Category Archives: Uncategorized

Ideas with no specific focus

One More Reason to Doubt the Stock Market Rally

My Comments: I’m now out of the markets with the exception of a Vanguard fund focused on high dividend yield stocks. And I may get out of that today… or not…

By Daren Fonda \ Nov. 30, 2018

Dovish comments by Federal Reserve Chairman Jerome Powell sent the stock market soaring on Wednesday. But bond investors yawned at the news. So who has it right?

The fixed-income crowd, according to economist David Rosenberg, chief economist and strategist at investment firm Gluskin Sheff.

Rosenberg, a longtime bear, has been warning that the U.S. economy isn’t as healthy as it might appear. Scores of indicators point to underlying softness, including a widening trade deficit, declines in home sales, weaker capital investment in equipment, and a slowdown in consumer spending as higher interest rates start to bite.

Add it all up, and the economy’s tax-cut fueled gains could be short-lived. And if the Fed really does pause in increasing rates-the stock market’s big hope-it would signal a recession coming sooner than expected

“The irony with Powell is what history tells us about what happens when the Fed pauses,” Rosenberg tweeted on Thursday. “The inevitable recession starts six months hence. The bulls should pray he has reason to keep tightening!”

While the stock market surged Wednesday, bonds held steady. Bonds, in theory, should be rallying on signs of a new dovish stance at the Fed. But as Rosenberg points out, yields at the front end of the Treasury curve (the most sensitive to Fed rate policy) barely moved. The two-year Treasury yield fell two basis points, or hundredths of a percentage point, to 2.8% after Powell’s comments. “As usual, the’bondies’ have the story right,” he wrote in a note.

At the center of the tug of war between stock and bond investors is the “neutral” federal-funds rate-the Goldilocks point at which it’s neither stimulative nor restrictive to economic growth. History shows that the neutral rate lies 100 basis points below nominal growth in gross domestic product. Nominal GDP growth in 2019 is likely to average 4%, Rosenberg estimates, which would put the neutral fed-funds rate at 3%.

But the Fed’s base case for nominal GDP growth is 4.5% in 2019. If that turns out to be the case, the neutral fed-funds rate would rise to 3.5%, up from the actual level of about 2.25% now.

Either way, he maintains, markets are pinning their hopes on the funds rate topping out at 2.5%, a level it would reach with just one more 0.25 percentage-point increase. But that may be wishful thinking. The Fed doesn’t have a great record in ending a tightening cycle before it tips the economy into a recession, indicating it waited too long.

“The Fed has not once completed a tightening cycle without raising the funds rate above neutral, even during the’soft landing’ episodes in the mid 1960s, mid-80s, and mid-90s,” Rosenberg writes.

If he’s correct, the stock market rally will soon peter out. Enjoy it while it lasts.



Our Man in DC

My Comments: I wrote this is May of 2017. I set it aside in an effort to help minimize potential bad feelings from friends and associates who didn’t, and perhaps still don’t, share my values as a Social Capitalist. I’ve reached the point in time where I no longer give a damn if anyone ‘unfriends’ me.

I didn’t vote for Trump though I had misgivings about Clinton. I rationalized my acceptance of him after the election as a necessary step in the evolution of our society where we stop and evaluate the decisions made over the past 70 years. Is racism ok? Do public parks still have value? Is it ok to lie through your teeth if you are making a political point? Is Social Security still a viable mechanism to limit poverty among our elderly? Is Medicare and Medicaid a viable health care model for certain people in society? Does it matter that there is growing income inequality in this country?

Here’s what I wrote in response to what I saw as a developing chaos among elected leaders in this country:

Maybe I’ve read too many spy novels or watched too many movies.

One recent story line involves several characters, one of them a global real estate mogul, declaring his intention to run for President of the United States. Surrounding this person are dedicated people, few of whom have ever held public office, or government service of any kind. It’s an entertaining story, especially when our key player succeeds. All the players are in over their heads, mistakes ensue, but all ends well.

Another story line involves the same characters but there is a cloud overhead. While perhaps entertaining, our story leads us down a path with global implications, most of them negative. We’re talking about possible war with economic chaos and human suffering.

In this story, the key player’s rise to prominence comes with help from questionable money that comes from Russian oligarchs. Their wealth was created following the collapse of the Soviet Union and their survival as individuals is linked to their friendship with Vladimir Putin. Somewhere along the way, our key player seems to have done something incriminating that, if revealed, would thoroughly compromise him.

Puzzlement surfaces when the key player and his entourage say lots of very nice things about Russia and the Kremlin leadership. This despite recent attacks by Russia on civil society outside their borders and decades of Russian efforts to diminish American and European influence on the world stage.

Meanwhile the US election process is evolving. Reputable sources declare when it’s over that the Kremlin influenced the outcome. What is not clear is the extent to which the key player and his inner circle were involved with the Russian efforts. They may in fact be innocent, but something is causing a large cloud to appear overhead. Did something happen in years past that compels the story?

Our man in DC never expected to become President. Running for the office would satisfy his ego and increase his standing in global real estate circles. Time passes and our man in DC finds himself increasingly drawn toward Russia and their ability to create fake news.

He has a compelling message for the electorate. He also discovers he can redirect our attention from his plausible faults by promoting the idea of fake news. He persuades the electorate the messages from traditional news sources are actually fake news. By election day, the resulting confusion, coupled with his promise to ‘drain the swamp’, was enough to carry the day. He wins and America hopes this will all play out well.

This alternative story line includes an emerging pattern among those in the candidates inner circle. They conceal facts, such as meetings with Russians diplomats here and there. Another is our man’s refusal to reveal his tax returns. Do they contain something toxic? Maybe not, but maybe something.

With victory, our man and his team gets ready to assume office. His team is vetted to gain access to classified information. As this effort moves forward, several of those in his inner circle decide to omit meetings they have with foreign nationals. Initially, it’s considered an oversight.

With every passing day, the cloud gets thicker with additional scrutiny from the media and law enforcement. Inner circle members Paul Monafort, Jeff Sessions, Carter Paige, Mike Flynn, Jared Kushner, and perhaps more are under this cloud. They are alleged to have not revealed meetings with Russians going back 18 months or more. While under oath in confirmation hearings, some fail to disclose these meetings with Russians.

By design or incompetence, the pattern of concealment grows. Is alleged Kremlin efforts to elect our man in DC, and gain political leverage, a success? After all, “Our Man in DC” is now the President of the United States!

The background murmurings are now appearing as though written in stone. Watergate taught us it’s not the alleged crime that kills you, it’s the cover up. Having top level meetings with a Russian emissary is not illegal; it’s the failure to report those meetings on your security clearance affidavit that’s illegal.

The pattern of concealment that began before the election is now apparent. Even our man’s son-in-law admits to concealed meetings, one of which was to promote covert communications with the Kremlin. The reader is compelled to assume something is amiss. If not, why bother.

Was there an effort to collude by our key player? Probably not. That implies overt intent. If our man is compromised from day one, there’s just the effort to hide the truth. One inner circle member was successfully promoted to lead the Justice Department. What better position to help keep that long ago event or action in the shadows.

The story is not over, but don’t hold your breath.

Successful Retirement Secrets™

My Comments: I am now among the ranks of internet publishers!

Almost four years in the making, Successful Retirement Secrets is an internet course that teaches a system to help you process retirement information.

The goal is to arrive at retirement ready with enough resources to live your life to the fullest with a minimum of financial stress and frustration.

Among other things, you’ll learn what has to happen between now and then. You’ll discover it’s not about having more stuff, but about knowing how much is enough and the questions you must ask of yourself to get it right.

There are three courses, and only one of them is free. But I do have FREE PREVIEWS to get you started.

An enrolled student will develop a system that works in the background, helping someone retire with more money and not less money.

Click on the image above with the train taking you toward the mountains, and watch a short, 60 second video. At the end, there’s a link to the home page where you’ll find the free previews. Then decide if enrollment in one or both courses will help you achieve the success you expect when you ultimately retire…

Happy Thanksgiving!

Happy Thanksgiving! Be safe, be alive, be excited about the future, and be thankful for every blessing.

The Looming Retirement Crisis for Public and Private Employees

My Comments: My efforts to build out an internet course on retirement planning is almost complete. I have a web site up an running and am making last minute changes to the content. There’ll be two course, one a relatively simple overview and the other a comprehensive outline with about 2 and a half hours spread over 18 video lessons. I encourage all of you to watch for my announcement.

by Joel Naroff, Posted: July 12, 2018

The United States has a retirement crisis.

When it comes to saving for their retirement, Americans better hope they don’t retire. Public-sector pensions are either running out of money or are at risk. But what we haven’t focused on is the rising problem with private-sector pension funds. That is something we must address as well, or retirement security will wind up being nothing more than an oxymoron.

When people talk of pension problems, Social Security and public-sector pensions are what always come up. Social Security is still the major source of retirement income for millions of people. According to the Social Security Administration, 21 percent of married couples and 43 percent of single seniors rely on Social Security for 90 percent or more of their income.

Unfortunately, for the first time since 1982, Social Security will pay out more than it collects. It could stop being able to pay full benefits as early as 2034. Clearly, something must be done to put the system on better long-term footing.

As for state and local pensions, the funding shortfalls are estimated to be at least $1.4 trillion using the plans’ expected returns — more if rational expected returns are used. Regardless, it is a lot of money. Locally, New Jersey has only 31 percent of the funds needed to pay its present and future recipients while Pennsylvania is at about 53 percent, according to the Pew Foundation. Delaware is in decent shape at 81 percent.

Hopefully, this failure of politicians to either raise the necessary revenues, make the required contributions to adequately fund the programs, or limit benefits will be debated during the upcoming election.

But what is not being discussed is the significant problems facing some private-sector pension plans.

There are two types of pension plans: defined contribution and defined benefits. The defined-contribution plans, which most of us know as 401(k)s, are owned by the worker. As such, they cannot be considered “underfunded,” except that most workers will not have enough money when they retire. A study by the New School for Social Research determined that about 35 percent of retiring workers will find themselves in poverty.

The private-sector pension problems exist in what are called defined-benefits programs. Those are the traditional plans where a worker has been promised a certain monthly/annual payment at retirement.

One group at risk stands out: The multiemployer pension plans. These are “pensions sponsored by more than one employer and maintained as part of a collective-bargaining agreement.” Many of the plans could become insolvent over the next 20 years.

So, why should we worry if that happens? It’s called the “contagion effect.”

Since a number of these plans are large, a collapse could cause the Pension Benefit Guaranty Corporation (PBGC), the federal agency that insures the benefits of private-sector pensions, to become insolvent. The government then would have to bail out the program and/or retirees would lose out significantly. The remaining private-sector retirement funds would lose their backstop.

But, it doesn’t stop there. Businesses that are responsible for the plans may be required to help bail out the plans. The added costs could put them and their workers at risk.

What is Congress doing? A sixteen-member Joint Select Committee on Solvency of the Multiemployer Pension Plans (Rep. Donald Norcross of Camden is the local representative on it) was created with the requirement that it develop policy recommendations that will “significantly improve the solvency of multiemployer pension plans and the Pension Benefit Guaranty Corporation.”

Their job is huge and must be completed soon. As a report from the committee states: “the insolvency of a large multiemployer defined-benefit plan would likely result in a substantial strain on PBGC’s multiemployer insurance program.” The PBGC projects its multiemployer program could become insolvent by 2025. There are about 10.1 million workers who fall under the umbrella of the pension plans, many of whom are in at-risk plans.

There are a variety of solutions to the private-sector pension problems. They are the same as the public sector and Social Security financial solutions: Either revenues would have to be increased and/or benefits reduced. Finding a political compromise will not be easy.

But, the most important takeaway from the multiemployer pension-plan crisis is that the nation’s pension problems are not just a public-sector worker issue. It is a mess all workers, public and private, are facing. Unless we start focusing on retirement security of all workers, the forecasts of massive numbers of retirees living in poverty will become a reality.


Replacing The 4% Rule For Retirees

My Comments: Yesterday I posted an article that talked about ‘rolling bear markets’ and what they will do to your assumptions about withdrawing money from your retirement accounts. The only answer I have is to start earlier and save more and hope for the best. And know that hope is not an effective investment strategy for anyone.

by Jack Guttentag \ September 15, 2018

My article last week cited some of the weaknesses of the “4% rule”, which says that it is probably safe for a retiree to draw an amount every year equal to 4% of the current value of a stock portfolio, rising modestly year by year with inflation. The principal weakness of the 4% rule is that the retiree does not know and cannot easily control the risk that is involved.

The major risk is that the rate of return that will be earned on the retiree’s assets will fall short of the rate that was assumed in calculating how much the retiree could withdraw from the assets each month. An additional risk is that the retiree will live past her expected life span. Either could result in impoverishment at an advanced age.

This article proposes a replacement I will tentatively call the “Retiree Discretion Rule”, or RDR. , which is designed to remove the weaknesses of the 4% rule. The RDR makes the risks explicit and places them under the retiree’s control. Viewed as a tool for advisors, RDR provides a framework for a retirement plan that incorporates the unique needs and concerns of each retiree.

The RDR calculates the initial monthly draw from the retiree’s assets, based on the following inputs.

  • Retiree’s age
  • Retiree’s gender
  • Value of financial assets
  • Annual inflation rate desired
  • Age to which retiree wants monthly draws to last – life span
  • Rate of return on assets

Here is an example. Retiree Smith is a 65-year male, has a common stock portfolio valued at $1 million, wants his monthly draws from assets to rise by 2% a year, wants those draws to last until he is 90, and assumes his financial assets will yield 4% over that 25-year period. RDR indicates an initial monthly draw of $4218. The risk of falling short due to an asset return of less than 4% is estimated at 6.4%, the risk of living past 90 is 18.6%, and the combined risk of a shortfall from either source is 23.8%.

The risk of a shortfall in the rate of return is based on a data base of common stock returns during the period 1926-2012. Over the 745 25-year intervals during that period, the rate of return on common stock was less than 4% on 6.4% of them. The risk of living past any age is based on the mortality statistics used by the Social Security Administration.

If Smith views a risk of impoverishment of 23.8% to be excessive, he can reduce the assumed rate of return, extend the draw period or both. With a 3% rate of return and draw period of 95, the draw amount falls from $4218 to $3210 but the risk of running out of funds falls from 23.8% to 9.4%. Another way to use the RDR is to generate a table of outputs that cover the different cases from which the retiree is making a selection. A table for Smith would look like the following.

A critical variable that is easy to overlook is the assumed annual increase in the draw amount. The table assumes that it is 2%. With a zero increase, the draw amounts in the table would be about 20% higher. Most retirees, however, will want the withdrawal amounts to rise over time.

The RDR has been implemented as an Excel spreadsheet ,which is available for free download at

At various times I was Chief of the Domestic Research Division of the Federal Reserve Bank of New York, on the senior staff of the National Bureau of Economic Research, Jacob Safra Professor of International Banking at the Wharton School, and managing editor of the Journal o… more

11 Proven Ways to Boost Your Retirement Income

My Comments: Personally, I’m completely invested in #4, #6, #8, and #9. I’m working hard on #1 and #10. What you choose is entirely up to you.

Boosting your retirement income is not about accumulating more stuff. It’s about enjoying life, completing your bucket list of things to do, and having money to pay your bills. Remember, you’ll have your GO-GO years, your SLOW-GO years and your NO-GO years. All require money.

by Selena Maranjian | Apr 8, 2018

Many Americans feel they’re on shaky financial ground these days. Fully 39% said that they feel not too confident or not at all confident that they’ll have enough money with which to live comfortably in retirement, according to the 2017 Retirement Confidence Survey.

How much money will you need for retirement? The answer will be different for different people, and many of us will not amass our needed amount. Fortunately, we can boost our odds of having a happy retirement by taking some steps. Here are 11 strategies you might employ now or later to increase your retirement income.

1. Get rid of debt

For starters, aim to enter retirement without a mortgage or any other costly debt, as that can weigh on you when you’re surviving on a fixed or limited income. Having to make debt payments while retired can hurt your ability to make other necessary payments. If you can pay off such debt before retiring, you can enjoy more income in retirement.

2. Make the most of retirement savings accounts

Tax-advantaged retirement savings accounts such as IRAs and 401(k)s are another good way to boost retirement income, as the more money you contribute to them while working, the more you’ll have in retirement. There are two main kinds of IRA: the Roth IRA and the traditional IRA. In 2018, the contribution limit is $5,500 for most people and $6,500 for those 50 and older in both types of accounts. You can amass even more with a 401(k) account, as it has much more generous contribution limits — for 2018 the limit is $18,500 for most people and $24,500 for those 50 or older. Give particular consideration to Roth IRAs and Roth 401(k)s (which are increasingly available), as they let you withdraw money in retirement tax-free.

The table below shows how much money you can accumulate over various periods socking away various amounts:
Growing at 8% … $5,000 Invested Annually     $10,000 Invested Annually
10 years              $78,227                                   $156,455
15 years              $146,621                                 $293,243
20 years              $247,115                                 $494,229
25 years              $394,772                                 $789,544
30 years              $611,729                                 $1.2 million
Calculations by author.

3. Set yourself up with dividend income

Fill your portfolio with a bunch of dividend-paying stocks, and you can collect income from it without having to sell off any or many shares to generate funds. A $400,000 portfolio, for example, that sports an overall average yield of 3% will generate about $12,000 per year — a solid $1,000 per month.

Dividend income isn’t guaranteed, but if you spread your money across a bunch of healthy and growing companies, you’ll likely receive regular — and growing — payments. Here are a few well-regarded stocks with significant dividend yields:

Stock                      Recent Dividend Yield
Amgen                    2.8%
General Motors    4.2%
National Grid        5.1%
PepsiCo                  2.9%
Pfizer                      3.7%
Verizon                   4.9%
Data source: The Motley Fool (April, 2018).

A dividend-focused exchange-traded fund (ETF) can be a fine option, too, offering instant diversification. The iShares Select Dividend ETF (DVY), for example, recently yielded about 3.2%. Preferred stock is another way to go. The iShares U.S. Preferred Stock ETF (PFF) recently yielded 5.6%.

4. Keep working in retirement

Another way to boost your retirement income is to work during the first years of your retirement — at least a little. Working just 12 hours per week at $10 per hour will generate about $500 per month. Also, given that many retirees can find themselves restless and a bit lonely in retirement, a part-time job can help by offering more daily structure and regular opportunities for socializing.

Here are some possibilities: You could be a cashier at a local retailer or deliver newspapers. You might do some freelance writing or editing or graphic design work. You might tutor kids in subjects you know well, or perhaps give adults or kids music or language lessons. Make and sell furniture or sweaters or candles. Do some consulting — perhaps even for your former employer. Babysit, walk dogs, or take on some handy person jobs. These days the internet offers even more options. You might make jewelry, soaps, or jigsaw puzzles and sell them online, or write e-books that you self-publish online.

5. Lock in income with fixed annuities

Give fixed annuities some consideration, as they can deliver regular income, and favor them over variable annuities and indexed annuities that often charge steep fees and sport restrictive terms. Fixed annuities are much simpler instruments and they can start paying you immediately or on a deferred basis. Below are examples of the kind of income that various people might be able to secure in the form of an immediate fixed annuity in the current economic environment. (You’ll generally be offered higher payments in times of higher prevailing interest rates.)

Person/People            Cost       Monthly Income      Annual Income Equivalent
65-year-old man       $100,000       $546                         $6,552
65-year-old man       $100,000       $522                          $6,264
70-year-old man       $100,000       $628                          $7,536
70-year-old woman  $100,000       $588                          $7,056
65-year-old couple   $200,000       $929                         $11,148
70-year-old couple   $200,000     $1,028                        $12,336
75-year-old couple   $200,000     $1,180                        $14,160
Data source:

A deferred annuity can also be smart, starting to pay you at a future point, such as when you turn a certain age.

6. Consider a reverse mortgage

Look into a reverse mortgage, too. It’s essentially a loan secured by your home. A lender will provide (often tax-free) income during your retirement, and that money doesn’t have to be paid back until you no longer live in your home — such as after you move into a nursing home or die. It has some drawbacks, such as requiring your heirs to sell your home unless they can afford to pay off the loan, but if you’re really pinched for funds and no one is counting on inheriting your home, it can be a solid solution.

7. Borrow against your life insurance

Many people don’t think of this strategy, but in the right circumstances, it can deliver needed income. If you have a life insurance policy that no one is depending on — such as if the children you meant to protect with it are now grown and independent — you might consider borrowing against it. This can work if you’ve bought “permanent” insurance such as whole life or universal life, and not term life insurance that generally only lasts as long as you’re paying for it. You’ll be reducing or wiping out the value of the policy with your withdrawal(s), but if no one really needs the ultimate payout, it can make sense. Plus, the income is typically tax-free.

8. Move to a less expensive home or region

You can also beef up your retirement income by spending less in retirement on your home. You can achieve this by downsizing into a smaller home and/or moving to a region with lower taxes or cost of living. This strategy can shrink your property taxes, insurance costs, home maintenance expenses, utility costs, landscaping bills, and so on. The median home value in Massachusetts, for example, was recently about $341,000, but it was only $264,600 in Colorado, only $143,600 in South Carolina, and $114,700 in Arkansas.

9. Collect interest

Parking money in interest-generating investments is a strategy that varies in its effectiveness as the economic environment changes. When interest rates are high, it’s great. In times like these, not so much. If you park $100,000 in certificates of deposit paying 1.5% in interest, you’ll collect $1,500 per year, not a very helpful sum. Back in 1984, though, rates for five-year, one-year, and six-month CDs were in the double digits. If you could get 10% on a $100,000 investment, you’d enjoy $10,000 per year, equivalent to about $830 per month. If interest rates are sufficiently low, they won’t even keep up with inflation, which has averaged about 3% annually over long periods.

Bonds are another interest-paying option, but the safest ones (from the U.S. government) tend to pay modest interest rates, especially in low-interest-rate environments. Still, if you have a lot of money, you might make this strategy work by buying a variety of bonds that will mature at different times, generating income over many years.

10. Retire later

Here’s a very powerful strategy, but one that many people would rather not employ: Retire later than you planned to. If you can work two or three more years, your nest egg can grow while you put off starting to tap it. (In other words, it can ultimately deliver more income, and it will have to do so for fewer years.) You might enjoy your employer-sponsored health insurance for a few more years, too, perhaps while also collecting a few more years’ worth of matching funds in your 401(k).

Imagine that you sock away $10,000 per year for 20 years and it grows by an annual average of 8%, growing to about $494,000. If you can keep going for another three years, still averaging 8%, you’ll end up with more than $657,000! That’s more than $160,000 extra just for delaying retirement for a few years.

11. Maximize Social Security

There are a bunch of ways to boost your Social Security income, too. You can increase or decrease your benefits by starting to collect Social Security earlier or later than your full retirement age, which is 66 or 67 for most of us, and you can make some smart moves by coordinating with your spouse when you each start collecting.

If you and your spouse have very different earnings records, for example, you might start collecting the benefits of the spouse with the lower lifetime earnings record on time or early, while delaying starting to collect the benefits of the higher-earning spouse. That way, you both get to enjoy some income earlier, and when the higher earner hits 70, you can collect their extra-large checks. Also, should that higher-earning spouse die first, the spouse with the smaller earnings history can collect those bigger benefit checks.