Money Matters Update July 21, 2013

Marc's Notes:

Markets slowly climb again as Bernanke back peddles on his stimulus withdrawal speech weeks back. The market rout after that speech surprised him and off he went to tell Wall Street he didn’t mean it. Like I said, he will NEVER be able to stop printing money, the street is addicted to it as is our economy.

No way, no how.

They will print until the cows come home. They may TRY and stop, or should I say slow down, but then the markets will crash again and so he will resume the programs of printing money, which they call QE or “asset purchases”.

What ever they call it, we call it what it is, printing money.

For now, the market buyers are starting to go back in the water and probably will rise again and again. I expect a minor correction soon as the markets again have gone UP days and days, but after that its Ludwig Von Mises “Crack UP boom” again.

As for bond holders, read this:

The exodus continues out of bonds with over 60 billion dollars being withdrawn from bond instruments in the last few weeks.  Investors worldwide are selling bonds by the boat load and that means bond prices are plummeting. Bonds funds which hold a basket of bonds are dropping even faster than the bonds themselves and many investors holding bonds are taking huge losses.

You have to wonder how investors didn’t see this coming. Many an analyst have been warning investors to be wary of bonds for over a year now including bond king Bill Gross and banking giant Bank of America. Still there are many main stream financial advisors who have been doing the exact opposite and telling investors over the last year or so to load up on bonds for their steady income.

To recognize just how silly this recommendation is, know this: bonds are just debt, nothing more.

The financial community gives them fancy names to confuse you but whether it’s a city bond, a corporate bond or a government bond, the idea is the same. You give someone your money and they promise to pay it back in the form of an IOU and that’s the bond.

They can have different interest rates, different payback periods and all types of conditions but its all just more debt.  Basically somebody needs your money and you lend it to them.

But there is a lot of debt floating around, in fact since the real estate boom, which was based on debt, there’s more debt then even before and even more is being issued every day.

With the mountains of government debt, mortgage debt, corporate and personal debt that exist today, much like a cloud raining bananas, (the price of bananas would drop) when it rains bonds, the price of bonds drop as a result of the over supply, and its this drop in price due to the current oversupply that we are witnessing. 

The drop is being predicated by the massive selling of bonds by investors, and this selling was in part brought on by Federal Reserve Chief Ben Bernanke announcing a proposed date to the beginning of the end of his quantitative easing program (QE) which he announced a week or 2 back.

Since the Feds were buying billions in bonds a month, they literally propped up the market for bonds, and now that they put a possible time line on when they might stop buying, the selling has began.

It goes to show the strength in bonds and bonds funds we witnessed in the last few years was most likely only because the Feds were buying billions of dollars worth of them and subsequently supporting almost the entire bond market with their monetary shenanigans.

Many have argued without such government support, the bond market would have collapsed.

Is this what is happening now?

Only time will tell. Meanwhile my recommendation remains as it has been for over a year: sell bonds except for short term US Government securities.

--------------------------------------------------------------------------------------------------------

Sounds like good advice.

Just so you know, a NEW Super Dividend Payers list was JUST POSTED last week so download your copy now. We added a company that has been in business 150 years and raised dividends for just about as long. New funds and more companies have been added as well. A new DREAM PORTFOLIO will be posted soon.

A NEW EVERBANK MARKET SAFE CD IS COMING !  Keep reading here to find out when it arrives and I will look at it and advise if I like it. If I do, I  will be adding one myself.

Everbank promises high rate savings and money market funds. Click here to read all about it and get the best rate I know about.

You can use the below links to open the right accounts:

Checking: http://adfarm.mediaplex.com/ad/ck/13305-85986-43235-1?referid=13286

Money Market: http://adfarm.mediaplex.com/ad/ck/13305-85986-43235-0?referid=13286

That’s all for now except the Swiss Annuities are again available so here is the skinny about them once again.

JUST OUT ON SWISS ANNUITIES:

Their window is closing AUGUST 15th, 2013 and will no longer be available to US Citizens, so if you want one YOU HAVE TO MOVE FAST!

Don't Miss out!

Swiss Annuities Offers Offshore Option

An annuity is a contract between an insurance company and investor that stipulates a payment of some sort to the investor in return for the investors initial or time payment to the insurance company. You give them money and they pay you back over time or on a specific date in the future. Annuities sold by U. S. companies may have fancy names, are structured in a variety of ways and are usually not guaranteed by the U. S Government.

I can’t recall an investor I’ve met who was glad they bought an American sold annuity after the fact and in my opinion they are one of the worst investments you can make. I view them as overpriced life insurance policies concocted by the insurance companies to boost their profits.

There is an annuity product I do recommend however and that is a Swiss Annuity.

Unlike their American counter parts, Swiss Annuities have many advantages.

Annuities sold here may restrict your access to your funds, entice you with a bloated death benefit then may charge you a yearly percentage fee on top of a sales fee.

There is usually a healthy cancellation fee should you want your annuity cancelled and your “guarantee” is only as good as the companies balance sheet. They obviously also located here in the U.S. meaning they are subject to U.S. jurisdiction by the IRS and the US court system.  Your money is held in U. S. dollars and usually invested in the stock market. In other words, you are US based in every sense.

Swiss Annuities on the other hand have no tie up period; there is no yearly fee, only a small cancellation fee in the first 12 months. They may not be subject to U.S. courts jurisdiction (although now you do have to report them to the IRS), there is no bloated death benefit, you can denominate them in another currency or even gold (hence protecting you against a falling U.S. dollar), you can get your money anytime you want and even borrow against its value.

Should you move to another country, you can have your money sent to almost anywhere in the world. There is also no social security number required to open a Swiss Annuity, a testament to one of their obvious advantages. Your money does not have to be in stocks but instead is can be backed by a variety of options not typically available here in US.

You can designate a beneficiary in case of your demise and you may elect any payment schedule you like, from a lump sum on a certain date,  structured over many years or even a get guaranteed for life payout. In a word, they are flexible.

I view Swiss Annuities as a great way to easily park money offshore versus other types of foreign accounts. Swiss Annuities require just a few forms and your funds are either wired or paid by your personal check.

They usually pay an interest and a dividend and the payments can accrue interest free until you withdraw the funds. They are regarded as a type of retirement account so withdrawals under a certain age can have IRS penalties but for the most part you can send them as much as you want and that amount may accrue dividends and interest free of yearly tax assessments. They do have a load fee thanks to the IRS new requirements but I opened one and paid the fee as I though it was well worth it.

Why Switzerland?

Although your annuity will not be guaranteed by any US government entity (annuities usually aren’t here either), consider that here in US we estimate there has been over 75,000 bank and insurance company failures in the last 100 years. In fact,  bank failings seem to be a weekly event lately nowadays.

Compare that to the last 150 years in Switzerland where there have been ZERO failures of either. Swiss bank and insurance laws are strict and Switzerland is the banking center of the world. They maintain a sound monetary policy and the Swiss Franc is regarded as the “Flight to Safety” currency. By keeping your annuity denominated in Swiss Francs, you may help protect against our insane money printing ramifications and even a possible default of the U. S. monetary system.

Unthinkable but a possibility none the less.

As always, check with your CPA on the laws surrounding Swiss Annuities but you may have to look hard for an accountant that is familiar with these types of foreign vehicles.

In conclusion, I have always said, there’s a reason why no one ever evades Switzerland. It’s where everybody keeps their money. Maybe you should keep some there too.

You can find out more about Swiss Annuities at:

http://moneymanagementradio.com/swiss_annuity

Remember the window closes August 15th and it takes weeks to open one so act now!

All for now and good investing!
Marc