My former employer is offering me a small payout or pension benefits. The payout is around $16,000 and the pension benefits are $178/month ($2,136/year). I am leaning towards the payout and investing in some good stocks. I only have until Oct 2 to decide. Can you offer any advice?
Every Little Bit Helps!
Dear Smart to Ask for Help!
This is really a two-part question. One is, “Should I take the buyout?” and two is, “Can I make a killing in stocks?”
Should I Take the Buyout?
If you are willing to learn about investing and be a good steward of your money, then taking a buyout is very likely a great idea. Most companies are underfunded on their pensions, and this is unlikely to improve in the coming years. In 2016, S&P 500 companies were underfunded by $391 billion on their pensions, with plans only 80.75% funded. Other post-employment benefits (like health benefits) were even more severely underfunded. Your company is one of the most severely underfunded in the U.S. So, the next offer you get could be a lot less than what you are currently being offered. Many legacy companies use Chapter 11 to restructure their debt and pension obligations when they get too overloaded. That is a risk going forward as well, if you choose the payment plan.
If you want to discover whether or not your company is severely underfunded on pensions and/or other post-employment benefits, this information is often found in the annual earnings report. That is a lengthy, unwieldy report that is quite hard to read, until you learn how to do power-searches. I can usually locate this information in about 5 minutes. If you are not familiar with earning reports then you might not find this data at all!
Should I Invest in Stocks?
Even great stocks lose money in a bear market. So, it’s important to educate yourself on investing before you dive in to the stock market, or leap into any investment on the advice of a friend, family member of financial professional. There are a few critically important rules that are easy to understand and implement, and can be the difference between growing and enjoying your returns, or watching your investment evanesce in thin air.
In short, you can certainly take a buyout and have that capital grow into a rewarding investment, but only if you’re willing to educate yourself and be the boss of your money. If you take the buyout and just hand it over to a “financial professional” without knowing what’s appropriate for you at your age and at this time in your life, you could end up giving the broker-salesman a great payday at your own expense. There are a lot of slick salesmen selling risky investments as “great” because they pay a nice commission (on the backend – you’ll be told that you don’t have to pay anything!).
You can read about The ABCs of Money in my 3 bestselling books, or you can learn them firsthand in my 3-day life-transforming Investor Educational Retreats. I also offer second opinions on your current budgeting and investing strategy in my private, prosperity coaching sessions. Call 310-430-2397 or email Heather @ NataliePace.com to learn more.
Test your investment skills in my Investor IQ Test.
About Natalie Pace:
Natalie Pace is the author of the Amazon bestsellers The Gratitude Game, The ABCs of Money and You Vs. Wall Street (aka Put Your Money Where Your Heart Is in hard cover) and the co-creator of the Earth Gratitude project. Natalie Pace is a repeat guest on national television and radio shows such as Good Morning America, Fox News, CNBC, ABC-TV, Forbes.com, NPR and more. As a strong believer in giving back, she has been instrumental in raising tens of millions for public schools, financial literacy, the arts and underserved women and girls worldwide. Follow her on Twitter.com/NataliePace, and Facebook.com/TheABCsofMoney. For more information please visit NataliePace.com. Click to access a longer bio on Natalie Pace.
Please note: NataliePace.com does not act or operate like a broker. We report on financial news, and are one of the most trusted independently owned and operated financial news corporations in North America. This article is intended to educate and inform individual investors, and, thus, to give investors a competitive edge in their personal decision-making. Any publicly traded companies or funds mentioned in this article are not intended to be buy or sell recommendations.
ALWAYS do your research and consult an experienced, reputable financial professional before buying or selling any security, and consider your long-term goals and strategies. Investors should NOT be all in on any asset class or individual stocks. Your retirement plan should reflect a diversified strategy, which has been designed with the assistance of a financial professional who is familiar with your goals, risk tolerance, tax needs and more. The "trading" portion of your portfolio should be a very small part of your investment strategy, and the amount of money you invest into individual companies should never be greater than your experience, wisdom, knowledge and patience.
Information has been obtained from sources believed to be reliable however NataliePace.com does not warrant its completeness or accuracy. Opinions constitute our judgment as of the date of this publication and are subject to change without notice. This material is not intended as an offer or solicitation for the purchase or sale of any financial instrument. Securities, financial instruments or strategies mentioned herein may not be suitable for all investors.
Are you the boss of your money? Or do you place all of your faith in someone else managing your money for you, without any checks and balances to ensure that you are safe, protected and hot? Below are 3 easy questions to ask your financial partner to ensure that your plan is sound, along with 5 tips and 7 considerations on how to weather the next financial storm.
How can you be the Boss of your Money? The first step is to learn the basics, and the second step is to hold yourself and your financial team accountable, by the books and numbers, not by their word.
Top 3 Questions to Ask Your Financial Team to Make Sure That They Are Working For You (and not just getting rich by selling you things)
And it is just as important to know the right answers. Otherwise, you could be seduced by sales-speak.
1. How Much Of My Portfolio Should I Keep Safe?
Sales-speak: “If you don’t invest, then your money just earns zero and doesn’t even keep up with inflation.”
This sound byte is designed to get you to buy more stocks and take on more risk than might be prudent for you, for your risk tolerance, for the current marketplace and for your time horizon.
Sales-speak: “Invest in this so that when the crash comes, you’ll be safe.” There are a lot of scams out there trying to capitalize on your fear, including gold scams, Bitcoin scams, penny pot stock scams, options trading software and more. When people scare the heck out of you and then sell you the cure, it’s often just snake oil. Be cautious and skeptical.
The Right Answer: “How old are you? The general standard is to keep a percent equal to your age safe. I would overweight a little more safe right now because we are in the 9th year of the current bull market and the CAPE ratios are quite high.”
If you have under a million dollars and are dealing with a broker-salesman who has a large number of clients (typically over 500), then odds are pretty low that you’ll get this answer. That is why it is so important to know the basics yourself, and to be the boss of your money and plan, rather than having blind faith in broker-salesmen.
2. How Much Commission Are You Being Paid to Sell Me This?
Sales-speak: “You don’t have to pay me anything!” This is a side-step of the question. Most broker-salesmen are paid on the back-end to sell you things, not by you directly. And the higher the commission they are paid, the higher the risk of the asset that you are being sold. So, don’t settle for this answer.
The Right Answer: “This [life insurance plan, annuity, REIT, mutual fund] pays 6% to me.” Remember that higher commissions and dividends = higher risk. So, if you hear if a commission or dividend that is 5% or higher, you then have to place even more forensic focus on question number 3.
3. How Safe is This Investment?
Sales-speak: “Your investment will not go down in value.” Or “Owning real estate is better than stocks.”
There are many ways that annuities and life insurance goes down in value. Most people who purchase life insurance have the policy lapse before the pay-out, even if they have paid in for decades, because when you retire and are on a fixed income, there will come a time when you have to choose between eating, having a roof over your head, visiting the doctor or paying your life insurance bill. If you miss a payment, or have any of a long list of other issues with the policy, then the insurance company can cut the benefit and dramatically increase the premium, making it unaffordable to continue the policy. With annuities, once you “annuitize” it, you give up the asset for the “guaranteed” annual income. In other words, if you deposited a million, and you die one year after you select “Income for Life,” then you’ve just lost a million dollars that could have gone to your loved ones or charity. Finally, all of the private placement REITs that I have personally looked at, which are in abundance today because they pay 7% commission to the broker-salesmen, are stock investments (not real estate investments) in companies that have been cash-negative for at least three years (in an up real estate market!). These investments are very high-risk and it is an out-and-out lie when they are sold to retirees as “safe” and income-producing.
The Right Answer: The safest investment right now is FDIC-insured cash. It pays you nothing, but you have no risk of capital loss (of losing money). That is why we are taking on some risk (appropriately) on the stock side.
FDIC-insured cash is just the first step to getting safe. At my investment educational retreats, I teach attendees how to consider safe, income-producing hard assets that you purchase for a good price because hard assets hold their value better than paper assets when you have too much debt in the world. In addition, our team has identified thousands of dollars in annual savings that most people can save with smarter energy, budgeting and investing choices! These investments pay dividends for life.
Learn about 12 Questions to Ask Your Broker in my first book: Put Your Money Where Your Heart Is. Learn what is safe and how to get safe in my second book: The ABCs of Money. Implement these strategies in the chapter-a-day 21-day plan in my third book The Gratitude Game.
Keep reading for 5 Tips and More Facts, Market Conditions, Testimonials and Resources.
Facts & Market Conditions
"My husband spoke with Natalie Pace, and after a brief discussion, she charted a plan on the back of a napkin. I decided to take her advice. Soon after, we had the big crash. I was one of the few and lucky people who actually made money (instead of losing). So, thank you Natalie, for saving my retirement!" Nilo Bolden.
"College students need this information before they get their first credit card. Young adults need it before they buy their first home. Empty nesters can use the information to downsize to a sustainable lifestyle, before they get into trouble."
Joe Moglia, Chairman, TD AMERITRADE.
"Many people, including educated men and women, often get into trouble when they
neglect to follow simple and fundamental rules of the type provided [by Natalie].
This is why I recommend them with enthusiasm."
Professor Gary S. Becker. Dr. Becker won the 1992 Nobel Prize in economics for his theories on human capital.
Additional Information (Blogs)
Stock prices are as high as they were in the Great Depression and the Dot Com Recession.
What is the Smart Money Doing?
Are You Gambling With Your Future?
Will Congress Raise the Debt Ceiling in Time?
Social Security is Cash Negative, at 28% of the Public Debt and Growing
Bitcoin and the Crypto Currency Flash Crash. (published on June 25, 2017).
If you are interested in helping out Houston and the Gulf Coast during Harvey’s flooding and deluge, below is a list of nonprofit organizations offering on the ground emergency services and post-storm recovery. Click on the name to access the organization's website and donation page.
All Hands Volunteers has already mobilized a response team for on the ground support.
The American Red Cross has shelters, supplies and volunteers in place to assist people affected by Hurricane Harvey.
Habitat for Humanity has been involved with disaster recovery and home building for those in need since 1976.
The Texas Diaper Bank has been helping underserved communities since 1997. Diapers (for babies and elders) are not provided by disaster relief agencies, according to the organization. Designate that you want your donation to go to Disaster Relief for Hurricane Harvey.
United Way Houston: If you or someone you know needs help in the Houston area, dial 2-1-1, the Texas/United Way Help Line. This 24/7 call center offers shelter, food, prescriptions and more.
Donate to the Houston United Way here.
The United Way Relief Fund assists with storm-related needs and recovery.
Be wary of any organization that you are not familiar with by name. There will be a few sham shysters capitalizing on your care and concern, without any intention of helping those in need. If you aren’t sure about who runs the organization or how long it has been around, just move on to an organization that you are sure about.
Your donations to a qualified 501(c)3 are tax deductible. Be sure to write down the 501(c)3 number for your accountant.
Please feel free to list your favorite organization in the comments below. If you notice a scam, please alert all of us in the comments below as well.
“The only time in history going back to 1881 when [CAPE] has been higher are, A: 1929 and B: 2000.
We are at a high level, and its concerning.
People should be cautious now.”
Robert Shiller, Nobel Prize winning economist and Yale professor of economics
Last week was a historic week. The White House was under fire after a deadly protest in Charlottesville. The fallout included another White House official being voted off the island Survivor-style, with the unceremonious ousting of Stephen Bannon. A CEO exodus from the White House business advisory councils forced the 45th President to disband them. With that kind of upheaval in the central government, as one might expect, the U.S. stock market took its second straight week of losses. As of today’s close, the Dow Jones Industrial Average was at 21,703.75, trading down 2% from its August 7, 2017 high.
Investors were looking for signs of stability from the central government. However, the real reason for the losses was fundamental economics, not politics. In fact, after the ousting of Bannon, the markets applauded only briefly, and then headed south again as news of an earnings miss by Foot Locker made the rounds.
Foot Locker sales declined 4.4%. Net income was off 60% year over year, as the company was hit with a $50 million pre-tax litigation charge relating to its handling of a pension plan conversion in 1996. Incidentally, S&P 500 companies are underfunded on their pension and Other Post Employment Benefit obligations by over half a trillion currently. Only 4.52% are fully funded on their pensions and OPEBs, with OPEBs (like health insurance) the furthest behind. “If OPEB were a patient, it’s status would be critical,” according to Howard Silverblatt, the senior index analyst S&P Dow Jones Indices.
Foot Locker isn’t the only retailer suffering. There has been a wave of bankruptcies in retail, with over half liquidating completely, rather than just restructuring debt. Malls across America are like expensive ghost towns, with no one, save the salesmen, inside the well-appointed and overstocked stores. Marketing firms say that Millennials prefer experiences to shopping. However, that’s a convenient simplification of what’s really happening. Many Millennials are strangled with college debt, working multiple jobs and still not able to make ends meet. Shopping is a luxury many simply cannot afford.
The Middle Class has been squeezed out of its comfort zone. Home prices are higher than they have ever been. Consumer debt is higher than it has ever been. "Flows of credit card balances into both early and serious delinquencies climbed for the third straight quarter—a trend not seen since 2009," according to the Federal Reserve Bank of New York. Wages have stagnated. The “Gig” Economy has many people trying to piece together a living with multiple part-time jobs. Health care costs are out of reach and unsustainable. (There are ways to personally put yourself in the best position during these hard times. Click to learn more about my Investor Educational Retreat this October, if you want to save thousands of dollars every year in your annual budget, protect your retirement plan from the next crash, live a richer life and have more money for retail and bucket list vacations. It’s less time and less money than you are currently spending, with solutions that will last a lifetime.)
With 69% of the GDP growth reliant upon the American consumer, and the Middle Class being squeezed, can the American Consumer continue to carry this economy?
The Stock Market and Earnings
According to Robert Shiller, Nobel Prize winning economist and Yale professor of economics, “The CAPE ratio that John Campbell and I devised 30 years ago is at unusual highs. The only time in history going back to 1881 when it has been higher are, A: 1929 and B: 2000. We are at a high level, and its concerning. People should be cautious now.” 1929 marked the beginning of the Great Recession; 2000 was the market high before the Dot Com Recession. Click to hear Professor Shiller discuss this in greater detail on CNBC.
Essentially, the CAPE ratio takes a look at 10-years of earnings when calculating the price to earnings ratio because earnings fluctuate wildly year-to-year. By either the CAPE or the annual average Price to Earnings ratio, the current PE ratio is high. Interestingly, the PE ratios are high even though corporations have done massive buying and retiring of stock – which reduces the PE.
NASDAQ dropped 78% between its highs in March of 2000 and its lows of October 2002.
The Dow Jones Industrial Average lost 55%, sinking to a low of 6547 on March 9, 2009.
Is this the new normal? 8-year bull markets followed by colossal implosions? It’s entirely possible, particularly as long as the Middle Class is being squeezed out of profits and strangled with debt, while being expected to continue to buy buy buy and fuel earnings.
As I’ve pointed out repeatedly, and as Robert Shiller stresses in his video interview with CNBC, market timing doesn’t work. PE ratios were high for a couple of years in the late 1990s before the Dot Com Crash. Also, if you move all into cash, then it’s very difficult to know when to move back in. If you did that just before two years of solid gains, then you’ll rue your actions and want to jump back in even if the prices are high and unsustainable.
Overweighting safe, diversifying and annual rebalancing work great. Getting safe in today’s climate is tricky. There are lots of “safe” assets that are losing money, and other “safe” products that have recently adopted redemption gates and liquidity fees. You can’t rely on Buy and Forget About It or any of the old investment adages.
Wisdom is the cure. Get the ABCs of Money so that you can be the Boss of Your Money. This has never been more important than now.
The last time the U.S. was in this position, in terms of consumer debt and squeeze, it resulted in the Great Recession and a meltdown of the U.S. banking system. The Federal Reserve and taxpayers have already bailed out the banks. U.S. corporations have more cash than many countries – particularly Silicon Valley companies like Apple, Google, Microsoft and Oracle. Corporate buybacks have largely fueled the current bull market. When economists talk about a sustained rally, they often point to buybacks and the amount of cash being held in corporations.
However, corporate cash can’t jumpstart personal consumption, when so many Americans have more debt than savings or retirement. Lower spending means lower sales and missed earnings. Financial engineering, like corporate buybacks, can only work for so long. Declining sales has already slain countless retail companies. What industry is vulnerable next?
If Nobel Prize winning economist Robert Shiller is right about the CAPE ratio indicators, it could be all of them.
Don’t get scared. Get smart. Call 310-430-2397 to learn more now.
Below are other Warning Signs in the Economy, which I outlined in greater detail in my BlogTalkRadio show this month. Click to listen to that show.
Bright Spots in the Economy
More Blogs With Additional Information and Data
What is the Smart Money Doing?
Are You Gambling With Your Future?
Will Congress Raise the Debt Ceiling in Time?
Social Security is Cash Negative, at 28% of the Public Debt and Growing
Minutes of the July 25-26, 2017 FOMC Meeting
Economic Projections from the June 2017 FOMC Meeting
PCE % of GDP Charts
In August 2000, a broker salesman attempted to take all of my hard-earned gains from a real estate sale, saying he would diversify and protect me, by investing in Enron, Global Crossing and AOL funds. I had 1000 sound reasons why all of those investments were a bad idea at the time, but I didn’t (then) have the confidence and wisdom to know definitively that I was right. If I had placed my trust and money with the salesman, I would've lost everything. I don't know as a single mother how I could've survived that.
It was then that I became determined to expose the conflict of interest that is inherent in much of the financial services industry, so that others could be saved, too. I developed simple, easy investing solutions that cost less time and money than having blind faith in a “financial planner” who often makes more commission when they sell you things that you don’t need. I also developed the Thrive Budget, which allows you to stop making the billionaire corporations rich at your own expense, which allows you to live a much richer life, have more bucket list vacations and provide far better for your future.
I love my job. I love hearing the stories of people who earn gains when the economy and markets lose more than half. (Yes, we have those testimonials.) Or retired couples who downsize to a sustainable lifestyle, and are able to live a richer life in retirement as a result. Or college students who get a far better degree for half the cost of their colleagues, and exit college capable of finding a job without the crushing debt.
There are people who complain about their problems, and there are those who can see beyond their problems, or at least have faith that there is a life beyond what crushes their spirit now. Having a vision of where you'd like to go and a plan to get there will always work better than throwing your hands up in the air and complaining that you have no control. Complaining and doing nothing are choices, too.
However, none of this happens without you. The status quo has more money, more advertising and thus a larger reach than I do. It is your 5-star reviews, your passionate support, your shares, your likes and your questions that enable me to save another down the road. And for that, I thank you.
All of my hottest tips, and most important alerts, from Bitcoin fraudsters to penny pot stock scams, from picking Tesla and Google at their product launches, all come from questions posed by people, like you, who follow my work. Money is a very personal topic, and that’s why we offer a number of ways that you can get your questions answered anonymously. Below are just a few ways you can do just that.
There are solutions for your challenges. They just aren’t found in the mainstream. Otherwise, your problem would already be solved.
I wanted to take a moment to thank you for joining my mailing list, my Facebook page, Twitter, Instagram, YouTube, Medium, Blog, BlogTalkRadio, etc.
If you are having difficulty making ends meet (who isn’t), if you’ve been approached with a surefire investment opportunity with promises of astronomical 100% guaranteed gains, or if you’re interested in a second opinion on the way your money is being managed, then it’s a very good idea to reach out for wisdom and a second opinion. Call 310-430-2397 or email info @ Nataliepace.com to reach my office directly.
Thank you for joining my mailing list, my Facebook page, Twitter, Instagram, YouTube, Medium, Blog, BlogTalkRadio, etc. Stay in touch. Ask your questions. Get your answers. Share hot opportunities (that you want me to check up on).
Have a wonderful summer. Now is the time to make sure that the plan and path that you are on is a good one. I’m here to help. I love empowering Main Street with the easy systems needed to thrive in today’s volatile economy. It is an honor, and a job that I cherish and take very seriously – since 2000!
What’s The Smart Money Doing?
Basic supply and demand tells you that prices decline when people sell en masse, and increase when there is colossal buying. Knowing what the big money is doing can help the Main Street investor get it right. So, what’s the smart money doing these days?
The Federal Reserve Board
The Federal Reserve Board announced that they will begin divesting themselves of the bonds they are carrying in a timely manner “relatively soon,” assuming the economy doesn’t tank. They are selling their long-term Treasury bonds and their mortgage-backed securities. Kathy A. Jones, SVP and the chief fixed income strategist of Charles Schwab Inc. & Co. believes this will impact interest rates on mortgages, and encourages everyone who is able to secure a fixed-rate on their mortgage to do so now (from my interview with her on July 19, 2017).
The stock market gains of the last few years have been thanks to cheap, easy money. The Feds kept interest rates at zero. Companies, even heavily indebted companies, could borrow almost free capital, and buy back their own stock. Thus, stock buybacks were robust, just as they were prior to 2007 (the year before the Great Recession). Buybacks have come to a screeching half of late. Buybacks were down 17.7% year over year in the first quarter of 2017. As Howard Silverblatt, the senior index analyst for S&P Dow Indices wrote on June 21, 2017, “Companies may need to make money the old-fashioned way – earn it.” (For information on how companies can push up earnings by buying back their own stock, read my blog on “Financial Engineering.”)
Less insider buying also means less price support. Companies are relying upon future push-ups in stock price to come from investors.
The bottom line is that the corporate “smart money” has pulled back on purchases of their own stock.
What Happens When Wall Street Invades Washington?
A 17-year Goldman Sachs veteran is the Secretary of the Treasury. A hedge fund owner is now the head of communications at the White House. Is it “smart” for someone who earns in the multi-millions annually to lop two zeroes off of his income and take a job in government that pays $170,000 or less? The answer is yes, sometimes. When someone is willing to take that kind of pay cut, Main Street should be alarmed and take note.
First of all, here’s how the math works. A salary of under $200,000 doesn’t come close to funding the lifestyle of a one-percenter! How can they even afford to do this? Hmmm…
What few Americans realize is that at the top of a bull market, taking the government job and being forced to sell high (when otherwise there might be constraints on how much they can sell, and when) and having the taxes on that sale deferred can be the biggest payday of all. As one example, Henry Paulsen was “forced” to sell over $500 million of Goldman Sachs stocks to become the Treasury Secretary in June of 2006. He was allowed to use the proceeds to purchase government bonds, under a Certificate of Divestiture, which means he paid no taxes on the sale of that half a billion (or more) in stock. When he sells the T-bills, he’ll be liable for the capital gains then. However, the sale can be spaced out, and the tax rate on long-term capital gains is currently 20%, roughly half of what the earned income tax rate can be.
So, guess how closely correlated market losses are with having a Wall Street Treasury of the Secretary?
As you can see in the chart above, since 2000, Wall Street rallies were all under the tenure of Treasury Secretaries who came from politics. The crashes occurred under the aegis of the one-percenter Wall Street veterans. It just doesn’t pay for Wall Street executives to take a salary that is a rounding error of their earning potential during bull markets. The payday comes when they get to sell en masse high without taxes, while their colleagues are vulnerable to losses, and would go to jail if they tried to dump all of their insider holdings at once.
Not surprisingly, Anthony Scaramucchi is seeking a federal tax break for his sale of Skybridge Capital. He calls it “taking a mega-opportunity cost for getting rid of all of your assets.” Others might see it as selling high and keeping all of the money, while deferring taxes, which can be the biggest payday of all, particularly if the markets head south.
The bottom line is that having so many Wall Street guys (i.e. the “smart money”) willing to take a meager salary for a job on Capitol Hill is not a good sign for investors. They don’t do that unless it adds up.
Remember that market timing doesn’t work. The systems that I’ve taught in my Investor Educational Retreats have outperformed the bull markets and earned gains in the bear markets since 1999, at a time when most people have lost more than half in two of the worst recessions the U.S. has seen since the Great Depression. Call 310-430-2397 to register for my Old West Financial Empowerment and Healing Retreat, which will be held in Arizona Oct. 13-15, 2017. Register by Monday, July 31, 2017 to receive the lowest price.
Have you become confused (or alarmed) at the new acronyms flying around, or the potential service disruptions that you’ve been learning about of late? Or (even more alarming), is your Bitcoin Club not even advising you about the events that are happening in just a few days?
Important Information That You Need to Know Now About the User Activated Forks.
The bottom lines on Bitcoin, Ethereum, Litecoin and other crypto currency is that the gains have been meteoric in 2017, and so has the volatility and the amount of speculation and outright scams. It’s very important to get informed before you buy or trade crypto currency. If you don't understand the necessary confirmations, how to get a a reliable wallet, which websites are legit and which aren't, etc., then your first investment should be in information and wisdom (not crypto currency).
I’ve penned two important blogs over the last month. (See below for links.) And I will spend some time at the Old West Retreat Oct. 13-15, 2017 outlining how to embrace the opportunities and avoid the dangers of crypto currency. Call 310-430-2397 or email info @ NataliePace.com with your questions, or to learn more.
Crypto Currency Crashes and the Bitcoin Chain Split of July 31, 2017. (published on July 16, 2017).
Bitcoin and the Crypto Currency Flash Crash. (published on June 25, 2017).
Crypto Currency Crashes and Bitcoin’s July 31st Network Disruption.
Ethereum is down 60% in just a few weeks. Bitcoin is off 34% from its high of $2,894, set on June 10, 2017. So, is this a buying opportunity? Before we jump in, let’s figure out what’s causing all of the volatility.
Bitcoin Network Disruption on July 31, 2017
Bitcoin.org is warning of a potential network disruption on July 31, 2017 during the User Activated Soft Fork (UASF). The official website for Bitcoin is recommending to stop accepting Bitcoin on July 28, 2017, and to “be wary of storing your bitcoins on an exchange or any service that doesn’t allow you to make a local backup copy of your private keys.” GDAX, the leading crypto currency exchange will be monitoring the situation closely. According to Adam White, the general manager of GDAX, GDAX will " temporarily suspend the deposit and withdrawal of bitcoin on GDAX and may pause the trading of bitcoin as well."
For a full list of the action points, and further explanation on the Bitcoin chain split, go to BitCoin.org and read the alert. You can also follow GDAX and Coinbase (GDAX' owner) on Twitter and on the exchange website for live updates during the chain split. Ultimately, the chain split should sort itself out. It's mainly the transition leading up to August 1, 2017 and the days/weeks thereafter where existing and potential bitcoin investors need to be more cautious.
Is this potential disruption what is behind the current sell-off of BitCoin, Ethereum and LiteCoin? Investors don’t like uncertainty, and they love gains. The July 31st event offers an incentive for anyone who has seen an extraordinary run-up of their investment to make sure that those paper gains are translated into their local, traditional currency. We’ll know in just a few weeks whether the July 31st chain split goes more smoothly than expected. Until then, I’d expect to see more volatility. Bitcoin.org is advising everyone that the currency could see “significant price fluctuations.” However, Ethereum is experiencing even more volatility more Bitcoin.
Ethereum’s Flash Crash
On June 13, 2017, investors were buying Ethereum at $381. The rapid rise from just $7 a year ago, prompted a multi-million dollar sell order on June 21, 2017 that triggered a cascade of chaos, where limits and stops were triggered. In a matter of seconds, an Ethereum flash crash caused an implosion of the price to just ten cents! GDAX, the premiere crypto currency trading exchange, is honoring the purchases and reimbursing the forced sales. This will help to reinforce legitimacy, and reduce the customers’ righteous indignation of massive, instant losses. However, the flash crash illustrates one of many concerns of investing early in any disruptive innovation. (See below.) Refer to my first report of the Flash Crash and other problems with crypto currency in June 2017.
Early Adopters Cashing In
Schumpeter’s Creative Destruction
Lessons from Skype
Hucksters and Hackers
Become an Early Adopter
Being on the Right Side of Massive Opportunity
That 10 Cent Trade
And here’s additional information on each Concern and Opportunity.
Flash crashes – massive drops in an investment – are exacerbated by High Frequency Trading, automated programs and derivatives. Ethereum’s drop to 10 cents on June 21, 2017 was the result of a multi-million dollar sell order that triggered multiple stop-loss and margin covers. Because those orders are automated, the crash occured in nano-seconds – before GDAX had a chance to halt trading. The large exchanges – NYSE and the Nasdaq stock exchanges – have breakers to stop rapid drops in the overall exchange. However, the May 6, 2010 Flash Crash, which saw a drop of 9% in the Dow Jones Industrial Average in less than half an hour, exhibits just how far and how fast the mood can change in an investment. Incidentally, Flash Crashes are one of the reasons why it is critically important to have a Capture Gains strategy, rather than a Stop Loss mentality. I teach this important distinction at my Investor Empowerment Retreats. Call 310-430-2397 to learn more about the Oct. 13, 2017 retreat now.
Early Adopters Cashing In
Whenever you see gains of 1000% or more, like we’ve seen this year Ethereum, you have to worry about the early adopters cashing in their gains. If you’re trying to buy while most are selling, it’s like trying to catch a falling knife. You’re bound to get cut.
Schumpeter’s Creative Destruction
Disruptors and unicorns are the hallmark of the tech industry today. They were in 1999 as well before the Dot Com REcession. As Schumpeter pointed out in his econ classic, Capitalism, Socialism and Democracy, there are two waves of innovation. The first is fast and furious, which is followed by a big crash that wipes out most of the investors and the more vulnerable companies. The second wave of the new technology, after all the chaff has been winnowed away, tends to be longer and more prolonged. For instance, Bitcoin was the first, but is LiteCoin (developed by Charlie Lee) or Ethereum (co-founded by Vitalik Buterin) the better platform? And what about all those Bitcoin clubs that are sprouting up?
Hucksters and Hackers
I’ve seen a massive amount of questionable opportunities (i.e. most likely scams) associated with Bitcoin lately. They have all of the hallmarks of hucksters, including claims of fast, easy profits and demands that you “join now or miss out.” Behind these billboards, are multiple red flags, including toll-free 800 numbers and P.O. boxes, often without any mention of where the company operates or who is running it.
Over the past few years, hackers have breached Bitcoin Wallet providers. Hucksters have faked Bitcoin Wallets, photoshopping in multi-millions of dollars worth of the crypto currency. And scam artists have faked Bitcoin wallet apps that they’ve successfully made available in your smart phone store. If you want to be sure that you’re dealing with a legitimate wallet source or exchange platform, then rely on information from BitCoin.org and CoinBase.com.
Lessons from Skype
Bitcoin has become a religion for people who are fed up with banksters preying on the Middle Class American. Be careful drinking the Kool-Aid that crypto currency will replace the banking industry altogether, however. Even Bitcoin.org, in its alert on the July 31, 2017 chain split, recommends that you only hold as much Bitcoin as you can afford to lose. A lot of the same predators who were selling you gold a few years ago as the apocalypse currency are now cashing in on Bitcoin hype. Skype was marketed as a disruptive technology that would put the telecom industry out of business. That never happened, though the industry now enjoys video conferencing as a result of the innovations that Skype pushed forward. The financial industry is moving fast to figure out how Bitcoin's block-chain might benefit the industry.
Become an Early Adopter
Getting in early on a trend always pays off. Investing fundamentals must still be applied, however. Buying high, or at the top of a market, is never a good idea. Investing in Amazon pre-Dot Com crash would have cost you 80% in losses -- something that would have taken a decade to recover from.
Being on the Right Side of a Massive Opportunity
There is no doubt that purchasing any crypto currency in January of this year was a great idea, particularly if you’re cashing in with 1000% gains, as some Ethereum investors are. However, whenever you start hearing about sure-fire investments on Facebook, that’s often your sell signal, not your buy opportunity. I started getting inundated with requests to report on crypto-currency in June, after a number of Bitcoin clubs started emerging from highly questionable founders and ads were everywhere touting gains. In my blog then, I warned of many scams and of high prices. Since that 4-alarm warning, all of the currencies have fallen 27-70%. Click here to access my June 2017 Bitcoin blog.
Though I do believe that crypto currency is a unicorn. It may have to spend some time back in the stable before it grows to its full glory. I’ll report again on the currency soon – after the July 31, 2017 Bitcoin chain split. However, the crypto currency environment right now is the Wild, Wild West. Be sure that you associate yourself with a town that has a sheriff, and buy your bank at a great price.
That 10-Cent Trade
The investor who is sitting pretty with an Ethereum investment that s/he picked up for just 10-cents on June 21, 2017, the day after someone else paid $318 has a Capture Gains, Buy on Opportunity mentality. Most clubs that I’m reading about are talking about a Stop Loss strategy, a losing strategy that is wiping out wallets, with egregiously high fees piled on top of the losses. Successful investing requires learning the fundamentals. Join me for my Investor Educational Retreat in October, where you can learn how to swim in this sea of opportunity. Otherwise, you could be jumping in without your water wings, and drown.
Are Bitcoin, Ethereum and Litecoin Great Buys Now?
All of the currencies are experiencing extreme volatility this summer. If you are an experienced trader who knows how to be on the right side of volatility, then there’s opportunity. If you’re a novice who is interested in jumping into the hottest investment of the year, your first investment should be in wisdom so that you learn how to be on the right side of the Wild, Wild West, in the first phase of a disruptive innovation.
Call 310-430-2397 to learn more about our #finlit #fintech training. Receive the best price when you register by July 31, 2017.
Are You Gambling With Your Future?
My question to you is this. Are you gambling on your future, without even knowing it?
Here are just a few of the concerns that I have.
*Congress is not taking the Debt Ceiling seriously enough. They’ve been warned to raise it before July 31, 2017. However, internal documents show that they believe they can wait until Sept. 30, 2017. If they cut it too close, we risk getting a credit downgrade from Fitch Ratings and Moody’s. The last time that the U.S. received a credit downgrade, on August 5, 2011, stocks sank and gold soared.
*The Feds are de-levering. The Smart Money always moves first.
*We are in a Bubble economy. Buy and Forget About It doesn’t work, and hasn’t worked since 1999.
*Wages have stagnated for three decades, while expenses have tripled or quadrupled (or more) in the basics of housing, insurance, transportation and food. Life doesn’t add up.
*The public debt is expected to soar to $30 trillion in the next decade. It’s at $20 trillion currently.
*Housing costs and consumer debt levels are higher than they were before the Great Recession.
*The total debt and loans in the U.S. exceed $66 trillion.
*Social Security went cash negative in 2010 (5 years early). Disability dried up completely in 2016, and is currently borrowing from Social Security. Social Security accounts for 28% of the public debt and is one of the reasons why the debt is ballooning.
*Financial engineering has been keeping stocks artificially high, and making them look like a better buy than they really are. However, the funds for that ruse are becoming more expensive, and reversed the trend starting in 2015.
*”Income-producing” retirement plans designed by broker-salesmen are actually losing money, due to high fees, in an up market! Imagine how poorly these plans will perform in a downturn.
*Financial predators and scams are proliferating and preying on everyone’s fear and anxiety. Worry and doubt are warranted, but require a real cure, not snake oil. These scams include Gold IRAs, Bitcoin clubs and penny pot stocks, most of which are being run out of "offices" with PO Box addresses by people with a history of predatory practices.
*The financial experts predict that the U.S. will have GDP growth of 1.9-2.2% over the next 3 years, while the politicians are basing their plans on 3% growth.
*REITs and annuities pay very high commissions and are being sold like hot cakes without the buyer truly understanding the risks of these products.
Yup. That’s right, you just read a dozen concerns. (There are many highlighted links in the list above, where I offer even more details on the issues.) And I could continue, until you passed out from boredom and exasperation. But rather, I’m going to give you the important information about how you can protect yourself. You don’t need to know anything about the above list to protect what you have, adopt a safe plan for your nest egg and even start saving thousands of dollars in your annual budget. It’s The ABCs of Money that we all should have received in high school, and it is easy as a pie chart.
I know you have heard phrases like this bantered about by other people, but there is a simple difference. The systems and strategies that I developed in 1999 have a Ph.D. in results. They worked fantastically in two of the worst recessions the U.S. has ever experienced (The Dot Com and The Great Recessions), at a time when almost nothing else has worked. The Easy-as-a-Pie-Chart Nest Egg Strategies and Thrive Budget have proven right on the money, time and again, for two decades now.
The last time I wrote a blog with this much alarming language in it was December 23, 2007 – right before the Great Recession. If you heeded that warning (as many did), then you earned gains in the Great Recession. If you did not, chances are that you lost more than half of your nest egg. Over seven million people lost their homes in the Great Recession. Incidentally, I began sounding the alarms on the real estate bubble in April of 2005 – in plenty of time for my readers to have avoided that problem.
You know that I am optimistic and a fundamentally happy person. When I turn serious on you, you should take it as a call to action to learn and adopt the systems that you need to protect yourself now. I do not put myself on the line and make claims idly. It may sound like a brash statement, but it is a true and provable one nonetheless. I began talking like this in Christmas of 1999, just a few months before the Dot Com recession, in April of 2005 before the real estate bubble burst and then again in December of 2007, before the Great Recession. No one wanted to hear about it then either.
Here is a mental test. Did you lose more than 25% in any or all of those downturns? If so, once again, you might be on the wrong side of a bubble that is ready to burst. The problem is that this time it is even more difficult to get safe because so much of the “safe” investments are now very vulnerable, including bonds, bond funds and money market funds.
Investing wisely does not require more time or money. It is simply understanding that you are the boss of your money and that, more often than not, the broker-salesman you are relying on is making a commission to sell you things that might not be in your best interest. You might have been told that you don’t pay them a commission. However that doesn’t mean that they don’t earn a commission from the fund provider. Buy and forget about it stopped working in 2000 and will not work going forward. Some, but not all, of the biggest dangers right now lie in the areas that have been traditionally known as safe.
I will be discussing all of this in a teleconference on August 3, 2017 (Thursday). You can call into (347) 215-7305 at noon ET (9 am PT), or listen back to the show 24/7 on demand at the link below. If you have questions feel free to email them to Heather now.
July 31, 2017 is the last day to register for my boardroom Investor Educational Retreat at the lowest price. It is also the deadline day for raising the Debt Ceiling to ensure that the U.S. does not receive a credit downgrade. Join me at the October 13-15, 2017 Old West Retreat, and you will learn the easy-as-a-pie chart investing strategy that has worked fantastically through bull and bear markets and will work for you for the rest of your life. It is as simple as getting the ABCs of money that you should have received in high school.
Does it pay off? Retreat attendees earned money during the Great Recession using the Natalie Pace system, while those around them lost half or more of their net worth. My 2009 Company of the Year earned up to 19X gains; my 2013 Company of the Year tripled, while the 2014 Company of the Year quadrupled! Two of the hot funds doubled last year. This is no accident, and it is not rocket science. It is a system that you need to learn in order to protect and grow your assets during the volatile economic times that we face now and in the decades to come, as we try to cycle through an unsustainable debt load.
Do you have any idea how much of your nest egg is at risk and how much is safe from a downturn? Did your investments crash in 2008 and 2001? Have you had difficulty getting rich on the software you purchased or the program you signed up for? Are you still underwater on your home? Are you having trouble making ends meet, or contributing to your own retirement plan due to high bills or high debt? If you answer yes to any of these questions, you have a lot to gain by attending my Old West Retreat in October, and a lot to lose if you don’t.
If you lost money in 2008 and haven’t made any changes to your plan, if you do not have a clue what holdings you have in your retirement plan, if you have a pattern of chasing or losing money, if you are relying on blind faith (and hope) in someone else to manage your money for you, whether you have $10,000 or $10 million invested in your account, you need to move heaven and earth to be at my retreat this October. Here is why. At the retreat, we will look at what is hot, what is not, and the danger zones that you need to avoid NOW before the retail implosion starts to spread into REITs and the general economy. You will learn how you can carefully (and easily) restructure your nest egg so that you are better protected against a downturn. You will learn sound, higher performing, less risky investment alternatives that could provide you with a great income and are not being offered by other pundits (largely because they can’t make money off of selling them to you). And you will learn which industries could be poised to soar above the rest, no matter what the market conditions are.
I have been looking at a lot of purported “income-producing” portfolios, which are actually losing money now (in an up market!) and are extremely vulnerable to severe capital loss in the years ahead. Whether you are a Millennial or a Baby Boomer, there’s no reason to make everyone else rich at your own expense. Wisdom is the cure. A better strategy could deliver as much as ten times the ultimate wealth creation, income and security over your lifetime. It is not more money invested. It is simply getting more performance for the money that you work so hard to earn and invest.
I have put together a 3-day process that is extremely unique, powerful and result certain. On Day One, we cover nest egg strategies. On Day 2, you learn what’s safe and how to get safe, including very low risk investments that can earn you thousands or tens of thousands annually with very low capital outlay. On Day 3, I open up my time-proven bag of tricks to teach you what’s hot and how to avoid the money pits. The rich are getting richer in America these days. You can join them because the Smart Get Richer, too.
Now I have to stop for a minute and introduce the secret weapon that is going to make this work so well for you, not just in the moment, but now and forever in your everyday life. I’m not handing you a fish, and then forcing you to buy fish from me for the rest of your life. This is a hands-on conference, where I teach you how to fish. You will learn and do and practice, so that you walk out with a plan that works instantly and for the rest of your life. With seven billion people on the planet to protect, I’ll have my work cut out for my entire lifetime, without having to rely on making you dependent upon me. In truth, financial independence requires financial wisdom, and that is what I’m offering you.
By the time you leave that room on the third day, you will no longer be the same person. I cannot promise you that you will make a billion dollars, but I can tell you that if you have enough capital in play and you invest with the foundation and strategies we will teach you, it is certainly possible. The one thing I will promise is that these three days will absolutely be the most enriching, the most important and the most valuable three days of your investment life, and that your results will be in direct proportion to the amount of effort you invest in learning and perfecting my strategies. As you can see from the testimonials below, the only thing people ever regret about my retreat is that they didn’t come sooner.
Speaking of which, I am not charging the $5,000 or $10,000 that most investment training programs ask. I am not even charging half of that. I am creating a value-priced, valuable retreat where I can work deeply, intimately and personally with my most motivated, serious and ambitious retreat attendees. The information you will receive and experiences and opportunities you will enjoy are quite simply not available anywhere else – not in universities, other seminars or even your brokerage.
If this resonates with you, register now by calling 310-430-2397 and speaking with Heather. I am holding a limited amount of rooms at a deliciously low rate for an Old West Inn that is surrounded by natural hot springs and healing waters. Mark your calendar right now and clear it for the dates October 13-15, 2017. The place is Thatcher, Arizona.
You need this information now, especially given all of the economic pressures that we are facing. There is no downside to you attending my October retreat, outside of the costs of travel and the modest hotel.
You do not want to miss this unique opportunity. You may never get the chance again to save, protect and nurture your nest egg.
On Wednesday, June 21, 2017, the GDAX (a leading digital asset exchange) experienced a flash crash in its Etherean crypto currency (ETH-USD). The currency dropped from a value of $317.81 to ten cents. Trading was halted, while the GDAX exchange could evaluate what had caused the implosion.
So, what happened? The cascade of chaos began as a multi-million dollar sell order. That dropped the price to $224.48, at which point stop-loss orders and margin calls kicked in.
The currency is back trading at $271.89 (down 14.4%) and GDAX has promised to credit any customers who had losses as a result of a stop-loss or margin call (with their own money). This is all according to GDAX VP Adam White, in his blog on the matter.
There are many lessons to be learned here.
And here are a few details.
1. Think Capture Gains, Not Stop Losses.
Exchanges don’t have to refund stop losses or margin calls. It’s important to have a good strategy in place that truly puts you in the best seat possible. In a volatile marketplace with wild price swings, stop losses mean you lose frequently. Capture gains would have you winning frequently in that same scenario. In fact, it has been reported that someone had a buy order at 10 cents for ETH-USD, which the GDAX has vowed to honor. That person made $307 for every dime invested. (Hopefully the entire stratagem wasn’t a scam by the multi-million dollar seller.)
2. Future Flash Crashes Are Possible.
All exchanges have a policy toward halting trading for 15 minutes or longer in a single company when there are suspicious circumstances, or when the exchange falls too far too rapidly. (You can search to find the Market Wide Circuit Breaker Policy of each exchange). However, with all of the options and margins alive in the markets today, crashes will still occur – at speeds that are far more rapid than we’ve seen in the past. Multi-million dollar trades do happen. While the market pauses may delay the inevitable and spread it out over a few days (or months), they can't prevent market drops. The Dow Jones Industrial Average fell from a high of over 14,000 in October of 2007, to 6547 on March 9, 2009.
3. Buy Low; Sell High.
It's always tempting to buy high in the hopes of selling higher. However, the surefire market rule is, "Buy low, sell high." Sure, the value of crypto currency might go higher. However, you should be aware that you could have purchased almost every crypto currency for pennies on the dollar just a few years ago.
Coinbase (and its digital currency exchange GDAX) is one of the few legitimate crypto currency companies. Coinbase is backed by some of the most respected venture capitalists in technology, including Andreessen Horowitz, with a board that includes Kathryn Haun, a former Dept. of Justice prosecutor.
Bitcoin and Crypto Currency Scams
Sadly, whenever you have an young, fast-growing business that is posting the kind of gains that crypto currency is posting, it’s like the Wild West, full of Snake Oil salesmen, gunslingers and highway robbery.
Trade Coin Club
Joff Paradise and his Trade Coin Club, appears to be a MLM proposition that has bathed in Ponzi perfume. The business will kill you in trading fees (25% of your ups) if it gives you anything back at all. There are multiple red flags with this website and the info-videos, and scathing warnings from former recruiters and customers. “Joff” has a LinkedIn page showing a graveyard of past “businesses.” (Just Google “Joff Paradise complaints” to get 11,300 results.) The recruitment video says that trading on other platforms is difficult, boasting that this club makes it easy with “Stop Loss buttons that allow you not to jeopardize your Bitcoin.” Trading Bitcoin is very easy on GDAX (a far more reputable exchange). Stop loss buttons are a terrible idea in a volatile marketplace. (See above.)
BitcoinIRA.com is another website that is rife with red flags. It’s a virtual office with an 800 number, with a website that has broken links when you try to find out who is behind the operation.
Bitcoin Buyer Beware! Know the executives and board members behind the operation before getting involved. If you're going to travel to the Wild West, make sure that you haven't selected a pistol-packing Ponzi clown as your tour guide. Bitcoin scams are becoming as widely spread as the Nigerian email scams were at the beginning of the Internet.
Early Adopters May Want to Take Quick Profits
Most investors want an exit strategy within three years of their investment. Traders who are sitting on millions from their small, early investment are going to be itching to turn their paper profits into real cash (and then probably a Tesla) – even if they are crypto-currency philes. It’s never a good idea to buy high. Whenever you see a quick spike, as there has been in both Bitcoin and Etherean, you have to be very cautious about catching a falling knife, when the sellers back up the truck to turn multi millions of crypto into USD. -- as happened on June 21, 2017 with Etherean.
Disruptive Technology vs. a Trillion Dollar, Global Industry
Bitcoin feels a lot like VOIP and video conferencing, ala Skype 2002. It’s a disruptive technology taking on an entrenched trillion dollar, global industry. Many of us would love to circumvent the banks altogether (particularly after their shenanigans that resulted in the meltdown of the Great Recession). However, the truth is that it is difficult to topple a trillion dollar, global industry. Skype didn’t wipe out telecom, and it’s hard to imagine Bitcoin wiping out banks. The technology will revolutionize the industry, however – something the financial industry is already moving to embrace and to regulate.
FINRA (the Financial Industry Regulatory Authority) is hosting a Blockchain Symposium in New York City this July.
If you purchased Bitcoin or Etherean two years ago on a respected exchange, like GDAX, then you are the most eligible bachelor/bachelorette in your city. If you're been sold into paradise recently on any other platform, you'd better make sure you aren't kissing a frog, hoping he'll make you a princely sum.
Natalie Pace is the co-creator of the Earth Gratitude Project and the author of The Gratitude Game, The ABCs of Money and Put Your Money Where Your Heart Is. She blogs on Huffington Post and Medium, and is a frequent guest contributor to national news shows and magazines. She has been ranked the No. 1 stock picker, above over 830 A-list pundits, by an independent tracking agency, and has been saving homes and nest eggs since 1999.