are probably waiting for some turn-around news. For the past two years, I have been reducing my position in stocks. Others have been increasing their position in stocks as the market has climbed to new highs. I am reminded that "I would rather be out of the market wishing I was in, than to be in the market wishing I was out." I have missed a "big move" in the market. But with a market that is manipulated by the Federal Reserve and the over exuberance of investors pushing the market ever higher, I have not felt that the risk is worth the reward.

In the previous article, I have shown you a possible trending in the market and the potential for a dramatic collapse. Below is noted "DOUBLE TOP" patterns. The retreat from the high in the S&P is a likely indicator of an impending down trend. I don't believe that "government stimulus" will prevent the coming decline and could aggravate a healthy return to growth.

Buffet has complained about it being hard to find things to buy. The Darden Restaurant chain (Olive Garden, Red Lobster, and Longhorn Steakhouse) is cutting employees and trimming budgets. JC Penny continues in a decline. The government reminds us that unemployment is declining, but companies are talking about letting employees go. On one side there is the declaration of a STRONG & VIABLE MARKET, yet numerous companies are talking about part-time employees and letting full-time employees go. CNBC reported today:

Gina Martin Adams is sticking to her guns.  The Wells Fargo strategist has been bearish on stocks all year, even as she watched the S&P 500 (^GSPC) add 21 percent. And on Thursday's " Futures Now ," Adams reiterated her call that the index would close out the year at 1,440.

"Our target is based on fundamentals," Adams insisted. "We're basing our target on typical valuation measures, given the level of interest rates and also on earnings forecasts. And that's why our target is relatively low."

In fact, "low" is somewhat of an understatement. Adams' target implies that the market will drop 16 percent in little more than three months, erasing everything that stocks gained after the year's first day of trading. This makes her one of the lone bears on the Street.

So what could produce such a dismal fourth quarter for stocks? First of all, Adams is highly skeptical about the rally that the market has enjoyed thus far. "It's all about emotion at this point. The entirety of the S&P 500's increase this year has come via the multiple," Adams said. "It's been simply through the amount that investors are willing to bid up the value of the future earnings stream."

Indeed, the S&P 500's price-earnings multiple has risen from 17 on Jan. 1 to nearly 20. That means the market has largely been rising due to investors' willingness to pay more for those earnings.

I am not going to print the entire article on my blog, but her voice is not a lone voice. She expects this downtrend to unfold in the next three months. 

I have no real advice to give, other than find a competent financial adviser you can trust. Adams is suggesting a 16% decrease that would erase any profits your portfolio has gained this year. I am suggesting that a decrease would bring a SELLING PANIC, pushing the S&P down even lower. 

(Note: the above article is for entertainment purposes only and not to be used as financial advice.)

Today's Market
by Dr Invest


Over the past months, I have pointed to several key challenges for the casual investor. First, stimulus has changed the normal cycles of the market, creating distortions that make the market appear more robust than it really is. The new criteria for measuring GNP, creative accounting when it comes to measuring inflation, fudging the numbers on unemployment are all the new norm for important data provided by the government that the investor needs to make sound investments.

Added to this are the all-time high profits recorded by corporations, the highest PE (Schiller), and a remarkable climb in the market only known when GDP was at a high point; these distortions are all part of government market manipulation and government propaganda.


Indeed, no one can predict where the market will move as central banks attempt to keep their stagnant economies vibrant. This unpredictable condition can be called a "High Risk" condition. Hussman, Rogers, and Faber believe that whatever gains may have been achieved over the short-term will be lost by a rapidly declining market. Because of computer trading, the market can decline hundreds of points in a day and instead of a stair-stepping down, most market declines can appear as though they have fallen off a cliff. A good example of this was the "flash crash".  Investors are already overly cautious, even though presently invested. Most have stop-sells in place and the winners will sell out before a deep down trend sets in.

The above chart simply makes note of business cycles and patterns that may or may not apply. My guess is that the market topped on July 29th and that after a short correction, the market will top again around the end of December, collapsing as we move into 2014. The risk is too high for me to be invested in stocks at this time. I would prefer to see the market do more than correct by 10%. I am waiting for a 30% to 40%   correction where I can enter the market as it nears a new low.

Volatility in Egypt and continued decline in the European market will affect the present market. I projected in May, a potential "Head and Shoulders" formation. Bernanke's renewed commitment to stimulus moved the pattern into a "Break-out". Our own GNP and world-wide growth has been so low that the actual potential growth in the stock market should be around 1.8% or less, yet we are seeing double digit returns.

In my July 19th blog, I showed a bar chart of monthly averages from the Trader's Almanac. Both August and September have been traditionally bad months for stocks. The recent down trend in stocks is proving that the market is following the typical business cycle. Today, several analysts suggested that we would see a decline of 10%.  Looking again at the above chart, you can see that the market hits an all-time high, loses momentum, regains the previous high, and then begins trending downward.

I am projecting that a similar pattern will take place between now and January of 2014. Please be aware that the Federal Reserve will be trying to circumvent this pattern. So, just because the pattern exists, doesn't mean that the pattern will result in a recession. What I am saying, is that the probability of a recession is growing and could happen at any time or later that projected, but it will happen.

(note: the above information is for entertainment purposes only and not to be used as investment advice.)

Today's Market

The Suit is always right!

by Dr Invest

So here we sit, waiting. If you are in the stock market your gains for 2013 have been nothing short of incredible. What is even more remarkable is that this spectacular growth in stock prices has occurred while the growth in the U.S. economy has been at an all time low. None of this really makes practical sense and everybody is well aware that the government has "cooked the books" and the Federal Reserve is "manipulating the market". Like a train wreck certain to happen, we just can't look away; fully knowing that immediate returns from stocks are due to to government stimulus, we just can't stop investing in a market that is certain to collapse. 

This past week, bullish sentiment continued to be high. The expectation is that the stock market will climb unabated. Listen the S&P has already advanced over 21% in 2013. These kind of pressures are too great to miss, even if the risk is high. This is free money, offered by the tax payers via the Federal Reserve. Why shouldn't an investor take advantage of these kind of returns?

The problem is that no one can predict when the collapse will come, but when it does, it will be sudden and without warning. Yes, there is a group economists warning about this coming calamity but the party is just getting underway. When the fall comes, most investors will find their gains erased and their fortunes lost. 

In all the years I have invested, I have never seen such a year as this. And I have never seen such a cooking of the books by the Federal Government. Read the report below:

 The 162,000 jobs the economy added in July were a disappointment. The quality of the jobs was even worse. A disproportionate number of the added jobs were part-time or low-paying — or both. Part-time work accounted for more than 65 percent of the positions employers added in July. Low-paying retailers, restaurants and bars supplied more than half July's job gain.

"You're getting jobs added, but they might not be the best-quality job," says John Canally, an economist with LPL Financial in Boston. So far this year, low-paying industries have provided 61 percent of the nation's job growth, even though these industries represent just 39 percent of overall U.S. jobs, according to Labor Department numbers analyzed by Moody's Analytics. Mid-paying industries have contributed just 22 percent of this year's job gain.

This is once again, the "cooking" of figures by the government showing remarkable declines in unemployment, but a closer looks reveals poor job opportunities and even poorer income that reduces the consumer rally to fuel a strong economic growth.

As all ways, if you are invested, guard your profits with a stop-sell. If you are not invested, stocks are over valued, over bought, and could lose value. I am planning to stay out of stocks until there is a significant decline, likely after reductions in the government's quantitative easing.

(Note: the above information is for entertainment purposes only and not to be used as investment advice.)

 

Today's Market
by Dr Invest

After yesterday's post, I did a little more research on the Triple Top Stock Pattern. The S&P 500 is displaying this signal over the LARGE MARKET. This is disconcerting at the least and if true, it is potentially an event of a great magnitude. I am fully aware of the market exuberance and the bullish trend purported by most of the investment community. This exuberance continues in the light of a weak GDP and poor growth. Even with continued stimulus purchases by the Federal Reserve, the government's own estimations of growth for the remainder of the year is a tepid .8%. We are moving into August and September, months with traditionally poor stock performance as seasonal averages. Adding to this world-wide recession, lower corporate profits, and over 4 years into a bull market that typically falls to a bear market between the 4th and 5th year, and you have multiple factors that could set the market up for a serious downtrend.

THE TRIPLE TOP

If the overall market is at a TRIPLE TOP (pattern), then the outcome is a move below the baseline. As predicted by Chris Martenson, a 60% decline could be possible. This is why John Hussman sees the gains brought by greater risks, completely erased by a sudden decline in the market. Remember that if your portfolio simply falls 50%, you must see a 100% gain to return you back to your original portfolio's balance.

In this scenario, the S&P returns to the baseline, losing 800 points and possibly even another 800 points as it plunges below the baseline/support. This means repeating 2008 and possibly even below the lows of 2008.

DOUG SHORT

So, what is fundamental analysis telling us about the SP500's potential "Triple Top" pattern? Interestingly, a broad market valuation measure called the "Tobin's Q Ratio", which has spotted every important generational stock market top of the past century, shows that stocks are quite expensive and comparable to past valuation levels that occurred at important prior market tops:

Chart Source: Doug Short, Advisor Perspectives

A historically-successful investment strategy is to buy stocks when the Tobin Q-Ratio is low, like in the early-1950s and early 1980s, and sell stocks when the Q-Ratio is high, like in 1929, the late-1960s and in 2000.

Go to: http://cybertradinguniversity.com/new/uncategorized/is-the-sp500-forming-a-triple-top-pattern/
to read the details of what someone else also discovered regarding this TRIPLE TOP FORMATION.

THERE IS ONE OTHER POSSIBILITY

Admittedly, there is one other possibility in this TRIPLE TOP PATTERN, a TRIPLE TOP BREAKOUT. This would present a remarkable buying opportunity, with the S&P 500 strongly rising another 800 points. The problem is that we don't have anything near a dynamic growth in the market, so this scenario seems very unlikely.



THE POWER OF GOVERNMENT MANIPULATION

Over the past year and a half, I have seen the power of the Federal Reserve in action. The promise of stimulus kept the stock market rising, and then when promises could no longer keep investors in the market, Bernanke began his massive QE through the purchase of bonds and bad mortgages. That step moved the FED from an adviser to an actor. The market could not fail, because the FED was invested along with the banks, funds, and private individuals. Even the hint of reducing QE put the market into a swoon, sending mortgage rates to new highs. Only after a carefully worded apology by Bernanke, explaining that no reduction would occur in the near future,"maybe... er... unless I think it necessary...but...uh...I don't think it is necessary now...umm... if unemployment stays above 6%...but ...er... then we might consider reducing bond purchases... uh... if we want to!" so said, Bernanke. But cautiously accepting this new apology by Bernanke and believing that Bernanke would now play fair, the STOCK BUYING PARTY has continued, pushing the market indexes higher and higher.

It seems to me that the Federal Reserve could keep the market climbing. In May was a clear Head and Shoulders Pattern, but Bernanke's promises to keep the bond buying pushed the market out of this potential deadly pattern. So here we are again, a pattern that portends a solid downtrend, only the market knows if it will accept Bernanke's reassurances that the Federal Reserve will keep the Bear's at bay.

(Note: the above article is for entertainment purposes only and not to be used as investment advice.)

Today's Market
by Dr Invest

The market continues to hum along, advancing day by day. It seems that some energy has come out of the market and CYCLIC AVERAGES are not favorable for the months of August and September. One would expect a decline in the market over the next two months. The problem is that an artificial market, bolstered by central bank stimulus, doesn't respond in predictable ways.

The Federal Reserve has created a cash conundrum in that, stocks are too overpriced to get into the market and bonds are in a bubble that could collapse at any moment. Major investors are still holding cash, and are reluctant to enter stock positions where prices could collapse at any moment. Many financial advisers, touting the BUY AND HOLD philosophy, are now boasting about their returns. Since 2009, the S&P 500 has risen well over 100%, but most portfolios have not realized these theoretical gains. (Theoretical, because when stocks collapse, advisers rebalance their customer's portfolios.)

So while some portfolio managers gloat over new found successes in market (based solely on government stimulus), many have failed to look at the overall pattern that is forming over time. This is a BIGGER pattern based on the LARGE MARKET. Central Banks can control the "small market" moves, but patterns and bubbles can form that can are too big for Central Banks to control.



The Federal Reserve has done numerous stimulus programs. Before the fall of the market in 2009, the Federal Reserve attempted a stimulus program but the LARGE MARKET move downward was unstoppable. The market may well continue upward with a breakout and stock market growth over the next five years, however; a weak GDP and world-wide recessionary pressures would not make this scenario a favorable outcome. Chris Martenson is forecasting a 60% decline in stocks, to begin at any moment. (Look up the Triple Top Pattern)

I believe that each of these peaks is the result government interventions in the market. Provide people easy money policies and they will spend, but eventually this continued spending will bring the market to a point of exhaustion. We can see two peaks in the above graph showing that point of exhaustion. We are now at the third peak.

Below is a forecast for business cycles by Princeton Economics LTD. Martin Armstrong built a 8.6 year Economic Confidence Model that is fairly accurate.



As with all "generalized models" the stock market has not followed this cycle perfectly and we can still point to the intervention of the Federal Reserve, changing these normal business cycles. The Economic Confidence Model does show a downtrend in the cycle beginning in August of 2013, continuing until September of 2014.  Will this be an entry into a recessionary period?

An investor needs to be aware of potential market trends. Stocks, overvalued, and monthly cycles turning potentially turning downward in August and September, could affect short-term profits in a negative ways. Moreover, there seems to be models that forecast a downturn in the business confidence cycle beginning in August and extending into the fall of 2014. None of this may happen and all of it may happen.

These potential trends would not keep me out of market, but when combined tepid GDP growth, I would be motivated to avoid the risks in the market.

(Note: the above information is for entertainment purposes only and not to be used as investment advice.)

Today's Market
by Dr Invest

Well, the test is finally here. Moving into a new earning season, will we see the continued corporate profits or will we see deteriorating corporate income. Will we continue to see a decline in unemployment or will employment remain flat? We can only speculate at this time whether we will see a continued rise or a coming decline in stock prices, but both world markets and the U.S. market seem to be slowing down.


We have been told by the Federal Reserve that the economy is rebounding and investors are relying on this fact. Certainly, with the manipulation by the Federal Reserve there are no longer characteristic expectations from the market. The STOCK ALMANAC is almost useless and all predictable stock patterns have become entirely unpredictable in the light of increased volatility.

Looking at the stock averages below, we see a poor chance of stock gains in August and September. July is half finished and while the S&P is reaching for new highs there seems to be some caution signs ahead.



At this time, I remain largely in a cash position. I am holding small positions in TIP and MBB but I am waiting to see if these positions decline further before selling. Though market expectations are for unlimited gains, I remain uneasy with the increased market volatility and wait for a 20% to 30% decline in the market before reinvesting. This decline could begin at anytime, but is most likely between January and June of 2014. Nearby triggers are budget fights this fall, continued conflicts in the Middle East, and increased costs from the taxation and the implementation of Obamacare.

You can't hardly remain out of the market, but you can't hardly get into the market because of the volatility. I would rather lose my opportunity to make 15% now, than to lose 40% later. So I'm setting on the sidelines until October and then considering the climate at that time.

(Note: the above information is for entertainment purposes only and not to be used as investment advice.)

Today's Market
by Dr Invest

The report of a 1.8% growth in GDP simply proves everything I have been saying for months, our bull market rally is simply, BULL! There is NO REASON for elevated prices in stocks, other than liquidity pumped into the market by quantitative easing.

After I had first gotten married, I remember how I was struggling to pay my bills. Yet, a peer of mine had a large home, new furniture, new cars, a boat, the latest gadgets...  however; I was certain that he earned an income that was near my own income. I would guess, at that time he was earning $20K a year, but living like he was $80K. One day, when he was in a talkative mood, he began to tell me about his financial successes. The key to this visible wealth was DEBT. He joked about "owing the banker the shirt off his back", but the enjoyment all the things was too great for him to change his debt load. A year later, with a downturn in the economy, my friend lost his job and all his THINGS.

Our nation's GDP is growing at 1.8% and expected to grow no more than 2%, yet the stock market is growing 12% to 18%? This morning the spin-masters are already sending a boat load of positive articles, reminding us that BONDS are whack, that GOLD is moot, and that STOCKS are destined for end-less gains. Even though everyone saw the volatile reaction of the market at the suggestion of a reduction in stimulus, the stock brokers are now advising them to get into the market because there is no finer time.

Your financial adviser or broker is not typically interested in your portfolio growing, he is interested in moving your funds around to get additional fees and bonuses. He is guaranteed a management fee, but there are also sales fees and transaction fees. Moving you to a "new" fund or taking on a "new" position in your portfolio is often more profitable to the financial adviser than to you.

THE KING'S CLOTHES

We have known for a long time that governments "cook the books". The way that the CPI is figured has been changed, so we don't really get a true sense of our real inflation. The way that unemployment is figured by the government doesn't truly reflect the depth of our unemployment. Can you ever remember the government under estimating the GDP? No, at the end of the year, it is always...ALWAYS... revised downward. So the present 1.8% GDP may be even lower.

If you ask anyone about inflation, they will tell you it has gone up. If you ask anyone about salary increases, they will tell you that they have gone down. Like the government, many individuals have found themselves earning less, but spending more.

Like the story of the King's Clothes, we have been told how beautiful the investment opportunities are but are in danger of exposing ourselves to public ridicule for putting our trust in those whose goal is to take advantage of us.

No one can deny the fact that stocks continue to climb, but when it is time to REDUCE LIQUIDITY in the market, there must be MONETARY DESTRUCTION. If you don't understand this term, look it up on WIKI. When a stock is overvalued, people can be influenced to pay the overvalued price, but at some point people will clearly see that the price of a stock is overvalued and sell their stock. Because they sold when there was still a demand for the stock, they made a profit. But others, beginning to see the sell of the overvalued stocks, can stay in that stock hoping for a recovery to even a higher price. (FOR EXAMPLE APPLE STOCK) When the stock goes down so much that there is PANICKED selling, then even the most positive investor is compelled to sell as well. The difference between the "high price" and the "low price" of the stock will be the monetary destruction and could amount to BILLIONS of dollars lost to monetary destruction.

As cynical as I am sounding, the government wants EVERYONE to get into stocks so this monetary destruction can take place. Yes, the government has bought BONDS and holds BONDS. Everyone now wants out of the bubble the FED created.... so they run to stocks... boom.... a sudden market downturn with investors loosing BILLIONS in stock value.... this is monetary destruction. You lose stock value and run to bonds...SOLD TO YOU BY THE GOVERNMENT. The government is now out of bonds, and you are holding those safe bonds after having lost 30% to 40% of your portfolio.

Life is good, when you can print enough money to move the markets and then destroy the money you printed by monetary destruction.

LOOK AT THE WEATHER

It is partly cloudy with thunderstorms in the forecast. The world economy is grinding to a halt. We are scheduled to have another government cut to the budget in October. In October, people will be signing up for one of the most expensive healthcare programs in the world with employers scheduled to carry one of the most burdensome financial expenses they have ever known, and 21 new fees and taxes will be implemented to cover these healthcare costs. Please think about it!

Though there seems to be some positive results in employment and corporate profits. These are hardly vibrant enough to warrant another 12% gain in the stock market.

(Note: the above information is for entertainment purposes only and not to be used as investment advice.)

Today's Market
by Dr Invest

I know, you want to make an apology. That's alright, the "Bull Mentality" is not over yet. The "talking heads" are already pretending that this is just a "temporary pull back" and a "buying opportunity". Now, they say, is the time get that money out of bonds and cash, so you can get your portfolio in stocks. Listen, they have been saying this for months now.  Others are saying, well a little reduction in QE is needed and it really won't affect the stock market, so investors have no need to get fearful of a major market pull-back. Really?

Today's sudden dive is symptomatic of market reality. The financial community has been dependent upon this Central Bank stimulus and is bloated with profits and bonuses from churning your investments. Removing the punch bowl means that the financial community will have to face up to the reality that we are along way from economic health.

Please... I mean, Please go to PBS.ORG and get the latest video: "How Retirement Fees Cost You Money". http://www.pbs.org/wgbh/pages/frontline/business-economy-financial-crisis/retirement-gamble/how-retirement-fees-cost-you/  This video by FRONTLINE will make you cry, when you see the pain people have gone through with their investments. The only honest voice I heard was Jack Bogle who started Vanguard. You will also find the video on YouTube.com.

There are many, many, many investors who have ridden the market to the top, and like previous investors, they falsely believe that the market will continue its climb. Our memory is short-lived. Since 2000, the market has been a wash-out. Since January of 2000 until now, the DOW has returned 32.33%. If I conservatively count that as 13 years, the average return is 2.4% annually. When you add the estimated 2% average annual CPI (inflation rate by government standards), you would have made .4% annually. I have been very kind in my analysis, because many of you are being charged 1% to 2% investment fees by your financial adviser. This means that while you puff up and talk about all the money you made this year, you are forgetting all the money you lost in past years. Your investment is underwater.

A Market Near Collapse

ECRI at businesscycle.com shows in their charts what we already know, uncertainty is in the market. Bernanke's new suggestion that QE may be tapered, raises further uncertainty. ECRI published the chart below, writing:

Despite surging prices for homes and equities, consumer spending is contracting, registering its biggest monthly decline since September 2009. Quite simply, the wealth effect is rendered moot by languishing incomes. 

No wonder yoy U.S. import growth has also plunged into negative territory, whether or not oil imports are included. In recent decades, this has happened only during U.S. recessions. Notably, unlike data for GDP and jobs, imports data are not revised substantially, long after the fact. 

Some are surprised that inflation has failed to take off despite massive amounts of quantitative easing. The explanation is simple: recession kills inflation. 

As a result, core inflation – defined as yoy growth in the Personal Consumption Expenditure (PCE) deflator excluding food and energy – has now dropped under 1.1%, to the lowest reading in its entire 53-year record. 

Meanwhile, yoy growth in the headline PCE deflator has dropped to 0.7%, its lowest reading since October 2009, and far below the Fed's official 2.0% target. This inflation measure has never been this low except during or in the immediate aftermath of recession.

The bottom line: for all the talk of the wealth effect, demand is falling and deflation is closer than at any time since 2009.



Last fall, ECRI called that the U.S. was in a recession. Only later, did the Fed admit that we were in period of contraction. (notice the careful use of words)  By January, the Federal Reserve became committed to its QE 3. Though there are some encouraging statistics, other statistics are in further decline. The above chart shows that beginning in 2012, an unusual anomaly rose in imports, with imports reporting uncertainty whether they would move up or down. Ranging around ZERO on the scale, imports have clearly turned down. When you look at all other examples in the chart above, where  U.S. imports DEFINITIVELY turn down, it has been indicative of a recessionary period.

Can we then, CONFIDENTLY declare a recession. NO! But a continued decline U.S. Imports makes an investor lose his nerve, as a shadow of possible recession extends itself over the present market.

Observations

If you are in the market, determine how much you are willing to lose and put a stop-sell on your investments. If you are thinking about getting into stocks, rethink this idea. Yes, I know that stock brokers/advisers are excited about how much their clients are going to make by moving into stocks, but are you sure that now is the time? If you are sure that now is an excellent buying opportunity, then confidently make your purchases.

Other than TIPS, I have been largely "out of the market". I did not return to stocks in January because all the fundamentals pointed to a declining economy. In spite of Federal Stimulus, I did not see the fundamental changing. Even today's economic fundamentals are questionable. Home sales have grown, but it is largely INVESTORS who are buying homes. Rising interest rates are excluding first home buyers. Lower unemployment is encouraging, but many of these jobs is work for unskilled laborers and part-time labor. This is hardly the things the American Dream is made of. Further cuts to the budget will automatically be enacted this fall.

Today's 206 point decline in the DOW is a sure indicator that many investors are unwilling to lose their gains. The 14% climb in the DOW since January is not likely to be followed by another 14% climb in the DOW for the remainder of the year. What is more likely, is a decline like we saw last year. The DOW could decline 14% and then start over climbing toward the end of the year. It is also possible that  the DOW could simply slide 30% or 40%. I would anticipate a mid-summer decline, that would be seen as a buying opportunity by the financial community; the market would continue rabid buying, ending with a strong contraction/recession in 2014.  In the last four years the market has grown 91%, adding the contraction period, we can divide 91% by 6, giving us an average annual gain of 15%. I can feel comfortable keeping a cash position for another two years and still see great gains after the stock market hits its down cycle and then returns to an up cycle.

(note: the above article is for entertainment purposes only and not to be used as investment advice.)

Today's Market
by Dr Invest

If you are small investor, I encourage you to remain patient. In this market, there are two things you need to do; control losses by use of a stop-sell and don't buy stocks while at a premium value. People, excited about  getting into a vibrant and rising stock market, have sold their bond positions and the government, suggesting that the stimulus program will soon be reduced, has become a threat to anyone holding bonds. Banks, having a tightening of their liquidity, have begun raising their interest rates. In the past month, interest rates have risen a half point. The government has done an excellent job of herding people toward stocks, but any investment position at this time will surely end in tears.

Here's why. Among the multitude of voices declaring an end to the recession and the beginning of a bull market is an overriding fact, we are still in a STIMULATED ECONOMY. Recent 200 point downturns in the DOW is due to an inference that the government would cut back their stimulus. Let me assure you, ANY REDUCTION IN STIMULUS by the FED will result in an immediate decline in ALL MARKETS. This is not the sign of a healthy and vibrant economy that is rebounding, but rather, an economy that is sick, lethargic, and near death. It is under these circumstances that hundreds of thousands of investors are encouraged to invest their fortunes into stocks.

Many investors understand that the present market is ARTIFICIAL, it is a MIRAGE, it is a LIE, yet; investors are so determined to see gains, they blindly place their money into the grandest of all PONZI SCHEMES that is run by our federal government. So the headline:"Nikkei Rises on Solid U.S. Jobs", seems to imply that we are well on our way toward recovery, but here is the rest of that article:

 "shares rebounded strongly on Monday, tracking a rally in global equities following U.S. jobs data that was solid but not strong enough to cause worry about near-term tapering of the Federal Reserve's ...

This is like saying, "The Titantic remains afloat, although many leaks persist and we hope the pumps keep working." Among lagging job reports, declining retail sales, decreasing buying power and increasing prices for commodities, there is a sinking feeling that among the poor and middle class that things are indeed getting worse. Add to this, ever increasing income taxes, property taxes, and Obama Care taxes. Then, recent studies show that Obama Care will not decrease healthcare costs, but increase healthcare costs. Those who are poor will be subsidized, but the middle class will carry the weight of these insurance costs. The wealthy "one percent" has plenty of income to pay for premium healthcare insurance and their taxes, the poor will have the middle class paying for their insurance because the middle class represents the largest part of the population paying the higher prices for healthcare to cover the poor who are subsidized by them. The middle class will pay higher healthcare costs and the lion's share of the taxes. (see www.economicpopulist.org  -  article: The Rich and the Rest of Us) The U.S. census says that 48% of the population are low income earners. 4.2% of the population make more than $250,000 annually. What this means is that 51.8% of the middle-class will be paying for the 48% who need healthcare subsidy. I was thinking that the government would pull money from their MAGIC BUCKET and pay for the low income earners, until I discovered that the government's Magic Bucket was my billfold.

What does all this mean. There is an end to stimulus, an end a kiting stock market, an end to limitless healthcare, and the end to the perceived good-times. When that end comes, the good-times will be met with tears and catastrophic reductions. Some say, "The government will keep the ball rolling, they will pay for the good-times to continue; but if history is an indicator what happens during a collapse, you need to look no further than the State of Minnesota, the State of New Jersey, or the City of Detroit. Governments do go bankrupt and the only avoidance are forced cuts to spending or reduction of services to the people.

Enough said. Wait for the economic cycle to turn down, only then will you be able to return back to the market.

(Note: the above information is for entertainment purposes only and not to be used as investment advice.)

Today's Market

by Dr Invest

What does today's sudden decline in the market mean? Absolutely nothing! As long as Bernanke continues his stimulus program, the market will climb; but the moment that Bernanke stops the $85 Billion of monthly stimulus, the market will immediately collapse. Not to repeat myself, GDP is only estimated to grow 2.8% in 2013. So does it make sense that the stock market would grow 14% or 16% or 18%? 

Company after company is being overvalued and the competitive valuation through stock prices keeps driving the prices up, not because of any real fundamentals but because of government manipulation of the economic markets. If an individual had done the same, they would have been sentenced to life in prison. 

Many years ago, the HUNT BROTHERS were accused of buying large quantities of silver to drive up the price of silver. On "Silver Thursday" the price of silver suddenly dropped as the market caught on to the ongoing manipulation, they were immediate set upon by the various governmental agencies, accused of varied charges for manipulating the price of silver. Yet, the government can do the same kind of manipulation, creating market bubbles that are destined to wreck the market. The Hunt's manipulation of silver, increased the price 712%. Four days after the silver market began its slide, silver lost 50% of its value. 

These kind of manipulations, whether done by governments or individuals, never turn out good. Many innocent people are hurt and in the months ahead, the same result awaits many investors. Be patient, protect your gains, this is a dangerous season and a more dangerous game. As an investor, you can;t be playing the tables, this isn't  LasVegas, the house always wins. Wait for the market to return to mean, to decline, to undergo a recession; then, you will be ready to get back in for a gain. 

(Note: the above information is for entertainment purposes only and not to be used as investment advice.)

Today's Market
by Dr Invest


A little over 101 years ago, a ship was making its way across the Atlantic. Aboard were both the elite and the impoverished. They knew immediately when the ship struck an iceberg from the groan of the ship, as it slid past that hulk of a berg that cut deeply into its side. The initial impact wasn't really taken seriously, because this ship was virtually unsinkable. Called the RMS Titanic, there was only a little concern about the impact.

It took over two hours for the Titanic to break into and sink; some lifeboats were only partially loaded because the crew believed that the Titanic would remain afloat. The reason I even mention this story is because our economy has struck an iceberg of debt and the government's refusal to reduce their spending. The economic ship is sinking, while investors rearrange the chairs on the deck. 85 billion each month is spent on monetary easing, pushing the stock market higher. It is like having the band play louder to drown out the cries of those drowning in the icy waters of continued economic decline. Recently the Secretary of Health has asked corporations to make contributions to help implement Obamacare. This one entitlement will place such a drain on the economy, both the wealthy and the poor will suffer from its economic burden. The ship is filling with water while politicians discuss the importance of government initiating even more reforms, rules, and regulations for small businesses to follow. My general feeling is that this will not end well.

"The Street" ran an article: "Stocks Slip on Concerns Markets are Overpriced". Another article was titled: "More Poor in the U.S. Suburbs". Here is a paragraph from that article: "Once considered the definition of the middle-class American dream, the suburbs are now home to a larger, faster-growing poor population than urban areas, according to a new analysis. During the 2000s, the number of poor living in U.S. suburbs grew by 64 percent — more than twice the 29 percent growth rate in cities.

Overall, 16.4 million poor people consider suburbia home, compared with 13.4 million in big cities and 7.3 million in rural areas, researchers for the Brookings Institution said in a book published Monday. The shifting poverty demographic can be seen in Chicago's suburbs, where the number of poor increased by 99 percent in the last decade — from 363,966 to 724,233, said Elizabeth Kneebone, co-author of "Confronting Suburban Poverty in America."

The economic ship is sinking while the Captain and his Lieutenants argue over the state of the ship. The passengers are only now realizing that the water is rising and it is only a matter of time before the boat begins to sink. Hopeful voices remind the passengers not to panic. So while investors slip back into their lounge chairs for another cigar and drink, the economic ship continues to fill with water.  Every thing said about the economic situation being only a small problem, will soon be revealed as a big problem. Both the wealthy and the poor will rush for the boats, abandoning their claims for the gold, clothing, or baggage remaining in their rooms. In panic, their only goal will be to abandon ship. 

I am not trying to be particularly negative here, I just want you to know that now is not as favorable time to position yourself in stocks as it might seem. The ship will lift itself from the water in only a short time, and then plunge into the deep, taking with it every thing you possess. If you can, move to the lifeboat now. If possible put on your life preserver. If you are invested in stocks, put a stop-sell on your stocks and be ready to get out quickly. The market has risen too sharply without a pull back. There may be another few months of gains before the boat sinks, but the economic boat is now filling with water. 

Someone asked, "Where should I be invested?" I would rather be in Certificates of Deposit at the present time, than to be invested in stocks. Let the market decline 30 to 40% and then buy stocks.  The market is close to cycling into a downtrend, so wait. Waiting is the opposite of what the "herd" is doing, but your waiting will payoff with a much larger return. 

Please go back to the early posts in this blog and study each one or go to the sidebar and read the investment advice. Not only do we want to recognize MARKET MOMENTUM, we also want to recognize MARKET CYCLES. The market momentum is very strong right now, but the market cycle is at its highest point and will soon move to a downtrend. You don't want to be in the market when the market moves into a downtrend. 

(Note: the above information is for entertainment purposes only and not to be used as investment advice.)

Today's Market
by Dr Invest

John Hussman has undergone some criticism for his conservative investment strategy, some of his colleagues have chided him and taking him to task for what seemed to be losses in the light of the DOW's remarkable 14% gains for the year. A study from the Harvard School of Business pointed out that financial managers were remarkably late to be invested and 98% under-performed the market by 4% to 8%.  Only a mere 2% could out-perform the market and never the same 2% of fund managers year after year. John recently quoted John Paul Getty:

“For as long as I can remember, veteran businessmen and investors – I among them – have been warning about the dangers of irrational stock speculation and hammering away at the theme that stock certificates are deeds of ownership and not betting slips… The professional investor has no choice but to sit by quietly while the mob has its day, until the enthusiasm or panic of the speculators and non-professionals has been spent. He is not impatient, nor is he even in a very great hurry, for he is an investor, not a gambler or a speculator. The seeds of any bust are inherent in any boom that outstrips the pace of whatever solid factors gave it its impetus in the first place. There are no safeguards that can protect the emotional investor from himself.”

- J. Paul Getty

You may be asking why the Jet Plane has taken-off and John Hussman is not-on-board. There may be something that John Hussman knows that you don't. John wrote:

I’ve often noted that even a run-of-the-mill bear market decline wipes out more than half of the preceding bull market advance. I doubt that the present instance will be different. Indeed, cyclical bear market declines that occur in the context of secular bear markets average a market loss of about 39%, wiping out about 80% of the prior bull market advance. We presently estimate a nominal total return for the S&P 500 of just 3.2% annually over the coming decade.

Some investors are so determined to get back into the market so as to not miss out on the NEW BULL MARKET, that they have ignored the obvious risks and dangers to the entirety of their portfolios. Listen to some of his further comments:

The perception that investors are “forced” to hold stocks is driven by a growing inattention to risk. But Investors are not simply choosing between a 3.2% prospective 10-year return in stocks versus a zero return on cash. They are also choosing between an exposure to 30-50% interim losses in stocks versus an exposure to zero loss in cash. They aren't focused on the “risk” aspect of the tradeoff, either because they assume that downside risk has been eliminated, or because they believe that they will somehow be able to exit stocks before the tens of millions of other investors who hold an identical expectation that they can do so.

I have had no comments over the past weeks because there has been nothing to comment on. The Federal Reserve is playing out their hand by adding over $40 BILLION monthly to liquidity, even the most simple among us could see that the economy is built on stimulus and the market is purely ARTIFICIAL. There is a slight of hand, a deception that turns in the house's favor. Someone will have to pay, to pay in inflated prices or lost savings, to pay in lost stock values (deflation).

For now, I know that my sleep is sweeter by staying out of stocks, rather than rushing in. In my lifetime, I have never seen such a dangerous season for the investor. Whether I patiently wait out investing until 2014 is of little concern to me. The stock market will FALL and I will be ready to move into the season of investment opportunity. For now, I'm staying out and watching the bragging financial advisers in their day of glory.

(Note: the above article is for entertainment purposes only and not to be used as investment advice.)

Today's Market
Dr Invest

As in past weeks, there is really nothing to report. Now if you want high risks, you need to buy stocks and plenty of them; but my belief is that any short-time gains will be lost by abrupt declines in the market. We are moving into the fifth year of a bull market. Statistics are against a continuation of a market bull run.

We do have another factor that keeps the market going, that is a stimulus program that keeps stock prices artificially high. This "artificial market" is not a reality, but a ploy to get investors back into the market. Since October of 2012, we have been in a recession; yet, the market has surged to all-time highs. Even the most positive of outlooks put GDP growth at 2.8%, still the market has soared. So what is happening here? New voices have declared that market declines are over and only strong market growth lies ahead.

Our actual economy does not reflect the strong growth touted and even some of the talking heads are now acknowledging that the recent gains are hollow when purchased by stimulus alone. Today the market fell 138 points on the DOW, but even if there is a small contraction, we are likely to see what seems to be a resurgence before there is a final plunge into a recession. The Federal Reserve reassured the markets today that they would be there, buying and buying, to keep the market stable. There are questions about the ability of the FED to accomplish market stability indefinitely.

WAITING FOR REGRESSION BELOW TREND

The Risks outweigh the Opportunity. Only a significant regression would make me willing to invest in stocks at this point. Some economist are pointing to 13 years of a flat-line market, saying that if you draw the trend, the DOW should be much much higher; thus, stocks are undervalued and cheap. All of the economic energy hasn't been released, people are holding on to their money. When they release this financial potential, then the market will soar. Now what hasn't been considered, is that all this potential wealth came from BORROWED MONEY. Thirty years of borrowing from the future, made things appear economically bright and tight. What some economists have failed to see is that you can't borrow forever, one day you have to pay for all that debt. The past 13 years has been payback. Still, we have built this city on debt. The promised pensions, city renovations, government projects, and generous entitlements came when we felt prosperous; each citizen was borrowing money for cars, houses, televisions, boats, etc. and that borrowed money was spread around the town from butcher, to baker, and candlestick maker. Now, money is not so easily borrowed, some have lost jobs, some have taken salary cuts, and the money is not there. Loans on cars and homes have been defaulted on and even the banks are on shaky ground. Government's solution is to borrow more money and tax the very people who can't afford to pay on their present loans. Good times have dried up and neither government nor individual can do anything but attempt to hold on to what little economic security they have.

With the coming of Obama Care, the small businessman cannot plan on any real expansion and the new Obama taxes will punish both the rich and middle class. If you have acquired your dream home, when you sell it, it may be subject to a 2.5% capital gains Obama Care tax (healthcare tax). Clearly 51% of our population liked this idea, so they shouldn't grump when they pay the bill. As I understand it, their are more of these kind of taxes hidden in the Obama Care Program. Doctors have told me about new requirements by the OCP (Obama Care Program) that will force them to pass the extra expense on to patients or they will no longer take OCP patients. Many of these doctors no longer take Medicare or Medicaid patients.

It is the debt, taxes, and government regulations on businesses that is posing a real drag to the economy. Some business men had hoped that real headway would be made by the government to support American businesses, instead the regulations and taxes have become all the more ominous forcing businesses to move outside the U.S.

WHAT TO DO?

Suggestions tend to lean toward putting all your money in stocks. Calls that there is a bond bubble seem to have some legitimacy. If you have positions in stocks, congratulations. You may even see the DOW rise to 15000 in the near future, but I would place a stop-sell on all my stocks. If you have enjoyed a 12% increase, set your stop-sell at a comfortable distance below that 12%. You could see the stock market go down 40%, even 50%.

If you are largely in cash, STAY OUT OF THE MARKET. The risk is too great for an immediate and sudden decline. By waiting, you can gain a 100% return or double your money.

EXAMPLE: You have $100,000 in stocks and the market declines 50%...you now have? Yes, $50,000! The market then grows 100% and you have how much in your stocks?  Yes, $100,000. 

2nd EXAMPLE: You have $100,000 in cash and the market declines 50%...you now have? Yes, $100,000! The market then grows 100% and you buy a DOW INDEX and you now have? Yes, $200,000. Listen, even if you time the market poorly and only gain 50%, you still have? Yes, $150,000!

The oft repeated formula is that you can't time the market. But in our case we are simply recognizing that the market has BROAD CYCLES. Right now we are at the top of that cycle. Let the cycle move toward its bottom, then take a position and wait for the BROAD CYCLE to move back up. It is better to be out of the market wishing you were in, than to be in the market wishing you were out.

(note: the above article is for entertainment purposes only and not to be used as investment advice.)

Today's Market
by Dr Invest

Tonight I enjoyed the PBS, Frontline production called: The Retirement Gamble. Go the to following link:    FRONTLINE This is one of the BEST programs I have seen on the investment racket, a documentary that is honest and raises tremendous questions regarding your investment strategies.

I know that I have covered this topic before, but by paying 2% to your financial adviser, another 2% in management fees, and another 3% for annual inflation, you would need 7% return just to break even each year.

A study by Morningstar Inc. Investment Management Division, recently showed that the tried-and-true 4% initial retirement withdrawal rate over 30 years, with a 40% allocation to stocks, will only lead to a 48.2% success rate, the researchers found.

David Blanchet with Morningstar, sets the withdrawal rate at 2.8% for a 30 year draw-down of one's retirement with a 90% reliability. The assumption is that the economy will improve within the next five-years. Now let me interpret what that means in a few portfolios. 

The truth is shocking. Even with 2 million in your portfolio, you would only be able to draw-down $4,666 monthly. It is hardly the life of luxury you had wished for. 

Some 30 percent of Americans say they will need to work into their 80s to be comfortable in retirement.

Where is the delusion? The reality is that many people won’t be physically able to work into their 80s. According to the U.S. Administration on Aging’s Aging Integrated Database (AGID), 22.5 percent of Americans aged 60-84 reported employment disability—they were physically unable to work and receive disability payments because of that disability.

Some 34 percent of Americans think they’ll need less than 50 percent of their retirement income; yet, median household income is approximately $50,000.

Where is the delusion? One-third of middle-class Americans think that they will need $25,000 annually in retirement. For a family of two, since we can assume that the kids will have left the nest by then, this puts them less than $10,000 above the federal poverty line. 

Middle-class Americans believe, on average, their retirement healthcare costs will be $47,000.

Where is the delusion? Medicare out-of-pocket costs are expected to be between $240,000 and $430,000 for a 65 year old couple retiring today.

Middle-class Americans say they will need a median of $300,000 to retire. The same respondents said that, to date, they have saved a median of $25,000.

Where is the delusion? The average age of the interviewee was 50 years old—the ages ranged from 25 to 75 in the interview. This means that, assuming a retirement age of 66 years, they have 16 years to save $275,000. If you assume that the stock market goes up 5 percent per year—perhaps not the safest assumption one could make—then to hit that savings number, they need to save $11,070.69 per year, or 22.1 percent of the median income. However, 68 percent of middle-class Americans who have a 401(k) plan contribute 10 percent or less of their income to retirement.

Middle-class Americans think that a median safe withdrawal rate in retirement is 10 percent.

Where is the delusion? Dr. Wade Pfau, CFA, ran historical simulations for retirees from 1926 to 2000 to see how long retirement savings would last at a 10 percent withdrawal rate. 

Through 2009, only one year group would still have money—those who retired in 1982. Everyone else ran out of money, with their retirement funds lasting between 8 and 25 years. In more than two-thirds of the cases, retirees ran out of money before reaching the average life expectancy. Most financial planners recommend a 4 percent withdrawal rate, and some, like Dr. Pfau, indicate that 4 percent may be too aggressive.

MY CONCLUSION

I have already shown you the recent statistics. 2.8% is the best draw-down. My table shows that a $300,000 portfolio will give you $700 monthly or $8,400 annually. This is a far-cry from the $50,000 you will need annually in your retirement years. The average retirement benefit is $1,237 monthly or $14,844 annually.  $23,244 of annual income, truly leaves seniors in a financial crisis even if they happen to have a $300,000 portfolio. I have not subtracted inflation, financial management fees, school taxes, healthcare costs,  or the replacement costs for a vehicle or home repair. 

Without LARGE SUMS OF MONEY, your chances of lasting income is unlikely. 12% returns on stocks, even 5% returns on stocks seem fleeting. Some kind of alternative strategy will be needed beyond your investment portfolio to bring the returns needed to fund a reliable retirement. 

I am implementing some strategies presently, but can't cover all the strategies in this single venue.  

CREATIVE THINKING & INVESTING

If you have ten to fifteen years before retirement, good credit, are willing to handle some contracts and do some maintenance in a geographic area that is growing, rental property can be viable investment. If you purchase a duplex for $160,000 (and I do suggest duplexes), you rent should be 1% monthly of the value of the property or $1,600 monthly. So $800 per rental. This gives you what you need to pay school taxes, the mortgage, and still make a profit. You can super charge this investment, if you have equity in your home, by taking the equity and paying for the duplex OUTRIGHT. Then take the profit from the duplex and pay-down your home mortgage. You will be shocked at how quickly you can pay-off your mortgage on your home while paying against the principle at $13,200 annually; a thirty-year loan will be paid off in nine years if you keep to this plan. 

The gain is the depreciation of the duplex against your income taxes, plus $13,200 in rental income. Go back to the above chart an look at how much money you need to return $14,000 annually....yeah, $500,000 in an investment portfolio. The advantage is that if inflation grows 20% per year, the inflation is passed on to the tenants. Not very ideal for them, but better than a 20% loss in your rental income that year. By adding $14,844, the average social security retirement benefit to the $13,200 of rental income, your total retirement income just went up to $28,044. Add to that $8,400 for the $300,000 you still have in your investment portfolio and you are getting $36,444 as your retirement package. One last benefit is that you have your home loan paid off and the asset of a rental property worth $160,000 or more. DON'T CARRY DEBT into retirement! Under the right conditions you can create positive cash flow, but debt can create a negative cash flow when you need the retirement. STAY OUT OF DEBT!

Recently, I was speaking with a friend. He told me how his dad had taught him the benefit of initiative and work. In his college years, while other students were playing pool and partying, he was making money. He had purchased a bucket, a squeegee, some towels, and glass cleaner. Going from business to business, he offered to wash their windows. In a few weeks, he had gained a clientele of regular paying customers. He said, dad never paid for my college, I got no loans, and I even sent money home. For $12, he earned a degree and had money as well. He later became a key executive for a major corporation. 

Don't tell me that there are not opportunities for someone with a creative mind and the willingness to work.

More later.

(The above information is for entertainment purposes only and not to be used as investment advice.)