Over the past month, I’ve received numerous requests from people who are interested in retiring abroad. A Baby Boomer couple thinks they need to relocate in order to afford healthcare and end-of-life care. A Gen X-er wonders if she could invest in the next “hot vacation destination,” buy a 3-bedroom home and rent it on AirBNB. A grandmother is considering a cheap villa (just $50,000!) in Costa Rica as her winter home.
So, is retiring abroad a good idea? As a world traveler, this is a question that I ask frequently of ex-pats. Perhaps the person who is the most excited about her homes abroad is the one who purchased three small flats in cities where she travels for work – one in Paris, one in New York City and another (for fun) in the French Alps. This woman has enough income and budgeted within her means, so she is not stuck living in any one of them. She purchased places she could easily afford, even without rental income. They are small flats, located in great walking neighborhoods, so she can actually host guests, which helps her businesses.
That experience is very different from the expats I encountered in Costa Rica a few years back. Over dinner, an unhappy couple told me that with the inflation there, daily life had become as expensive as living in the States and made them feel poor and stuck.
I recently returned from a month in India. Expats there can’t believe how far their money goes! However, they also have to endure the pollution, the perilous road conditions the poverty and the mosquitoes.
Everyone I know who had a place in the South of France has sold it. The woman who wanted to buy a villa in Puerto Rico last year is very happy she drug her feet and never jumped on the opportunity.
Each one of these real life experiences highlights a different risk factor that you must consider. Rule #1 is to spend at least a month where you are thinking about moving. After 21-days, you’ll start feeling more like a local and less like a tourist. Ask questions of the locals and the ex-pats. Mingle with people other than the folks trying to sell you into the opportunity. What do the expats and the locals like about living there? What are the challenges? Are ex-pats welcomed or shunned by the locals? These are your neighbors. If you don’t fit into the ethos or the community, or ex-pats are unwelcome, then you have your answer. Don’t force yourself onto a community that is unwilling to embrace you.
Below is a checklist that will help you to identify the red flags, the green lights, the caution signs and more. Because buying real estate is an investment, you also want to incorporate my 3-Ingredient Recipe for Cooking Up Profits.
Buying Abroad Ex-Pat Check List
And here is a little more information on each point.
1. The 3-Ingredient Recipe for Cooking Up Profits ®.The 3-ingredient Recipe for Cooking Up Profits helps you to organize the data and information that you need to assemble in order to properly evaluate the opportunity as an investment. Here are the ingredients.
1. Start with what you know and love.
2. Pick the leader.
3. Buy low; sell high.
Take each ingredient in order. One of the best tools to learn more is going to be your “kick the dirt” analysis – your month in the country and town you want to buy in, mingling with locals and ex-pats. The Index of Economic Freedom can also be very helpful to understand how well protected property rights and money freedom are. For additional information on the 3-Ingredient Recipe for Cooking Up Profits, read the chapter of the same name in my book Put Your Money Where Your Heart Is (aka You vs. Wall Street in paperback).
2. Know the Laws.Are property rights protected? Is the judicial system corrupt or backlogged, or does it run fairly and smoothly?
3. Know Your Neighbors.Are you living in an ex-pat community or with the locals? How friendly, happy and proactive are your neighbors? How expensive is the Homeowners Association dues and how restrictive are the rules? Is someone going to give you grief over the color you paint your home, or how you entertain, or if you rent your place on AirBNB?
4. Know Your History.Why is the homeowner so desperate to sell to you at such a low price? Of course, she will say that it’s nothing, and that you’re getting a great deal. You have to get your information from someone other than the broker/salesman and the seller. If you see, feel or hear anything that seems suspect, dig deeper. There are Eastern European countries that were a part of Russia a few years ago. Syria was the gem of the Middle East before it became a warzone.
5. Know The Local Culture.There are Red States and Blue States in the U.S. There is South Central and Beverly Hills in Los Angeles. Blood and tradition run thick. Know what you are stepping into, and what kind of shoes you’re going to need to navigate the streets and mingle with the locals.
6. Consider the Environment and Climate Change.India is one of the most polluted countries in the world. Air quality can be unhealthful, and clean water isn’t always easy to come by. I The first climate refugees in the U.S. are being evacuated from an island in Louisiana. Hurricanes are larger, with more frequency – affecting Japan in the Pacific, the islands in the Caribbean and the entire Eastern seaboard of the U.S., among other destinations.
7. Are The Locals “Your People?”Ideally, home is your sanctuary. Are you moving into a community that feels like your soul can sing there? Or are you motivated only by fear, trying to find something affordable, where you can die?
Health care and housing costs are not the only consideration of retiring abroad. You also want to consider:
If you go through the analysis, and you still feel great about the opportunity, then it is more likely to be the right answer. If you jump in without looking, you might find yourself in a sand trap money pit. We can get into a bit of a swoon while on a vacation. Real life can have a rainbow over the horizon, but only when you plan well.
If you are interested in learning more about successful investing, in smarter health insurance and health choices and in saving thousands annually in your budget when you stop making the billionaires rich at your expense, join me at my next Investor Educational Retreat. Call 310-430-2397 or email info@NataliePace.com to learn more.
While the politicians tout low unemployment (4.0%) and economic growth (2.0%), there are troubling occurrences that are not making headlines, which many economists and Federal Reserve governors are concerned might dive the U.S. into a recession. Economic forecasting is a tricky business. However, some of the warning signs below are batting 1000 on predicting recessions. This late in the bull market, it will pay to know what’s really going on that is not being discussed on prime time and make sure that you’re protected – before the next downturn. If you wait for the headlines that the economy is in trouble, it will be too late to protect yourself.
5 Harbingers of Recessions.
1. Inverted Yield Curve.
2. Tariff Wars.
3. Warning Language in the Federal Reserve Minutes.
5. Business Cycles.
And here is additional information on each red flag.
1. Inverted Yield Curve.
“Every U.S. recession in the past 60 years was preceded by an inverted yield curve,” according to Michael D. Bauer and Thomas M. Mertens of the San Francisco Federal Reserve Bank. Right now, the yield curve is flat, just a hair’s breath above the danger zone. With each Fed Fund rate hike, it becomes more likely that the yield curve will invert. So, keep an ear to the ground during the FOMC meetings for yield curve news. The next FOMC press releases are scheduled for August 1, September 26, November 8 and December 19, 2018. There are at least two more Fed Fund rate hikes expected in 2018.
2. Tariff Wars.
In the world of economics, tariffs are as welcome as viruses are to doctors. They are unhealthy for the economy in general, and can lead to a lack of confidence in business planning and expenditures that can stall out growth and slam economies into recessions. While the trade imbalance is in need of being addressed, there are few data-driven experts who think that tariffs are the answer. The most infamous tariff war was the Smoot-Hawley Tariff Act of 1930, which many experts believe deepened the severity and extended the length of the Great Depression.
3. Warning Language in the Federal Reserve Minutes.
The Federal Reserve under Chairman Ben Bernanke mentioned nothing of the inverted yield curve in the 2007 minutes, though this monumental event was surely discussed. Concerns over real estate, credit markets and subprime loans prompted the Feds to lower the Fed Fund rate. However, the official word was that the economy would slow in 2008, but still be growing. Thus, most Americans were blindsided by the severity of the Great Recession crisis. Under Chairman Jerome Powell, the June 13, 2018 meeting discussion included concern that the flattened yield curve might invert and spark a recession, or that “financial imbalances” might lead to a “significant economic downturn.” Powell is still staying close to his calming sound bytes in the press conferences. However, under Powell’s aegis, the FOMC minutes are far more transparent than his two predecessors allowed.
Warren Buffet has said that stocks and bonds are overpriced. Alan Greenspan went on Bloomberg TV and said that stocks and bonds are in a bubble. Robert Shiller continues to warn that stock prices are unsustainably high. Every troubling economic indicator that preceded the Great Recession is higher now. Housing prices, stock prices, bond prices, consumer debt and public debt are all far higher than they were in 2007 before stocks lost more than half of their value and 15 million homes were sent to auction, foreclosed on or received a loan modification. Low interest rates create bubbles, which is why the Federal Reserve Board is committed to increasing the Fed Fund rate to 3.4% by 2020.
5. Business Cycles.
This is the 10th year of the current bull market. Recessions occur on average every 5.5 years. In the last two recessions, most people lost more than half of their retirement. Between 2000 and 2002, the NASDAQ Composite Index lost 78% of its value. Between 2007 and 2009, the Dow Jones Industrial Average lost 55% of its value. Buy and Hold doesn’t work on the Wall Street Rollercoaster of today. My easy-as-a-pie-chart nest egg strategies earned gains in both of the last two recessions, outperformed the bull markets in between and are less time and money than most people spend.
What you can do about it. How you can protect yourself before the next market correction.
Market corrections and recessions happen. Regularly. (There were two recessions under President George W. Bush.) You can profit from a growing economy, while protecting yourself from a downturn, easily, with the strategies listed directly below.
Your 10-Step Recession-Proof Plan
If you don’t fully understand how to do the 10-point list above, then your next move should be education. It’s time to learn the ABCs of Money that we all should have received in high school. Wisdom is the cure. Come to my Investor Educational Retreat (links below), or, at minimum, read my 3 books, with time-proven strategies that earn gains in recessions and outperform the bull markets in between. Call 310-430-2397 to learn more!
Cut Your Health Care Costs in Half.
Health Insurance costs have doubled since 2013. The average person spends almost $5,000 a year on health insurance, while having the burden of a $4,000 deductible or higher! Annual family health premiums total $12,252! And that’s just the insurance side of the equation. Once you add in the cost of health care (your deductibles, coinsurances and unqualified costs), an average family could be spending $20,000 or more each year. Health care is in the top three most expensive basic needs in the family budget, alongside housing and transportation. Medical costs are the number one reason that most people declare bankruptcy, causing hundreds of thousands of bankruptcies each year. (The estimates vary widely; bankruptcies increase dramatically during recessions.)
What’s clear is that staying healthy now, reducing medical insurance and medical care costs as much as you can now and preparing for retirement is key, even if you just landed your first job. When you retire, Medicare has out-of-pocket costs including deductibles, coinsurances and uncovered services (like acupuncture and long-term care), and even premiums if you want a better plan. A Fidelity study claims that the average couple will need $280,000 to cover medical bills when they retire.
Fortunately, there is one simple trick that can cut medical costs dramatically, while providing far better for tomorrow. The sooner you get this information and activate it in your own life, the more you’ll save now, and the more money you’ll have squirreled away for when you need it – when you get sick or retire. (If you are already retired, you don’t qualify.)
For those of you thinking the simple answer is move to a country where medical costs are more affordable, that’s not my trick (although it might work out for you). If you’re only thinking of medical costs, then moving might be a solution. Nobody spends more on health care and health insurance than Americans do. Learn more about the over-priced medical industry in the U.S. in my blog on Social Security and Medicare.
However, health care is not the only consideration of retiring abroad. You also want to consider:
My one simple trick to reducing your health insurance costs and providing far better for tomorrow is the Health Savings Account. This, combined with the 3 additional strategies that are listed below, can put the odds in your favor that you can live a richer life today, promote health and even have more dough for bucket list vacations.
4 Strategies to Cut Your Health Care Costs in Half (or More)
1. Save thousands annually (tens of thousands for some) with smarter health insurance choices.
2. The best long-term health care plan.
3. Is retiring abroad a good idea for your emotional, financial and physical health?
4. Health is the best health insurance.
And here are more details.
1. Save thousands (tens of thousands for some) annually with smarter health insurance choices. If you are healthy and spending an arm and a leg on health insurance, then you should consider getting a catastrophic health care plan, which could cut your health insurance expenses in half or more, combined with a health savings account. The health savings account is where you’ll start building up the funds for the ultra-high deductible. As the years add up, you’ll find that you have the money built up in your HSA for your own long-term care (something that isn’t covered by Medicare). You get a tax credit for the HSA, and can even invest the funds to earn money while you sleep. Learn more about HSAs in my blog and at IRS.gov.
2. The best long-term health care plan. The Health Savings Account is your best long-term health care plan. Health insurance cancels if you miss a payment. Your HSA stays with you through thick and thin, no matter where you work, and acts as a great supplement to your retirement account. Health care costs increase dramatically as you age, so having an HSA is an important part of your retirement plan. If you are already retired, then you’ll need to develop a financial plan for your long-term care. (Get more than one opinion on this -- not just your "financial planner," who might have a strong incentive to just sell you more insurance that might not be your best plan.)
3. Is retiring abroad a good idea for your emotional, financial and physical health? When considering retiring abroad, consider your emotional, financial and physical health, in addition to the health care costs. Are you comfortable moving so far away from family? Are there other risks to where you are moving? Political? Environmental? Natural disasters? Economic? The South of France has long been a popular place for the world’s elite to own a home and/or yacht. Over the past few years, however, there has been an exodus of ownership (after the high profile terrorist attacks). Over 11,000 Puerto Rican residents are still without power – and up to 1/3 were without power four months after Hurricane Maria. It’s easy to fall in love with a foreign destination while on a vacation. Make sure that the bliss bubble can hold up after a hurricane or during political upheaval.
4. Health is the best health insurance. The truth is that eating right and exercising goes a long way to reducing your health care costs and increasing your income. (You can’t work if you can’t get out of bed.) Almost 40% of American adults are obese, with 18.5% obese children. The price tag of obesity is over $147 billion, adding about $1500/year, at minimum, to personal medical costs. Being fit is the best way to regulate your blood pressure and can keep the pain out of vulnerable joints. Aerobic activity keeps your mind active and alert.
Getting an HSA is not an extra bill. It is one of the easiest ways to put money back into your family budget by cutting your health insurance premiums (many times by half or more), while also reducing your tax bill. (HSAs offer a tax credit.) If you are healthy and spending an arm and a leg on health insurance, then you owe it to yourself to learn more. (Your health insurance salesman is not going to be the best source of this information. She has an incentive to keep you paying high premiums.)
If you are interested in learning more about how to save thousands annually with smarter big-ticket choices, in protecting your retirement, in living a richer life today and providing far better for tomorrow, then request a 2nd opinion on your current budgeting/investing strategy from my office. You can also join me at one of my next Investor Educational Retreats. Call 310-430-2397 or email Heather @ NataliePace.com to learn more.
There’s a saying that during a gold rush, you want to be the one selling pickaxes. This year, everyone is hot on cryptocurrency and blockchain, though few understand what these platforms are really doing. So, here’s a breakdown on the opportunities and the pitfalls, and ways that anyone can profit. Understand that there are more than a few risks associated with investing in the next hot thing, and, therefore, you should be using fun money, not your retirement.
6 Ways to Play Cryptocurrency and Blockchain.
And here is more information on each point.
1. Cryptocurrency as Currency.
In December of 2017, Bitcoin was trading at $20,000/coin. By June 15, 2018, it was down to just $6,514. Similar losses were seen in Bitcoin Cash, Ethereum and Litecoin. You can’t have a currency that is worth $20,000 one day and $6,500 the next. Avoid using cryptocurrency to buy or sell things. In 2018, over 85% of the transactions were speculative trading, not currency usage. Also, if you see a new cryptocurrency being launched, then you have to do a forensic analysis of the individuals behind the currency before you believe the sales pitch. Scams abound in this space. Shysters are on fire creating MLMs and “philanthropic” or utopian crypto worlds that are really just their own get-rich-quick on your dime nefarious underworlds.
2. Trading Cryptocurrency.
On June 21, 2017, Ethereum experienced a flash crash, dropping from $318/coin to 10 cents in a matter of minutes. This was sparked when a seller attempted to dump multi millions of Ethereum at once, and then cascaded into chaos with a mass of stop loss sell orders. There are two lessons to be learned here. One is to have a “capture gains” strategy rather than a “stop loss” strategy. When markets are this volatile, capturing gains can mean winning and increasing your wealth frequently with a “trade around the core” strategy, whereas stop losses lock in losses every time there is volatility (which is ongoing in crypto these days).
The other lesson is that you can place ridiculously low limit orders that might actually work out for you. It was reported that there was a buy order for Ethereum at 10 cents that GDAX (the leading cryptocurrency exchange) honored. Wow. Ethereum was back to over $300/coin within days, and is currently still at $490/coin (as of June 15, 2018). It was also reported that no one could sell at the high of $20,000/Bitcoin – that the site crashed. The volatility is extreme!
Coinbase and GDAX (owned by Coinbase) have solid leadership and boards, if you are looking for a reputable company for your crypto wallet and for your trading. Coinbase has hired CFO Alesia Haas, formerly CFO of Oz Management (a global hedge fund). This prepares the way for an IPO (but doesn’t guarantee it). Coinbase is a company that investors should keep an eye on.
3. Selling the PickAxes.
There are a lot of MLM schemes posing as pickaxes of the cryptocurrency and blockchain opportunities. I get emails almost daily asking me to double-check on this or that amazing, once-in-a-lifetime, act NOW! ruse. Not even one has turned out to be legitimate. Buyer beware!
So what are the pickaxes of blockchain and crypto?
4. Peripheral Industries.
Mining crypto takes a treasure trove of energy. So, you could make a case for data storage or energy companies as benefitting. Nvidia has exploded in share price, under the halo of crypto (and other tech products), and is part of the FAANNG super group (with Facebook, Amazon, Apple, Netflix and Google). Nvidia has 34% profit margins and year-over-year sales growth of 65.6%! However, the share price reflects this popularity, and is trading at an all-time high.
Coinbase is not yet publicly traded, but could be soon. Marathon Patent Group (NASDAQ: MARA), a potential Coinbase competitor, has $91.7 million in accumulated deficits, interim C-level management, only $5 million (or less) cash on hand and might not make it through the next quarter without restructuring. This means that even investing now, at an all-time low, might result in losing everything. Marathon will have to raise a substantial amount of capital to continue operating. They should report their 2nd quarter 2018 earnings around August 21, 2018.
Articles list dozens of cryptocurrency plays. However, the majority of those companies listed in the articles are cash-negative micro caps that are trading off the boards, where pump and dump schemes abound.
5. Blockchain Technology.
A lot of bulletin boards and stock newsletters are using the word block chain as bait to lure you into a subscription. The truth is that the biggest developers of blockchain are IBM and the banking industry, alongside a few entrepreneurial startups that are not yet publicly traded. This space is worth monitoring. However, again, here is another place where shysters, scams and newsletter opportunists abound more than opportunity... There is no clear winner here yet.
6. Disruptive Innovations. There are typically two cycles to disruptive innovations. The first wave is one where there are a slew of companies competing to have the best new technology and industrial game-changer, and even more wannabes and fakers who are capitalizing on the buzz words and taking people to the cleaners. After the bubble pops, usually due to too much speculative spending on R&D without enough sales and revenue, the industry experiences consolidation, where only the best survive. The next phase, one of mass adoption and more affordable pricing, produces a far more prolonged rally. We saw this in the Dot Com bubble and bust in 2000, which fell again in the Great Recession (due to market forces more than industrial disruption), and are currently experiencing the fever of FAANNG. So, even if you are able to find a company to capitalize on in crypto or blockchain, be careful that you are not caught up in the first, very reliable correction between the early innovation phase (bubble/crash) and the mass adoption (more extended) profitable cycle. Read Peter Schumpeter’s Capitalism, Socialism and Democracy for more information on disruptive innovations theory.
So far, Nvidia and Coinbase are the best bets in cryptocurrency. However, Nvidia’s price is very high, and Coinbase is not yet publicly traded. Steer clear of get-rich-quick schemes as these are often marketing ruses to allow insiders to pocket profits at your expense.
Other Cryptocurrency Blogs to Read
Chain Split Disruption
The Bitcoin Cash Hard Fork
The Ethereum Flash Crash
If you are interested in learning how to invest in cryptocurrency, emerging markets (like cannabis), hot stocks and more, then join me at an upcoming Investor Educational Retreat. Call 310-430-2397 to learn more. Register by June 30, 2018, and you will receive the lowest price and a complimentary 50-minute private prosperity coaching session (value $300).
Dear Natalie: Interest rates keep rising. I still have an adjustable rate mortgage. Should I lock in a fixed rate? Signed: Struggling to Make Ends Meet
Rising interest rates will affect homeowners, both sellers and buyers, as mortgage interest rates are predicted to move faster than the Fed Fund rate. If you are planning to stay in your home and you haven't locked in your fixed interest rate, then now could be a great time to do that. However, make sure that you are doing this as part of a serious look at the affordability of your home. If your home is seriously underwater, or if you are treading water to stay afloat on an unaffordable situation, then you need to address these issues before you decide to stay where you are (and lock in a fixed rate and commitment). According to ATTOM Data Solutions, there are still 5.2 million homes that are severely underwater. In many of the most popular cities in the U.S., homes have become unaffordable to the vast majority of the people who live there.
The economic projections indicate that the Feds could take the Fed Fund rate to 2.4% this year, which forecasts at least two more rate hikes spaced out over the 4 meetings that remain. Interest rates are expected to double by 2020, to 3.4%. (Fed Fund rates began 2018 at 1.5%).
Rising interest rates affect everything, including the cost of servicing the $21.1 trillion U.S. public debt. Here are a few of the main considerations for homeowners, buyers and sellers.
If you plan on living in your home for a while, then locking in a fixed rate now will protect you from rising mortgage rates. It’s a good idea to align the payoff date with your retirement date.
I’ve seen a few fixed rate loan modification offers that lock homeowners into a mortgage that is higher than the value of their home. This is generally a bad idea. So is staying in a home that you cannot afford, where you are draining your retirement accounts or taking on high interest credit card debt to make ends meet. Help for distressed homeowners is available. However, solutions that help you will not be found through the bank. (They’ll offer solutions that benefit the bank, oftentimes at the homeowner’s expense.)
Real estate prices are back to an all-time high. Be very careful that you are not buying high, and susceptible to capital losses on your purchase. Broker/salesmen will be tempted to use rising interest rates as a carrot to get you to bite into a purchase now. Yes you are very likely to have to finance at higher rates going forward. However, buying high is never a good idea.
As interest rates rise, fewer buyers will be able to afford your home. So, if you’re in need of selling sometime in the next 12-24 months, particularly if you live in an unaffordable area, then it might be a good idea to consider selling sooner rather than later.
Click to access links to the FOMC press release and the economic projections, released on June 13, 2018.
Here is Lawrence Yun's commentary on the action. Dr. Yun is the chief economist of the National Association of Realtors.
"We are still in the middle innings of rising interest rates; consumers should expect another three or four rounds of interest rate increases over the next 18 months. Mortgage rates will consequently continue to nudge higher. Fortunately, the economy is strong and wages are rising. If housing supply can be increased through more home building, then the negative impact of rising interest rates can be mitigated.”
When the Federal Reserve Open Market Committee raised interest rates on June 13, 2018, the stock market responded by dropping (as has been the trend). The Dow closed down 119.53 points.
The next Fed Fund rate assessment will take place at the FOMC meeting on July 31, 2018-August 1, 2018. I would expect another interest rate hike at that meeting, as the Feds try to stay ahead of inflation and continue to deleverage the Federal Reserve balance sheet.
If you are interested in protecting your nest egg from the next downturn in stocks, in adopting a sustainable budget, in learning more about real estate and homeownership, in reducing your debt and in saving thousands annually with smarter big-ticket choices, then join me at my next Financial Empowerment Retreat. You have two to choose from below. Register by June 30, 2018, to receive the lowest price and a complimentary private, prosperity coaching session (value $300). Call 310-430-2397 or email Heather @ NataliePace.com to learn more.
Today, the U.S. Trustees issued reports on Social Security and Medicare. The situation is stark and bleak. According to letters sent to Vice President Mike Pence and Speaker of the House Paul Ryan, Disability Insurance asset reserves will fall below 20% of the costs by 2027 (i.e. 9 years), and be depleted by 2032 (14 years). The combined trusts of the Old-Age and Survivor’s Insurance (OASI) and Disability Insurance Fund are projected to be depleted in 2034 (16 years). The Federal Hospital Insurance Trust Fund is projecting deficits every year until the fund is depleted in 2026. This is three years earlier than was predicted in last year’s report.
Here’s a summary of the Social Security and Medicare Trust Fund Reports.
* OASI or DI Trust Fund assets are projected to drop below 20 percent of annual cost within 10 years.
* Medicare’s Hospital Trust will be depleted in 8 years (3 years earlier than predicted in the last report).
Why is This Happening?
While political parties blame each other for the mess, the truth is that the world changed dramatically since these programs were created.
Baby Boomers are Retiring. 2018-2027 is expected to see a high level of Baby Boomer retirement. By 2030, 1 out of 5 Americans will be retirement age (source: Census Bureau).
People are Living Longer in Retirement. Today the average life span in the U.S. is 78 ½ years, with Canadians living until almost 81. In 1960, life expectancies were 67 years. Then you were lucky to live two years beyond retirement. Today, someone retiring at 65 might live 13 or more golden years beyond their career!
Medical Care Costs Went to the Moon between 1960 and 2008. Between 1960 and 2008, medical costs soared far above GDP growth. Since 2008, medical cost increases have moderated, but are still above economic growth (source: Trustees Report).
The Trustees encourage lawmakers to act now to “increase revenues” (taxes), to reduce costs by modifying benefit levels or eligibility requirements, or to use a combination of methods.
Economists say that the problem is quite simple. As Princeton economist Uwe Reinhardt said in a study 15 years ago, “It’s the prices, stupid.” According to a recent report by Dr. Ashish Jha of the Harvard T.H. Chan School of Public Health, medical costs in the U.S. are astronomical compared to other countries.
Pricing is clearly the biggest reason that our health care costs are out of whack. Anyone who has visited a hospital or doctor recently can tell you that.
While the politicians debate the solutions, there are a few ways that individuals can fix part of the problem. This becomes more evident when we take a peek behind the numbers. For instance, why have medical costs soared? Is it solely due to technology, innovation and inflation? Or are there other factors at play?
5 Fast Facts About Medical Costs in the U.S.
1. The U.S. is spending $3.2 trillion on health care each year. That equates to roughly 18% of our annual GDP, and is the highest in the world.
2. Obesity. More than 1/3 of American adults (36.5%) and 17% of children are obese. The U.S. ranks number 12 as the most obese nation in the world. The good news is that since 2014, there have been declines in obesity among preschool children.
3. Medical Costs Associated with Obesity. Obesity-related conditions include “Heart disease, stroke, type 2 diabetes and certain types of cancer, some of the leading causes of preventable death,” according to the CDC. Obesity costs added $147 billion to the medical bill in 2008. A decade later, the problem is even more pronounced, with more people affected and higher medical costs.
4. Since 2014, obesity rates in low-income preschool children have been declining.
5. The RX: Better Food and More Playing. The term is technically called healthy living, but it basically means that everyone, but especially children, need more access to nutrition-rich food and outdoor play. Click to see 5 bullet points on what the CDC recommends for better health at school, including opening up school gyms and playgrounds after hours for safe play.
While the legislators figure out how to shore up Social Security and Medicare by taxing us more, or reducing benefits and eligibility, we can, as individuals, help the issue by getting healthier. There are many fixes needed to save these programs, including ameliorating the opioid epidemic, making medical care more affordable and finding better solutions for end-of-life costs, which make up at least 11% of all medical costs. You can get some exercise (good for healthy living RX) walking over to your representative’s next town hall to make sure that all of these issues – not just higher taxes and reduced benefits – are in the debate.
If you are concerned about your retirement and want time-proven solutions, call 310-430-2397 or email info @ NataliePace.com. Receive a complimentary private, prosperity coaching session (value $300), when you register for a retreat by June 30, 2018. See below for information on the next two Financial Empowerment Seminars.
Hi Natalie. Tough tape these days for trading. I am tired of seeing slow declines in many of my long-term positions! Do you think it best to capitulate and sell currently declining positions, which you believe have great growth potential going forward? Signed Impatient With Volatility
Dear Prudent Investor,
First of all, I’m going to assume that we’re talking about a small trading portfolio, not your retirement fund. The strategies for nest egg rebalancing are very different from the strategies used in your trading portfolio (where you take on higher risk for higher gain, with money you can afford to lose). If you are talking about your nest egg, then please let me know, and I’ll do another blog on nest eggs.
There was a saying on Wall Street in 1999 that a monkey could throw darts at a wall full of Dot Com stocks and make a killing. Of course, as Warren Buffett is fond of saying, when you get a recession, you see who has been swimming naked. These market aphorisms basically say that it’s easy to make money in bull markets, and you’re very likely to lose a lot of money in bear markets. I have to mention here that the last two recessions were more like depressions in losses. The Dow Jones Industrial Average dove 55% underwater in the Great Recession.
Dow Jones Industrial Average Performance Chart
October 2007 - April 2009
The NASDAQ composite index lost 78% Dot Com Recession, and took 15 years to crawl back to even. Stocks are trading near an all-time high, even with the recent pullback.
NASDAQ Composite Index Performance Chart
March of 2000 - October of 2002
The simplest answer to your question is that this is the 10th year of the current bull market. Statistically and historically, the data says we should be near the end. Even great stocks with huge potential can get drug down in a major correction. Even Apple, which had launched a game changing smart phone and was giving it away for free (courtesy of AT&T), lost 45% between the highs of October 2007 and the low of March 9, 2009.
Whenever you have an individual stock, there is always a series of questions you can ask that will help you to determine whether or not that stock is really a leader in a hot industry, and whether or not it has the potential to continue to increase in share price. The first thing you do is line up the competition, do a Stock Report Card ®, ask my Four Questions ®, and then apply the 3-Ingredient Recipe for Cooking up Profits ®. As you can see, the analysis of whether or not the company is a great leader in the sector is detailed and full of data. However assimilating all this data takes about 20 minutes, the same amount of time you might spend reading a bunch of articles and receiving a fraction of useable information.
After you determine that your company is indeed a leader (the 2nd ingredient in the recipe), then you need to look at the macro economics. What is the general market place going to do? In the 10th year of a bull market you can assume that we’re nearing the end – especially when every economic indicator that was present before the Great Recession is back with a vengeance, with even higher numbers. Real estate prices are higher. Public debt is an astronomical $21 trillion and counting. Consumer debt is an all time high of $13 trillion. College loan debt has gone through the roof to $1.4 trillion. Earlier this year, Alan Greenspan said that stocks and bonds are in a bubble. So it may be fair to assume that the macro environment is inflated and poised for a correction.
Before any correction there is usually an effervescence stage. We might still be in that. You just don’t know how long the effervescence lasts before the bubble pops.
If for some reason the company you are interested in is trading for a song, or is a game-changer, like the iPhone was, then you might have a window for profit-taking before the next downturn. The 2nd quarter GDP growth report is supposed to be strong, which could lift things at the end of July. However, there are other indicators that might take stocks in the opposite direction, like another increase of the Fed Fund interest rate, which could be as early as June 13th or August 1st.
As you can see, there’s a lot of work in trading individual stocks, which is why funds are a better idea for most folks in their retirement plans. If you aren’t sure that your nest egg is protected adequately from the next downturn, then be sure to reach out again. It’s never a matter of market timing, or jumping all in or all out. You want your retirement accounts to be “money while you sleep,” not money while you fret, babysit, worry, work work work. For additional information on my nest egg pie charts, you can read my three bestselling books or attend an upcoming Investor Educational Retreat. See the links below.
Dear Natalie: There was a second exploding Tesla this week. How do you think it will affect their market? Signed: Is It Time to Cash In My Tesla Stock?
Dear Tesla Shareholder:
Thanks for alerting me to the car fire. Whenever there are headlines, it’s fair to reassess your investment, and it’s also important to put the headlines into context. The main question here is, “Are Tesla vehicles safe?” So, let’s dive in and explore the data.
There were 37,150 traffic fatalities in 2017. According to a report issued by the U.S. Fire Administration in January 2013, there were 194,000 vehicle fires between 2008 and 2010. Approximately 1 in 7 fires responded to by fire departments is a vehicle fire. That averages to about 65,000 vehicle fires per year, with 300 vehicle fire deaths and 1,250 injuries. When a Tesla is involved in a fatality, it makes national headlines. The other 37,000 times this happens, it’s a tragedy that stays mostly in the local paper. In my search for this data, I came upon a statistic showing that Ford Motor Company recalled 230,000 vehicles that were at risk of an engine fire in 2017. Somehow that didn’t make as many headlines.
Tesla’s Model S and Model X vehicles receive the highest safety rating possible, 5-stars, from the National Highway Traffic Safety Administration. In 2013, the Tesla Model S received the highest safety rating ever issued by the NHTSA.
Another question might be concerning Autopilot (something that planes have been using for decades). 94% of the crashes that occur are due to “human choices,” such as distracted driving (texting, etc.), drowsiness, speeding and driving drunk, according to the National Highway Traffic Safety Administration. That is why, according to an Oct. 6, 2017 press release, “NHTSA continues to promote vehicle technologies that hold the potential to reduce the number of crashes and save thousands of lives every year, and may eventually help reduce or eliminate human error and the mistakes that drivers make behind the wheel.” In 2017, traffic fatalities were down almost a percent, while miles driven were up 1.2%. Everyone is hoping that Autopilot will dramatically reduce traffic fatalities and accidents in the years to come.
All in all, it seems clear that the NHTSA is a fan of autonomous vehicles and Tesla. That may change if there is an endemic problem found that resulted in the Tesla fires (other than speed) or if there is a recall.
One other thing that is helpful is to look at the company sales growth, profit margins and debt, alongside the competition. This tells us how the customers feel about the company. So, how is Tesla performing compared to its peers, Toyota, Ford and General Motors?
If we consider sales growth, no company comes close. Tesla trounces the competition with 26.40% year over year sales growth, compared to 7% at Toyota and Ford and -3.1% at General Motors. Tesla lost $2 billion last year. GM lost almost $4 billion. Meanwhile, Ford and Toyota made $7.60 billion and $16.53 billion, respectively. Tesla’s debt is high, but Ford’s debt to equity ratio of 2.89 is even higher. The differences between Tesla and the century-old auto manufacturers is stark. Tesla is inventing a new paradigm and building factories to keep up with escalating demand. That’s expensive, but promising. However, it’s not as expensive as trying to keep pension and health care promises that were made to retirees. Borrowing from Peter to pay Paul is more far problematic for a business than borrowing to create more product to meet demand.
The outlook for Tesla Motors still looks bright, despite the tragic fatalities that have made headlines recently.
There are two separate concerns that traders and investors might have to endure this quarter, however.
Factory Shutdown for 10 Days
During the 2nd quarter of 2018, the Tesla factory will experience a 10-day shutdown to address bottlenecks, with the intention of doubling production to 5,000 Model 3 vehicles per week. (Production currently stands at 2,270/week.) Tesla aims to achieve this production goal within two months. That means that the 2nd quarter 2018 earnings will probably be a disappointment. 2Q earnings should be released in the first week of August 2018.
Tesla Executive Exodus
There has been a lot of speculation about an executive exodus at Tesla, and the toll it will take on this groundbreaking company. Elon Musk calls it a thorough reorganization, which is designed to flatten the management structure, combine functions and trim the fat. His goal is to take the company into the black in Q3 and Q4 2018. Executive exodus is typically a red flag. When I looked at the details, it appears that most of the executives were using their Tesla pedigree as a springboard to the C-suite of another company. In the rapid pace world of Silicon Valley, this is a lot more common than elsewhere.
Employees at Tesla give Elon Musk an 84% approval rating (source: Glassdoor). That high of a rating is hard to achieve in any company, particularly one that is reorganizing. To be fair, Ford’s Jim Hackett receives an 84% approval rating and the company itself ranked higher than Tesla, at 4% over Tesla’s 3.4%. Mary Bara, the CEO of General Motors, receives an impressive 91% approval rating, with a 3.8% company review.
Employees complain about the lack of work/life balance at Tesla, burnout and Musk’s micro-management. Despite the complaints, however, most of the employees weighing in say that Tesla has an important, positive mission and are proud to be a part of it.
Elon Musk is the CEO of Tesla Motors and SpaceX. He’s been called the modern-day Einstein of our era. When everyone else was producing electric golf carts, he made an all-electric sports car that could outpace a Porsche (the Tesla roadster). He has had many firsts in the space industry that seasoned veterans are blown away by. Personally, I wouldn’t bet against him.
I do continue to be concerned about the overall high valuations of all stocks, even given the pullback of Tesla stock to $275 range, from its high of $389.61/share.
Are you interested in learning how to evaluate individual companies from someone who has been ranked the No. 1 stock picker in the U.S.? If so, just call 310-430-2397.
You can also learn these strategies firsthand at my investor educational retreat. The next two retreats are listed below. Just click on the banner to learn more.
There are a lot of market trends and aphorisms that just don’t seem to be working this year. The Spring Rally sagged in returns. February delivered the worst point drop in history to the Dow Jones Industrial Average. The saying, “As January goes, so goes the year” hasn’t played out so far.
So, should you flip the “Sell in May” saying on its head, and hold on for more gains?
By the Numbers
Since 1999, whenever the Spring Rally produces negative returns, May performs better. When the losses are lackluster (as they were in 2015), so are the returns. When the losses are more pronounced (as they were in 2005), the May Rally tends to be more robust.
In 2018, the Spring Rally saw market losses of about -1% (February was worse). So, if May follows the recent trend, the month should be in the black.
There is another trend worth noting, however. In recession years, May was only a brief reprieve before severe losses. The Great Recession saw losses of 55% in the Dow Jones Industrial Average between Oct. of 2007 and March of 2009. The NASDAQ Composite Index dropped 78% between the high of March 2000 and the low of October 2002. We’re courting the 10th year of the current bull market, and many of the economic indicators are more troubling than they were in 2000 or 2008.
And here is more information on each trigger.
1. GDP Growth
The 1st quarter 2018 GDP growth numbers were 2.3%. This is much lower than the 3% growth rate that the Administration has been projecting, and much lower than China’s 7.7%. But it’s still growth. These numbers should hold steady through the end of June. On July 27, 2018, the 2nd quarter 2018 GDP growth advance estimate will be released. The current prediction is that 2Q 2018 growth will come in between 3-4%. If that is the case, then summer should be breezy on Wall Street – unless that prompts another interest rate hike. (The estimates have tended to start high and then be revised downward.) The GDP growth for 2018 is predicted to come in at 2.7%.
2. Interest Rates
The Fed Fund rate is currently 1-1/2 to 1 3/4 percent. By the end of the year, it should be at 2.1%, with an increase to 2.9% by 2019 and 3.4% by 2020. In other words, interest rates are predicted to be double where they are right now in just two years. Two more rate hikes are on tap for this year. Since the Feds are aware that the stock market has been going down when they raise rates, I’d bet on a rate hike on August 1, 2018 (when Wall street is on vacation). The June 12-13, 2018 meeting might be another pass, helping stocks to stay afloat for now. One last note on interest rates. Pundits say that interest rates are rising because the economy is doing so well. Insiders know that interest rates are rising because the Federal Reserve needs to be able to lower them again when the next recession hits, and to stop the bubbles in stocks and bonds. In fact, the projections are that GDP growth will drop from 2.7% projected this year, to 2.4% in 2019 and 2.0% in 2020, at the same time that the Federal Funds interest rate will double.
There are so many astonishing world events going on that Wall Street has become rather numb to even heartbreaking occurrences that used to roil trading. There is more market reaction to a hike in interest rates than to a school shooting or a White House executive exodus. However, all it took was one Alan Greenspan quote on Bloomberg TV to spark the largest point-drop in the Dow Jones Industrial Average in history, and knock the Consumer Sentiment Index (the “VIX) out of a slumber and into tailspin.
Stocks are at an all-time high. Real estate is at an all-time high, and has become unaffordable in many cities for 90% of the people who work and live there. As interest rates rise, the buying pool will become even narrower.
Alan Greenspan said bluntly on January 31, 2018, “We have a stock market bubble, and we have a bond market bubble.” Warren Buffett has $100 billion on the sidelines because “Stocks have gotten less attractive,” and “You are paying 45 times earnings when you buy a bond.” Nobel Prize winning economist and Yale professor of economics Robert Shiller says, “The only time in history going back to 1881 when [stock prices] have been higher are, A: 1929 and B: 2000. We are at a high level, and its concerning. People should be cautious now.”
1929 was before the Great Depression. 2000 was the Dot Com Recession, when the NASDAQ Composite Index lost 78% of its value. It took 15 years for the NASDAQ to crawl back to even.
Debt in the developed world has gone astronomical. The U.S. public debt is over $21 trillion. Consumer debt is over $13 trillion, with $1.4 trillion in student loans. Rising interest rates will have an adverse affect on all of this.
6. August: Toxic News Dumping Ground
August is the time when most insiders want to dump their bad news – when all of the Wall Street bankers and analysts are on vacation. When Standard and Poor’s decided to downgrade the U.S. credit, it was a Friday in August at 5:05 pm ET (8.5.11).
Nest Egg Vs. Trading
Rebalancing Time For Your Nest Egg
The bottom line is that now is an excellent time to rebalance your nest egg (401k, IRA, etc.). If you are unsure how to do this, consider getting a second opinion. Call 310-430-2397 to learn more. It’s never a good idea to market time and jump all in or all out in your nest egg. A balanced plan is well-diversified, keeps enough safe, adds in hot industries and rebalances 1-3 times a year.
Take Your Profits Early and Often
In your trading portfolio, where you take on higher risk for higher gain, my mantra would be “take my profits early and often.” You can probably make a lot more trading around the core than you can in hanging on for too long.
If you are interested in learning the ABCs of Money that we all should have received in high school, in saving thousands annually in your budget and in getting an unbiased second opinion on your current budgeting and investing strategy, email info @ NataliePace.com or call 310-430-2397.
About Natalie Pace:
Natalie Wynne Pace is the co-creator of the Earth Gratitude project and the author of the Amazon bestsellers The Gratitude Game, The ABCs of Money and Put Your Money Where Your Heart Is (aka You Vs. Wall Street). She has been ranked as a No. 1 stock picker, above over 835 A-list pundits, by an independent tracking agency (TipsTraders). The ABCs of Money remained at or near the #1 Investing Basics e-book on Amazon for over 3 years (in its vertical).
Natalie Pace is a top-ranked blogger for Thrive Global (Arianna Huffington's newest platform) and Medium, a repeat guest on national TV and radio shows such as CNBC, Good Morning America, Fox, ABC-TV, Forbes.com, NPR and more and a popular, engaging speaker at major conferences. As a strong believer in giving back, she has been instrumental in raising millions for public schools, financial literacy, the arts and underserved women and girls worldwide. Her sustainability tips have helped companies, organizations and individuals to save tens of thousands every year in their annual budget with smarter energy, budgeting and investing choices.
Please note: Natalie Pace does not act or operate like a broker. She reports on financial news, and is one of the most trusted sources of financial literacy, education and forensic analysis in the world. Natalie Pace educates and informs individual investors to give investors a competitive edge in their personal decision-making. Any publicly traded companies or funds mentioned by Natalie Pace 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.
First off: Thank you, Mom, for being a divine feminine presence in the lives of your families,
and for being the nurturing, creative foundation of the sanctuary home (along with all of the other Chief Everything Officer hats that you wear).
I wish you a blessed, sacred day, being honored in an abundance of love.
Now, for those of us who have waited until the last minute to pick up a gift for Mom, here are some clues to what she really wants… If you’re short on cash, TLC and compliments rank pretty high. The best gifts of all, however, are a holiday getaway (at least overnight), a spa gift certificate or diamonds. I was a little surprised to see stock and cash score so well. Chocolate is pretty far down the list.
So a trip to your favorite coupon site for a weekend getaway or a spa certificate is probably a gift that will surprise and delight Mom. Maybe it’s something that you can go in on with someone?
Here are a few other last minute gift options that might put a smile on Mom’s face, including a free gift from me (with purchase) that is valued at $300.
Want something special that is guaranteed to arrive on time? Gift Mom the Life Math Trilogy.
Want a special beachfront getaway that will make it possible for her to have a lot more beachfront getaways? Register between now (May 4, 2018) and Mother's Day (May 13, 2018), and we'll gift Mom a private, prosperity coaching session (value $300). Call 310-430-2397 to learn more now. Click on the retreat flyer directly below to learn more about this life transformational retreat and to see testimonials.
Gratitude Heart Mantra Stones.
These beautiful stones are handcrafted by artist Evelyn Ballin. This is a gift that allows Mom to carry your love with her wherever she goes!
*Free Coaching Session offer is valid May 4-May 6, 2018 Only, for new registrants to the June 9-11, 2018 Florida Beachfront Retreat, who register and pay in full between May 4-May 6, 2018 only.
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.