MONEY 152 - STOCKS

THIS IS MY 152^nd BLOG ON UNDERSTANDING MONEY TOOLS

December 28^th, 2018

www.understandingmoneytools.blogspot.com

I normally don’t write two blogs so close to one another, however in the past 6 days so much has happened in the stock markets that I thought an accurate accountability should be done.  I was familiar with all of it, but resorted to research to get the exact dates, information and terms to pass on.

First of all, I believe in a free market society and what has happened since Saturday, December 22^nd astounds me.  Uncle Milty Friedman would be turning over in his grave!

Financial reports I receive mentioned that Treasury Secretary, Steve Mnuchin, was calling the 6 largest US banks starting December 22 and 23 to inquire as to their liquidity. (The ability to convert to cash, or currently cash on hand.)  I wasn’t certain as to why until Wednesday, December 26^th.

With the downturn in the stock markets the past few weeks, I mentioned the “Purge Protection Team” in my last blog 151.  Again, that was enacted into law under President Reagan on March 18, 1988 as a result of the stock market tanking on October 19, 1987.  At the time, I was head of the Pension Department and it’s investments with Trust Company of America.  So I remember it well.  This law was Executive Order 12631, and also called the “Working Group on Financial Markets” as well as the “Presidential Working Group”.  The “team” consists of the Treasury Secretary of the US, the Federal Reserve and Board of Governors, and the Chairperson of the Commodity Futures Trading Commission.   Rarely has the government used this vehicle, as it should be for emergencies to control markets.  The last time I believe it was used was on October 6, 2008 at the start of the Great Recession.

Most mornings I check world markets and stock futures.  The morning of the 26^th was no exception.  The Asian markets including the Japanese Nikkei exchange were well down, including our stock market futures.  The US markets started to follow where they left off Monday, well down and no surprises to me as the market averages are way too high and now normalizing.  What surprised me was the afternoon of the 26^th when the markets shot upward and the DOW closing up over 1,000 points.  Can’t happen with the trend and free market.  My assumption was that the government instituted the Purge Protection Team and was buying stocks to offset selling, and then these banking institutions will warehouse the stocks.  I only have a couple friends remaining with Wall Street connections feeding me information, but I was right. Apparently, the Feds were scrambling the last 6 days to get this completed and stop the down markets.  Once again, the Feds stepped in the afternoon of December 27^th, and I suspect will continue. 

By Executive Order, Mr. Trump’s ego apparently cannot handle downward corrections albeit natural so we will continue to have government controls intervene.  Is something wrong here?  Yes.  The markets can rise in an “out of control fashion”, but cannot come down.  Are people’s 401K plans damaged by the downward trend in markets?  Yes, but we need to face reality.

Eventually, the markets should trend down.  The banks will run out of money moderating the selling going on.  In the meantime, expect these wild swings in the markets.

I hope you learned something from this blog.

MONEY 151 - THINGS

THIS IS MY 151^st BLOG ON UNDERSTANDING MONEY TOOLS

December, 2018

www.understandingmoneytools.blogspot.com

In this blog we will cover a potpourri of things.  Why?  Many useful things I have never covered, or have not in years.  And two, I have a lot of time on my hands after getting a Staph infection from a hospital operating room while having a hip replacement done.

Let’s begin with stocks again.  If you start a corporation, and you should with most business start-ups to protect yourself legally, think things through as to where you want to go.  You will have the “Articles of Incorporation”.  You need to decide on how many ‘authorized shares” you should have.  If you are a small independent company a small amount of stock is fine.  If you think you may build into a large company and someday “go public” through an “initial stock offering” better have millions of shares of stock available. (Here a good lawyer and accountant will render advice.)  From the authorized shares you will “give out” stock, “issued stock”, up to the authorized limit or hopefully far under as some day you may want to issue more to a key employee, “stock options” for employees and a signing bonus for new employees joining your company.

If I am looking at investing in a public company I look at the number of outstanding shares of stock, or “what is in the float”.  The “float” is the amount of stock in the market that trades.  A tightly held stock may not trade many shares each day, even though there may be a significant amount of issued shares.  However, a small float may create volatility in trading if someone buys or sells a large amount of shares.  Conversely, a large float should not vary in price as much, and perhaps give you more peace of mind on stability.

I love the government on figures. A month ago things were great; just ask our government on figures and our media on news/business coverage. All of a sudden, the markets start tanking as I have been waiting for 2-3 years, and we are talking perhaps recession in 2020. With rational thinking you know things don’t happen this quickly.  Could that 2020 be a controversial presidential election year, of course?!  Are we in a “bear market” as many indicate?  I will say we are in a “normalizing market” after stocks going up 330% in 10 years, which is abnormal.  With that rise in appreciation don’t you think it was a bit unusual when our Gross Domestic Product (GDP) only rose an average of 2% growth per year?

There are so many variables that effect or affect the markets.  Don’t believe most of the ones you hear on the news. The government stated that in the 3^rd quarter of this year GDP was 4.3%, now this past week it was downsized to exactly 3.4%.  Could it mean that we have a dyslexic bean counter in Washington?  (Please read my last blog, 150, for more insight.)

There are also many things concerning the world markets that are happening here in the US.  It is all “cause” and we will feel the “effects”.  Over the weekend, December 22 and 23, Treasury Secretary, Steve Mnuchin, called the 5 or 6 largest US banks to check on their liquidity and capital requirements to see 1) if we were going to have another banking crisis, and 2) to see if the Feds could loosen further credit to companies and consumers.  In my eyes we have gone beyond normality in debt, both government and private sector.  I don’t think we will experience a banking crisis, but the next recession will involve corporate debt and not being able to pay back loans from money borrowed since the Great Recession of 2008-2010.  This will also include a significant economic downturn worldwide.  There really is not one country in the world without problems at the moment; perhaps excluding Switzerland and Austria, both small countries that can control situations.

I’ve found over the years people in foreign countries are more aware of what is happening here than most Americans.  50% of our stock and bond sales over the past couple of months are from foreign investors.  They watch our ballooning debt, politics and policies.  America has the ability to cover debt two ways: print more money and tax the people and corporations; both detrimental to a well run country.

With the significant downturn in world markets we must remember that “fear” is a greater emotion than “greed”.  Greed was the emotion driving the markets the past 10 years.  We reached “stagnation” in the business cycle curve, the next phase is down,  thus fear already has set in.

Over the past few days president Trump said he is willing to step in with the “Plunge Protection Team”.  Not kidding, this exists.  Ever heard of it?  Probably if you are young, or have not read my previous blogs, the answer is “no”.  In October, 1987, during president Reagan’s term in office the market tanked, worse than now.  President Reagan determined the government should have the ability to step into the markets and stop trading, or “buy in” stock.  He called this the Plunge Protection Team signed into Act on March 18, 1988.  Of course, this is against “free market” and follows Keynesian economics, which Reagan was supposedly against!  It’s okay if the markets go up, but not down!

We also have a co-mingling of authority right now with the 3 branches of government.  Quick test.  Name the 3 branches of government……I hope you got the question right!  They are the Executive (President), the Legislative (Congress and Senate) and the Judicial (Supreme Court, Judges and Courts).  As divided political positions enter into the picture the strict division of each of these branches is compromised.  It should all be “nonpartisan”; currently it is not.

Each day the news/media and the government, including President Trump, blame the problems on various things that really are not to blame.  To a degree, not working in concert for the good of all Americans, is a big problem. 

Tariffs?  We had them at one time, we won’t beat the Chinese in this game.  The Chinese run an “autocratic” government controlled by the Communist Party.  Because of that structure they can move much more quickly than our Democratic system bogged down by the 2 party political agenda. Frankly, I see little that can be accomplished over the next 2 years because of all the internal fighting.

The halting of more money in the budget to keep our government running…over The Wall?  Actually, I believe in a very controlled and regulated system for entering this country like we had when my grandparents entered through Ellis Island. I am not sure that a Wall is the answer. Where there is a will, there is a way!  The “illegals” will find a way to enter.  Don’t stop the US government and payroll checks over $5 billion when we toss around trillions of dollars in wars, and consider billions in gifts to countries around the world as immaterial.

The Federal Reserve raising interest rates by Jerome Powell, head of the Fed Reserve appointed by President Trump.  I feel it has little to do with the economy looking forward, but more to do with being able to sell our bonds (needing a higher interest rate) and the ability to lower the prime rates when a downturn and recession occurs.

The “Trump Bump” was a bogus falsehood so Wall Street could promote the “Bull” in the stock market.  This was a true showing of “perceived value” versus “real value”.  The truth is that tax cuts helped big corporations and the wealthy, not so much for the middle class and has little effect on the economy.  The future outlook for the GDP is now 2% for 2019 proving my point.  That “little Trump bump” raised the DOW average 7,000 points, ridiculous!

Bottom line here is that there are many issues at hand, none easy to resolve.

The question comes up as to what I would have done with investments over the past 6 months.  If you read my blogs I indicated that we should at some point have a major correction, and that we most likely were in the “stagnation” part of the economic/business curve because we couldn’t break through price points.  I am not in the stock and bond markets and sit quite illiquid, which I wish I wasn’t. The whole emphasis would be to maximize gains and hedge potential losses, thus turning stocks and perhaps bonds into cash without getting hurt.  On long-term capital gain stocks, held over 12 months, I would have sold and paid my 15% tax (20% over $425,800).  I would have kept prime “staple” company stocks pay8ng dividends. The key is to sit with cash now. I think this downturn and possible recession will extend through 2020.  Analyzing my portfolio, or with my advisor, I would look at short-term held stocks and hedge them through vehicles I informed you about in previous blogs.  Short-term tax consequences can be up to 37% over $500,000.  (Also, get advice from your personal accountant.)  You need to look at your mutual funds.  Do they hold stock in tax-exempt areas of the world like Black Rock Funds do?  How many stocks long-term and short-term?  What is the funds average hold time?  How much volatility might you be exposed to with more of a downturn?  Are they in the “northwest quadrant” on a risk/reward basis (this is Beta versus Risk; look it up)?  If you don’t have this information you can get it from your fund, or through your investment advisor.  We are entering a time when cash will be king to re-enter quality markets.  Adjust your portfolios, get rid of the junk and use your losses against gains.

Never “assume” anything!  Good luck!

MONEY 150 - FINANCES 3

THIS IS MY 150^TH BLOG ON UNDERSTANDING MONEY TOOLS

December, 2018

www.understandingmoneytools.blogspot.com

In this blog we will continue with finances from the previous past two blogs. I feel it is important for most people and investors to understand the basic concepts of economics and finance.  Through past blogs we have covered these topics from various perspectives.

Let’s start with the various basics of economics and finance and the general meanings.  I was speaking with a friend recently and he interchanged the two words.  I addressed that topic and separated the two.  Economics and finance are inter-related.  Economics includes the social sciences, demographics and longer-term trends usually connected to countries versus individuals.  Economics measures the growth or decline (inflation or deflation) of a country.  Again, we can further separate micro-economics from macro-economics.  “Micro” is more for the individual, group or perhaps a company.  “Macro”, meaning larger, deals with countries or nations.

Finance on the other hand entails personal as well as a country’s state of being from a financial standpoint, relating to prices of products, markets, interest rates, cash flows and return on investments.  Thus, finance could be a sub-category of economics,

The government and media come out with figures from various offices.  Are they accurate? Who knows?  Can they be misleading to the public?  Yes.  Let’s look at a couple that might have an effect on your investment decisions.  The “median” family income right now is about $56,000.  The “median” is the value in a group of numbers, or the top of a “bell curve”.  Example: Lay forth 100 numbers with values low to high.  What is the value placed on the number in the middle, 50?  That is your medium value. You rarely see the median individual annual income advertised because it doesn’t look so good.  That figure is only $31,000 per year, barely enough for an individual to live on, let alone buy a house or condominium.

The “mean” family income in the US right now is about $79,000.  This is determined by all incomes and brings into account the top 1% wealthiest skewing the numbers upward.

You probably learned a third way of determining figures in school and that is “mode”.  This is not really used in our calculations but does exist.  The “mode” is the number that appears most frequently out of a group of numbers.  It definitely takes into account various age brackets. For instance, 21-26 year olds will not make as much as the 45-50 year old bracket.  Ages 65 and older make less.

Are we heading into an economic downturn and a bear market for investments?  I am not sure, but I will set forth facts and you decide:

-       We are now in the longest growth cycle in history without a significant downturn.  We should have had a recession tracking our past history about 2-3 years ago.  Of course, this has happened because of low interest money, and borrowing has been unprecedented both from government and the private sector.

-       As of this writing, December 19, 2018, the Federal Reserve raised interest rates again.  This should slow the economy down as companies and individuals will not be able to borrow as much money.  Thus, expect a more likely 2% growth (GDP) in the economy in 2019 and perhaps a negative growth in 2020, resulting in recession.

-       Why did the Federal Reserve raise interest rates when there is only a 2% inflation rate?  I believe it has more to do with higher rates (yields) needed on our 10 and 30-year bonds, and being able to sell the bonds to pay our debts. We need to compete worldwide.  Mexican bonds currently pay about 9%, although I wouldn’t buy any.  A second reason that comes to me for raising rates is that if we get into a significant economic downturn the Federal Reserve has more to “play with” in being able to lower interest rates without going negative as Switzerland has.

-       I believe we have hit the top of our business cycle of growth, stagnation and then downturn.  We’ve had growth and several months of stagnation.  Now, downturn.

-       Once the stock and bond markets get scary, investors protect themselves.  “Fear” is a stronger emotion than “greed”, and the world is somewhat a scary place right now.  It is reported foreign investors are selling our stocks and bonds.

-       As the markets trend downward we should adjust to a more normal price to earnings ratio of 15 to 1 versus 24 to 1.  With higher interest rates, and the expectation of two more interest rate increases, this should adjust corporate earnings downward, and lowering the purchasing power of consumers.  Of course, that should reflect downward on our stock markets.

-       The VIX (Volatility Index) went from a stagnant horizontal line to a lot of activity.  This is witnessed by the gyrations in the stock market.

-       The bond markets have been leading up to an “inversion curve” for some time.  This means that short-term bond yields (10 year) have risen faster than long-term yields (30 year). Just recently, the 10-year bond came down to a yield of 2.8% versus the 30 year at 3.1%, which means it backed off.  This inversion curve historically leads into economic downturn or recession.

-       What are “moving day averages”?  These are another way of analyzing market trends.  These are typically 50, 100, 200 day averages for an individual stock or the markets.  If the short-term daily average drops below the longer-term daily average it indicates where the markets are going. In this instance, view the DOW averages that went recently from above 25,000 to below 24,000, (23,300 as I write). Very significant adjustment on the downside.

-       The lack of trust in Wall Street, and there should be.  Wall Street and traders make a lot of money with volatility.  They trade the market up with buying long and option calls, and trade the market down with short selling and option puts.

-       A ton of debt throughout.  This includes governments as well as individuals with such things as credit cards, auto loans and student loans; the latter three each over $1 trillion.

-       If we look at return on investments our US stock markets have gone up an average of 330% since about 2009-2010, and that is a bit unusual.  Competing with other investments the markets should reflect a growth of about 6-8%.  Using the quick Rule of 7 and 10 it takes an investment at 7% to double every 10 years, and an investment at 10% will double every 7 years (actually 7.2 years).  Even at 8-9% annual returns our DOW should be at about 14,000, or so, not at 25,000!  Somebody could get really hurt on this one!

With all this said, you make the decisions.  Are we in the beginning of a strong bear market?  I’ll stay quiet on the issue.

Please remember what I have said many times before and that is there is always “cause and effect”, and “debt kills”!  We have caused our own issues and problems; at some point we will need to correct the situation.

MONEY 149 - FINANCES 2

THIS IS MY 149^TH BLOG ON UNDERSTANDING MONEY TOOLS

December, 2018

www.understandingmoneytools.blogspot.com

In this blog we are going to expand on “finances” from our last blog.  I write these blogs off the top of my head.  Any questions that come to me I research the facts for accuracy.

In the last blog I wrote about the typical price to earnings ratio that has been used as an overall baseline for many a year, and that is a 15 to 1 ratio.  I showed how this is calculated and can be used analyzing a market or a particular stock.  Today markets have built in horrendous upside for future expectations that I am afraid are not going to hold, and therefore in 2019 and 2020 going to disappoint and hurt many people financially.

Risk reward or loss plays a big part in analysis.  As a for instance, the NASDAQ normally carries a higher price to earnings ratio (P/E) than the DOW or S&P averages because of the number of high tech companies in the average.  Greater risk, perhaps greater upside.

Let’s look at a staple company, or consumer good’s company.  A “staple” company is one that deals in items you use every day or on a regular basis, perhaps like food and toilet paper.  One such company, Kroger Co., was started in 1883.  If you are not familiar with Kroger it is a grocery store chain.  Grocery stores are mundane and have a low profit margin.  Let’s take a peek.  As the market heads downward I like staple companies that pay a dividend, Kroger fits the bill and has a long history so should remain in business.  Looking up the most current facts on the company I find the price of the stock as of December10, 2018 to be $28.36.  It has a P/E of only 6.39 (well below 15), and pays a dividend at that price of about 2.5%, paid quarterly.

Using our formula from the last blog, is this stock a reasonable buy?  15 (baseline historical P/E)/ (divided by) 6.39 (Kroger’s P/E) X (times) $28.36 = $66. (Ah, your forgotten 7^th grade math!)  Well, this price of $66 per share is well above what the current price for Kroger stock is trading at.  Is it a good buy?  Chances are that with the market trending downward it may also come down further, but you can view this conservative company as a reasonable buy.

What other things raise yellow flags on my stock investments? (By the way, currently I don’t own any stocks.  Many stocks are impossible to analyze, and are priced way to high as they were in 1929 and 1999-2000.)

-       Jeff Bezos, of Amazon, announced 3 times that he expects his company to no longer exist far in the future. Most large companies last successfully no more than 30 years or less and head down.  Examples to this statement might be General Electric and Motorola.  Oil companies following this would be Standard Oil, Husky Oil, Sinclair Oil, Clark Oil and many more. In entertainment Blockbuster was the big company 30 years ago and today it is Netflix.  In today’s world things are happening and changing so much faster than in the past.

-       Take a good look at a company if any of these people are selling their stock: Board of Directors, Insiders, Upper Management or Officers.  They know what is happening in the company.

-       If you have a well performing mutual fund and the head of investments leaves the company, you might look elsewhere for your money.  A new investment manager will bring his style of managing money to the table and the fund may not perform as well as in the past.

-       Do you remember the Rule of 7 and 10 discussed in previous blogs? Simply put, and for easy arithmetic calculations any investment yielding 7% interest will double in a 10 year period.  Conversely, any investment yielding 10% will double in 7 years.  We have always viewed 6 to 7% return over time a good return on investment; stocks, real estate and others  The stock markets are up roughly 325% since the lows in about 2010, don’t you think they should adjust to norms at some point?

-       Trading is many times done on momentum theory using computers and paradigms, not analysis.

-       Lastly, just dumb common sense.

I look at the news of why the recent downturn in markets. Media blames it on Trump’s proposed tariffs, computer generated trading and stop losses, the Chinese, Britain’s exit from Europe, etc. In my mind it is all a bunch of garbage.  To me it is the economic cycle of growth, stagnation and downturn.  We cannot falsely build an economy on debt and continued governmental and private sector borrowing without repayment of debt.  As we, and the world economies weaken, we will find it harder to sell bonds to sustain our economy. Few countries can afford to buy our debt.  I see growth slowing to 2% next year and perhaps recession in 2020, an election year.

MONEY 148 - FINANCES

THIS IS MY 148^TH BLOG ON UNDERSTANDING MONEY TOOLS

December, 2018

www.understandingmoneytools.blogspot.com

Once again, in this blog we are going to go over finances.  Yes, I have a fancy, fetish with finances (a great alliteration) as I spent 20 plus years dealing in that industry.  We will touch upon various aspects so that you can have a clearer understanding of the “here and now”.  You one day may need this information to help you make money so please take heed.

I started writing this blog December 3^rd, and so appropriate as the DOW Jones Industrial average went down almost 800 points on December 4^th.  The morning of December 5^th the DOW down 500 points.  As I have written for 3 years now that a normal period for recession or downturn is greatly overdue.  It is much healthier to have markets correct periodically than go up, as now, with the longest growth in history without significant corrections.  This may be a bit redundant if you read my blogs, however it is important information for making money or hedging your bets on markets.

We will stick to stock markets and relate to other market options you have.  First, all markets go through cycles, growth, stagnation and downturn.  They may act in unison and may not.  For over the last 100 years or so the stock markets have established a baseline of a 15 to 1 price to earnings ratio (P/E).  This means that unlike a private company (where you might run a 3:1ratio) it will take you 15 years to return your investment.  Over a long period of time money managers and insurance companies view a 6-7% return on investment as a norm.  How is this related to a 15:1 P/E?  Divide 15 into 100 and you get approximately 6.5%! Not rocket science.  Where are the markets today?  Way ahead of themselves. The NASDAQ is over 50:1P/E and the DOW 24:1P/E or in that vicinity.  Let’s stay with this thought. What should the DOW be at to get to a norm, and how do I get to that norm for the market average or a particular company?  Take 15 times the market price, or a stock price, and divide by the first digit of the price to earnings ratio.  Let’s do this with the DOW as an example.  Let’s say for our use that the DOW is at 25,000.  Multiply that figure by 15 (the historical norm for the P/E) and divide by 24 the current P/E.  This results in 15,625.  This is more the historical norm for where the DOW should be priced.

Why is it so high when other markets are lower?  Too much money chasing investments like this.  Let’s look at real estate as an alternative.  I’ve owned several investment properties in my life. On a “cash on cash” basis without considering depreciation for taxes I would only make 6 to 7%.  (Depreciation is taken on investment real estate; most typically over a 30- year straight-line basis.  However, this lowers your basis in the property and therefore when it comes to selling you need to recapture that money and pay taxes. If I decide not to take depreciation, the government states you need to. Therefore, if audited you will pay the taxes on the difference between sales price and decreased basis anyway.)   Bonds with little risk like government bonds yield 2-3% interest, because of lower risk.  Junk bonds of B minus quality you raise the yield rate, however assume greater risk including default.  This yield will closer relate to real estate, a commodity and normal stock markets.

Another reason for about a 7,000 point increase in the DOW average since 2016 is the “Trump Bump”.  President Trump is a great promoter.  You don’t get half the accurate news from the media, and this is where I am trying to educate you.  There really was no reason for this rise other than the markets looking a long way ahead with speculation.  One, Donald Trump is a good businessman, although he inherited much of his money, and two the tax reductions mainly for the wealthy and large corporations won’t help Mr./Mrs. Average Citizen.  The United States GDP is currently over 4% according to government figures but things are slowing quickly in many industries so 2019 may look closer to 2% growth and perhaps recession in 2020.

Many say I am a pessimist, I am not.  I am a realist and like facts.  Why not be an optimist?  Actually, people who are optimists, right brained thinkers, and see the big picture (macro economics) are usually the most successful at something, although many give the money back or go broke at some point.  It is no news we have become a rapacious society.  History has shown us it has taken down civilizations prior to like the Greeks, Romans and others.  To put monied people on a pedestal is ridiculous, the likes of Jeff Bezos, Bill Gates and others.  Money is merely a “tool”, and should not be revered.

Where are we going as a country?  Doesn’t look good. Perhaps we will remain the strongest of the world’s weak?  Mr. Trump is slugging it out with President Xi from China on tariffs.  We used to have tarrifs, nothing new. I predict it will be a stalemate, and nothing good coming from it. Because of this conflict, Beijing is selling $1 billion of real estate here in the USA.  Ford Motor and General Motors have already given up manufacturing sedan automobiles here in this country keeping SUV’s and trucks. The world is addicted to inexpensive products from China and computer software from India.  Here is where it is dangerous for our country.  In July of this year our trade “deficit” hit a high up 9.5% or $50.1 billion. China represented $36.8 billion.  In October the trade deficit hit a 10 year high at $55.5 billion.  Here China represented $43.1 billion of this deficit.  These are dollars leaving this country and not returning, or circulating here.

We have run a Ponzi schemed/uber Keynesian growth since 2008 and the Great recession, going from a US debt of about $10.5 trillion to our current $21.89 trillion as of December 5^th.  This doesn’t include “off balance sheet debt”, nor under-funded government pensions totaling about $6 trillion owed to various government employees. To consolidate some of this, our average household debt is now about $55,000, a total of $13.5 trillion (we do not have individual savings to match).  Student loan debt about $1.4 trillion, auto debt and credit card debt both over $1 trillion.  We have grown our country through debt without the foreseeable ability to pay it down, let alone completely off.

To keep this more consolidated let me continue but in a punctuated manner:

-       Short term interest rates rising faster than long term.  This is known as an “inverted curve” or “inversion curve”, a time when things go wrong and precede a recession or economic downturn.

-       The USA is having a tough time selling bonds to raise money.  As we sanctioned Russia they now have sold off almost $1 trillion of our bonds. Not sure who bought that amount as the biggest buyers with money are China, Saudi Arabia and Japan. 

-       The VIX Index has finally become more volatile. It had been stagnant for several years.  People are wary of things to come.

-       We are a service-based economy, and can’t break the mold. I watch television at night in Arizona. There are only four industries represented in the TV ads; drug companies, followed by law firms that want to sue for side effects from the drugs, the big auto companies and the financial industry. Can’t grow a healthy country on that!

-       I am speculating that recent increases in interest rates are more due to being able to sell our bonds than a concern about inflation that holds around 2%.  The other thought here is that a higher interest rate may dampen the economy, but gives the Federal Reserve room to lower interest rates and not go negative in an upcoming recession or downturn.  As aforementioned, smaller economic downturns throughout a growth cycle is better than a long growth period with no downturns. This reminds me of gravity, if you drop an object from a few feet above ground it isn’t moving quickly. If you take an object up a considerable height it will drop fast….122 miles per hour to be exact.  The uptrend I refer to is related to the stock market, the downward correction might be quite fast.

-       We spend just under $1 trillion on defense budgets. Sad. We are at war constantly as it is good business.  Think about this in regard to countries we are concerned about invading us like China and Russia; who would want us and our problems they would inherit!  China stays out of wars and uses it’s money to grow their middle class sector. Our middle class as slipped ending up in the lower class.

To end this blog.  I hope you get the drift, be careful with investments.  Get rid of the junk in your investment portfolios and re-balance your positions, go considerable cash to wait for the next downturn to buy in. Perhaps look at investment grade bonds in such areas as nursing homes in the conservative Midwest states where occupancy is high with an aging population with money.