Boomer’s Worst Nightmare


The last two recessions (2009 and 2020) set up Boomers, those born 1946 to 1964, for a perfect financial storm. 

Boomers are running out of time because the 2010 HIRE act helped lock them into the US dollar.

Now the CARE act of 2020 will reduce the purchasing power of the greenback.   This will erodes the lifestyles of Americans aged 56 or older, who won’t have time to let their investments and savings work through the current cycle of volatility.

Boomers already had plenty to worry about in retirement; low interest rates and rising health care costs, plus stock market timing difficulties… not to mention the higher risks and uncertainty created by the COVID-19 pandemic.

Yet many are not aware of the dollar problem.

The 2010, domestic jobs stimulus act, called the Hiring Incentives to Restore Employment (HIRE) Act included Subtitle A (sections 501 through 541) of Title V of that law, called The Foreign Account Tax Compliance Act (FATCA).  This provision makes  foreign banks report to the IRS, the foreign assets held by any U.S. account holders the bank has.

The requirements in this act are so onerous that most non US banks simply closed all accounts of US citizens or residents.

In short this made the process of Americans holding money abroad so complicated that they are locked into bad inflation and three dangerous, dollar financial scenarios, because they lack time.

The first danger is stock market volatility.  This is still one of the best places to build wealth… but only if you have enough time.

The need for time is the problem for Boomers especially those (like me) born in the mid 1940s.

Many early boomers, already need to be drawing on their savings now… or soon will.  They can’t wait for a decade or more for a stock market recovery.

Stock markets are great ways to make money, but only if you have time because the way markets work is… they spurt up in short periods and, then drop down and drift sideways, often for many years.

The US stock market’s up at the moment, but history suggests that we’ll see a lot of volatility in this decade.

Decades of sideways movement after a severe correction is nothing new in the stock market.

The chart below shows how stock markets give most of their profits in spurts and then do a lot of sideways motion for years.

Look at the spurt history of the US stock market in the chart below.

stock chart

From www.macrotrends.net/1319/dow-jones-100-year-historical-chart

In July 1929 the Dow Jones Industrial Average  (DJIA) reached 5152.  Then the market crashed and the DJIA did not get back to that high for 32 years in December 1958.

The market was rising on a rocket at that time and by January 1966, six years later, the Dow Jones Industrial Average  (DJIA) had soared to  7930.

Then another period of volatility began and it took 29 years, until October 1995 for the DJIA to get back 7932.

There was only four years to really gain in the market at that time as the DJIA rose to 17,510 by December 1999, when the market again collapsed and it took the DJIA over 14 years (Mar 2014) to again return to  17,800.

Over the next six years, there was another upwards spurt, from March 2014 to January 2020 when the DJIA shot over 28,000.

The next crash came in February 2020.  There has been a lot of recovery since, but over a 100 years of stock market history suggests that the 2020 decade will see volatility.

stock chart

So everything’s as expected… except the pandemic.  The ravages of the coronavirus dramatically increase the unknown and this uncertainty is the greatest purveyor  of weakness that a stock market can have.

Yes, the stock market will spurt upwards, but to catch that next spurt requires time!

The next problem, low interest rates.

Normally those who have or are about to retire would shift a large part of their investments and savings into income producing certificates of deposit and bonds.

They would enjoy some benefits from compound interest rates.

The chart below from Getrichslowly.org (1) shows how much accumulation compound interest brings, over time.

compound interest

Not now!

The benefit of  compounding requires time and an interest rate.  Even if there was a decent interest rate to be earned, Boomers don’t have time.  Right now with an almost zero interest rate, compounding benefits are gone.

Even worse low interest rates and the potential of high inflation reduces the effectiveness of fixed income option.

Fixed incomes are doomed because there is almost unimaginable, horrendous deficits and debt of governments everywhere and they will do everything they can to keep interest rates very low.

The huge global debt combined with low interest rates will also create inflation.

The June, 2020 US Budget Deficit was the highest monthly gap ever.   The deficit for the month was $864 billion.

To put that into perspective the 2019 deficit for the year (already the third highest in history) was $984 billion.

The Wall Street Journal article “Coronavirus Spending Pushes U.S. Budget Deficit to $3 Trillion for 12 Months Through June” states that as a share of GDP, the deficit is on pace to be the largest since World War II.

Money needs trust to maintain purchasing power.

With trust, money provides a way to store wealth — to preserve current purchasing power for spending at a later date.

Money must be “real and rare” to have this trust.  Only money created by real production can be real money that survives inflation, because rarity creates trust.

Reducing the quality of rarity creates inflation.  When a government reduces the rarity of its money, the action destroys the money’s value.

Because almost all money is issued and controlled by governments, its rarity is at risk, so money is only a temporary store of value… but it is not a solid asset.

So what can Boomers do?

Invest in stock markets that pay high dividends.

Add Safety & Get Paid 154% More

Get paid more now!

Current markets have turned economic history upside down.  Normally bonds pay the highest interest rates and add safety to a portfolio.  Not right now.

This chart from the New York Times article “The Mystery of High Stock Prices” (1) shows that equities pay a higher yield than bonds.

wsj.com

Most Important, Get Paid the Most Now!

Just because US stocks pay more than dollar denominated bonds, does not mean they offer the best income deal.  In fact the chart below shows that US shares pay one of the lousiest yields of the 46 stock markets we monitor around the world.

The US MSCI Index pays a modest 1.91%.  That’s a terrible yield, but better than the 1.6% you can get in AA rated corporate bonds.

Nine solid, top value stock markets (shown below) not only add diversification and the best long term profit potential, they pay 71% higher yield, 3.27% compared to the US yield of 1.91%.

This is why my core stock portfolio consists of a handful of top value share ETFs and this position has hardly changed in five years. 

Let me explain why this strategy adds safety, increases long term appreciation potential and pays almost double short term income right now.

In a moment, I’ll show how to push that yield to 4.07% per annum without adding additional risk.

keppler62020

During the past five years, I have been steadily accumulating the same good value ETFs.  I have traded only three times, so my trading costs, my fuss, fiddle and time spent have been kept to an absolute minimum.

I have been investing in iShare country ETFs.  Each one invests in the MSCI Index of one of the top (or neutral in the case of Canada and Australia) value markets above.

My strategy protects against stock market volatility and yet has potential for the best gains long term from rising share prices by holding an equally weighted portfolio of the best value based country ETFs.

The Purposeful Investing Course tracks 46 stock markets around the world into determine which markets offer the best value.

Since no one knows what the future will bring, investing in value makes the most long term sense.

Plus Value ETFs are Safer

The people who dominate stock markets include a pack of thieves.  This fact has always been true.  We were recently reminded of this fact when Wirecard AG, one of Europe’s most prestigious companies, listed on Germany’s premier stock-market index, the Dax 30 fooled everyone including its top grade, longtime auditor, Ernst & Young GMBH.

The shares in German fintech company Wirecard AG (symbol WDI fell 63.74% as it filed for insolvency proceedings, after revealing that more than $2 billion in cash missing from its balance sheet was all a fraud.  The company’s market value fell to less than €500 million from almost €13 billion in a week.

Investors have seen this type of rip off again and again, really big scams from Enron to Bernie Madoff and these are just the tip of the iceberg.

Shares in stock markets are manipulated all the time.  Stock markets (in fact almost all types of markets) are led by sharks plain and simple.  Count on this fact.  This is the nature of the beast and the number one goal of many big businesses is to take as much of your money as they can to line their pockets.

In the Wirecard AG example many  thousands of investors have seen their hard work, their thrift, their security and hopes for the future disappear, even though they seemingly did everything right by investing in a blue chip, new era, high tech company.

A study of 92 years of investment returns shows that, despite the fraud and cheating and deceit, stock markets are still a good way to make your money grow… if you invest long term and diversify.

keppler

Our Pi strategy makes it harder for cheaters to grab your wealth because it’s very hard to manipulate an entire stock market, much less a dozen or so stock markets around the world.

Manipulators have a hard time tricking an entire market, especially larger markets.  If you get the best value country ETFs, your chances of long term profits improve.

Our Purposeful Investing Course (Pi) teaches an an easy, simple and effective approach to zeroing in on value because little time, management and guesswork is required.  You are investing in a diversified portfolio of good value indices.

Sticking to math based stock market value and country ETFs eliminates the need for hours of research aimed at picking specific shares.   Investing in an index is like investing in all the major shares of the market.  You save time because all you have to do is invest in the ETF to gain the profit potential of the entire market.

To achieve this goal of diversification the Pi portfolio consists of iShare Country Index ETFs managed by Black Rock, Inc.

Country Index ETFs are similar to an index mutual fund but are shares normally traded on a major stock exchange that tracks an index of shares in a specific country.  ETFs do not try to beat the index they represent.  The management is passive and tries to emulate the performance of the index.

A country ETF provides diversification into a basket of equities in the country covered.  The expense ratios for most ETFs are lower than those of the average mutual fund as well so such ETFs provide diversification and cost efficiency.

I am updating my plan to increase my average yield to as much as 4.07%.

My developed market portfolio has been diversified into nine developed markets: Austria, Germany, Hong Kong, Italy, Japan, Norway, Singapore, Spain and the United Kingdom.

iShares Country ETFs make it easy to invest in each of the good value markets.

The average yield of these nine markets combined was 3.27% as of June 2020.  By replacing the three lowest yielding markets, Austria (.64%), Germany (1.83%)  and Japan (2.51%)  with two better yielding neutral markets Australia (4.57%) and Canada (3.54%) the average annual yield on the entire portfolio rises to 4.07%.

4.07% is 154% higher than the 1.6% you can currently earn on AA rated corporate bonds!

The ETFs provide higher income and incredible diversification for safety, plus the highest long term profit potential.

iShares is owned by Black Rock, Inc. the world’s largest asset manager with over $4 trillion in assets under management.

There is an iShares country ETF for almost every market.

Here’s how you can create your own good value strategy.

I would like to send you, on a no risk basis, a 130 page basic training course that teaches the good value strategy I use.  You learn all the Pi strategies, what they are, how to use them and what each can do for you, your lifestyle and investing.

You also begin receiving regular emailed Pifiolio updates and online access to all the Pifolio updates of the last two years.  Each update examines the current activity in a Pifolio, how it is changing, why and how the changes might help your investing or not.

You also receive a 100+ page PDF value analysis of 46 stock markets (23 developed markets and 23 emerging stock markets).  This analysis looks at the price to book, price to earnings, average yield and much more of all 46 markets.

This year I will celebrate my 52nd anniversary of global investing and writing about global investing.  Our reports and seminars have helped readers have better lives, with less stress yet make fortunes during up and down markets for decades.  This information is invaluable to investors large and small because even small amounts can easily be invested in the good value shares we cover in the Pi course.

Time is your friend when you use a good value strategy.  The longer you can hold onto a well balanced good value portfolio, the better the odds of outstanding success.

A 45 year portfolio study shows that holding a diversified good value portfolio (based on a  good value strategy) for 13 month’s time, increases the probability of out performance to 70%.  However those who can hold the portfolio for five years gain a 88% probability of beating the bellwether in the market and after ten years the probability increases to 97.5%.

Subscribe to the first year of The Personal investing Course (Pi).  The annual fee is $299, but to introduce you to this online, course that is based on real time investing, I am knocking $124.50 off the subscription.

Guarantee

Enroll in Pi.  Get the basic training, the 46 market value report and access to all the updates of the past two years, plus all new updates over the next year.

I guarantee you’ll learn ideas about investing that are unique and can reduce stress as they help you enhance your profits through slow, worry free, easy diversified investing.

If you are not totally happy, simply let me know in the first two months for a full no fuss full refund.

You have nothing to lose except the fear.   You gain the ultimate form of financial security as you reduce risk and increase profit potential. 

Due to the COVID-19 pandemic we have cut the subscription to $174.50.  You save $124.50!

Then because this global recovery from the pandemic is going to take years, we’ll maintain your subscription at just $99 a year rather than $299.  Your subscription will be autorenewed in 2021 at $99, though you can cancel at any time.

Click here to subscribe to Pi at the discounted rate of $174.50

Subscribe to Pi today and you get a year’s subscription to Pi now, get the 130 page basic training, the 120 page 46 market value analysis, access to over 100 previous Pifolio updates, plus begin receiving regular Pifolio updates throughout the year.

Gary

(1) www.nytimes.com: mystery of high stock market prices

(1) www.getrichslowly.org/power-of-compound-interest/