1999 Again?

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I read an article explaining the similarities of the recent “four-fecta”: the Dow Jones, the Nasdaq, the S&P 500 and the Russell 2000 all hitting record new highs on the same day! Yes, in that respect, it is like the last time this happened in 1999. But the similarities end there, in my opinion.

LONG-TERM CYCLES

The difference between now and the 1999 bull market is that we are not in a tech bubble. Every major index was overpriced when compared to earnings. Now we’re at the beginning of slight overpricing. But when projected out on future earnings, the broad-based S&P 500 is fairly-priced for 2017 and under-priced for 2018.

According to Yardeni.com, earnings for the index will $132.61 in 2017 and then $148.11 the next year. This puts the P/E ratio at 16.52 and 14.79, for each respective year. The 2018 number is below the historic average. That’s why it’s under-valued for that year’s estimate.

We’re actually at the beginning of what I think is a long-term bull market that began in 2013. Here’s an article I wrote then expressing that opinion:  reprint-superbullmarket-senior-beacon-2013-sept-doc

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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.

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.

 

 

Carl Icahn is worried…Should You be, too?

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Carl Icahn In His Latest Video: "Danger Ahead"

Carl Icahn In His Latest Video: “Danger Ahead”

For those of you who don’t know, Carl Icahn is a famous, “shareholder activist” billionaire. He’s even been called a corporate raider for those wanting to insult him.

But, in my opinion, he and his cohorts are a positive force in the market. When there’s an undervalued asset, bad management or other opportunity, these are the guys that shake things up. They own a lot of that particular corporate stock and if you do, too, then you’re in good company. And, most importantly, your stock may go up significantly.

With that said, I have to take his latest video with not a grain, but a wheelbarrow, of salt. I agree with about 90% of what he says except Icahn’s BIG PREDICTION: he thinks there will be a market crash soon that will make all crashes since the 1960’s look minor. I have to say: “Hogwash!”

For context, the worst crash since the 1960’s was The Great Recession we just endured from 2008-09. Very simply, the big fundamentals were going down. Both GDP (the size of our economy) and corporate earnings (the stock market’s major indicator of health or weakness) were going down. And we were at the end of a massive real estate/lending bubble. In other words, the market deserved to go down 50 percent. Which it did.

So, Mr. Icahn, where are GDP and corp. earnings now? Hitting new records. Like they’ve been doing for the last several years. Like they’re estimated to do for as far as can be forecast.

Just a side note: the wealthy and the politicians seem to have lost touch with Main Street. The video also mentioned various bubbles, one of which was an art bubble! Who cares about an art bubble except the ultra-wealthy? It certainly doesn’t cause a tumble in the U.S. economy….

Here’s a link to the complete video via The New York Times: video

Take a look at Icahn’s video. It is really worth watching. Let me know what you think about this billionaire’s thoughts. Please feel free to comment below or contact me any time at RonPhillipsAdvisor@gmail.com