Posts Tagged ‘savings’

How to Turn $25,000 into $500,000 in 15 Years

Would you like a 20x return on your investments?

In our Weekly Webcast on Tuesday (replay available here), we discussed various ways you can make a nice retirement nest-egg for yourself as well as various stock and option strategies (and 9 new trade ideas to go with them) that can put you on the road to becomming a millionaire.  

Unfortunately, none of these are "instant" – these are not lottery tickets but long-term, time-tested strategies that can give you everything you ever dreamed of – IF you are willing to work for it.  

These same strategies can also be applied to generate an income off your retirement savings without digging back into your principal each year.    

We don't sell magic beans at Philstockworld, we teach our Members HOW to invest and put them on the road to wealth but it requires hard work and dedication on your part.  If you are willing to make the  effort, though, we are happy to show you how to make the climb.  

In the Webinar, we discussed turning $100,000 into $1M, $2M and $5M over various periods of time but we neglected to talk about strategies for people starting our with smaller amounts, say $25,000 to start.  We do run a virtual $25,000 Portfolio for our Members – to identify simple trades that require no margin and no day-trading (you really can't day-trade with $25,000 and, most likely, you have a job to do during the day anyway!) yet are still able to generate nice returns.  

Before we start, I want to get you comfortable with the math involved.  Money Chimp has a very nice Compound Interest Calculator which I'm using for my calculations and on the left is the model for the base premise of this article.   Follow the link and play with it so you can see how different strategies affect your Future Value

For instance, notice I'm going to tell you to add $2,000 a year to your account. That gets you to $558,000 after 15 years.  What if you don't add $2,000 a year to your account?   Then you…
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Boomergeddon

Book Review: Boomergeddon

Courtesy of JOHN RUBINO of Dollar Collapse 

The trouble began in the early 1980s, when we baby boomers entered our 30s and began molding the world in our own image. You can graph the spreading darkness from that point, as US debt, the number of government employees, the trade deficit and virtually every other measure of societal pathology inflected upward. Our generation, says James Bacon, a Virginia writer and magazine publisher, will go down in history as the one that ended the American empire — along with the retirement dreams of pretty much everyone everywhere.

Full disclosure: I’ve known Jim Bacon ever since I wrote for one of his magazines back in the 1980s. He was one of my favorite editors, both because he had a light touch and because he almost always saw the real story behind the noise and opinion. So I expected his new book, Boomergeddon to be both easy to read and incisive, and he’s succeed on both counts. Here’s a representative excerpt from the intro:

When you wake up 20 years from now, shaking your head of thinning white hair (those of you who have hair), groping for your bifocals, and feeling all out of sorts because your “golden” years have become as shopworn as cheap costume jewelry, you’ll know whom to blame. Just look in the mirror and take a long hard look at the miscreant who failed to save enough money, despite abundant warnings that retirement would be very, very expensive. Then head to East Capital Street, N.E./ Washington, D.C., where you can accost any  member of the 535 members of Congress who, through successive decisions more short-sighted than your own rheumy eyeballs, racked up mountains of debt, presided over the disintegration of the United States retirement safety net, and ruined whatever shot you had at living an old age where the words “happy,” “carefree” and “solvent” applied.

Bacon’s main point early on is that the system has devolved to the point where it no longer matters who’s in charge. Each major party is run by a ruling class of lobbyists, bureaucrats and professional politicians who are beholden to a set of interest groups that demand higher spending and increased money printing. Each side blames the other for the mounting problems, so elections tend to be alternating landslides, as opposition candidates demonize incumbents, are given a chance to…
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Federal Reserve Officials: Americans Are Saving Too Much Money So We Need To Purposely Generate More Inflation To Get Them Spending Again

Federal Reserve Officials: Americans Are Saving Too Much Money So We Need To Purposely Generate More Inflation To Get Them Spending Again

Courtesy of Michael Snyder at Economic Collapse 

Some top Federal Reserve officials have come up with a really bizarre proposal for stimulating the U.S. economy.  As unbelievable as it sounds, what they actually propose to do is to purposely raise the rate of inflation so that Americans will stop saving so much money and will start spending wildly again.  The idea behind it is that if inflation rises a couple of percentage points, but consumers are only earning half a percent (or less) on their savings accounts, then there will be an incentive for consumers to spend that money as the value of it deteriorates sitting in the bank. 

Yes, that is how bizarre things have gotten.  It is not as if U.S. consumers are even saving that much money.  Several decades ago, Americans typically saved between 8 and 12 percent of their incomes, but over this past decade the personal saving rate got down near zero a number of times as Americans were living far beyond their means. Once the recession hit, Americans very wisely started saving more money, and so now the personal saving rate has been hovering around the 5 to 7 percent range.  This is well below historical levels, but the folks at the Fed apparently are eager for Americans to pull that money out and start spending it again.

In an article entitled "Fed Officials Mull Inflation as a Fix", Wall Street Journal columnist Sudeep Reddy described this bizarre new economic approach that some over at the Federal Reserve are now advocating….   

"But as the U.S. economy struggles and flirts with the prospect of deflation, some central bank officials are publicly broaching a controversial idea: lifting inflation above the Fed’s informal target."

Does increasing inflation as a way to stimulate the economy sound like a good idea to any of you?…
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The Low-Interest-Rate Trap

The Low-Interest-Rate Trap

Courtesy of John Rubino of Dollar Collapse 

Cannon Beach, Oregon, USA

Pretend for a second that you recently retired with a decent amount of money in the bank, and all you have to do is generate a paltry 5% to live in comfort for the rest of your days. But lately that’s been easier said than done. Your money market fund yields less than 1%. Your bond funds are around 3% and your bank CDs are are down to half the rate of a couple of years ago. Stocks, meanwhile, are down over the past decade and way too volatile in any event. If you don’t find a way to generate that 5% you’ll have to start eating into capital, which screws up your plan, possibly leaving you with more life than money a decade hence.

Now pretend that you’re running a multi-billion dollar pension fund. You’ve promised the trustees a 7% return and they’ve calibrated contributions and payouts accordingly. But nothing in the investment-grade realm gets you anywhere near 7%. If you come up short, the plan’s recipients won’t get paid in a decade or – the ultimate horror – you’ll have to ask the folks paying in to contribute more, which means you’ll probably be scapegoated out of a job.

In either case, what do you do? Apparently you start buying junk bonds. According to Saturday’s Wall Street Journal, junk issuance is soaring as desperate investors snap up whatever paper promises to get them the yield they’ve come to depend on. Here’s an excerpt:

‘Junk’ Bonds Hit Record

U.S. companies issued risky “junk” bonds at a record clip this week, taking advantage of keen investor appetite for returns amid declining interest rates and tepid stock markets.

The borrowing binge comes as the Federal Reserve keeps interest rates near zero and yields on U.S. government debt are near record lows. Those low rates have spread across a variety of markets, making it cheaper for companies with low credit ratings to borrow from investors.

Corporate borrowers with less than investment-grade ratings sold $15.4 billion in junk bonds this week, a record total for a single week, according to data provider Dealogic. The month-to-date total, $21.1 billion, is especially high for August, typically a quiet month that has seen an average of just $6.5 billion in issuance over the past decade.

For the year, the volume of U.S.


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Michigan Consumer Sentiment Index

Michigan Consumer Sentiment Index 

Courtesy of Doug Short 

With all the other releases on Friday, especially the 3-year revised GDP, I’m a bit late in updating my monthly Michigan Sentiment chart.


The University of Michigan Consumer Sentiment Index for July is 67.8, down significantly from the June reading of 76.0. The survey’s chief economist, Richard Curtin, summarizes:

Scarce jobs and stagnating incomes have been the top concerns of consumers for some time. What changed in July was their recognition that the anticipated slowdown in the economy will keep jobs scarce for some time, while their uncertainties about future prospects were increased by the policies of the Obama administration. Rather than itching to resume old spending habits, consumers have begun to actively embrace a more defensive outlook, making them more likely to further pare their debt and increase saving and reserve funds. This new defensive posture could result in even slower economic growth and fewer jobs in the future.

See the full release in PDF format here.

Because the sentiment index has trended upward since its inception in 1978, I’ve added a liner regression to help understand the pattern of reversion to the trend. I’ve also highlighted recessions to help evaluate the value of the Michigan Consumer Confidence Index as a leading indicator of the economy.

Note: The Real GDP numbers include the Second Quarter and are now updated with the BEA’s revised estimates from 2007 through First Quarter 2010.

Click to View 

Click for a larger image 

 

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Read more about Doug Short here > 


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How in Heck Can Anybody Even Think That We Are on the Cusp of a Consumer-Led Recovery?

How in Heck Can Anybody Even Think That We Are on the Cusp of a Consumer-Led Recovery?

Courtesy of Michael Panzner at Financial Armageddon 

Plunge

(Image: Source)

For a growing number of Americans, job prospects are bleaksavings are too lowdebts are overwhelming, and, as the following report reveals, credit ratings are shot to pieces — how in heck can anybody even think that we are on the cusp of a consumer-led recovery?

"More Americans’ Credit Scores Sink to New Lows" (Associated Press)

The credit scores of millions more Americans are sinking to new lows. 

Figures provided by FICO Inc. show that 25.5 percent of consumers – nearly 43.4 million people – now have a credit score of 599 or below, marking them as poor risks for lenders. It’s unlikely they will be able to get credit cards, auto loans or mortgages under the tighter lending standards banks now use.

Because consumers relied so heavily on debt to fuel their spending in recent years, their restricted access to credit is one reason for the slow economic recovery.

"I don’t get paid for loan applications, I get paid for closings," said Ritch Workman, a Melbourne, Fla., mortgage broker. "I have plenty of business, but I’m struggling to stay open."

FICO’s latest analysis is based on consumer credit reports as of April. Its findings represent an increase of about 2.4 million people in the lowest credit score categories in the past two years. Before the Great Recession, scores on FICO’s 300-to-850 scale weren’t as volatile, said Andrew Jennings, chief research officer for FICO in Minneapolis. Historically, just 15 percent of the 170 million consumers with active credit accounts, or 25.5 million people, fell below 599, according to data posted on Myfico.com.


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Chinese savings and the wealth effect

Chinese savings and the wealth effect

Courtesy of Michael Pettis’ s China Financial Markets

Cityscape of Hong Kong at night, Victoria Peak, Hong Kong, China

Sorry to regular readers for my blog’s being out of commission for much of the past week, but apparently it has created too much traffic for the host, so without giving me any warning they pulled the site.  We came up with a temporary solution and will move to something more permanent soon.  Since I supposedly own the domain (this is what Charles Saliba, who takes care of these thing for me, tells me – I have no idea what that means), there will be no need to change the address of my blog.

Part of the reason this has taken so long to fix is that during the whole period I was at a conference in Sao Paolo, where I was lucky enough to share the stage with a number of luminaries, including Pedro Malan.  Needless to say the subject of China is hot in Brazil.  There is a great deal of soul-searching about the impact of Chinese commodity purchases on Brazil’s economy, along with a great deal of hope and dread.

One topic that people found especially interesting was the discussion on why China’s savings rate is so high, especially when I discussed it as one of the consequences of financial repression.  At least four different economists told me, separately, that my account of Chinese imbalances and the forced rebalancing process reminded them of Brazil in the 1960s and early 1970s, and the difficult rebalancing process of the late 1970s and the “lost decade” of the 1980s.  Brazilian economists seem to understand very quickly the relationship between financial repression and savings.  No surprise here – I suspect quite a few Japanese economists do too.

But it is not always easy for many others to see how it works.  For example in the US, unlike in China, we are used to seeing savings as positively correlated with interest rates.  When interest rates rise, in other words, the savings rate tends to rise and the consumption rate decline, although this doesn’t always happen so mechanically.

One explanation for this relationship is that the interest rate is the reward for postponing consumption.  Rising interest rates increase the reward, and so in response, households reduce their consumption and increase their savings.  The obverse is that the interest rate is the penalty…
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Savings Rates and Bond Yields

Savings Rates and Bond Yields

Courtesy of Michael Panzner at Financial Armageddon 

As the chart shows, the U.S. personal savings rate has loosely tracked notable moves in 10-year Treasury bond yields on both a short-term and long-term basis.

Savingsandyields

Another reason why policymakers keen to kick start consumption might not want to see long-term interest rates go up (any further)… 

 


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Chart of the Day: Personal Income and Outlays

Chart of the Day: Personal Income and Outlays

Courtesy of Edward Harrison at Credit Writedowns

Moneybag

I have sifted through the most recent personal income data and wanted to show you a few charts that might indicate where we’re heading.

First, there is personal income.  It’s fallen off a cliff since the recession began. Looking at the six-month average to smooth out blips, personal income growth peaked way back in June and July of 2006 at 7.8%.  The rate of change in personal income is a leading indicator of the economy’s direction because, absent tax changes, less money usually means less spending.

If you notice in the chart, the steep peaks and valleys run in line with the business cycle.  Right now, we are in the worst period in the 50 years of this particular data series by a large margin. The change in personal income began increasing from a low of -1.9% in July and August of 2009, where I expect the technical recession’s end date to be called.

personal-income-2009-12

I have previous data series going back to 1929 and you can see much steeper peaks and valleys in the Great Depression (and to a lesser extent in the mini Depression of 1949). I hope the chart below gives you a sense of the difference between today and the Great Depression.

personal-income-2009-12-historical

The downturn has been attenuated somewhat by tax cuts.  If you look at disposable personal income, the peak was again Jun-Aug 2006 at a 7.1% change year-on-year. This plummeted to a low of 0.5% in Jul-Aug 2009 – so, not as bad as personal income, but pretty horrific nonetheless as it is the worst performance since record keeping began – by a long shot.

personal-income-disposable-2009-12

How has that all translated into consumer spending? Again, we see some serious cliff diving in Personal Consumption Expenditures (PCE) – the worst performance since record keeping began – negative year-on-year numbers for the first time ever. The interesting bit is that the downturn in consumption was well before the downturn in income.  That is not the usual pattern. The peak change was 6.7% in Aug-Nov 2005. That’s a year before the summer 2006 peak in income and points to house prices as…
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DEEP THOUGHTS FROM DAVID ROSENBERG

DEEP THOUGHTS FROM DAVID ROSENBERG

Courtesy of The Pragmatic Capitalist

Some good thoughts here from David Rosenberg on the current state of the market:

It is really amazing to sift through the fund flow data because it is so apparent that it is the “pros” that are chasing this market higher. The private client is fully aware that two bubbles burst seven years apart as Wall Street product-pushers came up with back-to-back new paradigms — the first being the tech mania followed by a new era of housing and credit finance…

It is not lost on the individual investor that equities have generated no net return over the last 11 years and that we are very clearly in the middle of a classic secular bear market. What is amazing, and indeed, encouraging, is that the long-term resolve of the investor is not being overwhelmed by greed as Wall Street strategists push the theory of pricing the market on “mid-cycle” earnings and economists push the theory that data that come in “less negative” is actually bullish.

To be chasing the market after a 60% rally that is now priced for a V-shaped recovery is clearly not the strategy being deployed by the private investor, at the margin. So, what we see as evidence is the record $42.91 billion that flowed into U.S. bond funds in August, on top of the $34.7 billion intake in July. Year-to-date, bond funds have taken in a net $180 billion, about double the $92 billion during the comparable period in 2008.

It’s not as if people are selling equities — they are just watering down their already-high exposure in the stock market. Equity-based funds attracted $3.86 billion of new inflow in August, bringing the cumulative tally to $15 billion. So, it is very interesting to see where the “mountain of money”, “cash on the sidelines” and “dry powder” is going. Into fixed-income. For every dollar flowing into equity funds, twelve is flowing into bond funds.

To be sure, some will point to this as some sort of a bullish contrary data-point. Then again, maybe there is a secular demographic development that needs to be understood — a survey recently conducted by AARP (American Association of Retired Professionals) found that 49% of those between 45 and 64 years old are not confident that they have saved sufficiently for retirement. Fully 12% of this


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Phil's Favorites

Big Pharma has failed: the antibiotic pipeline needs to be taken under public ownership

 

Big Pharma has failed: the antibiotic pipeline needs to be taken under public ownership

A.G. Sanders with penicillin extraction equipment. Image reproduced with permission of the Sir William Dunn School of Pathology, University of Oxford, Author provided

Courtesy of Claas Kirchhelle, University of Oxford; Adam Roberts, Liverpool School of Tropical Medicine, and Andrew Singer, ...



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Zero Hedge

Aramco Scraps US And London IPO Roadshows Amid Too Many "Uncertainties" 

Courtesy of ZeroHedge View original post here.

Saudi Aramco has withdrawn from IPO roadshows in the US and London after it's likely they don't want to disclose oil reserve totals to Western banks and regulators. 

Meanwhile, it's becoming a giant circle-jerk for the Saudis, the IPO is expected to list on the Tadawul exchange, while the Saudi Arabian Monetary Authority (SAMA) is expected to double the amount it would lend out to domestic "buyers" for IPO purchases, reported Bloomberg.  ...



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Kimble Charting Solutions

Dow Megaphone Breakout Continues, As It Tests 77-Year Breakout Level

Courtesy of Chris Kimble

I’ve heard many times over the past 39-years I’ve been in the financial services business that charts have memories? Is it true they do? Is it possible that they have very long-term memories?

This theory looks to be put to a big test by the chart above, which looks at the Dow Jones Industrial Index since 1910.

The Dow has spent the majority of the past 77-years, inside of rising channel (1). While inside of this channel, it looks to have created two very long-term megaphone patterns.

It broke above the first megaphone pattern in the early 1980s, where ...



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Lee's Free Thinking

NY Department of Welfare Announces Increased Subsidies for Primary Dealers, Thank God!

 

NY Department of Welfare Announces Increased Subsidies for Primary Dealers, Thank God!

Courtesy of , Wall Street Examiner

Here’s today’s press release (11/14/19) from the NY Fed verbatim. They’ve announced that they will be making special holiday welfare payments to the Primary Dealers this Christmas season. I have highlighted the relevant text.

The Open Market Trading Desk (the Desk) at the Federal Reserve Bank of New York has released the schedule of repurchase agreement (repo)...



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The Technical Traders

VIX Warns Of Imminent Market Correction

Courtesy of Technical Traders

The VIX is warning that a market peak may be setting up in the global markets and that investors should be cautious of the extremely low price in the VIX. These extremely low prices in the VIX are typically followed by some type of increased volatility in the markets.

The US Federal Reserve continues to push an easy money policy and has recently begun acquiring more dept allowing a deeper move towards a Quantitative Easing stance. This move, along with investor confidence in the US markets, has prompted early warning signs that the market has reached near extreme levels/peaks. 

Vix Value Drops Before Monthly Expiration

When the VIX falls to levels below 12~13, this typically v...



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Insider Scoop

HP Rejects Xerox's Buyout Offer: Experts Debate What's Next

Courtesy of Benzinga

HP Inc. (NYSE: HPQ) rejected Xerox Holdings Corp (NYSE: XRX)'s $33-billion takeout offer Sunday, and experts are divided on what will occur next in the ongoing saga between two tech...



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Biotech

Why telling people with diabetes to use Walmart insulin can be dangerous advice

Reminder: We are available to chat with Members, comments are found below each post.

 

Why telling people with diabetes to use Walmart insulin can be dangerous advice

A vial of insulin. Prices for the drug, crucial for those with diabetes, have soared in recent years. Oleksandr Nagaiets/Shutterstock.com

Courtesy of Jeffrey Bennett, Vanderbilt University

About 7.4 million people ...



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Chart School

Dow Jones cycle update and are we there yet?

Courtesy of Read the Ticker

Today the Dow and the SP500 are making new all time highs. However all long and strong bull markets end on a new all time high. Today no one knows how many new all time highs are to go, maybe 1 or 100+ more to go, who knows! So are we there yet?

readtheticker.com combine market tools from Richard Wyckoff, Jim Hurst and William Gann to understand and forecast price action. In concept terms (in order), demand and supply, market cycles, and time to price analysis. 

Cycle are excellent to understand the wider picture, after all markets do not move in a straight line and bear markets do follow bull markets. 



CHART 1: The Dow Jones Industrial average with the 900 period cycle.

A) Red Cycle:...

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Digital Currencies

Is Bitcoin a Macro Asset?

 

Is Bitcoin a Macro Asset?

Courtesy of 

As part of Coindesk’s popup podcast series centered around today’s Invest conference, I answered a few questions for Nolan Bauerly about Bitcoin from a wealth management perspective. I decided in December of 2017 that investing directly into crypto currencies was unnecessary and not a good use of a portfolio’s allocation slots. I remain in this posture today but I am openminded about how this may change in the future.

You can listen to this short exchange below:

...



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Mapping The Market

How IPOs Are Priced

Via Jean Luc 

Funny but probably true:

...

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Members' Corner

Despacito - How to Make Money the Old-Fashioned Way - SLOWLY!

Are you ready to retire?  

For most people, the purpose of investing is to build up enough wealth to allow you to retire.  In general, that's usually enough money to reliably generate a year's worth of your average income, each year into your retirement so that that, plus you Social Security, should be enough to pay your bills without having to draw down on your principle.

Unfortunately, as the last decade has shown us, we can't count on bonds to pay us more than 3% and the average return from the stock market over the past 20 years has been erratic - to say the least - with 4 negative years (2000, 2001, 2002 and 2008) and 14 positives, though mostly in the 10% range on the positives.  A string of losses like we had from 2000-02 could easily wipe out a decades worth of gains.

Still, the stock market has been better over the last 10 (7%) an...



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Promotions

Free eBook - "My Top Strategies for 2017"

 

 

Here's a free ebook for you to check out! 

Phil has a chapter in a newly-released eBook that we think you’ll enjoy.

In My Top Strategies for 2017, Phil's chapter is Secret Santa’s Inflation Hedges for 2017.

This chapter isn’t about risk or leverage. Phil present a few smart, practical ideas you can use as a hedge against inflation as well as hedging strategies designed to assist you in staying ahead of the markets.

Some other great content in this free eBook includes:

 

·       How 2017 Will Affect Oil, the US Dollar and the European Union

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About Phil:

Philip R. Davis is a founder Phil's Stock World, a stock and options trading site that teaches the art of options trading to newcomers and devises advanced strategies for expert traders...

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