President Trump and Tribalism

My Comments: Some of you will see this as a political statement by me and perhaps recoil from it. I hope not.

We are in the midst of a national, if not global, re-evaluation of the values that underly society. On a personal level, I’m very troubled by Trump and how his values about life, about other people, about truthfulness, about the rule of law differ so greatly from my values. I’m less troubled by the political direction he’s pushing us.

That’s because, short of a global nuclear war, the outcome is very likely to be a re-affirmation of the assumptions that drove our nation and our economy toward greatness. Trump represents an effort to roll back the tides, and you know how that’s likely to play out. (See King Canute above.)

From an economic perspective, it’s a non-starter. Sooner or later, his narrow focus will doom him and those around him. Personally, I refuse to live in the past. I’m concerned about the now and tomorrow.

Ronald Brownstein on Nov 2, 2017

Although in dramatically different ways, Tuesday’s terrorist attack in New York and the Republican tax plan scheduled for release Thursday raise the same jagged question: In the Donald Trump era, is it possible for a deeply divided America to sustain any shared interest or common purpose?

The country obviously faced difficult divisions long before this president was elected. But he’s operated in a uniquely tribal fashion that has ominously, and even deliberately, widened those divides. In office, he has abandoned any pretense of seeking to represent the entire country. How deep a crevice he digs may turn on how much, if at all, the Republican congressional majorities resist his divisive tendencies.

Since announcing his presidential campaign, Trump has prioritized what I’ve called the “coalition of restoration”: the primarily older, blue-collar, non-urban, and evangelical whites who combine unease about America’s demographic and cultural change with anxiety about their place in an evolving economy.

Since January, Trump has repeatedly moved to show his coalition that he will resist the changes they fear. That impulse has been evident in his serial travel bans targeting mostly Muslim countries; his attempt to bar trans soldiers from the military; his forgiving reaction to the white-supremacist violence in Charlottesville, Virginia; and his support for preserving Confederate monuments.

Trump displayed a similar instinct following the New York attack, appealing to fear of the assailant’s Muslim background. In a flurry of tweets on Tuesday evening, Trump immediately denounced, as a “Democratic” invention, the “diversity lottery” immigration program that allowed the attacker to live in the United States. Leave aside that George H.W. Bush signed the lottery program into law, or that all Senate Democrats (along with 14 Republicans) supported ending it during the 2013 debate over comprehensive immigration reform. The key is that Trump’s reaction betrayed two central components of his political identity: his instinct to view any crisis more as an opportunity to divide than to unite, and how reflexively he portrays immigrants as a threat.

Trump is far from the first Republican tugged toward that dark star. But the party has sent mixed signals about how far it will follow him. On the one hand, this year’s attacks from Virginia gubernatorial candidate Ed Gillespie on so-called “sanctuary cities” and the Central American gang MS-13 have set a template for Trump-like anti-immigrant messages that many Republicans are likely to adopt in the midterms. On the other, Trump has struggled to build momentum for a bill to cut legal immigration in half, and he’s had trouble unifying congressional Republicans behind his demand for a border wall (which faces majority public opposition).

On immigration, Republicans appear genuinely divided—mostly by geography, partly by ideology—over how closely to join Trump in targeting whites most uneasy about the new arrivals. That hesitance is understandable given that, by 2020, minorities are likely to constitute a majority of all Americans under age 18.

But on taxes, congressional Republicans are placing an equally narrow bet. With Trump’s intermittent support, the GOP is advancing a tax plan aimed at a few voters at the pinnacle of the income pyramid. Although the numbers may change somewhat in the new House plan, the most comprehensive nonpartisan analysis of the GOP’s original blueprint found that it would shower fully four-fifths of its benefits on the top 1 percent of earners by 2027.

By diverting so much federal revenue to that one group, Republicans are ensuring future conflict with others. That lopsided allocation leaves them offering only small tax cuts to working-class voters, as well as possible tax increases to many upper middle-class families already recoiling from Trump’s behavior and cultural agenda. Their plan ensures they will pursue deep cuts in domestic discretionary programs that invest in the productivity of the increasingly diverse future generations—including programs in education and scientific research. It also means they will face growing demands from their fiscal hawks to cut entitlements, which benefit the predominantly white older population whose votes underpin their electoral coalition.

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Stocks for the Long Run? Not Now

My Comments: There is increasing uncertainty about the stock market. This uncertainty has been growing now for the past 3 plus years. The long term trends described below, coupled with historically low interest rates, suggest the next decade will be disappointing to most of us.

This analysis comes from a Guggenheim Investors report published last September. I haven’t included all the many charts as you will be better served by going directly to the source to see them. https://goo.gl/UL1SSP

If nothing else, you should read the conclusion below…

September 27, 2017 |by Scott Minerd et al, Guggenheim Investments

Introduction

Valuation is a poor timing tool. After all, markets that are overvalued and become even more overvalued are called bull markets. Over a relatively long time horizon, however, valuation has been an excellent predictor of future performance. Our analysis shows that based on current valuations, U.S. equity investors are likely to be disappointed after the next 10 years. While the equity market could continue to perform in the short run, over the long run better relative value will likely be found in fixed income and non-U.S. equities.

Elevated U.S. Equity Valuations Point to Low Future Returns

U.S. stocks are not cheap. Total U.S. stock market capitalization as a percentage of gross domestic product (market cap to GDP) currently stands at 142 percent. This level is near all-time highs, greater than the 2006–2007 peak and surpassed only by the internet bubble period of 1999–2000. This reading is no outlier: It is consistent with other broad measures of U.S. equity valuation, including Robert Shiller’s cyclically adjusted price-earnings ratio (CAPE), Tobin’s Q (the ratio of market value to net worth), and the S&P 500 price to sales ratio.

U.S. Equity Valuation Is Approaching Historic Highs

Here is the bad news for equity investors: At current levels of market cap to GDP, estimated annualized total returns over the next 10 years look dismal at just 0.9 percent (before inflation), based on previous trends. Intuitively this makes sense: Looking back at the history of the time series, it is clear that an excellent entry point into the equity market for a long-term investor would have been a period like the mid-1980s, or in the latter stages of the financial crisis in 2009. Conversely, 1968, 2000, and 2007 would have been good times to get out.

Market Cap to GDP Has Been a Strong Predictor of Future Equity Returns

Market cap to GDP is a useful metric because it has proven to be an accurate predictor of future equity returns. As the chart below shows, market cap to GDP has historically been highly negatively correlated with subsequent S&P 500 total returns, particularly over longer horizons where valuation mean reversion becomes a significant factor. Over 10 years, the correlation is -90 percent.

Market Cap to GDP Has Been a Good Predictor of Equity Returns 10 Years Out

It would be easy to assume that the rise in stock valuations is justified by low rates. A similar argument is made by proponents of the Fed model, which compares the earnings yield of equities to the 10-year Treasury yield as a measure of relative value. While there is some relationship between interest rates and valuation as measured by market cap to GDP, low rates do not explain why equities are so rich. At the current range of interest rates (2–3 percent), we have seen market cap to GDP anywhere from 47 percent to current levels of 142 percent—hardly a convincing relationship. In short, interest rates tell us little about where market cap to GDP, or other valuation metrics, “should” be.

Fixed Income Offers Better Relative Value

For a measure of relative value, we compared expected returns on equities over 10-year time horizons (as implied by the relationship with market cap to GDP) to the expected return on 10-year Treasurys—assuming that the return is equal to the prevailing yield to maturity. Typically, equities would have the higher expected returns than government bonds due to the higher risk premium, but in periods when equity valuations have become too rich, future returns on U.S. stocks have fallen below 10-year Treasury yields. Not surprisingly, past periods where this signal has occurred include the late 1990s internet bubble and 2006–2007.

The chart below demonstrates that if equities over the next 10 years are likely to return just 0.9 percent, 10-year Treasury notes held to maturity—currently yielding about 2.2 percent—start to seem like a viable alternative. The fact that S&P 500 returns over the past 10 years have not been as low as the model predicted can at least be partially explained by extraordinary monetary policy, which may have helped to pull returns forward, but in doing so dragged down future returns.

Conclusion

Based on the historical relationship between market cap to GDP ratios and subsequent 10-year returns, today’s market valuation suggests that the annual return on a broad U.S. equity portfolio over the next 10 years is likely to be very disappointing. As such, investors may want to seek better opportunities elsewhere. Equity valuations are less stretched in other developed and emerging markets, which may present more upside potential.

In fixed income, low yields should not deter investors, as our analysis indicates that U.S. Treasurys should outperform equities over the next decade. But as we explained in The Core Conundrum, low Treasury yields should steer investors away from passively allocating to an aggregate index that overwhelmingly favors low-yielding government-related debt. In particular, sectors not represented in the Bloomberg Barclays Aggregate Index, including highly rated commercial asset-backed securities and collateralized loan obligations, can offer comparable (or higher) yields with less duration risk than similarly rated corporate bonds. We believe active fixed-income management that focuses on the best risk-adjusted opportunities—whether in or out of the benchmark—offers the best solution to meeting investors’ objectives in a low-return world.

Roll Your 401k (or 403b) Into an IRA While You’re Still Working

My Comments: The prevailing wisdom is that if you have money inside a 401k, or a 403b (University and other not-for-profit employees), you are stuck there until you terminate your employment. This article says you can move it.

Being stuck means you can’t always make changes to insure your pile of money against a market correction. If you are young, it may not matter. But if you are really starting to think about your retirement, it could be seriously serious.

This chart shows the S&P500 over the past 20 years. To me it suggests there will be another downturn. You might want to be thinking about repositioning some of your retirement money…

Greg Soren, November 9, 2017

A client recently walked into my office and placed his 401(k) statement on my desk. He looked at me, pointed to the document and asked, “Can I bombproof my 401(k)?” We reviewed his statement, investment options and expenses, then considered his ability to lower risk inside the 401(k).

Unimpressed, his next question was, “Is there anything else I can do?” I hesitated for a moment, then asked him if he’d ever considered an In-Service Distribution. He looked at me with a blank stare that immediately let me know he had no idea what I was talking about.

Many employees diligently focus their energy on accumulating assets into their Employee Retirement Income Security Act 401(k) or 403(b) employer plans. But, they don’t take the time to understand all the associated rules; specifically, in-service distributions and other options those plans may afford to them as they approach retirement age.

Background
Most employees are aware they have the option to roll their employer plan over to an Individual Retirement Arrangement (IRA) when they retire. However, very few know that they can take a distribution from the plan while they’re still employed with the company. The employee must be over the age of 59.5 to access the majority of their funds, and the fact that the Employee Retirement Income Security Act of 1974 (ERISA) may allow for such a distribution doesn’t necessarily mean your employer’s plan permits it.

Rollover while you are still employed
The In-Service Distribution allows you to initiate a tax-free, trustee-to-trustee rollover into an IRA while you’re still employed, offering advantages heading into retirement. The rollover can be made from a traditional employer plan, a Roth employer plan or a combination plan. (If you’re completing an In-Service Distribution for a Roth portion of your plan, you must be sure it rolls over to a Roth IRA.)

For Example
John Doe has been employed with ABC Widgets, Inc. for 35 years. At age 62, John is three years away from retirement and wants to decrease risk in his 401(k). John’s 401(k) plan does allow for In-Service Distributions, so he decides to diversify and take advantage of this option. John and his adviser determine to allocate 35% of his 401(k) to an outside investment. They agree upon and choose a lower-cost, lower-risk fixed indexed annuity and rebalance the 401(k) in order to accomplish this goal.

Advantages and Disadvantages of In-Service Distributions

• Unlimited Control: Once you roll employer plan dollars over to your IRA, you have total control and ownership of that investment. You can choose the investment strategy and the custodian without any restrictions, including unlimited withdrawal options. Under your employer’s plan, you’re restricted to the investments they select and also face potential blackout periods, related fees and limited distribution options.

• Investment Diversification: If you opt to roll over your employer plan dollars, you’ll be able to choose the investments you want in your IRA without being subject to the limited options of an employer plan. Or, you can use the In-Service Distribution to enjoy the best of both worlds by leaving some dollars in the employer plan and also transferring some to your IRA.

• Beneficiary Options: With employer plans, ERISA requires a spouse to be the primary beneficiary unless he/she signs paperwork to recuse himself/herself. With an IRA, you can name anyone as a beneficiary with no approval or additional signatures required. Your IRA beneficiary can be updated and changed as frequently as you like, just remember to always name a primary and a contingent beneficiary.

• Federal Tax Withholding: When you withdraw dollars from an employer plan, 20% federal withholding is required. If dollars are transferred to a rollover IRA and then withdrawn, there is no federal withholding requirement. The owner determines the federal and state withholding amounts needed, if any.

• Fees: IRA owners are able to shop and compare competitive fee pricing, which can result in savings compared to employer plan fees. My clients often say, “Oh, there are no fees in my 401(k),” but we know this isn’t true. Under ERISA, Code sections 408(b) (2) and 404(a) (5) require all plan participants receive a full disclosure of fees related to their company plan, including indirect and direct compensation and services. This information helps employees make the most informed decisions.

• Bankruptcy Protection: IRA owners maintain bankruptcy protection for their IRAs up to $1,283,025. However, like the ERISA plan, the amount of IRA dollars protected in bankruptcy is unlimited if dollars are rolled over to an IRA. Creditor protection in the IRA varies from state to state; some states have unlimited creditor protection while others are limited. Make sure to research the state in which you live.

• Prefund Your Retirement IRA: Once a rollover IRA is opened, it’s ready to house any additional plan dollars you contribute prior to retirement, making the transition that much easier.

• Net Unrealized Appreciation (NUA): Transferring plan assets to an IRA can disqualify an opportunity to benefit from Net Unrealized Appreciation (NUA), an option to tax gains from highly appreciated company stock at the more favorable long-term capital gains tax levels as opposed to ordinary income tax. Company stock is transferred from the company plan to a non-qualified account. Ordinary income tax is paid on the basis of the company stock, and the gain of this stock will be taxed at long-term capital gains rates when sold in the future. The ability to pay tax at the long-term rate on a portion of the plan dollars benefits the account owner.

• After-tax Dollars: Some qualified plans allow you to contribute after-tax dollars. Just be sure these monies are distributed to a Roth IRA or non-qualified account, as you don’t want to co-mingle after-tax dollars with pre-tax dollars. If this happens, your CPA will be required to complete IRS tax form 8606 every year thereafter on your federal taxes to inform the IRS what amount of after-tax money is in your pre-tax IRA. It’s much easier to segregate the two balances and have 100% access to your after-tax dollars.

• No Required Minimum Distributions (RMDs): Individuals are required to start taking their Required Minimum Distributions (RMDs) the year they turn 70½, or by April 1 the year following. The amount of money they must withdraw is based on the Single Life expectancy table or Joint Life expectancy table. If individuals do not take the appropriate distribution, the IRS can penalize them up to 50% of the RMD. Employees who remain working for the employer that houses their company plan do not have to take dollars out of the plan at age 70½ , and are allowed to waive the RMD until April 1 the year after they retire. Exceptions also exist for pre-1987 403B plan dollars; check your company plan for more information.

• Borrowing Availability: You may be able to take a loan from your company plan if the plan allows. You are not allowed to borrow money from a rollover IRA or contributory IRA.

A Stock Market Crash In 2018?

My Comments: Last Monday, I posted comments from three people who said with conviction there was no reason to expect a market correction any time soon.

Today I have someone with no discernable name who says, also with conviction, that we’ll have one next year.

Here’s my take on this: if you are 60 years old or more, prepare for a correction. If you are less than 60 years of age, ignore all this, put your money to work and don’t worry about it.

Now, do you feel better?

November 7, 2017 from GoldSilverWorlds.com

The U.S. stock market is in amazing shape. Every day new all-time highs are set. This must be bullish, and investors should go all-in, right? Well, not that fast, at least not in our opinion. We see many signs that this rally is getting overextended, from an historical perspective. While we clearly said a year ago that we were bullish for this year, we did not see any stock market crash coming (a year ago). Right now, we are now on record with a forecast of a stock market crash in 2018, and it could take place as early as the first weeks / months of 2018.

So far, in all openness and transparency, our warning signals for a mini-stock market crash in November were invalidated. We were horribly wrong in terms of timing. However, we still believe there is a huge risk brewing for a mini-crash. The stronger the current rally, the stronger the fallback.

Yes, we do expect a strong mini-crash in the stock market in 2018, starting early 2018. Central banks will likely step in to avoid a similar chaos as in 2008/2009, so we don’t forecast the end of the financial system.

We do, however, believe a very stiff correction will take place, which potentially could bring a buying opportunity (to be confirmed at that point in time based on intermarket dynamics). More likely, however, we believe that money will rotate out of U.S. stocks into emerging markets. That is why we are very bullish emerging markets in 2018.

The first warning signs of a stock market crash

We published the following warning signs starting in August:
• Is Volatility Making A Higher Low Here?
• Volatility On The Rise As Expected. What’s Next For Stocks?
• Ignore This Series Of Volatility Warning Signs At Your Own Peril
• Volatility Hit Historic Lows This Week. Maximum Complacency Is Bearish!

But the number of concerning indicators is accumulating now. Yes, it may sound as foolish as it can be that right during a strong bull market rally InvestingHaven’s research team talks about concerning indicators. But let’s first deep-dive before you come to a conclusion.

The Dow Jones Industrials chart is one of those concerning charts. The area indicated with “0” shows that the index has risen with more than 30% in 12 months without any meaningful correction. This rally may be amazing, but it is reaching a level never seen before in the past 12 years (including the 2007 rally and major top). All other instances of a 30% rise in 12 months are indicated on this chart (from 1 till 5):
• The 2013 rally (“5”) was as powerful as the current one, but resulted in a mini-crash just 3 months later.
• All other rallies (“1” till “4”) resulted in a strong correction or mini-crash within or right after the 12-month rally.

The current U.S. stock market sentiment shows extreme greed, according to the CNN Money fear & greed index.

In the past 3 years, the Fear & Greed index reached similar levels of bullishness only twice. This bull run is overextended on the short-term time frame for sure.

The stock market breadth, an indicator of strength of market internals, is suggesting that this rally is driven by a minority of stocks. As the broad indexes move higher, there are fewer stocks participating in the rally. Not a good sign.

4 charts suggesting a stock market crash in 2018 based on historical data

Let’s put the current stock bull market in historical context. As the charts speak for themselves, we believe they suggest a stock market crash is brewing, and it could start as early as the first days or weeks of 2018.
The first chart shows the strongest bull markets in the last 80 years. Visibly, the current bull market, which started in 2009, is now close to being the strongest ever. The current strong rally, which comes after an 8-year bull run, is a concerning factor, according to us.

Note from TK: To see these four charts and read the short accompanying text, GO HERE:

How this Bull Market Will End

My Comments: Once again, our assumptions about the future of the current bull market are challenged. I want these writers to be right, and that too is a challenge for me. I share it with you here in hopes it gives you a better idea about what to do with your money.

By Krishna Memani, Brian Levitt & Drew Thornton | August 15, 2017

This secular bull market—the least loved in memory—is now more than 100 months old, and up by 265% from its bottom on March 9, 2009. It is also the second longest bull market on record (after the 1990s’ dot-com boom) and fourth largest in terms of market advance.

For some investors, the sheer age of this cycle is enough to cause consternation. Yet there is nothing magical about the passage of time. As we have said time and again, bull markets do not die of old age. Like people, bull markets ultimately die when the system can no longer fight off maladies. In order for the cycle to end there needs to be a catalyst—either a major policy mistake or a significant economic disruption in one of the world’s major economies. In our view, neither appears to be in the offing:

• Global growth is sufficiently modest. The “accidental” synchronized global expansion (so-called accidental because it was more of a coincidence than a coordinated effort by global policymakers) is already fading, but slowing growth in the United States and China does not foretell a crisis.

• The United States, nine years into this market cycle, has not exhibited the excesses that are indicative of typical economic downturns.

• For its part, China’s high leverage poses a threat to its financial stability, but government actions are likely to be gradual to ensure a phased pace of deleveraging while maintaining growth stability.

• We believe that low inflation globally will provide cover for policymakers to be more accommodative than many expect.

We are optimistic that this cycle will ultimately be the longest on record, though we do not believe our view is Pollyannaish. We will continue looking out for telltale signs indicating the end of the current cycle, even as we believe that none of them are forthcoming:

1. U.S. and/or European inflation increases more rapidly: If inflation picks up meaningfully in the developed world and tighter policy commences, then the cycle will likely be curtailed.

2. High-yield credit spreads widen: The bond market is usually a good indicator of the end of a cycle. Cycles end with the yield curve inverting and high-yield credit spreads blowing out. An equity market sell-off typically follows soon thereafter.

3. The 10-Year U.S. Treasury rate falls and the yield curve flattens: The 10-Year Treasury rate will reflect the real growth and inflation expectations of bond market participants. A flattening yield curve driven by the decline of long-term rates would be an ominous sign for the U.S. and global economy.

4. The U.S. dollar strengthens versus emerging market currencies: A flight of capital from emerging markets to the United States would slow growth among the former—which are major drivers of economic activity—and potentially cause another earnings recession for U.S. multinational companies.

Note: There is a white paper published by Oppenheimer Funds with 18 charts in support of the authors argument that the current bull market will not end soon. You can find it HERE.

How to pay for long-term care? Several funding options exist

My Comments: If you don’t think about it, maybe it’ll go away. But for millions of us, living longer than our parents, LTC is an insidious risk that needs to be dealt with. There is probably no best answer, just a better one.

Short of dying early, most of us will need advanced care of some kind. And like shopping for groceries or going out to eat at a restaurant, it ain’t gonna happen without a money source.

The sooner you come to terms with this, the more likely your future years will be less stressful.

Oct 9, 2017 By Greg Iacurci

Roughly half of Americans turning 65 today will require long-term care. As life expectancy continues to rise and the cost of care creeps up, there’s a growing need for financial advisers to be knowledgeable about long-term-care funding mechanisms to help clients choose the best one — or combination.

Long-term-care coverage is delivered primarily through “private” means. Roughly 55% of expenditures from age 65 through death are via these private forms of payment, with 2.7% of that from insurance and the remainder from out-of-pocket expenses, according to the U.S. Department of Health and Human Services.

About 45% of long-term-care funding is from the “public” sector, mainly from Medicaid.

Public and private options have respective benefits and drawbacks concerning expense, level of long-term-care benefits and quality of care.

INSURANCE

Traditional LTC
There are a few insurance options to hedge long-term-care risk: traditional long-term-care insurance, and life insurance policies and annuities with long-term-care features.

In 2017, the national median cost for a private room in a nursing home is roughly $8,100 per month, according to an annual report published by the insurer Genworth. An assisted living facility costs $3,750 a month.

Traditional LTC insurance is a stand-alone policy devoted specifically to providing benefits for long-term care if a need arises. This insurance delivers LTC benefits at the lowest cost and offer inflation protection, observers said.

Sales of these policies have dwindled over the past several years. While insurers sold 700,000 of these policies in 2000, the American Association for Long-Term Care Insurance estimates the industry will close out this year with 75,000 policy sales.

There’s been negative consumer sentiment in the marketplace as insurers have had to raise premiums in recent years on in-force policies due to initial policy mispricing, following a misjudgment in lapse rates and interest rates, said Jesse Slome, executive director of AALTCI. A number of insurers also have abandoned the marketplace.

Advisers typically use traditional LTC insurance if clients have a tolerance for a potential premium increase in the future and if they don’t have a life-insurance need, said Phil Jackson, insurance planner at ValMark Financial Group.

Life insurance – LTC combination
Sales have shifted more to combined life insurance-LTC products. These products drew $3.6 billion in new premiums in 2016, a 500% increase over the $600 million in 2007, according to Limra, an insurance industry group.

Broadly, advisers like the flexibility of these policies. Mr. Jackson explains it in terms of “live, quit or die”: Clients get a long-term-care benefit while living, but can also surrender the policy for a portion of their premium or provide heirs with a death benefit. The latter options aren’t available for traditional policies.

Further, premiums and benefits are guaranteed, he said.

Combo policies come in two flavors: hybrid LTC, and life insurance with LTC riders. Hybrids provide more of a long-term-care benefit and have a “very small, very modest” death benefit, whereas policies with LTC riders are more life-insurance focused, Mr. Jackson said.

One key difference is hybrids typically have an inflation-protection feature allowing a client’s future LTC benefit to grow annually, whereas the benefits are fixed in policies with riders, Mr. Jackson said.

Among LTC-related sales year-to-date at ValMark, 45.9% have been hybrid, 49.5% LTC riders and 4.6% traditional LTC.

Annuities
Annuity products are the least-used among insurance products for providing LTC benefits. Combination annuity-LTC sales were $480 million last year, up from $285 million in 2011 but little-changed since 2014, according to Limra.

The products deliver a lifetime income stream, and increase that income in the event of a long-term-care need.

“Annuities are pretty much a last resort for long-term care,” said Jess Rorar, a planner at ValMark. Life insurance products provide more of a benefit and give more value for the money, she said.

However, in the event insurers decline a client from buying traditional LTC or combined life insurance-LTC, annuities can serve as a backup because the underwriting requirements are easier, said Jamie Hopkins, the Larry R. Pike Chair in Insurance and Investments at the American College of Financial Services.

MEDICAID

“Almost every adviser you talk to has clients that end up on Medicaid. It’s just the reality of aging and living a long time,” Mr. Hopkins said.

The government assesses income and asset levels when determining individual qualifications for Medicaid. Generally, individuals have to essentially run out of money before Medicaid kicks in, Mr. Hopkins said.

Clients often need the help of an elder-care attorney to structure their assets appropriately — for example, there are several exceptions for assets, such as a home, that get protected from a Medicaid spend-down calculation, and an attorney can help protect those to the largest extent possible, Mr. Hopkins said.

Medicaid facilities, though, often aren’t as nice as those provided by private care; so private insurance would likely better protect one’s quality of life, he said.

SELF-INSURANCE

Clients concerned about asset flexibility and freedom, as well as those with an aversion to medical underwriting, are often candidates for self-insuring if they have the appropriate wealth, Mr. Jackson said.

“Generally, even if you have the assets to self-fund, you’ll get a better return on your dollars if you use an insurance solution,” he said.

Clients also “tend to have to hold a lot of assets hostage to that self-insurance,” Mr. Hopkins said. “You’re not really allowed to touch them,” which sometimes leads to a reduction of lifestyle when young people set assets aside in a separate account for LTC purposes.

One Of The Most Overbought Markets In History

My Comments: As someone with presumed knowledge about investing money, my record over these past 24 months has been pathetic. I’ve been defensive, expecting the markets to experience a significant correction “soon”…

I lived through the crash of 1987, the crash in 2000, and then the Great Recession crash in 2008-09. I saw first hand the pain and chaos from seeing one’s hard earned financial reserves decimated almost overnight.

Only the crash hasn’t happened. But every month there are new signals that one is imminent. And still it doesn’t happen.

I’ll leave it to you to decide if what Mr. Bilello says makes any sense. I’m not sure it does.

by Charlie Bilello, October 22, 2017

The Dow is trading at one of its most overbought levels in history. At 87.61, its 14-day RSI is higher than 99.999% of historical readings going back to 1900.

(Note: Developed by J. Welles Wilder, the Relative Strength Index (RSI) is a momentum oscillator that measures the speed and change of price movements. RSI oscillates between zero and 100. Traditionally, and according to Wilder, RSI is considered overbought when above 70 and oversold when below 30. Signals can also be generated by looking for divergences, failure swings, and centerline crossovers. RSI can also be used to identify the general trend. TK)

Sell everything?

If only it were that simple. Going back to 1900, the evidence suggests that such extreme overbought conditions (>99th percentile) are actually bullish in the near term, on average.

Come again? In the year following extreme overbought readings, the Dow has actually been higher roughly 70% of the time with an average price return of 14.2%. From 5 days forward through 1-year forward, the average returns and odds of positive returns are higher than any random day. While the 3-year and 5-year forward returns are below average, they are still positive.

Does that mean we’ll continue higher today? No, these are just probabilities, and 30% of the time the Dow is lower looking ahead one year.

What it does mean is that one cannot predict a market decline based solely on extreme overbought conditions. Declines can happen at any point in time and “overbought” is neither a predictor nor a precondition of a bear market to come.

If one is going to predict anything based on extreme overbought conditions (and I would advise against doing so), it would be further gains. I realize that doesn’t conform to the conventional narrative of “overbought = bearish,” but the truth in markets rarely does.