A Little Bit of Shock Value…

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I just published an article titled “Welcome to 2026.” It showcased my new-found optimism about the future of our economy and our markets. And, admittedly, I was going for a little bit of shock value when, near the end of the article, I declared the Dow Jones could hit 44,000 in ten years. The DJIA is currently around 18,500.

Here’s a link to the article in the local seniors’ paper, The Senior Beacon (article on page 24).

A FEW WARNINGS

After reading some scary articles about the very near-term, I wanted to repeat my warnings. We will absolutely have recessions, bear markets, catastrophes and other bad and volatile events. BUT…those things have never stopped the market in a super-bull cycle.

LOTS OF BAD THINGS

The world’s a total mess: there’s record-high government debt, record-low U.S. interest rates (indicating a weak economy), wars, invasions, bombings, negative global interest rates, worldwide growth slowdowns, Brexit–whoa, gotta wipe the sweat from my brow. Are you optimistic yet?

I’m aware of these major issues. They are important. But they’re not devastating.

WHAT WE’VE TRIUMPHED THROUGH

For example, the U.S. has survived most of those things before, including bigger trials like assassinations, Great Depressions, multiple World Wars, etc. You get the idea. All through this, the markets have reached new highs, generating new wealth.

I believe we’re on the cusp of another super-bull market. We had the latest in the ’80’s and ’90’s. Then we had the worst decade in the stock market. Ever. The worst ever. Even worse than the decade that includes the Depression.

That was the major down cycle. Now I think it’s time for the markets to move even higher up. Get ready for Dow 44,000…

Here’s a link to the article again. Check it out on page twenty-four.

If you’d like a free report that took 17 years to build, highlighting the ten most-repeated mistakes I’ve seen dozens of investors make, just email the word “ten” in the subject line to RonPhillipsAdvisor@gmail.com

This report can help you minimize risk, save you $1,000’s in unnecessary fees, protect you and your loved ones from financial devastation, and minimize or even eliminate your taxes on investments. Pull up your email program, put “ten” in the subject line, send to RonPhillipsAdvisor@gmail.com and sit back and wait for the most important free report you’ll ever read on your investments.

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Romantic Brazil…

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File:Amanhecer no Hercules --.jpg

HOME TO THE OLYMPICS, RAMPANT CORRUPTION, A RECESSION & MAYBE THE BEST OPPORTUNITY THIS YEAR

The Olympic Games are close. Brazil and the rest of the world are getting excited. The country has poured billions of dollars into getting ready. It’s sure to be a beautiful event. And, seemingly from Mount Olympus, a lightning bolt has struck Brazilian politics and economics.

They’re experiencing a 5-quarter recession…so far. The government is so crooked that 6 of 10 Congress members are facing corruption charges. The stock market is in the dumps.

SEEING THROUGH THE SMOKE

My favorite investing quote and strategy is to “buy when there’s blood in the street.” Very graphic but very helpful. We want opportunities that are cheap and beat-up. We want discounted assets.

The way I look at Brazil is the country is trading at 2005 prices. At that time, their economy was at about $882 billion. The 2016 estimate is for them to hit $1.53 trillion. That’s an increase of 73 percent! We’re buying a much bigger economy at half the price….

PLAYING THIS OLYMPIC-SIZED TRAGEDY

The largest ETF for Brazilian stocks is the iShares MSCI Brazil Fund ($28.15; symbol: EWZ). It has a 12-month yield of 3.3 percent and a low expense of 0.62 percent per year. The fund has over 60 different investments and over $3 billion in assets.

A warning: the top two stocks make up over 20 percent of the portfolio. So it’s both a concentrated and diverse fund. Yep. Sounds strange but they’ve achieved it. This can be good if you want exposure to Brazil and you have faith in these two companies.

The largest is Itau Unibanco. According to Wikipedia, it’s “the largest financial conglomerate in the Southern Hemisphere.” That’s usually a great way to get exposure to an economy. Banks lend the growth money, profit from upswings and are a good representation of the overall market. Buying a bank is like buying the lifeblood of a nation.

The second-largest holding is Ambev SA. They’re based in Sao Paulo and controlled by Anheuser-Busch InBev. This parent company is the maker of Budweiser, Corona, Stella Artois and over 200 brands. It’s also the world’s largest brewer.

These two concentrated positions look pretty stable and may juice-up the portfolio volatility. Both upward and downward. Yet the downward movement may have largely already happened.

To learn how to add international exposure to your portfolio: request a free copy my report, “Producing Large Portfolio Income.” Visit RetireIQ.com to request your report, giving you ideas on how to generate 5-7% annual portfolio income.

Political Fighting is Sorta Good…For the Markets

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Yep. That’s about the only thing our political strife produces: solid stock performance. According to S&P Capital IQ research, a mix of a Democratic president and Republican Congress produces the highest annual returns for the Standard and Poor 500 Index (over 15 percent annually).

Also, when there’s a Democratic president and Congress/Senate are both Republican, the performance is over 13 percent.

Not all gridlock is good, though. There are some scenarios where a mix of the three produces underperformance. One scenario is a Republican president and Democratic Congress/Senate, producing only about 5 percent yearly gains.

For this entire time period, starting in 1945, the S&P 500 averages 8.8% per year.

Here’s a link to the article I found explaining this phenomenon. Most articles and research look only at which party controls the presidency. This research is pretty unique in that it covers who controls both houses and the presidency.

 

Market Volatility: Are You a Victim or a Victor?

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Market volatility is very scary. It (temporarily) destroys our wealth, makes us hate watching the news and just freaks us out emotionally. But…volatility can be our friend. Or, at the very least, our frenemy.

How do we manage volatility?

The Number One way is to manage our emotions. The markets really are simply driven by fear or greed. It can be that basic. It’s such a predictable thing that there are quotes about it. Warren Buffett famously said to “be fearful when others are greedy and greedy when others are fearful.” Simple. Basic. But emotionally hard to do at times.

How did this strategy play out in the past? Well, in 1999 everyone was euphoric (greedy) over tech stocks. If you were fearful then you would have avoided arguably the largest stock bubble, and bust, in one hundred years. If you were greedy when others were fearful, in March 2009, the market would have roughly tripled your investment.

It seems like this approach might have some merit….

STRATEGY NUMBER TWO

Dollar-cost average into the markets: purchase investments on a regular basis with a regular dollar amount. If you’re young you can do this fairly easily through your paycheck. Even if you’re older, or retired, you can still do this. You may have a portfolio. That portfolio should be producing a large income, in percentage terms. So take that monthly and quarterly income and reinvest, if possible.

You can visit RetireIQ.com and request my free report “Producing Large Portfolio Income” to get an idea on how to generate 5-7% annual portfolio income.

STRATEGY NUMBER THREE

This multi-pronged idea is definitely for the “advanced students.” You can manage risk by using short mutual funds when the market is dropping; tactical allocation and cash for macro-events like dropping GDP; and options writing or buying for relatively steady income and hedges, respectively.

Again, these are more complex ways and you may want to get some professional advice before starting in this direction.

If you have any questions or comments you can always reach me at RonPhillipsAdvisor@gmail.com

 

 

How To Profit From Davos, 2016, Part 2

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Recently at The World Economic Forum in Davos, the CEO of PayPal said you can “have the power of a bank branch in the palm of your hand.” I thought that was pretty amazing, if true, and set out to figure out if he was really accurate.

Just poring over my memory of recent commercials, I figured if you had a Samsung (SSNLF 1025.oo, in local currency) smartphone and a Wells Fargo (WFC, $48.56) bank account you could, indeed, have “the power of a bank branch” in your mitts. Wow! You can get a check from a customer, take a picture and deposit it; you could transfer money from account to account and then back again; you could “withdraw” at a store, using your smartphone payment or shop from your phone; you could check balances and transactions, all with an app! This is amazing technology. Unheard of two or three decades ago. Real Star Trek stuff here.

*       *       *

While Samsung is very tough to buy directly for an American investor (I checked into it for a client and, if that same ol’ memory serves, you would need to be a citizen of some European country to get it done). The next best thing is to buy a U.S.-based mutual fund that holds a large position in Samsung. Does such a fund exist? Sure does.

The iShares MSCI South Korea ETF (EWY, $46.77) holds almost 20% of it’s funds in Samsung Electronics. This would probably be the easiest way to get significant exposure to the stock. As a bonus, an investor would also get diversification, liquidity and over 2% in annual dividend income.

Despite the exciting possibility, despite the source of the idea don’t invest a lot into trends. Rarely does it end well going “all in” following an amazing idea. Maybe for a time but not long-term. Yet these industries and ideas can make investors money.

My point here is that following hot ideas is usually a fun way to play with a small bit of money. For consistent wealth-building, though, you want to stick with the very boring approach of asset allocation, true diversification, buying low and time in the market. Sure, play around with 5% of your money but be ready for any result, good or bad.

Here’s the Bloomberg Davos video that got the juices flowing for this article.

For my popular report “10 Investor Oversights” visit RetireIQ.com, enter your info and mention the name of the report to receive a free copy. Also, if you wrangle a new sign-up to this e-letter I’ll give you a $5 Starbucks card. Just direct ’em to the above website. Thanks.

 

 

How To Profit From Davos, 2016, Part 1

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World Economic Forum logo.svg                        

Many of the greatest economic thinkers, managers and superstars attended this year. There were billionaires, heads-of-state, CEOs, money managers, professors and more billionaires. Did I mention there were billionaires there? This was the place to be.

I ran across this great “highlights” video from Bloomberg.com and was happy to see that the “smart money” confirmed my thoughts: this correction is no big deal. I’ve thought, for two years now, that the U.S. market had been up for 6 years straight and needed to correct. Since we didn’t have a significant, or long, contraction, I thought when it finally hit (now) that it could turn into a small bear market. Thankfully I’ve been wrong on this last point.

But I digress. How can you profit from this correction and multiple global bears and how does it tie into Davos?

Answer: Christine Lagarde, the head of the International Monetary Fund, said in the previous video that “we will have volatility” in 2016. And she’s absolutely right. I’ll take it a step further: We will have volatility every day of every year into the indefinite future! That’s the market. And market participants get rewarded for this volatility and patience. So you, as a brave, courageous & profitable investor, need to buy this volatility. Either in a retirement plan on a monthly basis (best) or making calls on an undervalued sector (maybe even better).

I have an answer for the undervalued sector. To me this is a no-brainer. Find a solid asset in the energy sector. I’m going to repeat a drawing of mine about a specific fund. This is not a recommendation only a vivid example of a cheap asset. I’m actually recommending mid-stream MLP mutual funds. I’m using one now that has a TTM (trailing twelve month) yield of 11.54%.

OIL

Visit my website at RetireIQ.com to request a one-page info sheet on that MLP fund, yielding over 11 percent. Just type in “MLP info” when signing up.

So back to volatility. We, as smart investors, have to have the chutzpah to buy these down times. We get rewarded for buying risk assets at low prices. Assets like stocks, businesses, real estate, even bonds at certain times.

I just finished an article for the local paper The Senior Beacon. Take a look in February when it gets posted (online or in most grocery stores). I go into the recent correction, various international bears and how you could further profit from declines.

 

 

Billionaires John Paulson, Buffett & Trump: Their Money Secrets

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The ultra-wealthy move markets, news cycles, politics and policy with equal aplomb.

THERE’S LESS GOLD IN THEM THAR HILLS

Let me introduce you to the world’s highest earner. John Paulson started Paulson & Company, a preeminent hedge fund shop. He lucratively bet against the subprime bubble in 2006 and won big.

His latest bet was a little too big, a little too bold. He started his Gold Fund in January of 2010. It hasn’t done too well. Paulson & Co. went from $36 billion in assets down to $19 billion, due in large part to the gold drop.

Paulson’s bet is even bigger, and more unique, because he created gold-denominated shares in his funds. This way you get gold exposure even on more traditionally invested hedge funds.

“We view gold as a currency, not a commodity. It’s importance as a currency will continue to increase,” said the Queens, New York native who earned nearly $5 billion in a single year.

Here’s how well that “currency” has performed since he started. Using the SPDR Gold Trust (GLD; $111.73) as a proxy for gold, it’s been flat since Paulson’s fund was created. GLD traded at $109.80 in January of 2010 and is a couple of dollars higher, as of this writing. Also, the SPDR fund was as high as $185 during that time and is now 40 percent lower.

Take-away: beware of too much exposure to a single asset class.

THE REAL-ESTATE-TURNED-POLITICAL MOGUL

“It’s tangible, it’s solid, it’s beautiful,” so says Donald Trump about his cherished real estate. But is it really that great?

Short answer: pretty much. Longer answer: The Donald is actually invested into quite a few different asset categories. Things like aircraft, licensing businesses and alternative real estate, such as gold courses. He also has about a third of a billion dollars in cash. These other areas produce a disproportionate amount of his cash flow.

The Forbes 400 magazine just had a 15-page expose on “The Maned One,” revealing his ups and downs. Trump was on the inaugural rich list, dropped from it for several years and has been back for two decades.

Take-away: real estate can juice up returns (and risk), help protect against inflation and provide growth, income and diversification.

THE FRUGAL BILLIONAIRE

It’s hard to find much bad to say about our last “big dog”. Investment-wise he is arguably history’s most successful. Although politically he’s gotten a bit controversial, especially regarding taxation and social causes.

I’m talking about The Oracle of Omaha, Warren Buffett.

Buffett’s approach has been the most prudent of the three. His approach is an extreme in diversification. His empire spans hundreds of companies, and stocks, in dozens of countries and industries, churning out billions in new wealth and income on a regular basis. He’s gone a long way since buying a “cigar butt” textile company named Berkshire Hathaway.

Take-away: diversification really does work. For the short-haul and the long haul.