Why ABC is the Most Reliable News Source

Oct 25, 2021 David Kennon

I am getting more and more calls about the impending doom of the stock market.   Why would people like you get the idea that the stock market is “due” for a crash?  Why do people like you feel the need to worry?  It’s because you’ve been trained by the financial media to believe so.   You are only hearing one side of the story.   I obviously don’t have a crystal ball, but I could just as easily argue:   The pace of innovation is incredible.  We are seeing entire parts of the economy reinvent and improve themselves at light speed.  It would be totally reasonable for me to say: “In the next ten years we will experience the largest market increase in the past 100 years.”   So why does everyone have such a “glass half empty” attitude towards their investments?   It’s because these pundits are completely guessing, but make it sound like they are smart.  Below I am going to show you some articles I’ve found over the past week alone.    October Stock Market Outlook: Is The S&P 500 Ripe For A Correction?   Dave’s angry comment:   The main thrust of the argument is that October is a notorious month for poor stock market performance.  But this is completely misleading.  In the past twenty years there were two significant downturns, both of which happened quickly, and both of which just happened to be in October.  It has created skewed long-term results.  It was pure chance.     When to Expect the Next Stock Market Correction, According to Investment Pros   Here’s a doozy:   “A stock market correction is coming. There is no way to say for certain whether or not we’re already at the beginning of the correction (generally considered a dip of 10% to 20% in stock prices), but experts say one thing is for sure: it’s coming at some point.”   Dave’s angry comment:   And with all due respect, the writer (Mallika Mitra), is in her early twenties and has been writing for Money magazine for less than a year.  Why are we letting her article give us heartburn?   The odds of a 20% correction in stocks are rising as the market transitions to the next stage of its cycle, Morgan Stanley warns   The main issue I have with this one is that they use such confusing language.  The average reader would have no idea what they are talking about.  And it’s very easy to think, “If Morgan Stanley thinks this is going to happen, and since they know how to use a lot of fancy words, it must be true.”   It’s not true.  It is pure speculation.  The article should say, “Morgan Stanley hired a monkey to throw darts at an investment chart on the wall.  This is what it said.”   As stocks soar to historical highs, some experts say conditions ripe for correction   My main issue with this is the source.  For many people, ABC News is a very reliable place to get your news (a lot of people would not agree with that).   The trick used here is employing the opinions of very fancy people.  Namely, a Yale professor and a professor from the Wharton School of Business.  The Yale Professor got really lucky and predicted the Dot.com bubble in 2001.  Since then he has been treated as investing royalty.  If he is so smart, why doesn’t he invest his own money and become fabulously wealthy?  Professors don’t exactly make the big bucks.   As our population ages, future stock market returns will be lower. Here’s a metric to watch   I see these articles often and they drive me absolutely crazy!   They always go something like this:  “Going forward we can’t expect the same returns as the past because of blah blah blah.”   Ok. Maybe the stock market won’t make 10% like it has for the past 200 YEARS.  If between now and the end of your life, the stock market does not return around 10% is would be historically unprecedented.   But I don’t want to do what these other guys are doing.  I am also “guessing.”  I don’t want to give you the impression I know any more about the future than anyone else.  But I would argue my guessing has centuries of sustained proven results.  You have to bet on something when you invest your money.  I’m betting on what got us here.   I read the same kind of articles in 2010 and the market averaged 15% a year for the next decade.   We’re in a massive market bubble. When it pops a lot of investors will get wiped out   This is another very common trick and I believe it to be the most underhanded.  The author, Frank Giustra, runs a company that sells investments.  The more air time he gets, the more he appears legitimate.  The more he appears legitimate, the more investments he can sell.   Negative, scary news always gets the most attention.  Mr. Giustra is well-known for making scary predictions about gold, bonds, stocks, real estate, global markets, Bitcoin… basically anything.   Who gave him the right to financially damage good people like you?  There were people who read this article and literally moved their portfolios around.  These articles are not a victimless crime.  They cause real people to make bad emotional decisions about their money.   Ok.  I guess that’s enough ranting for this week.   Be Blessed,   Dave   Presenting: Ask Dave Anything I wanted to give back to the community.  So I’ve started scheduling short, free phone calls, where I will answer any financial questions you may have.  Spots go pretty fast.   Click here to get your spot

Ten Biggest Retirement Planning Misconceptions

 

Ten Biggest Retirement Planning Misconceptions   After 15 years of “in-the-trenches” planning experience, I can tell you that I consistently see the same misconceptions come up time and time again among the Baby Boomer generation. Do not trivialize these misconceptions. It only takes one or two to really mess up your retired years.   For example, a very nice woman, who was about to retire, once told me that she didn’t plan on ever spending any of her savings and investments. When I inquired as to why, she said, “You never know, I worry about medical costs. There is a history of cancer in my family.” I replied, “If you are enrolled in Medicare and if you have a Medicare supplement, the most you can be ‘out-of-pocket’ is less than $10,000 each year. If you get cancer and have a $400,000 medical bill, you are only responsible for less than $10,000 of it.”   Without that tiny tidbit of information, this woman would have made every financial decision for the rest of her life based on a faulty understanding of the facts. She would have lived small, worried about money, and feared the future- for no reason.   So let’s make sure you live the life you deserve.   Misconception #1: I need to have $1,00,000 to retire.    There is no standard amount of money that you need to possess in order to retire. It all depends on your savings, your monthly budget, and your expectations. Someone with $200,000 in savings and a monthly budget of $3,000 is probably going to be just fine. Someone with $2,000,000 in savings and a monthly budget need of $20,000 is probably in trouble.   Misconception #2: The stock market is unpredictable and dangerous.   If you still believe this fallacy, please go to www.DavidKennon.com and read my past commentaries. The stock market has a remarkably consistent, and successful, track record.   Misconception #3: Once I retire, I am too old to invest.    The life expectancy of a healthy 65 year-old is around 90 years old. Without utilizing growth investments, such as stocks, you are missing out on a powerful tool. I’m not promoting that you put all of your money in the stock market, but a diversified portfolio of stocks and bonds is usually appropriate throughout your entire lifetime.   Misconception #4: Super-smart people make more money investing than "normal" people.   There is zero academic evidence that anyone can outperform the markets. In other words, no one has a magical secret that will make your money grow faster than everyone else.   Misconception #5: If the stock market crashes, it could take decades for my savings to recover.   Not true. It took less than four years to recover losses from the 2008 crash. 2001 crash? Four year recovery. 1987? Just one year. 1973-74? Four years. 1939-40 took three years. Even the Great Depression losses were recovered in 4-½ years. Just get that belief out of your mind. Markets recover faster than you think.   Misconception #6: Social security is going to go bankrupt.   I stay very close to developments within the Social Security Administration. I can find no evidence that your benefits are going to get cut. Luckily for you, it is easier for politicians to keep kicking that can down the road. My kids need to worry. You do not.   Misconception #7: I need to have my house paid off before I retire.   While it might feel nice to be debt-free, it is not a prerequisite for retiring. As long as your retirement budget can handle the payment, many people retire with a mortgage.   Misconception #8: I need to be super-vigilant on financial news and adjust my investments constantly. No, you don’t. Believe it or not, people back in the 70s and 80s only got market news once a week (gasp).   Misconception #9: I shouldn't spend any retirement savings unless I have to.   If you still believe this widely-held misconception please read my past commentaries or listen to my previous radio show episodes. It is absolutely responsible and prudent to withdraw a reasonable amount of money from your retirement accounts each month.   Misconception #10: Some people lose ALL their money in the stock market.   While this may be possible if you put all of your money into a single stock or a single bond, a diversified portfolio of stocks and bonds has never gone to zero. In fact, in the past fifty years, the WORST year for an investor with a 50/50 stock/bond portfolio was 1974. You would have lost about 12 percent overall for the year. By the way, the same portfolio would have been up 20 percent the following year.  Nobody has ever lost anything close to all their money.  It's just not how this works.    I hope this helped put things in perspective.  There is so much financial noise out there that I am trying my best to tell you about the 10% that actually matters.   Be Blessed,   Dave   P.S.-  For those of you waiting for my new book, there is a paper shortage.  You're going to have to hang in there :)

 

How to Take Advantage of Booming Home Prices

Oct 11, 2021 David Kennon

If you haven’t noticed, home prices have slightly increased recently. Many of my clients are telling me, “It’s time to sell and get all this equity.  We’re rich!”   Of course, the big question is, where do you live now?!  Rent is outrageous, and even though you are selling at the top of the market, you are buying at the top as well.   A lot of Baby Boomers find that the majority of their assets is equity in their homes. In conversations with me, they say something to the effect of, “Dave, a big part of our retirement plan is to downsize our house.”   Let’s think about that idea for a second.   Let’s assume:   –         You own a single-family house in the area. –         You enjoy living there. You’ve made it your home. –         You decide to downsize in order to fund your retirement and lower your budget.   Ok. So now let’s think about your options. Where are you going to move to?   –         A smaller (possibly crappier) single-family home –         A townhouse –         A condo –         A manufactured home   That’s not to say there aren’t situations where downsizing makes sense. There are. Keep reading and we’ll get there. But first, let’s assume your house has been your sanctuary for most of your adult life. You love it, but you’re considering downsizing to have more money for retirement.   Downsizing for savings is often a daydream, not reality. For example, let’s say you own a $500,000 single-family home with no mortgage.   You decide to move into a townhouse. A decent townhouse will cost you $300,000 at an absolute minimum. Don’t forget about the HOA fees. That could be hundreds a month. And don’t forget about moving costs, paying the realtor a commission, redecorating, or making minor repairs ….   You now own a $150,000 townhouse (which maybe you don’t like as much as your last home), paying a few hundred a month in HOA fees. Sure you have $100,000 in the bank (after fees, commissions, closing costs, etc). That $100,000 can produce about $400 a month in dividends and interest if invested. You are almost exactly where you started. Maybe you are saving a couple of hundred dollars a month.   Is it really worth it?   Another example: Let’s say you own a $500,000 single-family home with a $200,000 mortgage. You are paying $1,300/mo on the mortgage which you’ve had for well over ten years. You decide to move into a condo. You sell the house, pocket the $250,000 (after commissions and fees) and find the condo of your dreams.   Actually, that’s not entirely true. Barring some kind of real estate miracle, a $300,000 condo is not going to be as nice as the house you just sold.   Now come the HOA fees. Condos are notorious for high fees, which can change at the drop of a hat. Also, don’t forget, you may get a letter from the condo board that says: “We decided to replace the roof and we’re going to charge you an assessment of $8,000.”   But now you have no mortgage! That saves you $1,300 a month in mortgage payments (minus the HOA of $300). So you now live in a condo that you don’t like as much as your house which needs a ton of work and you have an extra $1,000/mo.   Is it really worth it?   When does it make sense to downsize?   Here are some examples where it might make sense to downsize.   Your current home is too big. The kids moved out and you are left with a 3,000-square-foot home with a big yard. Downsizing in this situation often makes sense. While you might not save a ton of money, maintenance-free smaller townhomes can be very attractive.   You plan on a major downsizing. Moving from a $400,000 home to a $100,000 manufactured home will create a significant difference in budget and spending needs going forward. Few people like this option.   You have the opportunity to move in with a family member. This can be especially attractive if your child or relative has an apartment attached to their home or a mother-in-law suite. This is a fantastic way to lower expenses and increase cash in the bank (not to mention bringing your family together).   You have no other retirement assets. This is not ideal, and not the situation for most retirees. But, for those folks facing this reality, selling their home and downsizing to a much smaller space can help them live comfortably throughout their retirement.   So, before you think that downsizing could fix all your retirement worries, really consider the long term financial ramifications. Do the math. Consider the emotional consequences of moving. And move ahead with caution.   Be Blessed,   Dave   Presenting: Ask Dave Anything I wanted to give back to the community.  So I’ve started scheduling short, free phone calls, where I will answer any financial questions you may have.  Spots go pretty fast.   Click here to get your spot

 

This is a Seriously Bad Time to Invest

Oct 4, 2021 David Kennon

I’ve been getting a lot of phone calls.   The world seems extra uncertain and crazy right now, doesn’t it?  If you really think about it, this is an absolutely terrible time to invest.  Think about it…. 1. Government shutdowns 2. A global pandemic 3. Political division 4. Out of control spending 5. A total mess overseas This stuff is downright scary. How could you not be thinking to yourself, “This is a bad time to invest. I had better wait until things cool down.” I can’t blame you for having those thoughts, but allow me to gently plant a seed: This way of thinking could devastate your long-term financial well-being. So this week I want to give you some perspective. Let’s all jump into my handy time machine. We’re headed back to early in the 20th century.   (Buzz. Whirr. Beep. Clunk.) We’ve arrived! The year is 1941. Hitler is marching across Europe. The war is clearly working in his favor. The reality of World War II can be seen on every American’s face. News just hit that Pearl Harbor has been bombed by the Japanese. Boys are going to war. American citizens are very realistically thinking to themselves, “THIS time is different. The stock market could collapse and never recover. Heck, there may not even BE a stock market in a few years. We may all be speaking German.” If you invested $100,000 in 1941, ten years later you’d have $483,014. Let’s jump ahead a few years. Next stop, 1951! The year is 1951. Harry Truman orders the development of the hydrogen bomb. Russian expansionism has become a giant concern. The Korean War begins when North Korean Communist forces invade South Korea. Why in the heck would you invest your money at this time in history?! A new “red” menace has appeared from the wreckage of WWII. The world is an uncertain and scary place. If you invested $100,000 in 1951, ten years later it would be worth $446,944. Buckle up, because our time voyage still has a few more stops. 3. The year is 1962. The Cold War begins to really heat up. The USSR has plans to build missile bases in Cuba capable of launching nuclear warheads. As a side note, the Russians had, the year before successfully tested a 50-megaton hydrogen bomb. The American populace is gripped with fear. Schools run nuclear attack drills for students. The possibility of a new World War is staring us in the face. You would have to be completely nuts to invest your money facing such uncertainty. The possibility of worldwide nuclear Armageddon would get any investor a bit nervous. If you invested $100,000 in 1962, ten years later it is worth $257,778. Let’s jump ahead to the seventies. Groovy, man. 4. The year is 1974. The Watergate scandal has rocked the country, leading to the resignation of Richard Nixon. The Arab oil embargo, which began the year before, has had a deep effect on the economy. Unemployment reaches historic highs. Cars line up for miles at the gas pumps. Society—economically, politically, and socially—is experiencing some of the worst struggles since the Great Depression. Investing your hard-earned savings at this point in history is ludicrous. The economy is in shambles with no relief in sight. If you invested $100,000 in 1974, ten years later you would have $397,874. You know what? Let’s take the expressway past the eighties. Here we go! 5. The year is 1991. Saddam Hussein invades Kuwait. A new Middle-Eastern menace has appeared on the scene. George Bush initiates Operation Desert Storm. Racial tensions explode in Los Angeles following the Rodney King verdict. What a crazy time to be alive! For the first time, the news stations report on the war in real-time, broadcasting frightening images of bombs exploding and tracers filling the air from anti-aircraft guns. Investing during such upheaval would be nothing short of irresponsible. If you invested $100,000 in 1991, ten years later its worth would be $337,272. Two more stops on our way back to the present day. 6. The year is 2003. The September 11th attacks have radically changed the way Americans view the world. The USA PATRIOT Act and Department of Homeland Security come into being. Hundreds of thousands of troops are called up. The U.S. invades Iraq. The threat of radical Islamic terrorism seemingly comes from nowhere. Tension fills the hearts and minds of the American public.   Why would anyone invest their savings amid such uncertainty? If you invested $100,000 in 2003, ten years later it would have grown to $204,207. Last stop on our Time Travel Express! 7. The year is 2008. The housing market plunges. Banks are hit hard, most of them slashing dividends to near zero. Respected institutions such as Lehman Brothers, Washington Mutual, and Countrywide go bankrupt. The stock market goes into free-fall. The “Great Recession” is upon us. If you invested $100,000 at the end of 2007 (before the stock market crash), ten years later it is worth $225,863. I think you get the point. The phrase “This is a bad time to invest my money” can have dramatic consequences. The world will always seem unstable.   In the twenty years that I’ve helped people with their investments, there has never been a single day where I thought, “Man, everything is working out A-OK in the world right now.  What a perfect time to invest”   Be Blessed,   Dave     I wanted to give back to the community.  So I’ve started scheduling short, free phone calls, where I will answer any financial questions you may have.  I can almost guarantee I’ll be able to improve your situation.  Spots go pretty fast.   Click here to get your spot