Paper Losses. Were You Assured Your Money Was Safe When It Wasn’t Properly Protected? Should You Buy into the Bond Selloff? What About Those High-Yield Opportunities That Are Popping Up Everywhere? What the Broker/Salesman Might Not Be Fully Disclosing, Including a Warning on Those Losses That They Claim are Just on Paper. Also, Are High Yields in a Low-Yield Market Too Good to Be True and Too Dangerous to Touch? The Retail Apocalypse Continues: Bankruptcies Are at the Highest Level Since 2010 694 companies declared bankruptcy in 2024, up 9.3% year-over-year, according to S&P Global Market Intelligence. That marks a 14-year high not seen since the 828 bankruptcy filings in 2010. Retail was the most problematic (Big Lots), while industrials (Spirit Airlines) came in second. This is very relevant for anyone who is suffering from paper losses. When companies restructure their debt, or countries must be bailed out, bondholders lose money. After the Greek bond crisis in 2011, MF Global was forced to take 1/3 of the principle it had invested. That put MF Global out of business. (There’s a Wiki page on this.) How long is the term on your holdings? Will you be alive when the company (or country) has to pay you back? What are the odds that the bond will be part of a restructuring proceeding and you recover far less than you invested? Orange County declared bankruptcy in 1994, while cities like Stockton and Detroit did in 2012 and 2013, respectively. Is the coupon illiquid because sophisticated investors already know that the term is too long and the creditworthiness is too low? These are just some of the ways that we can lose money in a conservative portfolio. Those pesky paper losses are far more problematic than most of us are being told – and few of us are warned before we are sold into these risky assets (which we might be told are conservative). We can’t hold a bond to term if the company goes bankrupt, and we can’t sell it to someone else if there are no buyers. With paper losses, our wealth plunges and our FICO score sinks because our debt to assets ratio is no longer attractive. If a better investment opportunity comes along (lower risk and higher yield), we won’t be able to take advantage of it. (Most people don’t buy low because they can’t.) So, how can we earn income in a Debt World without paper losses, risk or illiquid holdings? Here are the things we will cover in this blog. Why Conservative Plans Are Not Conservative What the Broker/Salesman Might Not Be Disclosing Should You Buy into the Bond Selloff? High Yield in a Debt World Misleading “Expert” Salesmen, Blogs and Webinars And here is more information on each point Why Conservative Plans Are Not Conservative A person who is risk-averse to stocks recently asked me for an unbiased second opinion. He had been told that he was avoiding the losses of stocks from the pandemic, while earning 5 to 10% income on his investments. The broker/salesman had misinformed him because stocks have been on fire, with gains of 24% in 2023 and 23% in 2024. As you can see in the chart at the top of this blog, the 10-year returns of large cap stocks (including the losses in 2022), are 13.1%. The Magnificent 7 companies (Alphabet, Amazon, Apple, Meta, Microsoft, Nvidia and Tesla) doubled in 2023 and led market gains in 2024. Meanwhile, long-term bonds and many bond funds have lost value (money) over that period. 2022 was a terrible year for bonds, when long-term government bonds lost -26%. (Remember that 5 banks failed in early 2023.) Things haven’t improved measurably for fixed income. Saying that this client was earning 5-10% yield on his bonds was excluding the fact that he had paper losses, which reduced the performance to under 2%. One of his holdings was a junk bond with a term of over 50 years. The investor had lost money the moment he purchased the bonds, and, as they were illiquid, it was questionable whether or not he could exit the high-risk investment and get a better, more protected return. What the Broker/Salesman Might Not Be Disclosing Another client was sold into multiple annuities without being informed that the insurance company who sells them is not FDIC-insured, nor that up to 9% of their money would be lost the moment they purchased the annuity. They were not told about surrender fees prior to owning. Instead, they were told that there was no way they could lose money. Surrender fees are paper losses, too, that you have to earn back over up to 10 years. If the financial advisor can buy and sell without consulting us, we might be sold into whatever their boss (brokerage) is telling them to sell. And any commission-based broker/salesman is going to be tempted when the commission is higher, as is the case with annuities and private placements. 6% commission on $250,000 is $15,000 to the broker/salesman. Be sure to read, “They Trusted Him. Now He Doesn’t Return Calls.” Should You Buy into the Bond Selloff? Another troublesome development is the funds that are flowing out of bonds. If you look at the liquidity chart below, you’ll see that short-term bonds are very liquid, as are S&P 500 stocks and gold. On the other hand, corporate stocks, even investment grade, along with Dow Jones Industrial Average stocks are not very liquid. (The same is true for U.K. gilts and German Bunds). I recently read an article where the writer was encouraging people to go on the buy side of this trend. The writer noted that when interest rates get cut, bonds benefit, which is true in a normal world, but is ignoring the risks of a Debt World. The greatest risks to loaning money in a Debt World are duration and credit risk. While interest rate cuts help a little bit, they don’t eliminate those danger zones. Interest rates were cut to zero in 2008, and that didn’t prevent the bankruptcies of Stockton and Detroit, the liquidation of Washington Mutual, or the debt restructurings of General Motors and Chrysler. Additionally, at 4.5%, we’re not paid to take on the risk. We get paid almost the same amount for short-term, creditworthy, and more liquid fixed-income products than we do for long-term, illiquid, negative-yielding assets. High Yield in a Debt World Have you been approached by someone telling you that you can earn double what the current climate offers? I recently came upon a YouTube advertisement where the CEO of a brand-new company was offering 9-13% annual yield. Remember that this is more likely a red flag, then an opportunity. If it sounds too good to be true it often is. High-yield is quite risky in the world where we’re seeing so many bankruptcies, which is why high-yield is referred to as junk. The commodity behind the investment that this person was offering has a very volatile price history. We have to ask ourselves, “If BBB corporations can still borrow at under 6%, why am I being offered 13%?” Misleading “Expert” Salesmen, Blogs and Webinars The CEO mentioned above who is offering 9-13% yield has no prior experience in finance. He is an engineer by trade. The company has only been around since 2022. Engineers are not trained in capital markets. Their expertise lies elsewhere. Grade your guru before listening to anything s/he says, and certainly before watching her YouTube pitch. Another misleading sales tactic is that investors are being advised that when the corporate share price goes down, the yield goes up. While this is true, there are problems with this concept (such as Detroit, GM, Stockton, Silicon Valley Bank and many commercial real estate REITs). The yield does not go up enough to cover a plunge in share price. The second is that when the price goes down and the company is really getting into trouble, the first thing they do is cut the dividend. When that happens, the share price will plunge even further before investors can sell. (It’s called a gap down.) We’ve seen that in many high-profile corporations, including General Electric in 2017. Prior to General Electric’s dividend cut and share price plunge, the company had been one of the Dividend Aristocrats on Wall Street. (Click to access the blog I wrote in Nov. of 2017.) FYI: I had been warning about GE in my books, retreats and blogs for years before the dividend cut. The company was one of the most egregious at borrowing and was a poster child for the mantra, “The higher the dividend, the higher the risk.” FYI, that is another problem of sales pitches. They come up with sexy names like Dividend Aristocrats to seduce investors, even if the truth is far afield of the name. A better not-so-sexy characterization to remember is that we live in a Debt World, with leverage that is unprecedented in history – far above what it was in the Great Recession. Even today, the long-term debt to equity at GE is 106% (very high). Bottom line Insurance companies and homeowners are learning the true risk and cost of natural disasters with all of the catastrophes of late. Bond owners are now feeling the paper cuts of loaning money to heavily indebted corporations for 30, and sometimes even 100 years. In an increasingly risky world, it pays to be informed and to be the boss of our money and future. We must understand the danger before we make the purchase, otherwise we jeopardize being a day late and a dollar short. How can you take ownership of your wealth plan? With regard to bonds: Keep the terms short. Keep the creditworthiness high. Consider FDIC insurance levels. Read the fine print. Diversify across banks and with Treasury bills. Have rolling maturity dates. Know the risk before signing on the dotted line and plunking down any money. We might also understand how safe income-producing hard assets that we purchase for a good price might offer the best yield in today’s Debt World. (There are some areas of interest other than just real estate and income property.) We cover what’s safe for one full day at our Financial Freedom Retreat. Join us April 25-27, 2025, online. Register by January 31, 2025, to receive the best price and a private prosperity coaching session with me personally (value: $400). Join us at our online Spring Financial Freedom Retreat April 25-27, 2025 (online) and our Stock Masterclass (learn the strategies that earned me the ranking of #1 stock picker) on May 3, 2025. If you'd like a life-changing adventure of a lifetime, be our guest at a royal manor house in Cornwall, England, March 7-14, 2025. Only one room is still available. Call 310-430-2397 or email [email protected] to learn more. Learn how to: * Invest in hot industries, such as Nvidia and artificial intelligence, * Hedge against a weaker dollar, * Invest and compound your gains, * Green your retirement plan, * Easy and efficacious nest egg strategies, * Get hot and diversified (including in artificial intelligence and EVs), * Evaluate stocks, * Keep an age-appropriate amount safe, and, * Know what's safe in a Debt World. You'll even discover how to save thousands annually with smarter big-ticket choices. Yes, it's a complete money makeover. Email [email protected] or call 310-430-2397 to learn more and register. Learn the 15+ things you'll master and read testimonials in the flyer on the home page at NataliePace.com. Register with friends and family to receive the best price. "Ten minutes into the first day I was already much smarter about investing than I ever thought I would be in my life and I knew I was in exactly the right place at this retreat. I am amazed at how EASY and FUN it is to make my money work for me and those I love. I think this kind of information should be compulsory in schools. I wish I'd learned this sooner." CM If you’d like an unbiased 2nd opinion on your current wealth plan, email [email protected] for pricing and information. ![]() Join us for our Online Spring Financial Freedom Retreat April 25-27, 2025. Email [email protected] or call 310-430-2397 to learn more. Register by Jan. 31, 2025, to receive the best price and a complimentary 50-minute private prosperity coaching session (value $400). Click for testimonials, pricing, hours & details. ![]() Join us for our Restormel Royal Immersive Adventure Retreat. March 12-19, 2027. Email [email protected] to learn more. Click for testimonials, pricing, hours & details. Register now. There are only 9 rooms available. This retreat includes an all-access pass to all of our online training for a full year for two, and three 50-minute private, prosperity coaching sessions. Much more affordable than you might think. Email [email protected] to learn more. (2025 is sold out.) ![]() Natalie Wynne Pace is an Advocate for Sustainability, Financial Literacy & Women's Empowerment. Natalie is the bestselling author of The ABCs of Money and The Power of 8 Billion: It's Up to Us, and is the co-creator of the Earth Gratitude Project. She has been ranked as a No. 1 stock picker, above over 835 A-list pundits, by an independent tracking agency (TipsTraders). Her book The ABCs of Money remained at or near the #1 Investing Basics e-book on Amazon for over 3 years (in its vertical), with over 120,000 downloads and a mean 5-star ranking. The 6th edition of The ABCs of Money and the 2nd edition of Put Your Money Where Your Heart Is are the most recent releases of these books. Follow her on Instagram. Natalie Pace's easy as a pie chart nest egg strategies earned gains in the last two recessions and have outperformed the bull markets in between. That is why her Investor Educational Retreats, books and private coaching are enthusiastically recommended by Nobel Prize winning economist Gary S. Becker, TD AMERITRADE chairman Joe Moglia, Kay Koplovitz and many Main Street investors who have transformed their lives using her Thrive Budget and investing strategies. Click to view a video testimonial from Nilo Bolden. Check out Natalie Pace's Substack podcast on Apple and Spotify. Watch videoconferences and webinars on Youtube. Other Blogs of Interest 2025 Investor IQ Test. 2025 Investor IQ Test Answers. Apple iPhone Sales Plunge in China. Indonesia: Rich in Nickel with Ambitions of Becoming an EV Battery Hub. RoboTaxis. AI. The Magnificent 7. Charitable Giving. Nonprofits that are Worthy of Supporting. The DJIA Plunged 1100 Points After the Dec. 2024 FOMC Meeting. Why Are So Many Safe Investments Losing Money? A Bargain-Priced AI Company. Canadian, Australian and U.S. Banks. Are Any of Them Safe? Ireland. Rich in Technology, Biotechnology and Agribusiness. Black Friday and Cyber Monday Sweepstakes. Robo Investing and AI. No, They are Not Foolproof. Stocks Soar as Nvidia Joins the DJIA. Copper. Peru ETF Outperforms the S&P500. 4 Ways to Celebrate World Sustainability Day, Oct. 30, 2024. Will There be a Santa Rally or will the Election Ruin Everything? The Chips are Down. ASML, Intel and Super Micro Computer Plunge. Is Nvidia Next. Will Insurance Companies & Homeowners Weather the Hurricanes? 9 Money Secrets of the Ultra Wealthy. Housing & Budgeting Solutions. Will Boeing Be Booted Out of the Dow Jones Industrial Average? Arkansas Sues Temu for Data Theft. We Must Be the Boss of Our Money. Why? Oil Prices Tumble. Why? Sweepstakes for the Release of The ABCs of Money. 6th Edition. Should You Go Conservative or Aggressive? Fast Fashion. Fossil Fuels. Plastic Clothing. Atacama Desert Waste Dumps. Can Crowdstrike Recover from its Colossal Catastrophe? Featuring a Cybersecurity Overview. Fintechs and Brokerages that Fail are Not FDIC-Insured. Stocks Keep Hitting New Highs. Are You Thinking "Capture Gains?" 5 Green Tips for Clean Beaches Week. Nio Sales Expected to More Than Double in 2Q 2024. So, You Think You Want to Be a B&B Owner... Retiring Soon? Start Planning Now. 2024 Rebalancing IQ Test. Answers to the 2024 Rebalancing IQ Test. May is National Bike Month. Paris and Amsterdam are the Stars. Vacations that Color Our World Forever. 9 Inflation, Budgeting, Debt Reduction and Investing Solutions. China & Russia Double Their Gold Holdings. 2024 Investment of the Year? Bitcoin Sets a New Record High. The Importance of Rebalancing. Uh. Oh. More Bank Trouble. Housing. Unaffordable. What Works? Case studies and creative solutions. The Underperforming DJIA, Full of Fossil Fuels and Forever Chemicals. A Spectacular Year for 3 of the Magnificent 7. The Best ROI* (Almost 40%!) & 7 Life Hacks That Save Thousands. Portugal Eliminates Tax Advantages for Ex-Pats. WeWork's Bankruptcy. Half-Empty Office Buildings. Problems in our Personal Wealth Plan. Cruise Ships Give Freebies to Investors. Should You Take the Bait? Should You Take a Cruise? Bonds. Banks. The Treacherous Landscape of Keeping Our Money Safe. 7 Rules of Investing 13 Lifestyle Choices to Reduce Waste, Pollution & CO2 & Save a Boatload of Dough. China Bans Apple 11-Point Green Checklist for Schools. 10 Wealth Secrets of Billionaires and Royals. Bank of America has $100 Billion in Bond Losses (on Paper) Fiat. Crypto. Gold. BRICS. Real Estate. Alternative Investments. BRICS Currency. Will the Dollar Become Extinct? Are There Any Safe, Green Banks? 7 Ways to Stash Your Cash Now. Lessons from the Silicon Valley Bank Failure. Which Countries Offer the Highest Yield for the Lowest Risk? Why We Are Underweighting Banks and the Financial Industry. Save Thousands Annually With Smarter Energy Choices Is Your FDIC-Insured Cash Really Safe? Money Market Funds, FDIC, SIPC: Are Any of Them Safe? My 24-Year-Old is Itching to Buy a Condo. Should I Help Him? The 12-Step Guide to Successful Investing. The Bank Bail-in Plan on Your Dime. Important Disclaimers 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.
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AuthorNatalie Pace is the co-creator of the Earth Gratitude Project and the author of The Power of 8 Billion: It's Up to Us, The ABCs of Money, The ABCs of Money for College, The Gratitude Game and Put Your Money Where Your Heart Is. She is a repeat guest & speaker on national news shows and stages. 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. Archives
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