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Friday, September 15, 2017
September 15, 2017
Are you planning to work in retirement? You’d be in good company: Surveys indicate that more than a quarter of workers plan to take on some form of paid employment after they call it quits in their main job. And doing so is good for both your health and your wallet. If you plan on relocating in later life, weigh job prospects among other factors. Here are the 25 cities with the most jobs now. Just remember to have a Plan B if your retirement plan depends on earning income well into later life, since caregiving responsibilities and health concerns can sometimes interfere with that goal.
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Friday, September 8, 2017
September 08, 2017
Savers have enjoyed watching their retirement account balances climb over the past eight and a half years, thanks to one of the most robust bull markets in history. But now’s no time for complacency, especially for retirees and near-retirees. The bull market may be losing its legs, and experts predict that what succeeds it will be a prolonged period of more modest returns. If that’s the case, retirees may not be able to withdraw as much income from their portfolios as they expected.
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Friday, September 1, 2017
Sunday, August 20, 2017
Friday, August 18, 2017
Wednesday, August 9, 2017
|You Can't Fix Stupid|
There's a lot of stupid out there in investment-land right now.
The Dow Industrial Average just broke 22K, and some talking heads are already getting excited about Dow 25K. Yeah, because a 10% run in six months isn't good enough. The forward P/E ratio for the S&P 500 is around 18, well above the five-year average of 15. We should know better by now...
People are telling us that Bitcoin is an actual, viable currency, when it is backed by nothing, not even the "full faith and credit" of the U.S. government. Not only that, but Bitcoin is also an investment.
But here's the thing: You can't have a "currency" that can jump 50% or 100% in just a few months. That's a complete disaster for business. How do you manage expenses when prices fluctuate wildly?
The irony is that Bitcoin can only be considered a viable currency when it stabilizes. But no one owns Bitcoin because they want to buy stuff with it. The only reason people own it now is because of the wild fluctuations. They think they will make money on it. That's called speculation. Don't get me wrong, I love speculating. I do it all the time. But let's be honest and stop calling Bitcoin and Ethereum currencies. They just aren't.
Maybe this analyst believes Musk when he says Tesla will be able to ramp production to 500,000 cars in 2018. How many did it sell in 2016? 76,000. This year it's on pace to make a little over 100,000 cars. So yeah, getting to 500,000 cars next year should be no problem.Investors and analysts alike continue to jump on the Elon Musk bandwagon and buy shares of Tesla (NASDAQ: TSLA). One analyst just bumped his price target to $444 because "we believe that Tesla will be able to reach its 25% gross margin target on the Model 3 late next year, in line with the margins already achieved on the Model S and Model X."
Finally, the analyst says Tesla will maintain gross margins of 25%. Sounds good? Well, let me put it this way: Does it matter what your gross margins are if you're losing money?
Tesla is in the red by about $800 million over the last 12 months. Losses will be over $1 billion this fiscal year. Right now, Tesla is selling $1.5 billion in bonds, which will raise outstanding net debt to about $6.5 billion. Tesla is $61 billion company. Nearly 50% more valuable than Ford. It trades as though it's the only electric car company in the world. It's not. But sure, keep buying the stock...
Bond prices are ridiculous pretty much across the board. Treasuries, emerging market, corporate, high-yield — investors are simply paying too much for "safe" returns. What could go wrong?
FOMO and FOJI
I learned two new words this morning: FOMO and FOJI. They stand for "Fear of Missing Out" and "Fear of Jumping In." Apparently these are the emotions driving people's investment decisions these days. Sad!
But I get it. When stocks get cooking, it does something to people's brains. Dollar signs start rolling up in people's eyes. All people can see is the money they could be making... or losing.
This type of thinking is kind of weird. Because it's not really about what a particular person is doing, but rather how they see themselves and how they appear to others. It's either: "Joe Dumbass down the street is making all the money and I don't want to look like an idiot for missing this obvious opportunity..."
Or it's: "The market's up so much I do not wanna be the Joe Dumbass that buys right before everything falls apart."
Neither of these lines of thought is rational. They are rooted in emotions and appearances. And there's no need to bring emotions into investing. I mean, of course, we're humans, so we're gonna get emotional. In fact, we will very rarely be non-emotional. But investing is a non-emotional, plan-based process. It's not about "the market." It's not about the Fed, or Congress, or China, or any of the other things that are supposed to have a huge impact on the economy.
So let me ask you: Do you think about the money that goes into your 401(k) every two weeks? Do you think, "Oh, the market's up a lot this week, maybe I should cut my contribution amount"? Probably not.
Investing is a process for saving and growing your money. And you do that by essentially giving your money to a great management team running a great company that sells great products or services and let them do what they do. Do that, and the whole Joe Dumbass question goes right out the window.
To illustrate, here are a couple of quotes from an investment article I read recently. I'm going to leave the company names out to start, so you can think about which sounds like the better company. I will tell you that they are both in the same sector, and the author wants you to buy the first one and sell the second...Now, I have one more point to make about stupid. Because there are a lot of stupid opinions out there about the kinds of companies will be good shepherds to your money.
Company One: Sentiment is terrible following a 20% decline in the past month on another round of food-safety fears. Even after the recent declines, the stock trades for a pretty rich forward P/E of about 30.
But there is also a lot to like about this stock, if you can look past some of the unfavorable headlines.
For starters, [XXX] is on track to grow its top line about 16% this fiscal year — and if it does just a hair better than that forecast, it could mean a new record for annual sales.
Company Two: [XXX] has seen some big successes in the last few years, including its best-in-class mobile ordering technology that helped to boost sales volume, and of course the cult sensation that was the [insert product name HERE].
But recent earnings show the company isn’t living up to investor expectations anymore. In its first-quarter report back in April... same-store sales grew just 3% year-over-year and revenues missed expectations. It saw trouble once more as second-quarter profits looked weaker than many investors would have liked — and as concerns bubbled up that mobile ordering is such a hit that it may actually be overcrowding stores.
Now, to boil these down a bit, Company One has negative sentiment because of food safety fears, it's expensive, and the author is talking about how the company could rise if it can beat earnings.
Company Two has best technology, the ability to churn out very popular products, 3% same-store sales growth, and the stores are crowded.
OK, so there's a pretty big clue in the first one: food safety fears. So yeah, the first one is Chipotle. The second stock is Starbucks.
Chipotle has seen its stock cut in half after a few hundred people got E. coli 18 months ago. It started to rebound, and then more people got sick a month ago. And you wanna talk about sales and profits rising to a record? Good lord, man...
This comparison is just stupid. Starbucks is by far the better company. It pays a dividend. It has loyal young customers who will be customers for life. It has beaten competition from Dunkin Donuts, Caribou Coffee, and a host of others. It can raise prices.
And Chipotle? No dividend. We'll see how loyal the customers are. Rather than beating the competition, Chipotle has fostered it: There are now twice as many fast-casual restaurants as there were less than 10 years ago. And rather than raise prices, Chipotle will likely be giving away food again to lure people back.
Both stocks are down from recent highs on the concerns the author mentioned. But Chipotle's problems are existential, while Starbucks just needs to sell more food.
Which company will be the better shepherd of your money? I think it's pretty obvious.
Until next time,