The Real Reason Stocks Fell 600 Points on Veteran’s Day.
 
 
On Veteran’s Day, November 12, 2018, the Dow Jones Industrial gave up 602 points. Was it for political reasons? If not, why are investors skittish when unemployment is low and GDP growth rang in at 3.5% in the 3rd quarter? Are there other financial phantoms looming in the shadows?
 
In order to answer how politics affect the markets, I looked at history. We’ve had two impeachment proceedings in the recent past, one with President Clinton (Democrat) and one with President Nixon (Republican). How did Wall Street react before, during and after each?
 
Turns out that Wall Street enjoyed one of the strongest Santa Rallies of our generation during the Clinton Impeachment hearings. The Dow Jones Industrial Average soared 21% between September 1998 and February 12, 1999.  The impeachment began October 8, 1998 and ended February 12, 1999, when President Clinton was acquitted by the Senate on both counts of impeachment. Of course, that wasn’t because investors were excited about the salacious tales of a White House intern and her lying boss. It was all about the money. The 3rd quarter GDP growth of 3.9% was officially released on November 24, 1998. However, the market is forward-looking, and the big money was expecting a solid number, after the rather tepid 2nd quarter growth of 1.6%.
 

In 1973, GDP growth was 5.6%. Impeachment proceedings began on February 6, 1974 against Richard Nixon. Nixon resigned on August 9, 1974. The Dow Jones Industrial Average sank from 957 on Oct. 31, 1973 to 608 on September 30, 1974, for losses of 36.5%.
 

However, Watergate wasn’t the cause of the Wall Street rout. It was the First Oil Shock. In October of 1973, the members of the Organization of Arab Petroleum Exporting Countries called for an oil embargo against the United States and other nations that supported Israel (including the UK and Canada). Global oil prices quadrupled, from $3/barrel to $12/barrel between October 1973 and March 1974. Oil was rationed. American consumers were asked to conserve gas and could only fill up their tanks on certain days. Unemployment jumped from 4.9% to 7.2%. 1974 was a recession year because oil prices squeezed our economy.
​
The U.S. was very reliant on foreign oil in 1973, producing only 16.5% of global output. However, since 2009, the U.S. has been the world’s top natural gas producer, toppling Russia from the top spot. The U.S. became the No. 1 petroleum hydrocarbon producer in 2013, when it replaced Saudi Arabia (source: EIA.gov)

So, why is there so much volatility in the stock market this year?
Wall Street follows the economic indicators – the money. Though investors and business leaders care about policy (lower taxes, business-friendly rules), they are not invested in the individual who sits in the Oval Office. We don’t have an oil embargo to deal with, and the 2nd quarter GDP was actually quite good, at 3.5%. So, why did the market really drop?
 
Here are 7 Real Concerns that Have Kept Stocks on a Rollercoaster This Year
 
1. Interest Rates. The Federal Reserve Board is predicted to raise interest rates again at their Dec. 18-19, 2018 meeting. Rising interest rates put pressure on housing, real estate and any corporation, individual or nation that has a lot of debt. Over half of the investment grade corporations in the U.S. are at the lowest rung, just one spot above junk bond status, according to Collin Martin, a fixed income strategist at the Schwab Center for Financial Research. The costs of servicing the U.S. debt is going up as well, adding to an already ballooning $21.7 trillion public debt.   
 
2. The 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. Every rate hike takes the data closer to an inversion. Learn more about yield curves in my blog, “5 Warning Signs of Recessions.”

 

3. Valuations (Bubbles)
Alan Greenspan, Warren Buffett and Nobel Prize winning economist Robert Shiller have all been saying for over a year that stocks and bonds are in a bubble. Real estate prices are unaffordable in many U.S. cities to the denizens who live there. When prices outpace prospective buyers, they have to come down to attract an audience again.
 
4. Speculation. High frequency trading. Trading around the core. On Oct. 24, 2018, when the NASDAQ Composite Index dropped 4.4%, the second most active sell was the 3X NASDAQ bull fund. Yesterday, on November 12, 2018, the second most active sell was a NASDAQ index fund. The top-seller on both days was Advanced Micro Devices, a company that many traders have been using for fast profits due to the predictable volatility in the share price. This kind of speculation is called trading around the core. Apple was also one of the top trades on 11.12.18. Insider selling at Apple is in the hundreds of millions range. 
 
 

5. Tariffs
As Liz Ann Sonders, the Chief Investment Strategist at Charles Schwab, told me in an interview last month, “Trade Wars almost always raise inflation and lower growth.” Click to read more of Liz Ann’s wisdom in my blog on ThriveGlobal.
 
6. Tax Cuts Boosted Earnings in 2018, But Won't in 2019.
In 2018, most corporations were able to boost earnings with the tax cut. However, it will be more difficult to keep that growth apace in 2019, when there isn’t another stimulus to goose earnings.
 
7. GDP Growth
GDP growth was 3.5% in the 3rd quarter, however 4th quarter 2018 GDP growth is predicted to be back in the high 2% range.  
 
Crystal Ball 2019
We won’t get the 4th quarter GDP growth results until January 30, 2019. Between now and then, there will be a lot of headlines about the great 3.5% GDP growth, which will allow the big money and the speculators to profit on those who are led by headlines. In other words, rollercoaster volatility is expected to continue, with dramatic run-ups and pullbacks. 
 
There could be more dramatic selling in January and February 2019 for a few reasons. One is that corporations don’t buy back their own stock in the two-week period before they release earnings. This quiet period has been when the markets have experienced the most dramatic downturns and selling. Valuation remains a problem for the “smart” money. Finally, corporations buying back their own stock has fueled this entire bull market. As interest rates rise, it becomes more expensive for corporations to do that. Considering the cost of money (higher borrowing costs) with the inflated stock prices (buying high), you have a proposal on the table that reasonable board members can no longer support.

 
Don't be caught unaware. Don't be complacent. Don't rely upon others to do it for you. It's time to know what you own and be the boss of your money.

​If you are interested in receiving an unbiased second opinion on your current investing strategy, email info@NataliePace.com or call 310-430-2397. You can learn the ABCs of Money that we all should have received in high school at one of my Investor Educational Retreats. Only 3 seats remain available at the Valentine’s Retreat in Santa Monica. Receive a complimentary private, prosperity coaching session (value $300) when you register for the Colorado Retreat by November 30, 2018. 

​
Other Blogs of Interest
Will Ford Bonds Be Downgraded to Junk?  
6 Risky Investments. 12 Red Flags. 1 Easy Way to Know Whom to Trust With Your Money.
Whom Can You Trust? Trust Results.
October Wipes Out 2018 Gains.
Will There Be a Santa Rally in 2018?
The Dow Dropped 832 Points. What Happened?
​Bonds are In Trouble. Learn 5 Ways to Protect Yourself.
Interest Rates Projected to Double by 2020. 
5 Warning Signs of a Recession.
How a Strong GDP Report Can Go Wrong. 
Should I Invest in Ford and General Electric?
Interview with Liz Ann Sonders
 
​

With very high liabilities ($223 billion), tariffs and rising interest rates, Ford faces a tough road to keep out of junk bond territory. Moody’s downgraded Ford bonds to the lowest investment grade rung, with a negative outlook, on August 29, 2018. At the time the analysts wrote, “The ratings could be downgraded absent clear progress in pursuing the Fitness initiatives by early to mid-2019, with evidence that the company is on a strong trajectory for recovery.” As interest rates rise, bond investors have begun trading Ford like it is already in junk bond territory, according to a report from Bloomberg today. Ford is America’s bestselling brand for trucks, SUVs and vans.
 
Since bonds are on the safe side of your nest egg, this is something that everyone should pay attention to. More than half of investment grade corporations are at the lowest rung above junk bond status. Many bond funds allow 20% or more junk bonds in their bond funds, making these products far riskier than most investors realize.
 
Ford earnings are predicted to finish up 2018 21-30% lower than last year. Ford Motor Company has the highest debt to equity ratio in the U.S. auto manufacturing industry. (Yes, Ford’s debt and liabilities are eight times higher than Tesla’s.)  Nov. 14, 2018 will be a big day for Ford, when they reveal their “operational efficiency improvements.” The presentation will include “complexity management, capital equipment reuse and yield management.”
 
Ford stock investors should be aware that one of the ways Ford can avoid a downgrade is by cutting its dividend. The company promised in the 3rd quarter earnings call and in its fixed income presentation to keep the regular dividend “throughout the cycle” (whatever that means). Ford did not respond to my inquiry to define this phrase. More details on the regular and special Ford dividends should be revealed on Nov. 14, 2018.
 
Ford Motor Company’s revenue was up 3.3% in the 3rd quarter of 2018; Tesla’s revenues more than doubled in the same period (from $2.98 billion a year to $6.8 billion). Learn more about what’s really happening at Ford and Tesla in my blogs from September 20, 2018.
 
Investors Ask Natalie Pace: Should I Invest in Ford?

The Tesla 3 is the Number 1 Selling Luxury Sedan
 
In other news, yesterday Ford purchased the e-scooter company, Spin. Learn more here:

Wall Street values Tesla ($60 billion) higher than GM ($50 billion) and Ford ($37 billion). All three U.S. carmakers combined don’t equal the value of Toyota Motors ($168 billion).
 
Moody’s indicated on September 18, 2018 that the auto manufacturing industry should keep their current bond ratings into 2019. However, with gasoline prices up near $3.00/gallon (nationwide average), over $1.88/gallon in early 2016, and mounting “environmental policy pressures” (worldwide), consumer preferences are likely to shift, technological disruptions will continue and pressure will increase on profit margins and cash flow. This is the cocktail that weakened General Motors’ capital position ten years ago, when Toyota launched the Prius and consumers opted for fuel efficient vehicles. If Ford relies too much on gas guzzlers to fuel it through these challenges, that could be a losing bet.
 
All Americans want a strong economy, jobs and a healthy auto manufacturing industry. As investors, however, it’s imperative to know the fiscal health of your holdings and to make sure that you are not over-exposed to industries and companies that are experiencing fiscal health challenges. Tariffs, higher costs for steel and rising interest rates are expected to negatively impact all carmakers in 2019.

Other Blogs of Interest
6 Risky Investments. 12 Red Flags. 1 Easy Way to Know Whom to Trust With Your Money.
Whom Can You Trust? Trust Results.
October Wipes Out 2018 Gains.
Will There Be a Santa Rally in 2018?
The Dow Dropped 832 Points. What Happened?
​Bonds are In Trouble. Learn 5 Ways to Protect Yourself.
Interest Rates Projected to Double by 2020. 
5 Warning Signs of a Recession.
How a Strong GDP Report Can Go Wrong. 
Should I Invest in Ford and General Electric?
 

​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. Securities, financial instruments or strategies mentioned herein may not be suitable for all investors.
 ​

In today’s world, it’s easy to get caught up in trying to earn more to make ends meet. However, there are certain moments in time when protecting what you have, and learning how to stop making everyone else rich at your own expense, becomes the most important thing you can do for your future. That time is now. Cheap money has fueled bubbles in real estate, stocks and bonds. As interest rates rise, all of those over-leveraged and over-priced industries will become vulnerable to capital loss. You don’t want the lost capital to be on your dime.
 
Yes, the GDP growth, low unemployment and low inflation are all good things. However, they are not indicators of corrections. All of these healthy signs were present in 2000 and 2008. Click to learn more about why asset bubbles are the top concerns in the New Millennium. Asset Bubbles and other Harbingers of a Recession are here, which means now is the time to make sure the roof and foundation of your money house are secure enough to withstand the financial storms on the horizon. As John F. Kennedy Jr. said, “The time to repair the roof is when the sun is shining.”
 
Below are risky investments, red flags you need to be aware of, and one easy way to know whether or not you can trust someone who is offering you investing tips.
 
6 Risky Investments that are being Sold as Safe.

1. Bonds. Particularly long-term bonds.
2. High-Dividend Stocks.
3. Private Placement Real Estate Investment Trusts (REITs).
4. Annuities.
5. Money Market Funds.
6. Pensions.

 
12 Red Flags that You’re Dealing with a Scam Artist or a Salesman.

1. Pushy salesman or person.
2. Email or URL looks fake.
3. Misspelled words.
4. Promises of fast, easy, often free money.
5. Comes in as a phone call, email or shared on a friend’s timeline.
6. Guarantees that you can’t lose.
7. Require you giving personal information.
8. Require you giving money first.
9. Website doesn’t have a physical business address.
10. 800 phone number and fill-in-the-blank contact form, instead of a staff member and real email address to contact.
11. The website is filled with marketing lingo, but you can’t find who owns the company, who runs it, or access the bios and CVs of the executives and board members.
12. The company is based out of a well-known tax haven/secrecy shelter, such as The Bahamas, Panama, Cyprus, the British Virgin Islands and The Cayman Islands.

1 Easy Way to Know Whom to Trust!
Whom should you trust with your money? Trust results. Click to read my blog on that.
 
And here is a little more information on each point.
 
Learn 6 Risky Investments that are being Sold as Safe.
In 2018 and beyond, the big issue is one of over-leverage and over-valuation. Low interest rates create bubbles, which is why we’ve seen real estate, stocks and bonds soar to the highest prices ever seen. As interest rates rise, all of these assets are under pressure. What’s more troublesome is that many are where you are placing your safe money, where you don’t want to worry about losing money.
 
1. Bonds. Particularly long-term bonds.Bonds lose value as interest rates rise. Many bond funds can have 20% or more in junk bonds. Over 50% of investment grade corporations are at the lowest rung, just one step above junk bond status. In the worst-case scenario, bonds can become illiquid or the corporation will declare bankruptcy.

2. High-Dividend Stocks.The higher the dividend, the higher the risk. High-dividend paying stocks are seducing investors with the “fixed income,” without properly advising them of the leverage risk. General Electric isn’t the only legacy corporation that is borrowing from Peter to pay Paul. When the dividend gets cut, the stock drops precipitously. GE’s dividend is now one of the lowest on Wall Street, and the stock has lost 72% of its value.

3. Private Placement Real Estate Investment Trusts (REITs).Private placement REITs lure salesmen in with high commissions. One retiree had all of her nest egg put into REITs without realizing that every one of the companies she invested in had been cash negative for years. She was told that she owns real estate, rather than the truth, which is she owns stock in high-risk cash negative companies. As interest rates rise, these companies will become a serious problem for their investors, who may have to try to get a portion of their return of part of their money in a bankruptcy court.

4. Annuities. Annuities are one of the few investments where you lose money the minute you purchase them. (They call it a surrender fee.) The largest annuity and insurance provider in the U.S. wouldn’t be in business if we hadn’t bailed it out in 2008. This company is back to being the largest. In 2017, it lost $6.08 billion. If an insurance corporation goes belly-up, your annuity and life insurance product is not FDIC-insured. If your annuity’s value is tied to the stock market performance, then you are vulnerable if the market corrects (which it does in recessions).

5. Money Market Funds. Money market funds are now subject to redemption gates and liquidity fees. If you want to ensure that you have access to your own money, without paying for it, then FDIC-insured cash accounts are a safer bet.

6. PensionsAnother little known Wall Street secret is that U.S. corporations are underfunded on their pensions and Other Post Employment Benefits by $453.6 billion (almost half a trillion). Multiemployer funds, government employees and others who have been promised pensions are likely linked to underfunded accounts as well – something that is more of a problem than most realize. According to W. Thomas Reeder, the director of the Pension Benefit Guaranty Corporation, “The [PBGC] Multiemployer Program faces very serious challenges and is likely to run out of money by the end of fiscal year 2025.” These funds are supposed to do better in bull markets, but that hasn’t happened this time. In fact, prior to the last two recessions, pensions were overfunded… 
​

12 Red Flags that you’re Dealing with a Scam Artist or a Salesman.
Learn more about all of these red flags in my blog on the Elon Musk cryptocurrency scams that made the rounds this year, and the penny pot stock scams that made the rounds in 2017. If something fishy turns up in your email box or on social media, let us know and we’ll look into it for you! Call 310-430-2397, email info @ NataliePace.com or ask your question on my Twitter or Facebook pages.

1 Easy Way to Know Whom to Trust!
Whom should you trust with your money? Trust results. If you have a managed account, ask your financial advisor for a chart of the performance of your portfolio, including fees, compared to the NASDAQ Composite Index for a 10-year-period and for a 15-year-period. The first will let you know how well you’ve done in the bull market. The second will let you know how protected you are from the next stock market downturn.
 
Most people are performing far below the NASDAQ because they are more invested in large cap value stocks than they are in hot, growth stocks. Additionally, when you add in the fees, your performance sinks even further.
 
Click to learn more in my teleconference from Thursday November 8, 2018.
 
 
If you are interested in receiving an unbiased second opinion on your current investing strategy, email info@NataliePace.com or call 310-430-2397. You can learn the ABCs of Money that we all should have received in high school at one of my Investor Educational Retreats. Only 3 seats remain available at the Valentine’s Retreat in Santa Monica. Receive a complimentary private, prosperity coaching session (value $300) when you register for the Colorado Retreat by November 30, 2018. 
 
 
Other Blogs of Interest
Whom Can You Trust? Trust Results.
October Wipes Out 2018 Gains.
Will There Be a Santa Rally in 2018?
The Dow Dropped 832 Points. What Happened?
​Bonds are In Trouble. Learn 5 Ways to Protect Yourself.
Interest Rates Projected to Double by 2020. 
5 Warning Signs of a Recession.
How a Strong GDP Report Can Go Wrong. 
Should I Invest in Ford and General Electric?

​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. Securities, financial instruments or strategies mentioned herein may not be suitable for all investors.
 
 

​Dear Beefed,
 
I can understand your frustration because there is a lot of noise out there and a lot of Madoff-types making promises of easy returns without any risk. There are also a lot of commission-based salesman passing themselves off as informed advisors.
 
Trust Results
You wouldn’t expect a failed musician to teach you music, so hold your financial team to the same test. The proof of whether or not they have a plan worth listening to and adopting is easily visible in the results test. Simply ask for a graph of the returns of the financial plan compared to the S&P500 for the past 10 years, and the past 15 years. The first chart shows you how well the plan did in the bull market. The 15-year chart will show you how the proposed investment strategy fared in the Great Recession.
 
Most plans underperform the bull markets, due to fees, and drop precipitously during bear markets because they are not properly diversified. If the plan performed at or below the market, then you’re signing up to ride the Wall Street rollercoaster. Clearly, it’s not a good idea to lose more than half of your retirement every 8-10 years, and then just crawl back to even, only to be crushed again.
 
If the strategy is an annuity or a high-yield REIT (Real Estate Investment Trust), then you can easily construct the chart yourself on Money.MSN.com (as long as the company is publicly traded). Since you are being asked to place your full faith in the company itself, without any backstop, it would be important to know how well that company fared in the last recession. If the business isn’t publicly traded then your risk level is much higher.

AIG Compared to the Dow Jones Industrial Average January 2006-December 2009

What Worked in 2000 and 2008?
Buy and Hold worked in the wake of World War II because the United States was in an expansionary period and our dollar had just become the world’s reserve currency. 

Performance of the Dow Jones Industrial Average Index 1940-2000

​Since 2000, the U.S. (and most of the developed world) has been engaged in financial engineering to boost growth. Low interest rates create bubbles, which is why 2000 and 2008 losses were devastating, with investors losing up to 78% of their NASDAQ holdings in 2000-2002 and up to 55% of their Dow Jones Industrial Average positions in 2008. 

​Bubbles are the reason that Wall Street has been a rollercoaster in the New Millennium. In 2000, it was the Dot Com Bubble. In 2008, it was the real estate bubble. What bubbles exist in 2018? 

An Easy Plan With a Ph.D. in Results
There is a simple plan that worked great in both recessions – being properly diversified, with annual rebalancing. As for the results test, this easy-as-a-pie-chart nest egg strategy earned gains in the recessions and outperformed the bull markets in between. See Nilo Bolden’s testimonial for a real-world example of someone who trusted results before the Great Recession and is very happy that she did!
 
In both 2000 and 2008, simply keeping a percentage equal to your age safe, and overweighting up to 20% safe due to the perilous market conditions, combined with the tried-and-true annual rebalancing, limited losses on the “at-risk” stock side and earned gains on the “fixed-income” bond side. That’s how Nilo and many others earned gains in the Great Recession – by having an age-appropriate, balanced and diversified plan.

Bonds Earned Gains in 2008, When The DJIA Dropped by More Than Half

Getting Safe in 2019
Getting safe now is trickier because bonds are vulnerable and losing money. As interest rates rise, as is predicted to happen over the next two years, bonds will continue to be under attack. Meanwhile, stocks are overleveraged, too, and are vulnerable to a correction. Diversification, annual rebalancing, avoiding the leverage, adding in hot industries and knowing what is safe in a world where bonds are losing money is important. That may sound complicated, but it is in fact easy as a pie chart (alongside a few other important details). Many, but not all, of the financial products that are readily available to you are overleveraged and overpriced today, meaning you are vulnerable to capital loss. Don’t let yourself succumb to disillusionment, befuddlement, blind faith or complacency. You have far too much at stake. Make it a priority to learn the ABCs of Money that we all should have received in high school.
 
Be The Boss of Your Money
Yes, you can be the boss of your money. No, it doesn’t mean that you have to take on another job, anymore than being the boss of your home means that you have to fix every little thing that needs to be repaired. There are certain times when protecting what you have is the most important financial move you can make. Now is that time. If blind faith cost you more than a third of your nest egg in 2008, then you have all the proof you need that your current plan needs a second opinion. Now.
 
When you are disillusioned and befuddled, the right answer is to become informed and clear-headed. Wisdom and right action are always the best strategy, especially in tough times. Who can you trust to help you learn? Trust results. They will reveal who is the shaman and who is the snake-oil salesman.
 
When someone says, "Let me do it for you," prepare to be oppressed. When someone says, "Let me teach you how," prepare to fly.
 
I’ll be discussing 5 High-Risk Investments that are being sold as safe, and 5 Red Flags that you’re dealing with a salesman (rather than someone who is protecting you) in my November teleconference this Thursday (Nov. 8, 2018) at 9 am PT (noon ET). Call into: (347) 215-7305.
Listen back 24/7 on demand at BlogTalkRadio.com/NataliePace.

If you are interested in receiving an unbiased second opinion on your current investing strategy, email info@NataliePace.com or call 310-430-2397. You can learn the ABCs of Money that we all should have received in high school at one of my Investor Educational Retreats. Only 3 seats remain available at the Valentine’s Retreat in Santa Monica. Receive a complimentary private, prosperity coaching session (value $300) when you register for the Colorado Retreat by November 30, 2018. 
​

​Other Blogs of Interest
October Wipes Out 2018 Gains.
Will There Be a Santa Rally in 2018?
The Dow Dropped 832 Points. What Happened?
​Bonds are In Trouble. Learn 5 Ways to Protect Yourself.
Interest Rates Projected to Double by 2020. 
5 Warning Signs of a Recession.
How a Strong GDP Report Can Go Wrong. 
Should I Invest in Ford and General Electric?

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. Securities, financial instruments or strategies mentioned herein may not be suitable for all investors.

​October Spooks Investors. A Tale of Bubbles, Speculation and Greed.
On October 24, 2018, stocks wiped out their gains for the year. The NASDAQ Composite Index dropped 4.4%, and the Dow Jones Industrial Average dropped 608 points. What happened was a tale of …
 
Bubbles, Speculation & Greed
The average P/E of the S&P500 Index from 1936 to today is about 17.18 (source: S&P Dow Jones Indices). The technology stocks that crashed on October 24, 2018 were all trading at a much higher price to earnings ratio than the average, and most were above 50. Growth stocks can certainly take a higher valuation based upon forward earnings potential. However, when the growth dries up, if valuations are too lofty, then you get rapid corrections such as we saw on Wednesday. In today’s world of high frequency trading and novice options traders and speculators, the correction in a few stocks can trigger a cascade in the larger marketplace.
 
Yesterday, the largest volume trade was Advanced Micro Devices, with a volume of 108.7 million shares (compared to an average volume of 27 million). AMD lost 9.17% in value in advance of earnings. After the markets closed, AMD reported that they had missed their projections. Revenue was down 6% quarter over quarter, and net income was down $14 million from the 2nd quarter 2018. Even with the sell-off, the P/E for AMD is still 73.53. The $34 share price that AMD enjoyed in late September was up three times from the low of $9.04 in April 2018. AMD’s price on October 25, 2018 opened at $17.92.
 
As the NASDAQ began dropping, speculative traders starting abandoning positions. The second largest volume in the NASDAQ was the ProShares 3X Bull NASDAQ fund (symbol: TQQQ), followed by Nvidia, Netflix, Proteostasis Therapeutics and Cypress Semiconductor. Check out the chart below for details.
 

One other lesson of yesterday is that the smart money is tripping the sell button before earnings. 
Warren Buffett sold all of his General Electric stock a few months before GE cut their dividend in half and before the share price dropped by half. Yesterday, 108.7 million shares of Advanced Micro Devices and 12.1 million shares of Cypress Semiconductor traded before the earnings release.
 
Tomorrow the advance estimates for 3Q 2018 GDP growth in the U.S. will be released.
The estimates for what this will be are all over the board, from 2.1%-3.6%. If GDP comes in low, investors will be tempted to sell – largely due to the frothy valuations. If GDP comes in high, then we may have a Santa Rally… There are a lot of ifs in that sentence.
 
Things to keep TOP OF MIND.
Asset Bubbles are more problematic today than they were in 2000 or 2008, before the Dot Com Recession and the Great Recession. See the chart below. Learn more in my blog on why interest rates are rising.

Quiet Periods
Companies have a 2-week quiet period prior to announcing earnings. Since this bull market has been built on buybacks, when companies can’t purchase their own stock, the general marketplace has dropped (early February and again early October).

Valuations are frothy – too frothy for weaker revenue and earnings growth. The tax cut boosted EPS (earnings per share) in 2018. However, without the help, 2019 growth should sag.

Financial Engineering, particularly in the Blue Chips, has made earnings look stronger and share prices look lower than they really are. As interest rates rise, it will become more expensive for over-leveraged companies to continue this practice.

Rising Interest Rates typically stalls out home buying and weighs on real estate. It will also hit highly leveraged companies hard, particularly dividend stocks. The higher the dividend, the higher the risk.
 
Flat Yield Curve. The reason that inverted yield curves are so highly correlated with recessions (100% since 1980) is that banks make their profits on the spread. As short-term Fed Fund interest rates rise, we get closer and closer to an inverted yield curve… In the chart below, the grey areas are recessions. 

The truth is, as Alan Greenspan warned us on January 31 of this year, stocks and bonds are in a bubble. Bubbles pop. Getting safe is not a matter of market timing, particularly since the “safe” side of most nest eggs is losing money, too. A better strategy is to adopt the time-proven system that earned gains in the last two recessions and has outperformed the bull markets in between. Call 310-430-2397 to get an unbiased second opinion on your current strategy or to learn more. 

Other Blogs of Interest
Will There Be a Santa Rally in 2018?
The Dow Dropped 832 Points. What Happened?
​Bonds are In Trouble. Learn 5 Ways to Protect Yourself.
Interest Rates Projected to Double by 2020. 
5 Warning Signs of a Recession.
How a Strong GDP Report Can Go Wrong. 
Should I Invest in Ford and General Electric?

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. Securities, financial instruments or strategies mentioned herein may not be suitable for all investors.

​How Have The Markets Performed This Year?
Like a rollercoaster. 

​The S&P500 index is actually up 2.7% on the year. That’s not enough to cover the fees that many financial advisors and mutual funds charge. Additionally, there have been two periods of dramatic dives. In early February and again on October 10-11, 2018, the Dow Jones Industrial Average dropped 5%. 

Will There Be a Santa Rally?
So, will it be smooth sailing from here on out? The short-term economics support a Santa Rally. The long-term economics suggest that this 10-year bull run is near its end. That is why every little event can spark a sell-off, particularly if something occurs right before earnings are released.
 
In early February, stocks headed south when Alan Greenspan appeared on Bloomberg and said that stocks and bonds are in a bubble. In October, the drop was largely due to a little known, behind-the-scenes phenomenon called The Quiet Period. Blue Chips have been borrowing money cheaply and buying back their own stock. However, two weeks before a company releases earnings, during the quiet period, the kibosh is put on buybacks. The volatility in early February was also during a quiet period. The next quiet period will happen in late January/early February.
 
Blue Chips vs. Technology. A Tale of Two Indices.
 
U.S. Stocks
U.S. stocks are a tale of two indices. The NASDAQ Composite Index leans toward younger companies with great earnings, that are overpriced. The Dow Jones Industrial Average hosts legacy brands, many of which are weighed down by pension promises, health care costs and debt, but are using financial engineering and cheap, easy, borrowed money to make their earnings look better than they are. They are also overpriced. In the words of Nobel Prize winning economist and Yale professor Robert Shiller, “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.”
 
Companies like Advanced Micro Devices, Facebook, Nvidia have sales growth of 40% or more, with net profit margins of 5%, 39% and 36%, respectively. Turtle Beach’s sales growth was 218% in the last quarter!

Chinese technology and cannabis are on fire with sales growth. Many Chinese technology companies have high double-digit sales growth and profit margins 30% or higher. With Canada legalizing weed, publicly traded cannabis companies are boasting some of the highest sales growth rates seen in this bull market.
​

Santa Rally or True Correction?
So, will we have a Santa Rally? Or will the current sell-off continue? The Dow Jones Industrial Average was off 5.2% in just two days as of Oct. 11, 2018, while the NASDAQ was down 5%. Below are the pros and cons…
 
GDP Growth. 4.2% in 2Q 2018.
The 4.2% GDP growth in the 2nd quarter is something you’d have to be living under a rock to miss. This was strong – boosted at least 1% by a rush by the Chinese to buy soybeans before the tariffs kick in. Most analysts predict a decent 3rd quarter GDP report, though not as strong as 2Q. (The projections are virtually useless, ranging from 2.1% - 3.9%.) We’ll get the advance estimate on Oct. 26, 2018 (Friday). If the numbers are 3.9% or higher, investors could dance and sing, and we could see a rally. 2.1% growth could silt returns in stocks, even though everyone wants to be happy during the holidays, which often helps Wall Street to rally. A natural, political or terrorist disaster could spoil the fun no matter where the numbers land.     
 
Tax Cut and Tariffs Boosted Earnings in the 2nd Quarter 2018
Analysts are optimistic about the 3rd quarter 2018 earnings. According to Howard Silverblatt, the senior index analyst of S&P Dow Jones Indices, “With S&P 500 Q2 2018 EPS being declared a success and setting a new record, attention is now on Q3 2018, which is expected to also set a new record with a 27.8% gain over Q3 2017, as it posts strong earnings and cash-flow, via lower tax rates and stronger sales.” Next year, it will be tougher to show earnings and sales growth, as there will not be a tax slash to boost profits and earnings. 
 
What Could Silence the Santa Rally?
 
Tariffs. Tariffs hurt profits. There have been many industries that have warned the White House that their tariffs are going to hurt sales, profitability, growth and potentially cause layoffs in the labor force. Those industries include auto manufacturing, solar, utilities and more.
 
Rate Hikes
The Federal Reserve Board has indicated that they intend to keep raising the Fed Fund Rate. The most recent projections from the September meeting suggested that the rate will hit 3.4% by 2020, with one more rate hike at the December 18-19, 2018 Federal Open Market Committee meeting.
 
The “Smart” Money
The sell-off on Oct. 10-11, 2018 was not prompted by any communication or action from the Federal Reserve Board. The “Smart” Money has been moving to take profits all year, causing large ripples in the market when they do. This 10-year bull market has been largely fueled by corporate buybacks. Rising interest rates make this a much more expensive proposition. Quiet periods happen every quarter, when corporate buybacks are not allowed. Hedge funds, high-frequency trading and general competitiveness are causing the markets to move at higher speeds and with deeper drops than in the past.
 
Politics
The markets don’t like uncertainty. We have that in abundance, not just here in the U.S., but all over the developed and developing world.
 
Act of God
Uncertainty is coming from natural causes, too. Every day there is a new report with a dire warning on climate change, or a catastrophic hurricane or other calamity.
 
Real Estate
Rising interest rates will limit the buyers, putting downward pressure on prices. If you’re staying in your home, can afford it and aren’t underwater on your mortgage, consider locking in a fixed interest rate now. If you are still underwater on your mortgage, can’t afford your home or can’t lock in a fixed rate, then it’s time to look at options that the debt collector, mortgage broker and bank will not offer you.
 
Cryptocurrency
This is still the Wild West for cryptocurrency. The space is rife with scams and shysters. That doesn’t mean that there isn’t a future for blockchain or Bitcoin, Ethereum, Litecoin and more. But it does mean that you should only gamble with a sliver of your money, and only that which you are willing to lose. You also need to grade your guru before you buy into anything. Many slick snake oil salesmen are jumping into this space with MLMs that are designed to line their pockets while draining your bank account.
 
Your best next move is to know what you own, and make sure that you are properly protected from a downturn, with exposure to assets and industries that will hold their value or increase in value if stocks and bonds fall. That requires education and an unbiased second opinion on your current plan. Call 310-430-2397 to learn more now.
 
Market timing rarely works. So, don’t just sell everything, or shift from stocks to bonds, without knowing what you are doing. You need to employ a time-proven strategy that earned gains in the last two recessions and has outperformed the bull markets in between. It’s easy-as-a-pie-chart, which is why I call it the ABCs of Money that we all should have received in high school. Part of that process is understanding that Wall Street has become a Tale of Two Indices.
 
If you wait for the headlines that the economy is in trouble, it will be too late to protect yourself. Know what you own now, while the markets are still very high.

Click to listen to my teleconference on the 2018 Santa Rally. If you'd like to learn these time-proven nest egg strategies, join me at an upcoming Investor Educational Retreat. Call 310-430-2397 to learn more. 
​
Other Blogs of Interest
The Dow Dropped 832 Points. What Happened?
​Bonds are In Trouble. Learn 5 Ways to Protect Yourself.
Interest Rates Projected to Double by 2020. 
5 Warning Signs of a Recession.
How a Strong GDP Report Can Go Wrong. 
Should I Invest in Ford and General Electric?

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. Securities, financial instruments or strategies mentioned herein may not be suitable for all investors.

The Dow Dropped 832 Points Today. What Really Happened?

It was a cascade. Bond rates fell. The yield curve flattened. That spooked investors. Sparking a sell-off.

​An inverted yield curve has a very high correlation (100%) with recessions, and a flat yield curve is dangerously close to an inverted yield curve. As you can see in the chart below, every recession since 1980 was preceded by an inverted yield curve. Recessions are indicated in grey. When the blue line dips below 0, the yield curve is inverted.

​As you can see in the chart below, the difference between the yield on the 2-year Treasury bill and the 10-year Treasury bill is negligible at 2.88% and 3.21%, respectively. ​In other words, the yield curve is flat. 

Even if you don't know the first thing about yield curves, you can get informed on what is driving today's sell-off, and how to protect yourself. Read more on the yield curve and why the Federal Reserve Board is determined to keep raising interest rates, in my blogs "5 Warning Signs of a Recession" and "Odds of an Interest Rate Hike are Above 90%." 

It is being reported that everything fell, which isn't true. There was one industry that gained. Since that asset is selling at a bargain right now, it's worthy of consideration as a hedge against further losses. Remember, however, that a healthy nest egg is never all in/all out, but is, rather, based upon time-proven, easy-as-a-pie-chart strategies that earn gains in recessions and outperform the bull markets in between. Wisdom, now more than ever, is the cure! (We teach these at our Investor Educational Retreats. Call 310-430-2397 to learn more.)

So, will the problems and issues continue. Or will the markets stabilize?
The near-term financial indicators support a Santa Rally. The long-term financial indicators support getting defensive. As I said in my "Back to School Stock Sales?" blog on September 13, 2018:

Earnings support a Santa Rally this year, if the interest rate hikes don’t spook investors. There is a big if in that sentence, so the most important stance for the Santa Rally is a defensive one. Make sure your assets are protected, that you have enough safe and that you know what is safe in a world where bonds are in a bubble. It’s never a matter of jumping all in or all out. 
 
Today, interest rates spooked investors, pushing up the clock on when you should make sure that you are safe from the next downturn, and that you know what is safe in a world where bonds are losing money, too. Call 310-430-2397 to learn my time-proven, easy-as-a-pie-chart nest egg strategies. They earned gains in the last two recessions and have outperformed the bull markets in between, which is why they are enthusiastically recommended by Nobel Prize winning economist Gary Becker and TD AMERITRADE chairman Joe Moglia. 

"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

"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.

"I earned gains in the Great Recession. Thank you Natalie for saving my retirement!" Nilo and Bill Bolden

Other Blogs of Interest
​Bonds are In Trouble. Learn 5 Ways to Protect Yourself.
Interest Rates Projected to Double by 2020. 
5 Warning Signs of a Recession.
How a Strong GDP Report Can Go Wrong. 
Should I Invest in Ford and General Electric?

Most of us don't know that this year’s time bomb in our retirement plans is hidden on the "safe" side. Why? Mainly due to:
 
Interest Rates to Double in Two Years
Bond Values Sink When Interest Rates Soar
Hiding in the Shadows
Sneaky Names
Invested Like Babies
 
And here’s the score on each red flag…
 
Bonds 101: Why the “Safe” Side of Your Nest Egg is in Trouble.
 
Interest Rates to Double in Two Years
Interest rates are set to hit 3.4% by 2020. That’s more than double where they started 2018. So, why is that a problem? Because…
 
Bond Values Sink When Interest Rates Soar
If you have a 4% 30-year Ford Motor Company bond, and Ford borrows more money at a higher interest rate, then everyone will want the higher interest rate and no one will want your bond. If you have to sell it (for whatever reason), then you’ll have to sell it at a discount to find a buyer. In the worst-case scenario, you won’t be able to sell it, and your bond becomes illiquid, forcing you to hold it for 30 years. You’ll have to just pray that the company will take the bond to term without restructuring debt.
 
Since over ½ of investment grade corporations are BBB (the lowest rung of investment grade before junk bond status), most bond funds are riskier than investors are aware. So, there is both credit risk and interest rate risk preying on the “fixed income” side of your nest egg – which is supposed to be the safe side. The safe side is not supposed to lose money, so you need a better design than bonds to ensure that you keep your dough in 2018 and beyond.
 
For these reasons (and more), keep the duration of your bond terms short and the credit quality high. Do not assume that “investment grade” means safe. Know the composition of your bond fund and know the debt load, profit margins, sales growth and pension funding status of any corporation that you hold bonds on.
 
Hiding in the Shadows
Many plans lump bonds on the “fixed income” side, without giving you a lot of details. I’ve been conducting a 2nd opinion on several nest eggs. Across the board, without one exception, I’m finding that almost everyone who thinks that they are safe are actually invested in very risky fixed income strategies, including junk bonds and high-risk mortgage securities – that are already losing money! As interest rates rise (and they are), the risk of capital loss increases. Most of the time it is very tricky getting the details on what you are actually invested in, which is why the second opinion can be so valuable.
 
Sneaky Names
A fund might simply call itself Bond Fund A. After clicking around on a wild goose chase, you might finally discover that the bond fund is actually invested in junk bonds – without giving any indication of that in the bond fund name. Another fund was called a Short-Term Income Fund. It was actually high-risk mortgage backed securities, which were already losing principal value. As interest rates rise raising the cost of borrowing, corporations with a lot of debt become more vulnerable than credit-worthy companies (although all bonds lose capital value when interest rates rise).
 
Invested Like Babies
Most people are invested like they are half their age. Some are invested like teens or children. You should always keep a percentage equal to your age safe. Overweight 5-20% additional safe in the 10th year of the bull market to protect yourself from the next downturn. That simple strategy earned gains in the last two recessions. That and adding in hot industries, along with annual rebalancing, outperformed the bull markets in between. In a world where stocks and bonds are in a bubble, according to Alan Greenspan, FDIC-insured cash is only the first step of getting safe. There are some excellent choices for preserving your principle that are not found at brokerages and are not paper money. Getting safe is so important, and so tricky in today’s world, that I spend one full day on this at my investor educational retreats.
 
 
In other words now is the time to understand clearly what you own, and to know what a healthy retirement plan looks like. This is actually easy-as-a-pie-chart, which is why I call it the ABCs of Money that we all should have received in high school. Start with a second opinion. Call our office at 310-430-2397 or email info @ NataliePace.com now to get started.
 
Last week I interviewed the chief fixed income strategist for Schwab, Kathy A. Jones. We discussed the many problems with bonds, rising interest rates, “fixed income” and the “safe” side of the average retirement plan. Check out that blog here.
 
 
Other Blogs of Interest
Interest Rates Set to Jump 70%. Watch out investors and homeowners!
​Should I Invest in Ford and General Electric?
The Tesla 3 Becomes the Top Selling Car in the U.S.
​Cryptocurrency Scams and Phishers.
Back to School Stock Sales. 
​Gold vs. Facebook. 
Nike Share Price and the Kaepernick Ad.

People have been emailing me about cannabis for a couple of years now. I’ve been resistant for a few reasons.
 

• There were so many penny pot stock pump-and-dump schemes.
• Cannabis is still flat out illegal, even medical marijuana, in 20 U.S. states.
• Only 9 U.S. states have made recreational marijuana legal.
• Successful cannabis entrepreneurs of today were criminals a few years ago.
• This is the first stage of an exploding industry, making it very high risk for a variety of reasons.
  ​
  

However, with marijuana becoming legal in Canada on October 17, 2018, this is an industry that simply can no longer be ignored (unless you have a moral reason).
 
Here are some very important things to consider before you invest in a marijuana company.
 
1. The Big Picture
2. Cannabis ETFs
3. Investing in Individual Companies
4. How Much Should You Invest?
5. The 3-Ingredient Recipe for Cooking Up Profits
6. Speculating on New Products and Private Placements
7. Beware of Scam Artists and Social/Email Pump and Dump Schemes
 
1. The Big Picture
It’s important to remember that legal marijuana is a brand new industry – similar to the Internet in the late 90s. (Getting high has been popular for a long time, though criminal.) New industries have a boom period, then a bust, and then a longer period of becoming mainstream. Amazon is worth $2003/share today. However, in between 2000 and 2002, Amazon’s price dropped from $86/share to as low as $6/share. It took almost a decade to crawl back to even. Priceline saw similar price implosions. Many Internet companies, like eToys, disappeared altogether.
 
2. Cannabis ETFs
This is such a new field that your fund choices are very limited. ETF Managers Trust Alternative Harvest Fund (symbol MJ) includes some of the top cannabis companies. However, ETF Manager’s Trust and its CEO Sam Masucci have already seen a slew of lawsuits, which adds to the management costs of the funds. Additionally, Masucci’s last ETF provider, Factor Shares, went belly-up in 2013, when investors were ultimately charged fees of almost 33% (source: Seeking Alpha)! The MJ prospectus includes line items for distribution and service fees and “other” fees, which will be “accrued daily and taken into account for purposes of determining net asset value,” opening the door for unlimited, unexpected costs to own the ETF.  Before FactorShares, Masucci was involved in another arbitration and award due to a deal with Bear Stearns in 2000 (source: Bloomberg). So, the top dog at ETF Managers Trust does not have a great track record, which is a huge red flag.

3. Investing in Individual Companies
Since the ETF options for cannabis are few and undesirable at this time, you’re left with investing in individual marijuana companies. Most people are not as good at stock-picking as Warren Buffett and should, therefore, limit their gamble to money they are willing to lose. If you do wish to take on the higher risk of investing in a single company, then be sure to learn how to pick a leader, and how to purchase the company for a good price.
 
4. How Much Should You Invest?
For most investors, it is not appropriate to invest any of your retirement in individual companies. You should only invest as much as you are willing to lose (perhaps education or fun money), and never make a Hail Mary gamble. A rule of thumb, if you choose to invest some of your liquid assets, would be to limit your investment to one Hot Slice of your at-risk assets. You can mock up a sample pie chart using my Easy-as-a-Pie-Chart web app (click to access). Here’s a sample pie chart, based upon your age being 25. 

​If your nest egg were $100,000, and you were overweighting 20% safe, then the appropriate hot slice investment would be $5,500.
 
Remember to always keep a percentage equal to your age safe. Overweight up to 20% additional safe due to it being the 10th year of the current bull market. And then divide the remaining at-risk amount by 10.
 
5. The 3-Ingredient Recipe for Cooking Up Profits
1. Start with what you know. 2. Pick the leader. 3. Buy low and sell high.

Learn more about how this recipe works in my first book, Put Your Money Where Your Heart Is. Using a Stock Report Card ® and asking Four Simple Questions ® can help you to determine the winner (both are outlined in detail in my book). Here’s a sample Stock Report Card on a few of the more popular, publicly traded cannabis companies.

6. Speculating on New Products and Private Placements
Keith Villa, the brewmaster behind Blue Moon has left MolsonCoors to launch Ceria Beverages, a cannabis-infused, new non-alcoholic brew using the technology of Ebbu. Province Brands, founded by one of the co-founders of Ebbu, is prospecting the cannabis beer space as well. Province Brands just completed a Reverse Takeover, which will allow the company to list on the TSX venture exchange, even though it is only a few months old.
 
http://ceriabeverages.com/
 
https://www.newswire.ca/news-releases/province-brands-of-canada-announces-reverse-takeover-of-colson-capital-corporation-684565321.html
 
https://realmoney.thestreet.com/articles/07/05/2018/cannabis-beer-giving-investors-fresh-buzz
 
Keith Villa is attributed with creating the fever for craft beer, with Blue Moon. Given the popularity of cannabis and social drinking, Mile-high beer might be the next micro-brewery hit. Still it is very early stage and there will be a lot of startup costs before these companies hit cash-break even. Be sure you’re willing to weather the storms from here to there, and that you aren’t investing in a company that already has too many liabilities to make it. If you don’t understand profit and loss statements, or don’t have access to the financials, then you are investing with blind faith in a very risky endeavor – something that successful venture capitalists would never do. (And you are investing like a VC if you plunk down money in an early-stage, unproven industry.)
 
7. Beware of Scam Artists
There are a lot of bad actors in this space, pretending to be legitimate, who are trying to make a quick buck. It’s important to remember that the titans of the cannabis industry were criminals just a few years ago. Doing your due diligence is key to weeding out the chaff. If the company is not traded on the NASDAQ or New York Stock Exchanges, then it’s a good idea to avoid the investment as a general rule. Pump and Dump schemes abound off the boards. See my Penny Pot Stocks warning of last year for multiple examples of social media scams that were very popular and toxic. If you don’t know how to determine whether or not a company is on the Big Boards, then your next investment should be learning how to invest. (Learn more about my Investor Educational Retreats at NataliePace.com.)
 
Learning how to pick great companies can help you to pick hot industries in your nest egg and avoid the bailouts. As an example, in 2006, I began encouraging investors to overweight the NASDAQ Composite Index and underweight the Dow Jones Industrial Average, particularly overleveraged companies, like General Electric. In the wake of the Great Recession, the NASDAQ doubled the returns of the DJIA. General Electric, which has slashed its dividend in half and lost more than half of its share price in the last year, is not the only overleveraged, problematic Blue Chip. This information is so important that we spend one full day on it at my Investor Educational Retreats. So, if you want to develop your skillset on stock picking, protect your nest egg from the next downturn and even learn how to save thousands annually with smarter choices on your big-ticket bills, then call 310-430-2397 or email info @ NataliePace.com to join me in Arizona Oct. 13-15, 2018 or in Santa Monica, California Feb. 16-18, 2019.
 
Other Blogs of Interest
Penny Pot Stocks.
Interest Rates Set to Jump 70%. Watch out investors and homeowners!
​Should I Invest in Ford and General Electric?
The Tesla 3 Becomes the Top Selling Car in the U.S.
​Cryptocurrency Scams and Phishers.
Back to School Stock Sales. 
​Gold vs. Facebook. 
Nike Share Price and the Kaepernick Ad.

 

I'm sure you've seen the news that the Securities and Exchange Commission has charged Elon Musk with fraud & wants to bar him from serving as an officer or a director of any publicly held company, including Tesla.
 
Elon Musk is calling the action "unjustified," according to TechCrunch.

The independent directors of Tesla's board issued a letter of support last month, before the SEC's action.
 
My blog from September 16, 2018 includes key updates on Tesla to factor in the mix, particularly if you are an investor, or are tempted to purchase Tesla shares at the new discounted price (which could conceivably go lower). That blog includes an update on Tesla’s safety ranking, sales ranking, predictions for the 3rd quarter earnings report (due the first week of November), tax credits, other Tesla products and more. 

One big consideration that most people are not factoring in is that the SEC charges are not an all or nothing proposition. If Tesla investors and Tesla's Board Of Directors want to keep Elon Musk, and the SEC persists in their charges, Tesla can go private. The SEC can't bar him from running the company then. Since this plan was already on the table, it’s still top of mind. If the 3rd quarter earnings report is as outstanding as forecasts predict, then it is hard to imagine that Tesla investors will want Musk ousted. Of course, there are a lot of ifs in that sentence. The situation will certainly become more clear between now and early November.
 
Two things that are sure already, however, are that the Tesla cars are scoring the highest safety ratings ever issued by the National Highway Traffic Safety Administration, and the Tesla 3 just became the bestselling car (by revenue, in August). There are a lot of problems and issues with the other car companies, which never make headlines. General Motors lost almost $4 billion last year, and has lower revenue this year. Ford sales are lower year over year as well. Both GM and Ford have eyepopping exposure to pension and other post employment benefit obligations, in addition to massive debt. Ford’s pensions and OPEBs are underfunded by $13 billion, while GM’s underfunding status is $20.5 billion (at the end of 2017). Tesla benefits from being a newer company, at a time when self-directed 401ks are de rigueur. Pension problems at legacy companies haven't made many headlines.

There are a lot of noise, false information and soapbox pundits out there, offering some ill-informed misinformation. This blog, and my blog from Sept. 26, 2018, offer a more complete picture, so that you can make your own judgments.
 
Finally, Tesla's stock is down, but it's not "crashing." In fact for news like this, the stock has held up pretty well. Tesla shares were trading for $307 yesterday and closed at $265 today. Since April of 2018, Tesla shares have been fluctuating between $250/share and $385/share, rising and falling on headlines.
 
Tesla is making the safest cars on the road and the company is growing revenue at a pace of 43% year over year, simply squashing the competition in growth. Learning how to do a Stock Report Card and ask the Four Questions to evaluate your investments can reveal most of the pieces of the 100-piece puzzle that is investing in individual companies. For those of you who have attended my retreats or read my books, what you are experiencing today with Tesla is exactly why it is so hard to “buy low and sell high.” Today, Tesla’s stock is 13% cheaper than it was yesterday. However, everyone thinks it’s crashing. The temptation is to sell low, rather than to buy low. It is the sober analyst who is forecasting possible scenarios, based upon the facts, and coming up with a rational plan that includes buying Tesla stock on sale (or perhaps selling it, even at a loss, if the company is headed into the toilet).
 
We’ll see if the SEC’s rush to judgment stands up, whether the parties settle this empasse or whether Tesla will be forced to go private to protect its visionary chairman and CEO. I’ll be sure to include an update in my October teleconference on Oct. 11, 2018. Be sure to join me. (It’s free.) Click on the link to access the show page, call-in and listen back information.
 
We spend a full day at my Investor Educational Retreats evaluating individual companies, to determine what’s hot and what’s a bailout, which you can use to inform all of your investments and your nest egg strategies. Call 310-430-2397 to learn more and to join me in Arizona mid-October or Santa Monica for Valentine’s Day 2019. Register for the Santa Monica Retreat by Sunday, September 30, 2018 to receive the best price, and while there are still a few seats available. 

​Other Blogs of Interest
Should You Buy Tesla Stock?

Has Elon Musk Lost It?

Russia is Dumping U.S. Treasuries and Buying Gold Instead.

Are Electric Cars Safe? from May 20, 2018

Odds of an Interest Rate Hike are Above 90%.

5 Harbingers of Recessions

How a Strong GDP Report Can Go Wrong.
 
Unaffordability: The Unspoken Housing Crisis in America
 
Social Security and Medicare Warn of Depletion.

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