Picking Your Pockets
Stealing a page from Elliott Management, the $27 billion hedge fund founded by Paul E. Singer, who successfully sued Argentina for payment of defaulted bond issues, other hedge fund managers have been buying distressed Puerto Rican debt hoping for a similar payout.
The strategy works like this: Puerto Rico is known to be in dire financial straits. With the tax free debt of this US territory trading at large discounts hedge funds have been buying these bonds in the secondary market and hoping to convince congress to bail out Puerto Rico. Essentially they want the U.S. taxpayers to pay the full price for the bonds they bought for pennies on the dollar.
Fortunately, legislation has just passed out of a house committee that would set up an oversight board to restructure Puerto Rican debt. Seeing that their gambit is slipping, the hedgies have resorted to buying ads that protest this restructuring and warning that states like Michigan could be the next to restructure their debt and pay less than 100% of bond obligations. These hedge funds conveniently forget that Puerto Rico is not a state.
By remaining quietly in the shadows and using their political contributions to convince your congressional representatives to argue for them, they hope to turn your money into their money by political fiat.
Warren Buffett's $1 Million Bet
Warren Buffett is the man. The Oracle of Omaha just seems to make the right move almost all of the time. One of my favorite Buffett moves has been 8 years in the making…so far.
About 8 years ago Warren made a $1 million bet with a hedge fund company that a simple S&P Index Fund would outperform a group of hedge funds over a 10-year span. The winnings will go to a charity of the victor’s choice and right now, Buffett’s less managed and much more affordable Index Fund is crushing its competition.
Of course, we can learn yet another vital lesson from Warren. It’s not always the flashy, trendy, and often times much more expensive investments that perform the best. Often times, as history has proven to us over and over, a simple index fund and the stock market’s consistent rise over time can turn out to be the strongest investment of all.
It may not be a flashy way of investing, but it sure pays off in the end.
Stole that headline from Twitter. Originated with someone named Allen Kuhn. I don’t know Allen but that is a catchy snippet. One hundred and forty characters doesn’t tell much of a story so I will just guess what Allen was thinking.
These were all on Yahoo finance today.
This could send gold tumbling below $1,000 again, Citi says – Citi doesn’t know which way gold will trade next, but they know you are scared.
Hedge funds dumped Apple, and bought this stock instead – Hmm Apple was a great investment for a long time and now these guys have found a replacement for Apple in my portfolio! Holy iWatch, Batman! Jump on it!
Top 3 American Century Investments Asset Allocation Mutual Funds (TWSAX, TWSMX) – Wait, what? You said three, this is only two and they both have above average fees.
A brutal remark from a high-speed trader tells you everything you need to know about where Wall Street is headed – and my crystal ball says they are all wet.
Your Monthly Budget Is Already Garbage
Throw away your useless May 2016 monthly budget and just start over. Seriously, 99% of us have not stuck completely to the plan, and that’s expected. But that doesn’t mean you should go and spend as you please, it just means it’s time to start over.
Reconstructing your budget around the middle of the month is a helpful way to stay in control of your money. By this time your bills are paid, mortgage/rent has been sent off, and you’re now dealing with necessities (gas, groceries etc.) and disposable income.
The key here is disposable income. Have you already spent most of it? Do you have some surplus you should be putting into a savings account? Can you maintain the month’s plan without adding extra onto a credit card? These are all things you should be going back over in the middle of the month that will help you stay in control. Because there’s two ways we can live with money:
You can control your money…or your money can control you.
Why Is It So Hard To Save??
savingNo matter how much we need to save, no matter how badly we want to break out of the paycheck to paycheck life, saving money is hard. It’s hard because we get an immediate reward for spending money. I give you $5 you give me a Mocha Latte.
Saving on the other hand forces us to delay receiving our reward. I give you $5 and in twenty years or so you give me $20 to enjoy in my old age.
Sometimes it helps if you can visualize the future. In 20 years I will spend my days walking in the woods and exploring new cities. I see myself spending my time with my grandchildren, going to the zoo, planting my garden. Visualization helps some but it’s still hard to save.
You can also make saving easier by planning things you enjoy that are free or cost very little. Maybe you can go visit a museum or a nearby town. Go for a bike ride or a Sunday afternoon drive. Look for local festivals. Maybe only take a few dollars with you on these short trips so you won’t be tempted to spend.
You can make saving automatic by having some amount debited from your paycheck or checking account each month or even each week. If you don’t see it, you won’t miss it.
All these things can make saving easier, but it will never be easy.
Your Home is a Nice Place to Live
Too many times I see folks counting on the appreciation of the home to help with their retirement goals. A big part of the problem with the real estate bubble of 2007-08 is that people used their homes like a piggy bank with HELOC loans they could not afford when real estate prices headed south.
When you retire you should aim to have your home paid for. No mortgage = peace of mind and less stress on the investment assets you do have. In extreme situations, like when someone has done a poor job of saving and investing for retirement, a reverse mortgage can help make ends meet, but it should not be a part of your plan.
Think of your home as a nice place to live!
Cheap vs. Frugal
As a financial advisor, I often talk about being aware of where you are spending your money, because I believe awareness triggers restraint and restraint leads to better savings habits. While saving money is a good thing, buying something that is cheap is often expensive.
If you are planning a purchase look for value, don’t make a purchase just because an item is ‘cheap’. Mindful purchases that you have determined represents good value can bring years of joy and usefulness into your life.
Making a spur of the moment purchase because something seems like a deal often leads to regret.
Be frugal with your spending but never cheap.
Should You Buy Gold?
I do not like gold as an investment. I think it is just speculation.
But if you are bitten by the gold bug and can’t be cured, please at least buy your gold coins directly from the US Mint. You won’t pay outrageous spreads when you purchase the coins, you won’t be called and pressured into buying more, and you won’t be sold “collectables” of dubious value.
And since many folks are convinced to own gold coins in their IRAs, a word of caution. While it is okay for your IRA to invest in gold coins like the American Eagle, collectables are a prohibited transaction which could lead to your IRA being considered void and immediately 100% taxable.
Waiting for Perfect
How many opportunities are lost as we wait for the perfect time to start? You do know there is no perfect time, or perfect place, or perfect way. You do the best you can with what you have now. Don’t wait for the perfect stock, or the lowest price, or the perfect job, or the perfect house. They do not exist.
Just start. Today.
The Problem With The Stock Market
Wow! Can you believe it? What in the world is going on now? No one understands this, it just makes no sense. Has the world gone mad?
All of these sentences could be uttered every week if you have a conversation about the stock market. It never seems to change, there is always something nutty happening. If it’s not the Fed, it’s congress. If it’s not interest rates, it’s PE ratios. If it’s not earnings, it’s IPOs.
All of this reminds me of an old Saturday Night Live skit that featured Gilda Radner as Roseanne Roseannadanna. After going off on a rambling rant loosely related to some topic, Rosanna would be interrupted by the news anchor played by Jane Curtin and then Roseanna would end the segment with the line, “Well, Jane, it just goes to show you, it's always something — if it ain't one thing, it's another."
And that’s the problem and opportunity with the stock market!