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Money Update March 19, 2017 READ
The Euro in trouble again or just more of the same? Stay tuned to future Money Matters shows in April as we take another look at the plight of the Euro
Marc's Notes:
Back again from a trip discussing investments and opportunities for our clients. I did manage to get in some R and R in between meetings which consisted of some nice dinners and hitting the slopes, but most of it was hard work. I never stop going to seminars, classes and meeting with influential people who either know more than I do in certain areas, offer some interesting programs that might be worth looking into for our clients or in this case, meeting with VP's of businesses that influence or could influence the investment community. I spent the weekend with a CEO of a software company where we discussed his business and where the technology markets may be going in general. Great insight from a truly brilliant mind and a gentlemen who has incredible foresight into where the tech industry may be going. Making sure our clients are taken care of is first and foremost. Look for a seminar announcement soon as soon as I work out the details. We will cover the subject highlighted in the first article below. Keep reading!
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Approved 187031
Did you know there are options for investors to participate in up markets without risking loss? Other strategies can guarantee an investor won’t outlive their money and still other options cover concerns such as estate protection, long term care and catastrophic illness.
Today there are contracts which bind an insurance company to guarantee your principal against loss, yet allow you to participate if the market goes up.
There is another strategy which also guarantees your principal and guarantees you get income payments for the rest of your life. You can never outlive your money.
There are usually tie-up periods where only a certain amount can be withdrawn without penalty and other terms and conditions which should be considered before applying for such products. But having the principal guaranteed yet still have the potential to participate in market rallies can be an alternative to being in stocks that can lose value or in savings or Cd’s which may not keep up with inflation.
Some of these products can usually be bought by persons all the way up to the age of 80 (discussions should take place with your advisor of course as to the suitability in your situation) but generally accumulative products such as annuities are considered more appropriate for younger investors only. You can usually put these products in an IRA or cash account (non-IRA) but might lose some tax advantages depending what kind of account you use so make sure you consult with your tax professional to make sure you use each product accordingly.
Certain issues may have tax advantages and others guarantee a minimum increase in principal as well as market participation when markets rise.
Certain products can also cover the value of your estate and protect it against potential negative events such as estate taxes, long term or critical care costs.
As with any investment, a consultation with a licensed professional is highly recommended and in many cases required by law to insure you understand the ins and outs of how things will work but in many cases they terms are simple to understand without any hidden gotcha’s.
Many investors just don’t know there are products like these available. The obvious advantage to some of these products is that the downside risk in zero yet upside potential is possible. Many variations are available that can address whatever concerns an investor might have.
Traditional portfolio holdings may suit many an investor’s needs but other products are available for those who just cannot tolerate red numbers on their statements for any length of time. All or a part of a portfolio can be considered for a wide variety of products which can mix and match to best suit your needs and your individual situation.
As with all investments, there are things to consider with many of the above options. Some have fees, withdrawal penalties and other considerations you should be aware of so as always, make sure you understand completely all the terms of the investment.
Consult with an investment professional before making any investment decisions and read the prospectus and terms of anything you might be considering. Guarantees are not through the U.S.. Government but through the claim paying individual companies that provide such services.
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Broken plans and promises?
We’ve covered the looming pension crisis here on Money Matters in previous shows and articles and the problem just seems to get worse by day. The issue at the root of the pension debacle is the fact that more than just a few private and public pension plans are grossly underfunded.
Business Insider pegs Federal pensions with a shortfall of 3.5 trillion while Zerohedge says U.S. corporate plans are bleeding red to the tune of 225 billion. The pension’s plans simply don’t have the money in the coffers to pay out what is promised and when that math doesn't’t add up, somebody has to pay, or more accurately, should I say somebody doesn't’t get paid.
The latest in defaults comes from the great state of Illinois, which told the world last week they won’t meet their annual interest payment due on their pension debt to the tune of 9.1 billion. Ouch.
If 9.1 billion sounds like a lot, it pales in comparison to the 130 billion shortfall the Edelson Wave claims Illinois is currently underwater on its pension obligations.
Double ouch.
Apparently the states problems are ongoing, lacking an annual budget for almost 2 years and shelving more than 11 billion in past due debts to date.
All this despite having the highest property taxes in the U.S.. It also not surprisingly hosts the worst credit rating of all the states.
Residents smell the rot and are leaving in droves which will hammer state revenue even more exasperating the problem. The U.S.. Census Bureau reported the state of Illinois is losing residents faster than any other state and it’s been that way for three years running. Residency is at its lowest in more than a decade.
Lawmakers are considering a variety of solutions to rectify the problem but given the shortfall has been growing for years, one has to wonder what the heck authorities have been doing while the horses fled the barn and what could they possibly do now that hasn't’t already been tried in the past. Or are lawmakers finally smelling the proverbial toast and just waking up to a very, very bad problem. Either way, the road back will prove to be a difficult if not impossible task.
Illinois bureaucrats apparently aren’t the only ones to be asleep at the switch. California and New York among many others are wrestling with crippling red ink on a variety of pension plans. The massive California public pension plan CalPERS holds just 68 cents on the dollar of what it owes.
The problem may lie in the erroneous yet generous assumptions that pension managers make when forecasting yearly returns on their investments. With many managers assuming returns north of 5% annually, the near zero interest rate environment set by the Fed is causing massive shortfalls when compared to actual returns.
Low interest rates may be good for credit users and borrowers alike which include many state and federal governments, those that depend on higher rates to earn income on investment like the many pension plans around the nation are suffering badly from the anemic returns near zero rates offer them.
Although raising rates will likely strain the budgets of those who are on the borrowing end of the proverbial monetary stick, those that depend on higher returns on their retirement savings to live out their golden years such as those dependent on these massive pension plans will likely welcome the higher rates with open arms and hopefully fatter checkbooks.
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Earthmover or Talker. keep reading...
Spinners, Earthmovers, Doer’s, Dawdlers, Talkers, Slugs, Fakers, Weasels and Crooks.
What does it all mean? Fancy words or animal descriptions?
Actually these are my own classifications of different types of people as they relate to their own career path.
Sounds confusing but read on and see if you recognize any of the work types described below.
The easiest to spot are the Earthmovers and Crooks. Earthmovers start those incredible companies that revolutionize how we live in some way or another. They may or may not be college educated, and many attend Ivy League schools only to drop out midway through because they know their ideas don’t need degrees to make them work. Bill Gates, Mark Zuckerberg, Steve Jobs and Elon Musk come to mind. Billionaires all of them and they have changed the way we live our lives through their genius. As for community, Earthmovers usually operate alone or in pairs.
Crooks are also easy to understand and identify. They are basically, well, crooks. They lie cheat and steal to make a living and are usually a victim of a personality disorder or two. Crooks operate alone but if you find two of them in cahoots, the con is usually much bigger in scope.
Easy enough but now let’s look at the others.
Doer’s are good folks. They are the pragmatic ones. They start small businesses that usually succeed. They also make good employees and know the value of a buck. They work hard and treat others fairly. They are usually honest and live fruitful lives that contribute to society and they rarely take handouts unless badly needed and then only do so temporarily. Most of the working class fit in here and likely you do to. Doer’s operate solo or in groups of any size.
I will cover other groups in future newsletters.
All for now and Jambo!
Marc
