What WeWork’s Bankruptcy and Half-Empty Office Buildings Have to Do With Our Personal Wealth Plan.9/11/2023 What WeWork’s Bankruptcy and Half-Empty Office Buildings Have to Do With Our Personal Wealth Plan. WeWork is the first major crack in the frozen commercial real estate market. What other companies will fall in and sink? Is this dangerous for our own wealth plan or the overall economy? With all that is going on in the world (prayers for peace continue), you might not have heard that WeWork filed for bankruptcy on Nov. 6, 2023. The company will continue operating, but will restructure its debt and use the Chapter 11 filing to exit its underperforming leases. According to David Tolley, the CEO of WeWork, “Now is the time for us to pull the future forward by aggressively addressing our legacy leases and dramatically improving our balance sheet.” Since WeWork was the largest tenant in New York City, this could have a major ripple effect on other commercial real estate companies, at a time when the industry is already in distress. In a report earlier this year, S&P Global warned that “fundamentals in the office real estate market are deteriorating, pressured by longer-term secular headwinds from remote working and near-term cyclical risks from a slowing economy and weaker job growth.” The rating agency downgraded Hudson Pacific Properties to junk (BB+, outlook negative) on June 28, 2023. (WeWork was always a junk bond – even before its failed IPO.) Most CRE corporations are at the lowest rung of investment grade or speculative status. Why should this matter to the Main Street investor? Banks, insurance companies and pension providers loan on a long-term basis to commercial real estate companies, and these problematic loans and bonds are losing value. As we’ve been reporting all year, long-term bonds lost more than stocks in 2022. Since financial planners (even fiduciaries) typically invest the safe side of our portfolio in bonds, this problem impacts many of us (who might not realize it, if we are not forensic about reviewing our holdings). CRE exposure and long-term bonds were also at the heart of the bank failures earlier this year. Whether we have uninsured deposits or annuities, are counting on a pension, or just want to ensure that the “safe” side of our wealth plan is protected from capital losses, it’s important to understand the issues of CRE, why we’re underweighting the industry in our sample pie charts, and what each one of us can do to steer clear of the risk. (Consider joining us for our New Year, New You Retreat or getting an unbiased 2nd opinion through my private coaching program. Email info@NataliePace.com for pricing and information.) Here are the topics we’ll cover in this blog. Recent Downgrades to Junk Suspended Dividends (HPP) Empty Office Buildings Stalled-Out Projects (Google: One Westside) Valuations Debt Banks, Insurance Companies, Pension Plans And here is more information on each point. Recent Downgrades to Junk Before Hudson Pacific Properties was downgraded to speculative status on June 28, 2023, the company was trading at $15/share with a yield of 19%. It’s now trading in the $5/share range, with a suspended dividend. Be careful of taking the bait of high yield. It can result in major capital loss. In the case of a bankruptcy like WeWork, it is common for existing stock to become worthless, and for the company to reissue new shares when it emerges from bankruptcy. Suspended Dividends Hudson Pacific Properties suspended their dividend on September 7, 2023. Vornado postponed their dividends on April 26, 2023. At the end of the year, the company will determine whether the dividend will be paid in cash or cash and securities. We don’t get advance notice before the action takes place. Typically companies announce after the market close, which causes the stock to gap down in after-hours trading. (In the case of GE, Warren Buffett magically exited the stock just a few months before the company slashed their dividend by half.) By the time that most Main Street investors learn of the bad news, they’ve already lost a great deal of money. There have been many lessons over the years on dividends. Click for a history lesson on what happened when General Electric cut its dividend in Nov. 2017. FYI: We also warned about WeWork when the IPO was first announced. Empty Office Buildings Work From Home has changed the inner city landscape. Gone are the bustling business centers and the crowded taco stands, lunch counters and restaurants that serviced office staff. Vacancies are up, and many corporations are looking to downsize their office footprint. Alphabet (Google) booked $2.6 billion in charges related to workforce and office space reductions in the 1st quarter of 2023. Many other companies, including technology, banking and more, are reducing their office space and switching to hybrid work-from-home schedules for their staff. When we hear Jamie Dimon and other bank CEOs yelling that people have to come back to the office or else, one of the underlying reasons is that banks have a lot of exposure to those empty office buildings. HENRYs fled expensive cities to work from home in more affordable suburbs and towns. With housing still largely unaffordable in the very areas with the highest office vacancy rates, it’s difficult to see this situation resolving itself without more bloodbaths like WeWork – no matter how red in the face exacerbated CEOs get. Stalled-Out Projects (Google: One Westside) In January 2019, Google signed a 14-year lease as the sole tenant of One Westside, a mall renovation project owned 75% by Hudson Pacific Properties and 25% by Macerich. Everyone was excited by this ambitious attempt to give new life to an outdated shopping center. And then the pandemic hit. All three companies (Macerich, Hudson and Alphabet) have been radio silent on when or if Google is going to move into One Westside. However, the building is completely fenced in. and there was no construction activity when I visited the site in September and again in November. When I visited on Nov. 7, 2023, I was greeted at the gate by a construction supervisor who told me there was still a lot of work to do before any tenant could occupy the space. Valuations Transactions have been down significantly in CRE of late. Sales this year are about 1/3 of the volume of transactions last year (source: CommercialEdge). Hanging on to hopes that outdated valuations would hold worked out during the pandemic, when money was flowing free and easy. However, now monetary policy is tight and expensive. Many loans and covenants are coming due in 2024. With a frozen market, the valuations that the CRE companies and banks are clinging to may not be representative of what the buildings are truly worth. We got a glimpse of that on Oct. 10,, 2023 when a downtown Boston office building sold for $4.1 million. It had been purchased for $16 million in 2018. The potential for large losses on commercial real estate is currently one of the most cited risks to financial stability in the U.S. Debt Commercial real estate has been on a lifeline of leases and federal support since 2020. However, as leases come up and are not renewed, as companies fail (WeWork), or as large corporations (such as Alphabet) are willing to take a huge financial hit to extricate themselves from their leases, all of which are happening, CRE companies are forced to borrow money to make ends meet. Many already have speculative credit, or reside at the lowest rung of investment grade. Borrowing today with a low credit score is expensive. High vacancies complicate things even further. The older the building, the least likely it is to be one of the chosen few for the new work environment, which trends toward communal space and sustainability over cubicles and a big CO2 footprint. Banks, Insurance Companies, Pension Plans According to the Federal Reserve’s Oct. 2023 Financial Stability Report, “Higher interest rates, declining property prices, and structural shifts in demand for office space may prompt large realized losses.” Small and regional banks are the most vulnerable to CRE weakness. However, insurance companies are also large holders of commercial mortgage-backed securities (CMBS). “Life insurers continued to allocate a high percentage of assets to risky instruments, such as leveraged loans, high-yield corporate bonds, privately placed corporate bonds, and alternative investments,” according to the Financial Stability Report. Bottom Line It’s important to look forensically at the holdings in our wealth plan, even if it is professionally managed. Telling our financial advisor broker/salesman to get us “safe” is not guaranteed to achieve what we desire, especially if we don’t know or understand what we own. (I do a great deal of 2nd opinions and have seen losses and heard many alarming misrepresentations in “conservatively” allocated wealth plans! Click to read about a few.) The safe side of our portfolio is not supposed to be vulnerable to capital losses. While digging into the details might sound laborious or complicated, it’s actually less time and money (there is quite a lot at stake money-wise) once we learn the life math that we all should have received in high school and college. Wisdom is the cure and the time to be the boss of our money and future is now. I’ll be discussing this in greater detail in my Thursday videoconference (Nov. 9, 2023). Email info@NataliePace.com with VIDEOCON in the subject line if you’d like to join us live. (You’ll receive the logon instructions automatically if you’re already on the list.) Email info@NataliePace.com with CRE Stock Report Card in the subject line if you’d like an updated Stock Report Card. Join us at our Jan. 13-15, 2024 New Year, New You Financial Freedom Retreat. Learn nest egg strategies, how to get hot and diversified, and 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 info@NataliePace.com to register. Learn the 15+ things you'll master and read testimonials in the flyer (link below) and on the home page at NataliePace.com. Register by Nov. 30, 2023 to receive the best price. 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 Join us for our Restormel Royal Immersive Adventure Retreat. March 8-15, 2024. Email info@NataliePace.com to learn more. Register with friends and family to receive the best price. Click for testimonials, pricing, hours & details. There is very limited availability, and you must register early to ensure that you get the exact room you want. This retreat includes an all-access pass to all of our online training for a full year for two! Natalie Wynne Pace is an Advocate for SustainabilityFinancial Literacy & Women's Empowerment. Natalie is the bestselling author of 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 5th edition of The ABCs of Money and the 2nd edition of Put Your Money Where Your Heart Is were released in 2021. 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 Apple Podcast. Watch videoconferences and webinars on Youtube. Other Blogs of Interest Solutions for Unaffordable Housing. The Magnificent 7 Drag NASDAQ into Another Correction 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 Air B N Bust? Santa Rally 2023 or Time to Get Defensive? Barbie. Oppenheimer. Strikes. Streaming Wars. Netflix. Monero: A Token of Trust? 13 Lifestyle Choices to Reduce Waste, Pollution & CO2 & Save a Boatload of Dough. China Bans Apple 11-Point Green Checklist for Schools. Artificial Intelligence and Nvidia's Blockbuster Earnings Report Biotech in a Post-Pandemic World Summer Sweepstakes 10 Wealth Secrets of Billionaires and Royals. What Happened to Cannabis? Bank of America has $100 Billion in Bond Losses (on Paper) The USA AAA Credit Rating is on a Negative Watch. Lithium. Essential to EV Life. I'm Just Not Good at Investing. Investors Ask Natalie. Should I Buy an S&P500 Index Fund? Investors Ask Natalie. Bonds Lost More than Stocks in 2022. Tesla's Model Y is the Bestselling Car in the World. 2023 Company of the Year Sell in May and Go Away? Do Cybersecurity Risks Create Investor Opportunities? Writers Strike, While Streaming CEOs Rake In Hundreds of Millions Annually. I Lost $100,000. Investors Ask Natalie. Artificial Intelligence Report. Micron Banned in China. Intel Slashes Dividend. Buffett Loses $23 Billion. Branson's Virgin Orbit Declares Bankruptcy. Insurance Company Risks. Schwab Loses $41 Billion in Cash Deposits. The Debt Ceiling Crisis. What's at Stake? Fiat. Crypto. Gold. BRICS. Real Estate. Alternative Investments. BRICS Currency. Will the Dollar Become Extinct? Empty Office Buildings & Malls. Frozen Housing Market. The Online Global Earth Gratitude Celebration 7 Green Life Hacks The Debt Ceiling. Will the U.S. Stop Paying Bills in June? Fossil Fuels Touch Every Part of Our Lives Are There Any Safe, Green Banks? 8 Fires the Federal Reserve Board Needs to Put Out. 7 Ways to Stash Your Cash Now. Lessons from the Silicon Valley Bank Failure. The 2 Best Solar Stocks Which Countries Offer the Highest Yield for the Lowest Risk? Rebalance By the End of March Solar, EVs, Housing, HSAs -- the Highest-Yield in 2023? Are You Anxious or Depressed over Money? Why We Are Underweighting Banks and the Financial Industry. You Stream all the Channels. Should You Invest, Too? NASDAQ is Still Down -26%. Are Meta & Snap a Buy? 2023 Bond Strategy Emotions are Not Your Friend in Investing Investor IQ Test Investor IQ Test Answers Bonds Lost -26%, Silver Held Strong. 2023 Crystal Ball for Stocks, Bonds, Real Estate, Cannabis, Gold, Silver. Tilray: The Constellation Brands of Cannabis New Year, New Healthier You Tesla's $644 Billion Fall From Mars Silver's Quiet Rally. 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. Gardeners Creating Sanctuary & Solutions in Food Deserts. The Bank Bail-in Plan on Your Dime. Rebalancing Your Nest Egg IQ Test. Answers to the Rebalancing Your Nest Egg IQ Test. 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.
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Housing is Unaffordable. Here Are Some Solutions and Warnings. The housing market is virtually frozen. Airbnb hosts are experiencing longer periods of unoccupancy. More apartment buildings have been constructed. However, many sit empty because the owners are unwilling to lower their prices. Meanwhile, report after report comes out stating that housing is virtually unaffordable. “The dynamics influencing the U.S. housing market appear to continuously work against everyday Americans, potentially to the point where they could start to have a significant impact on home prices,” said Rob Barber, CEO for ATTOM. “We clearly aren’t there yet, as the market keeps going up… But with basic homeownership now soaking up more than a third of average pay, the stage is set for some potential buyers to be priced out, which would reduce demand and the upward pressure on prices. We will see how this shakes out as the peak 2023 buying season winds down.” High prices, and the need to charge high rents, puts homeowners, commercial real estate, homebuyers and renters all in an untenable position. If you are a homeowner who is in distress, then private coaching might be very helpful. (Email info@NataliePace.com for pricing and information.) At minimum, read the Real Estate section of The ABCs of Money, 5th edition. This blog offers solutions for anyone who finds themselves in a position of paying 30% or more of their income on housing. Drowning in basic needs means we cannot invest in our own future. When we put essentials like food and clothing on credit cards that is a disaster waiting to happen. The only solution is to make brave choices about the big-ticket bills as quickly as possible, in order to get ahead in a world that simply doesn’t add up at this time. Here are the 4 Tips and 3 Warnings we’ll discuss in this blog. Think Bigger Keep the Money in the Family Partner Up The 4 D’s Warnings Are You Buying High? Know Your Neighborhood Do Your Own Math And here’s more information on each point Think Bigger Singles and one-bedrooms are far more expensive than two, three or four-bedroom lodging that you might split with a few friends. If a one bedroom (in a more affordable city) costs $1200 and a two bedroom costs $1400, the saving amounts to about $500 a month which is $6000 a year. Of course, in big cities rents are a lot more expensive than that. However, the savings of thinking bigger tend to be substantial there, as well. If you are a homeowner who is spending 30% or more on your home costs, then is there a way to start earning some income? Can you put in an ADU* and have your aging parents stay there, with everyone contributing to the housing costs? (Why not have them pay you instead of making the landlord rich?) If your parents aren’t the right answer, could you provide lodging for a traveling nurse or Ph.D. student? *additional dwelling unit Keep the Money in the Family We all think about family money when someone passes, and the will of the estate is being parceled out. However, how much more money would we have if we all thought about keeping the money in the family? (This is the way that very wealthy people think.) Yes, this could mean living with your parents as an adult. The Prince of Wales has inherited a lot of land and money. However, for most of his life, he lived in apartments in his Grandmother’s castles and estates. His salary as an air ambulance helicopter pilot wouldn’t have paid for all of his expenses. I know one mother who is close to retirement, who gave her kids the big house and remodeled an ADU in the back for her mother-in-law unit. Family solutions are happening all across the United States. According to a Harris Poll for Bloomberg, about 45% of young adults between the ages of 18 and 29 now live with their parents. For many of them that is a savings of $10,000 or more annually that they would be giving to a landlord. Partner Up Another way of saving money on housing is to partner up. As a young single mother, I moved in with another single mother. I experienced savings of about 30% on rent, thousands of dollars on child care that I didn’t have to spend, and cut my food bill in half because we would switch off weeks that we cooked. There is a pretty funny Neil Simon play and vintage TV show, The Odd Couple, about two divorced dads who move in together to save money. What kind of community will serve you best? The 4 D’s While the housing market is currently frozen, the 4 D’s can be relied upon to dislodge the stalemate. What are the 4 D’s? Death, divorce, depression (recession) and disaster. Sadly, in today’s world, we can count on one of these tragedies occurring. Things become a grave hardship when two or more happen at the same time. Currently, everyone is still hoping that the Federal Reserve Board will achieve a soft landing and start cutting interest rates. What is missing from that rationale is that the Feds don’t cut interest rates until economic conditions have become strident. Cutting interest rates is the medicine administered when unemployment skyrockets, equity prices plunge, foreclosures abound, and corporate bankruptcies escalate. While 0% interest rates have been the norm since the Great Recession, they encourage speculation and discourage savings, which has exacerbated the pickle we’re in today. Those homeowners who wanted to get rich quick or land a treasure trove as an Airbnb host are now hanging on for dear life. Warnings Are You Buying High? Are you tempted to buy now? Are you aware that you’re buying at an all-time high? Are you being seduced into that situation with the bait that you could buy something for less than you’re renting, or with the promise of capital gains or rental income? Did you know that that simple math is excluding a great deal of homeownership expenses and could add up to hard life lessons and expensive losses? Buying high is rarely a good idea, and can destroy your financial life for a decade if home prices fall severely below your mortgage. The reason few people buy low is because they can’t. They have all their money tied up in investments that have lost too much value. There is no liquidity remaining. Matters are made worse because our FICO score plunges as well. In recessions, most people spend years of the recovery hoping and praying that they crawl back to even. Know Your Neighborhood It’s tempting to run off to the suburbs, or some smaller city where prices might be more affordable, particularly if we believe that we can work from home. However, have we factored in the extra expense and time of our commute? Do we really know what the benefits and challenges are of the neighborhood or city that we are moving into? Are there downsides that tourists are simply not aware of? Are these our people? Will you and your neighbors bicker or support one another. There are seven tips for considering where your ideal home should be in the Real Estate section of The ABCs of Money, 5th edition. Do Your Own Math The first time that we buy a house, we are often looking at the price, and then focusing on whatever numbers the real estate broker salesman provides us with. The fine print might include the closing fees and property taxes, but rarely spells out the actual cost of remodeling, the maintenance on the home, and many other expenses that renters rarely experience. While prices are currently at all-time highs is in the United States and many other developed world countries, the real estate broker/salesman will be steering our gaze towards the gains that have been made over the past decade, without warning that in recessions, prices plunge. It is very important to know where the value of your home sits on the Buy Low, Sell High continuum over the past decade. That is far more important than how many gains have been made by sophisticated investors who purchased when the price was much lower. Bottom Line New studies are showing that almost half of people under the age of 30 are living with their parents. While previously this would’ve come with a derisive comment about slackers, it is now being acknowledged as a way to keep the money in the family instead of making the landlord rich. Millennials who are ready to start a family might be sick of this situation and rightfully so. However, the solution is not going to be buying high and trying to ride through the downturn. Losing that much money, and being underwater on a large mortgage, can be very hard on a marriage and is definitely terrible for our FICO score. A little patience in planning to allow the frozen market to thaw could yield smooth sailing ahead. You can learn about more solutions in the Thrive Budget and Real Estate sections of The ABCs of Money, 5th edition. There are lots of ways that we can save thousands of dollars annually with smarter big ticket choices. Few of us are shopaholics who eat avocado toast at restaurants every night (the budget solutions outlined by so many financial authors). Wisdom is the cure. Let’s stop making everybody else rich and keep the money in the family. Join us for our Restormel Royal Immersive Adventure Retreat. March 8-15, 2024. Email info@NataliePace.com to learn more. Register with friends and family to receive the best price. Click for testimonials, pricing, hours & details. There is very limited availability, and you must register early to ensure that you get the exact room you want. This retreat includes an all-access pass to all of our online training for a full year for two! Natalie Wynne Pace is an Advocate for SustainabilityFinancial Literacy & Women's Empowerment. Natalie is the bestselling author of 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 5th edition of The ABCs of Money and the 2nd edition of Put Your Money Where Your Heart Is were released in 2021. 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 Apple Podcast. Watch videoconferences and webinars on Youtube. Other Blogs of Interest The Magnificent 7 Drag NASDAQ into Another Correction 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 Air B N Bust? Santa Rally 2023 or Time to Get Defensive? Barbie. Oppenheimer. Strikes. Streaming Wars. Netflix. Monero: A Token of Trust? 13 Lifestyle Choices to Reduce Waste, Pollution & CO2 & Save a Boatload of Dough. China Bans Apple 11-Point Green Checklist for Schools. Artificial Intelligence and Nvidia's Blockbuster Earnings Report Biotech in a Post-Pandemic World Summer Sweepstakes 10 Wealth Secrets of Billionaires and Royals. What Happened to Cannabis? Bank of America has $100 Billion in Bond Losses (on Paper) The USA AAA Credit Rating is on a Negative Watch. Lithium. Essential to EV Life. I'm Just Not Good at Investing. Investors Ask Natalie. Should I Buy an S&P500 Index Fund? Investors Ask Natalie. Bonds Lost More than Stocks in 2022. Tesla's Model Y is the Bestselling Car in the World. 2023 Company of the Year Sell in May and Go Away? Do Cybersecurity Risks Create Investor Opportunities? Writers Strike, While Streaming CEOs Rake In Hundreds of Millions Annually. I Lost $100,000. Investors Ask Natalie. Artificial Intelligence Report. Micron Banned in China. Intel Slashes Dividend. Buffett Loses $23 Billion. Branson's Virgin Orbit Declares Bankruptcy. Insurance Company Risks. Schwab Loses $41 Billion in Cash Deposits. The Debt Ceiling Crisis. What's at Stake? Fiat. Crypto. Gold. BRICS. Real Estate. Alternative Investments. BRICS Currency. Will the Dollar Become Extinct? Empty Office Buildings & Malls. Frozen Housing Market. The Online Global Earth Gratitude Celebration 7 Green Life Hacks The Debt Ceiling. Will the U.S. Stop Paying Bills in June? Fossil Fuels Touch Every Part of Our Lives Are There Any Safe, Green Banks? 8 Fires the Federal Reserve Board Needs to Put Out. 7 Ways to Stash Your Cash Now. Lessons from the Silicon Valley Bank Failure. The 2 Best Solar Stocks Which Countries Offer the Highest Yield for the Lowest Risk? Rebalance By the End of March Solar, EVs, Housing, HSAs -- the Highest-Yield in 2023? Are You Anxious or Depressed over Money? Why We Are Underweighting Banks and the Financial Industry. You Stream all the Channels. Should You Invest, Too? NASDAQ is Still Down -26%. Are Meta & Snap a Buy? 2023 Bond Strategy Emotions are Not Your Friend in Investing Investor IQ Test Investor IQ Test Answers Bonds Lost -26%, Silver Held Strong. 2023 Crystal Ball for Stocks, Bonds, Real Estate, Cannabis, Gold, Silver. Tilray: The Constellation Brands of Cannabis New Year, New Healthier You Tesla's $644 Billion Fall From Mars Silver's Quiet Rally. 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. Gardeners Creating Sanctuary & Solutions in Food Deserts. The Bank Bail-in Plan on Your Dime. Rebalancing Your Nest Egg IQ Test. Answers to the Rebalancing Your Nest Egg IQ Test. 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 Magnificent 7. Why the Weakness on Wall Street? The Wild Ride The Magnificent 7 have been spectacular throughout the entire 21st Century. However, the ride of late has been a bit wild. As you can see in the chart below, Tesla lost -66% in 2022 – one of the worst performers of the year. However, it is still the strongest performer of the seven companies, with a 9-fold increase in share price over the 5-year period. In 2022, the NASDAQ Composite Index plunged -33% compared to the S&P500 decline of -19.44%. So far this year, the NASDAQ is up 21.6%, even with the -11.8% retreat we’ve seen since July 28, 2023. The Magnificent 7 is boasting share price gains of 34%-182% year to date, even with the sell-off of the last few days. (The high of the NASDAQ Composite Index was 16,212, which was set on Nov. 19, 2021.) Volatility is why regular rebalancing is so important. (More on that below.) Here’s where things stand at this time. The revenue growth in almost all of these companies is still respectable (and eyepopping in the case of AI-company Nvidia). So, that doesn’t explain the pullback. What is causing investors to be skittish about these Wall Street All-Stars, and will it continue? In this blog, we’ll look at: Earnings Prices Outlook Rebalancing And here’s more on each point. Earnings Most of the Magnificent 7 have reported their earnings, with the exception of Apple (Nov. 2) and Nvidia (Nov. 21). While the earnings of the companies that have reported remain noteworthy, particularly given the war, hardships and competition throughout the world, the net profit margins are moderating. Tesla is trading down -15% since it reported earnings on October 18, 2023. The company saw its revenue increase by just 9% in the 3rd quarter of 2023, after reporting double-digit growth for the past decade. $1.853 billion in net income was a drop of -44% from the prior year’s $3.3 billion. Alphabet and Meta increased revenue by 11% and 23%, respectively, while retaining profit margins of 26% and 23%. Yet both saw a drop in share price after reporting their 3Q 2023 results. Meta’s guidance calls for 4Q 2023 revenue of $36.5-$40 billion, which is an increase of 13.5%-24.3% year over year. However, investors were spooked by CFO Susan Li’s admission that the war between Israel and Hamas was negatively impacting ad sales, which make up 98.5% of Meta’s revenue. Ruth Porat, the President and Chief Investment Officer; CFO, Alphabet and Google, dodged the question of whether the conflict would impact ad spend in the 3Q 2023 earnings call. Is that why the sell-off of Alphabet Inc. (Google) was so severe (-9.5% over the last 5 days)? Is there something else at play? Prices “We’re valuing based upon what it will be worth in 3 years.” Wall Street insider explaining why he was excited to buy Nvidia at a 108 price-earnings ratio. Prices of stocks are elevated and share prices of the Magnificent 7 are astronomical. As you can see in the Magnificent 7 Stock Report Card below, P/Es are light years above the average P/E of 17. Yes, companies with high growth can support a higher P/E. However, like Nvidia, Tesla’s market cap soared to a trillion when the company had earnings of only $5 billion. It’s now worth $655 billion, down -35% (with a still elevated PE of 66). The boom of Artificial Intelligence is real, as you can see in Nvidia’s revenue growth. However, competition, supply chain disruptions, restrictions on semiconductor sales to China (where 19% of Nvidia’s revenue comes from), a recession, war, and other headwinds could put plenty of obstacles in Nvidia’s road to earning its (almost) trillion dollar valuation. Whenever there is a game-changing innovation like AI, there are always fits and starts on the road to success, just as we saw with the Internet in 1999 – when many companies were completely wiped out, while others saw their share price plunge by 78% and take 15 years to recover. Nvidia looks like the one that will survive and thrive any fallout. However, macroeconomic challenges can cause all equities to go underwater. The biggest headwind for Nvidia is the share price, which is trading at 97.41 times earnings. The share price has fallen $100 over the past two months – -19.4% . What will happen over the next few weeks when Apple and Nvidia report earnings? Outlook On Nov. 2, 2023, all eyes will be on Apple to determine whether the Chinese ban on the iPhone (and launch of a competitive Huawei smart phone) will make the company miss their earnings forecast. As I mentioned in my Sept. 9, 2023 blog, even if Apple hits their $81.8 billion revenue target, it will be -9.3% lower than the Sept. quarter of 2022. It’s hard to imagine that investors are going to be thrilled with this earnings report, unless there is an upside surprise that no one sees coming. Nvidia is expecting another gangbuster earnings report. Judging by the amount of times AI was mentioned in the earnings calls and press releases of the other Magnificent 7, nothing is going to prevent the company from meeting or exceeding earnings expectations, when it reports on Nov. 21, 2023. However, as we’ve seen in the other reports, the analysts are looking for any sign of weakness in the forward outlook. As the outlook becomes less certain, it’s difficult to justify such lofty share prices . Whale investors are forward-thinking. Rebalancing The Magnificent 7 have soared to interstellar heights and have sunk back to Earth multiple times over the past five years. That is why capturing gains and rebalancing is such an important tool in our wealth plan. By using our pie chart system, your slices prompt you to capture gains when stocks shoot the moon, and buy low when they crash. Rebalancing 1-3 times a year is a buy low, sell high plan on auto-pilot that takes the emotions out of investing, and prompts us to employ this time-proven investing rule. Bottom line The Magnificent 7 companies are so strong because they are embedded in every part of our lives. I’m writing in a Word document, while looking up data on MSN and Google search, from my MacBook Air and iPhone. All of these companies are remodeling every room in their business with artificial intelligence. Electric vehicles are the fastest growing vertical in the auto industry. However, war, unsustainably high post-pandemic debt loads, inflation, supply constraints and economic uncertainty will impact almost all of these businesses. Tight budgets curtail consumer spending, which causes businesses to cut their ad spend. It is rare for a company to swim upstream, when all of Wall Street is crashing. It’s not a matter of jumping all in or all out. Market timing doesn’t work. However, acting our age and overweighting safe when there are economic storms on the horizon is a sound strategy – and is something we’ve seen the whales do over the last two years, as they trim back on their at-risk positions and move into a safer yield. (Bonds are tricky, but can be safer if we adhere to a few, simple rules.) Join us at our Jan. 13-15, 2024 New Year, New You Financial Freedom Retreat. Learn nest egg strategies, how to get hot and diversified, and 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 info@NataliePace.com to register. Learn the 15+ things you'll master and read testimonials in the flyer (link below) and on the home page at NataliePace.com. Register by Halloween (10.31.2023) to receive the best price and a complimentary 50-minute private prosperity coaching session (value $400). 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 Join us for our Online New Year, New You Financial Freedom Retreat. Jan. 13-15, 2024. Email info@NataliePace.com or call 310-430-2397 to learn more. Register by Halloween 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 8-15, 2024. Email info@NataliePace.com to learn more. Register with friends and family to receive the best price. Click for testimonials, pricing, hours & details. There is very limited availability, and you must register early to ensure that you get the exact room you want. This retreat includes an all-access pass to all of our online training for a full year for two! Natalie Wynne Pace is an Advocate for SustainabilityFinancial Literacy & Women's Empowerment. Natalie is the bestselling author of 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 5th edition of The ABCs of Money and the 2nd edition of Put Your Money Where Your Heart Is were released in 2021. 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 Apple Podcast. Watch videoconferences and webinars on Youtube. Other Blogs of Interest 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 Air B N Bust? Santa Rally 2023 or Time to Get Defensive? Barbie. Oppenheimer. Strikes. Streaming Wars. Netflix. Monero: A Token of Trust? 13 Lifestyle Choices to Reduce Waste, Pollution & CO2 & Save a Boatload of Dough. China Bans Apple 11-Point Green Checklist for Schools. Artificial Intelligence and Nvidia's Blockbuster Earnings Report Biotech in a Post-Pandemic World Summer Sweepstakes 10 Wealth Secrets of Billionaires and Royals. What Happened to Cannabis? Bank of America has $100 Billion in Bond Losses (on Paper) The USA AAA Credit Rating is on a Negative Watch. Lithium. Essential to EV Life. I'm Just Not Good at Investing. Investors Ask Natalie. Should I Buy an S&P500 Index Fund? Investors Ask Natalie. Bonds Lost More than Stocks in 2022. Tesla's Model Y is the Bestselling Car in the World. 2023 Company of the Year Sell in May and Go Away? Do Cybersecurity Risks Create Investor Opportunities? Writers Strike, While Streaming CEOs Rake In Hundreds of Millions Annually. I Lost $100,000. Investors Ask Natalie. Artificial Intelligence Report. Micron Banned in China. Intel Slashes Dividend. Buffett Loses $23 Billion. Branson's Virgin Orbit Declares Bankruptcy. Insurance Company Risks. Schwab Loses $41 Billion in Cash Deposits. The Debt Ceiling Crisis. What's at Stake? Fiat. Crypto. Gold. BRICS. Real Estate. Alternative Investments. BRICS Currency. Will the Dollar Become Extinct? Empty Office Buildings & Malls. Frozen Housing Market. The Online Global Earth Gratitude Celebration 7 Green Life Hacks The Debt Ceiling. Will the U.S. Stop Paying Bills in June? Fossil Fuels Touch Every Part of Our Lives Are There Any Safe, Green Banks? 8 Fires the Federal Reserve Board Needs to Put Out. 7 Ways to Stash Your Cash Now. Lessons from the Silicon Valley Bank Failure. The 2 Best Solar Stocks Which Countries Offer the Highest Yield for the Lowest Risk? Rebalance By the End of March Solar, EVs, Housing, HSAs -- the Highest-Yield in 2023? Are You Anxious or Depressed over Money? Why We Are Underweighting Banks and the Financial Industry. You Stream all the Channels. Should You Invest, Too? NASDAQ is Still Down -26%. Are Meta & Snap a Buy? 2023 Bond Strategy Emotions are Not Your Friend in Investing Investor IQ Test Investor IQ Test Answers Bonds Lost -26%, Silver Held Strong. 2023 Crystal Ball for Stocks, Bonds, Real Estate, Cannabis, Gold, Silver. Tilray: The Constellation Brands of Cannabis New Year, New Healthier You Tesla's $644 Billion Fall From Mars Silver's Quiet Rally. 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. Gardeners Creating Sanctuary & Solutions in Food Deserts. The Bank Bail-in Plan on Your Dime. Rebalancing Your Nest Egg IQ Test. Answers to the Rebalancing Your Nest Egg IQ Test. 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. Cruise Ships Reward You for Investing. Is it Worth It? Cruise ships give shareholders spending money. Should you take the bait? Or is it more like those free vacations, where you go home with a timeshare (money pit) that you didn’t know you wanted, and can’t get rid of? Are cruise ships an adventure, a treasure trove, a great investment, CO2 horrors or a huge money pit? Revenue Growth Cruise ships are definitely back in business. According to the Royal Caribbean blog, when cruise ships started up after the pandemic, occupancy rates were sometimes as low as 30%. Today, the Big 3 (Royal Caribbean Group, Norwegian Cruise Line Holdings, and Carnival Corporation) are all at 100% capacity. If we line up the revenue, the business looks downright exciting, with year-over-year revenue growth of 60-86%. 2023 annual revenue should be close to the pre-pandemic highs in 2019. Cruise ships are turning a profit this year for the first time since 2019 – before the pandemic. The companies are buying new ships (to retire old ones), are setting out asea with all of their cabins full, and are reducing debt. The goal for many of the companies is to return to investment grade in their credit rating. However, before we get excited and slide into a pool of the mandatory 100+ shares for an extra $100-$250 of spending money on our next cruise, it’s important to understand some of the significant challenges that cruise ships face. In this blog, we’ll take a closer look at how they survived the pandemic and what rules, regulations and debt are part of the industry’s post-pandemic world. Here are some of the things we’ll cover. Operating in the Red Junk Bonds & High Fuel Costs Natural and Unnatural Disasters Carbon Footprint Stock Volatility And here is more information on each point. Operating in the Red Norwegian and Royal Caribbean both lost over $2 billion in 2022, while Carnival lost over $6 billion. The 2023 revenue growth and full-to-capacity cabins will help the 2023 margins to recover. However, the entire industry is heavily indebted – spending more on interest than on fuel, which is typically the largest line-item. Junk Bonds & High Fuel Costs The Top 3 cruise ship companies all carry junk bond ratings. Interest rates on their debt can run as high as 11.5%. Gasoline costs for Royal Caribbean are expected to be $1.14 billion this year, with interest at $1.27-$1.28 billion. The top three companies have over $60 billion in debt, with Carnival carrying the largest load at $29.5 billion in long-term debt. Oil prices are very high, at $85.35 a barrel. With so much war and economic uncertainty in the world, and with OPEC cutting production, the U.S. Energy Information Administration is forecasting $95/barrel oil prices in 2024. Higher fuel prices could raise fuel costs by 11% in 2024, which amounts to a hundred million dollars or more for each company – if the EIA projections are spot on. This will make it challenging for cruise ships to return to investment grade – particularly if anything causes occupancy rates to fall. The low credit quality, massive leverage and rising fuel costs are likely the culprits that are causing the share prices of Carnival and Norwegian to trade close to their 5-year low. Royal Caribbean has a slightly higher share price on the 5-year range, and also a slightly higher credit rating, at BB- (still junk status). Natural and Unnatural Disasters Cruise ships are a very safe form of travel. However, having every cabin full and people packed in can also be a breeding ground for viruses. The pandemic was one of the worst disasters to hit the cruise ship industry since the sinking of the Titanic, when passengers were marooned and confined to their cabins before the industry was ultimately shut down. However, cruise ships have also made headlines for food poisoning (salmonella and e coli) and violent storms. (Click to see a report of a torrential downpour that flooded hallways and made many passengers very nauseated from May 29, 2023.) There has also been a post-pandemic spike in the Cruise Ship Virus – Norovirus – that causes diarrhea outbreaks, according to the CDC. While everyone is excited at the first profits cruise ships have shown since 2019, could the cause of profits (people packed into every square inch) also come with health risks? We’ve seen an increase in very severe storms in the Caribbean and elsewhere. Will this negatively impact voyages during Hurricane Season, cutting into revenue forecasts? Carbon Footprint Not only is gasoline expensive on a balance sheet, it’s very, very hard on the planet. (Greta Thunberg took a sailing ship when she came to speak at the UN about climate crisis.) Cruise ships use almost half a million gallons of gasoline for a 7-day cruise for 3000 people. While a 747 averages about 91 mpg/passenger, a cruise ship is more like 14 mpg/passenger. Will potential customers be put off by the CO2 footprint? On a cruise ship, a lot of the time is spent on the ship doing things that you might do in Vegas – eating, gambling or playing in a swimming pool. In a lot of ways, it’s just Vegas on water. For many cruises, the port of call stops last only a few hours – meaning you’re limited to tourist destinations near the harbor, rather than immersing yourself in the local culture. Sure, you get to gaze out at sea, if you want to brave the high winds to do that – something most people avoid. Is there an adventure we might take with friends, family and our sacred beloved that is affordable and planet-friendly – one that will become a treasured memory? Are we just jumping onboard the cruise ship because we think it is low-cost? Have we added in all of the mandatory taxes, tips and port fees, and “extras,” like costs for specialty restaurants, alcoholic drinks, excursions, exercise classes and even WIFI? Stock Volatility Cruise ships aren’t the only companies to offer incentives to their shareholders. Berkshire Hathaway has a bazaar at its meetings, where many of the companies owned by BH offer discounts on their products. However, an investment in Berkshire is trading close to its 5-year high, while many of the cruise ship stocks are down -40% (Royal Caribbean) to -75-80% (Norwegian and Carnival). Are we being penny wise and pound foolish in purchasing cruise ship shares for a cash credit on our vacation? Bottom Line While 2023 is a recovery year for cruise ships and the first year of profits since 2019, it’s not all smooth sailing for the companies or their shareholders. The headwinds for the industry include hurricanes, pandemics, foodborne and airborne diseases, massive debt, high fuel costs and an astonishingly high CO2 footprint. Join us at our Jan. 13-15, 2024 New Year, New You Financial Freedom Retreat. Learn nest egg strategies, how to get hot and diversified, and 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 info@NataliePace.com to register. Learn the 15+ things you'll master and read testimonials in the flyer (link below) and on the home page at NataliePace.com. Register by Halloween (10.31.2023) to receive the best price and a complimentary 50-minute private prosperity coaching session (value $400). 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 Join us for our Online New Year, New You Financial Freedom Retreat. Jan. 13-15, 2024. Email info@NataliePace.com or call 310-430-2397 to learn more. Register by Halloween 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 8-15, 2024. Email info@NataliePace.com to learn more. Register with friends and family to receive the best price. Click for testimonials, pricing, hours & details. There is very limited availability, and you must register early to ensure that you get the exact room you want. This retreat includes an all-access pass to all of our online training for a full year for two! Natalie Wynne Pace is an Advocate for SustainabilityFinancial Literacy & Women's Empowerment. Natalie is the bestselling author of 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 5th edition of The ABCs of Money and the 2nd edition of Put Your Money Where Your Heart Is were released in 2021. 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 Apple Podcast. Watch videoconferences and webinars on Youtube. Other Blogs of Interest Bonds. Banks. The Treacherous Landscape of Keeping Our Money Safe. 7 Rules of Investing Air B N Bust? Santa Rally 2023 or Time to Get Defensive? Barbie. Oppenheimer. Strikes. Streaming Wars. Netflix. Monero: A Token of Trust? 13 Lifestyle Choices to Reduce Waste, Pollution & CO2 & Save a Boatload of Dough. China Bans Apple 11-Point Green Checklist for Schools. Artificial Intelligence and Nvidia's Blockbuster Earnings Report Biotech in a Post-Pandemic World Summer Sweepstakes 10 Wealth Secrets of Billionaires and Royals. What Happened to Cannabis? Bank of America has $100 Billion in Bond Losses (on Paper) The USA AAA Credit Rating is on a Negative Watch. Lithium. Essential to EV Life. I'm Just Not Good at Investing. Investors Ask Natalie. Should I Buy an S&P500 Index Fund? Investors Ask Natalie. Bonds Lost More than Stocks in 2022. Tesla's Model Y is the Bestselling Car in the World. 2023 Company of the Year Sell in May and Go Away? Do Cybersecurity Risks Create Investor Opportunities? Writers Strike, While Streaming CEOs Rake In Hundreds of Millions Annually. I Lost $100,000. Investors Ask Natalie. Artificial Intelligence Report. Micron Banned in China. Intel Slashes Dividend. Buffett Loses $23 Billion. Branson's Virgin Orbit Declares Bankruptcy. Insurance Company Risks. Schwab Loses $41 Billion in Cash Deposits. The Debt Ceiling Crisis. What's at Stake? Fiat. Crypto. Gold. BRICS. Real Estate. Alternative Investments. BRICS Currency. Will the Dollar Become Extinct? Empty Office Buildings & Malls. Frozen Housing Market. The Online Global Earth Gratitude Celebration 7 Green Life Hacks The Debt Ceiling. Will the U.S. Stop Paying Bills in June? Fossil Fuels Touch Every Part of Our Lives Are There Any Safe, Green Banks? 8 Fires the Federal Reserve Board Needs to Put Out. 7 Ways to Stash Your Cash Now. Lessons from the Silicon Valley Bank Failure. The 2 Best Solar Stocks Which Countries Offer the Highest Yield for the Lowest Risk? Rebalance By the End of March Solar, EVs, Housing, HSAs -- the Highest-Yield in 2023? Are You Anxious or Depressed over Money? Why We Are Underweighting Banks and the Financial Industry. You Stream all the Channels. Should You Invest, Too? NASDAQ is Still Down -26%. Are Meta & Snap a Buy? 2023 Bond Strategy Emotions are Not Your Friend in Investing Investor IQ Test Investor IQ Test Answers Bonds Lost -26%, Silver Held Strong. 2023 Crystal Ball for Stocks, Bonds, Real Estate, Cannabis, Gold, Silver. Tilray: The Constellation Brands of Cannabis New Year, New Healthier You Tesla's $644 Billion Fall From Mars Silver's Quiet Rally. 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. Gardeners Creating Sanctuary & Solutions in Food Deserts. The Bank Bail-in Plan on Your Dime. Rebalancing Your Nest Egg IQ Test. Answers to the Rebalancing Your Nest Egg IQ Test. 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. Bonds. Banks. The Treacherous Landscape of Keeping Our Money Safe. I’ve been reading Samuel Pepys diary. In it he describes the Great Fire of London, when he stashed his gold coins in a carriage, and then had his wife and father bury it in the yard of their country home. Over a year later in the dead of night, he and a trusted friend dug it up in the shadows, out of sight (they hoped) from their neighbors. After the first lode was recovered, they tallied everything up and discovered they were still about 100 coins shy of the total. So they spent the rest of the night sifting through dirt to try and find the missing pieces. In the end, Pepys was relieved that they had only lost about 20 to 30 gold coins. Pepys remarked in his diary, “How painful it is sometimes to keep money, as well as to get it.” This is a sentiment many bond investors and even bank depositors have felt this year, after learning that bonds lost more than stocks in 2022, and watching four major U.S. banks fail. First Republic Bank was A- rated when it had to be rescued. Heartland Tri-State Bank of Kansas didn’t make as many headlines as Silicon Valley Bank, Signature Bank and First Republic did, when it failed in July 2023. We’ve been warning against bonds since 2011. Savers and fixed income investors weren’t being paid to take on the risk, when rock-bottom interest rates encouraged speculation and discouraged pensioners and bondholders with almost no Return On Investment. Asset prices (stocks and real estate) and leverage (debt) soared to new heights, while long-term bonds lost value, and became illiquid and negative-yielding. There have been many failures attributed to bad bond bets. MF Global was one of the more high-profile bankruptcies in 2011. Silicon Valley Bank is another tragic example, as is the $100 billion paper bond losses on the books of the Bank of America. However, how many of us are aware that we are likely holding some of this dodgy paper in our own retirement accounts – even if it is being managed by a fiduciary financial advisor? A Better Way to Get Safe At the bottom of the Great Recession, it was fairly easy to invest in real estate, and do quite well. Anyone with a great deal of money in their liquid assets on the safe side could consider having a safe income-producing hard asset (like a 2nd home that they rented out) that they had purchased for a good price. The ongoing income was a safer yield than bonds were. Real estate is unaffordable in most areas these days. So, that strategy is on pause for now. However, there are other ways to produce income by thinking creatively about all of the bills we pay. (We cover this in depth at our Financial Freedom Retreat.) Of course, we’re always going to need liquidity and cash, too, which means figuring out a way to protect our money from losses, while taking advantage of the 5.5% interest rates that are available this year. This is tricky, but doable. Below are the areas we’ll cover in this blog. Bonds. Tricky, but Doable. Keep the Terms Short and the Creditworthiness High Duration Risk Credit Risk Liquidity FDIC. CDIC. Diversification SIPC. Money Market Funds. Bond Funds and Annuities. Employer Retirement Plans One More Rate Hike? And here is more information on each point. Bonds. Tricky, but Doable. I’m seeing a lot of managed plans that are supposed to be conservative, which are getting loaded up with risky junk bonds and loan products. Getting safe is not as simple as asking your fiduciary financial advisor to protect your wealth. It’s important to know what you own and why, and to read the fine print on your statements. Even highly educated, successful business people can have trouble reading their statements, especially when the information that they’re being told is quite different from what is lying there in the fine print on the statement itself. (Are you verifying what you own with the fine print, or just having faith in what you’re being told?) As just one example (there are many), one of my clients had been told that he was earning 5-7% yield on his portfolio, and that his safe investments protected him from all of the losses in stocks. The statement itself revealed that this was not the truth at all. Due to the losses in the value of the bonds, the return was 1.7% year to date (not 5-7%), compared to 13.9% ROI in stocks. 2022 was a down year for equities. However, stocks had a gangbuster 2021. Even with 2022’s poor performance, stocks earned 7.3% annualized over the 3-year period and 10-12.5% over the 10-year period. Keep the Terms Short and the Creditworthiness High In 2024, the best policy for bonds is going to be to continue to keep the terms short, and the credit worthiness high. The reason for that is duration risk and credit risk. According to the Financial Stability Report released by the Federal Reserve Board on Oct. 20, 2023, “Gross leverage—the ratio of debt to assets—of all publicly traded nonfinancial firms remained high by historical standards.” Net leverage is also elevated. When companies that are already burdened with high debt hit troubled times, one of the options that has to be thrown on the table is debt restructuring through bankruptcy proceedings. Johnson & Johnson, a AAA-rated Dow Jones Industrial Average component, is seeking bankruptcy protection to help settle its talc lawsuit liabilities. (Companies can restructure debt obligations while remaining in business. We’ve seen this in the airlines, retail and automakers industries.) Duration Risk “I am more concerned with the return of my money than the return on my money,” Will Rogers. When are you supposed to get your money back? Is it after you will have been dead for a couple of decades? When someone makes a promise to pay you back, it’s a good idea to know exactly when that’s going to occur, and what events might happen in between now and then that might prevent them from keeping their promise of paying you back. Some businesses are still borrowing for terms longer than 30 years. Even an AA+ rated company, like Apple, can run into challenges over that long of a period of time, just like AAA- Johnson & Johnson is currently facing. If the company gets a credit downgrade or needs to raise money again at a higher interest rate, the value of your existing bond plunges. There is an elevated risk in long-term bonds at this time, partly due to rampant leverage in today’s Debt World. However, there is also a lot of war, political instability, supply chain bottlenecks, inflation, strikes and other challenges to the peace and prosperity of Main Street and Wall Street. Typically, you’ll get a higher interest rate for taking on the additional risk of duration. However, we’re currently getting paid more for short-term bonds than long-term. That will change, which is why annual rebalancing of our wealth plan is important. Credit Risk With over half of the S&P 500 at or near junk-bond status, including most American banks, there are a lot of reasons to be conservative about who you loan money to (in your bond) and how long they have before they have to give it back. Commercial real estate is one industry that is vulnerable right now. However, casinos, cruise ships, hotels, airlines and auto manufacturers are also highly leveraged with low (junk bond) credit ratings. At minimum, it’s important to know the credit rating, leverage, revenue growth and future prospects of the entity you’re loaning the money to (not just the credit rating, as we learned with First Republic Bank and Johnson and Johnson). Liquidity Having access to your money is key, particularly in uncertain times. However, if you buy a risky bond, you might have difficulty finding someone to take it off your hands. If you are able to find a buyer, they’re going to want to buy it on the cheap. That is another reason why we don’t want to reach for yield in today’s overleveraged, volatile world. We risk having our safe assets become illiquid. Now would be a good time to separate the short-term, high quality bonds in our portfolio from the toxic, overleveraged, long-term. Yes, there is a chance that interest rates will start being cut in the future (as soon as late 2024?). While in a normal world, that would help the value of our existing bonds to increase, the matter is complicated when the bonds are low quality and long-term (unless the maturity date is very near). Unless there is a massive growth streak, these firms may have to unload some of their obligations in order to keep operating. Debt restructuring means everyone with a claim gets paid less than par. (Shareholders typically get shafted, which is why stocks are riskier than bonds.) FDIC. CDIC. When Silicon Valley Bank failed, there was one uninsured depositor with over $5 billion, and many other uninsured depositors, as well. I’m sure that played into why the FDIC, Treasury and Federal Reserve came together to embrace a rule that allowed them to make a one-time exception and cover uninsured depositors. These government institutions have taken steps since then to force banks to improve their balance sheets because they do not want to have any more bailouts. How much money do you have sitting at your bank? Is it above the FDIC levels? Why not consider a few FDIC-insured CDs in other creditworthy banks? Federally insured short-term CDs are paying a decent interest rate these days. Diversification Consider diversifying across banks, so that our wealth is federally insured as much as possible. We might also consider having treasury bills (in our own country). Here again, keep the terms short and the creditworthiness high. Long-term government bonds lost -26% of their value last year. They pay less than the short-term issues. Many brokerages make it easy to purchase short-term treasuries within our self-directed retirement accounts. Consider having rolling short-term maturity dates. As the landscape for bonds changes, there will come a time to start adding mid-term duration for the higher credit quality countries and companies with good growth prospects on the horizon. For now, there is a lot of risk in corporate bonds. However, there are also a few opportunities. Again, one must step gingerly to avoid illiquidity, negative yield, and principal loss. However, diversifying, while keeping the terms short (1-3 years) and the creditworthiness high, will go a long way to protecting us from today’s volatile, uncertain world. SIPC. Money Market Funds. Money market funds can lose value and are not FDIC insured. When they lose favor, the share price can plunge as investors run for the exits. (Money market funds had to be rescued in the Great Recession.) The SIPC is not as well-funded or as safe as federally insured banks. There are loopholes in the bank sweep programs that many brokerages offer as a way to get our cash FDIC-insured. I outline a lot of these challenges in my blog from June 2021. (Click to access.) Money market funds no longer have redemption gates. However, they are required to impose liquidity fees if too many people leave at the same time. Bond Funds and Annuities. Bond funds are also losing value. Many have expenses that knock the yield down by one percent or more. Bond funds, pension funds and insurance companies (annuity providers) have investments in illiquid long-term bonds; they loan to commercial real estate and other projects that will need to borrow in 2024 at a much higher rate than they did between 2009 and 2021. According to the Financial Stability Report, “Bond and loan funds that hold assets that can become illiquid during periods of stress remained susceptible to large redemptions. Life insurers continued to rely on a higher-than-average share of runnable liabilities.” Annuities are not federally insured; they are backed by the company that issues the promise. If they are tied to an index, they might also lose value in a recession. Employer Retirement Plans It can be difficult to get safe from the bond challenges in our employer retirement account. If we read the fine print on what is offered in the fixed income or safe category, and are confident that we have selected the best choice, then that’s a good start. However, there are a few other things to consider. One might be to deposit only up to the employer’s match into your employer retirement account, and put the rest into self-directed retirement accounts, including a Health Savings Account (if you’re an American). You’ll have more freedom and choices in your self-directed accounts than the couple of dozen mutual fund options available in your 401K or RSP. Having a more holistic approach to our wealth plan, rather than just depositing into our 401(k) or RSP and checking off the boxes as best we can, will make a huge difference in our quality of life today, and our security tomorrow. We cover all of this at our Financial Freedom Retreat, which is a complete money makeover. One More Rate Hike? The Summary of Economic Projections from the September 20, 2023 FOMC meeting indicated that there could be another rate hike in the November or December 2023 meeting, which is negative for bond values. The board members are also projecting rate cuts in 2024, which is positive. Of course, all of this is fluid and reliant on incoming data. According to Federal Reserve Board Chairman Jerome Powell in a speech to the Economic Club of New York, “Additional evidence of persistently above-trend growth, or that tightness in the labor market is no longer easing, could put further progress on inflation at risk and could warrant further tightening of monetary policy.” That’s Fed-speak for “interest rates could rise.” This uncertainty may appear to make it more difficult to separate the toxic bonds from those that will return to full value and get paid back in full, and will be something that most financial advisors will cite as a reason to do nothing. However, a general rule is that higher credit quality and shorter terms will reduce your risk, while risky bonds could continue to lose value due to the potential of a credit downgrade or debt restructuring (bankruptcy). A harsh recession would be the reason that interest rates get cut, which will be hard for the low credit quality companies to endure without an event that would be negative for bondholders. If you’d like an unbiased 2nd opinion on your personal plan, we offer that through our private coaching. Email info@NataliePace.com for pricing and information. Bottom Line Today my thoughts and prayers are with anyone displaced from their home, embroiled in the horrors of war, or trying to make ends meet in a world of inflation when life doesn’t add up. These hardships and tragedies are heartbreaking. And they also add risk to all of us. There’s a reason why peace and prosperity are interlinked so often in grammar. War, natural disasters, pandemics, bank failures, supply chain bottlenecks, skyrocketing debt, inflation, nationalism and elevated asset prices can be perilous to our fiscal health. Navigating to safety in such an environment requires careful planning and execution. While protecting our wealth is not going to end war and create peace on the planet, it can put us in a better position of operating from strength instead of fear, anger and distress. A healthier, wealthier you can make positive contributions to humanity and our shared home planet. Join us for our Online New Year, New You Financial Freedom Retreat. Jan. 13-15, 2024. Email info@NataliePace.com or call 310-430-2397 to learn more. Register by Halloween 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 8-15, 2024. Email info@NataliePace.com to learn more. Register with friends and family to receive the best price. Click for testimonials, pricing, hours & details. There is very limited availability, and you must register early to ensure that you get the exact room you want. This retreat includes an all-access pass to all of our online training for a full year for two! Natalie Wynne Pace is an Advocate for Sustainability Financial Literacy & Women's Empowerment. Natalie is the bestselling author of 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 5th edition of The ABCs of Money and the 2nd edition of Put Your Money Where Your Heart Is were released in 2021. 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 Apple Podcast. Watch videoconferences and webinars on Youtube. Other Blogs of Interest 7 Rules of Investing Air B N Bust? Santa Rally 2023 or Time to Get Defensive? Barbie. Oppenheimer. Strikes. Streaming Wars. Netflix. Monero: A Token of Trust? 13 Lifestyle Choices to Reduce Waste, Pollution & CO2 & Save a Boatload of Dough. China Bans Apple 11-Point Green Checklist for Schools. Artificial Intelligence and Nvidia's Blockbuster Earnings Report Biotech in a Post-Pandemic World Summer Sweepstakes 10 Wealth Secrets of Billionaires and Royals. What Happened to Cannabis? Bank of America has $100 Billion in Bond Losses (on Paper) The USA AAA Credit Rating is on a Negative Watch. Lithium. Essential to EV Life. I'm Just Not Good at Investing. Investors Ask Natalie. Should I Buy an S&P500 Index Fund? Investors Ask Natalie. Bonds Lost More than Stocks in 2022. Tesla's Model Y is the Bestselling Car in the World. 2023 Company of the Year Sell in May and Go Away? Do Cybersecurity Risks Create Investor Opportunities? Writers Strike, While Streaming CEOs Rake In Hundreds of Millions Annually. I Lost $100,000. Investors Ask Natalie. Artificial Intelligence Report. Micron Banned in China. Intel Slashes Dividend. Buffett Loses $23 Billion. Branson's Virgin Orbit Declares Bankruptcy. Insurance Company Risks. Schwab Loses $41 Billion in Cash Deposits. The Debt Ceiling Crisis. What's at Stake? Fiat. Crypto. Gold. BRICS. Real Estate. Alternative Investments. BRICS Currency. Will the Dollar Become Extinct? Empty Office Buildings & Malls. Frozen Housing Market. The Online Global Earth Gratitude Celebration 7 Green Life Hacks The Debt Ceiling. Will the U.S. Stop Paying Bills in June? Fossil Fuels Touch Every Part of Our Lives Are There Any Safe, Green Banks? 8 Fires the Federal Reserve Board Needs to Put Out. 7 Ways to Stash Your Cash Now. Lessons from the Silicon Valley Bank Failure. The 2 Best Solar Stocks Which Countries Offer the Highest Yield for the Lowest Risk? Rebalance By the End of March Solar, EVs, Housing, HSAs -- the Highest-Yield in 2023? Are You Anxious or Depressed over Money? Why We Are Underweighting Banks and the Financial Industry. You Stream all the Channels. Should You Invest, Too? NASDAQ is Still Down -26%. Are Meta & Snap a Buy? 2023 Bond Strategy Emotions are Not Your Friend in Investing Investor IQ Test Investor IQ Test Answers Bonds Lost -26%, Silver Held Strong. 2023 Crystal Ball for Stocks, Bonds, Real Estate, Cannabis, Gold, Silver. Tilray: The Constellation Brands of Cannabis New Year, New Healthier You Tesla's $644 Billion Fall From Mars Silver's Quiet Rally. 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. Gardeners Creating Sanctuary & Solutions in Food Deserts. The Bank Bail-in Plan on Your Dime. Rebalancing Your Nest Egg IQ Test. Answers to the Rebalancing Your Nest Egg IQ Test. 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. 7 Rules of Investing. In times of uncertainty, it helps to go back to the basics. Rather than hope and pray that things go well – that our wealth is growing but also protected from losses – it’s a better idea to do a quick checkup to make sure that we are adhering to time-proven wealth strategies. Even if someone else is tasked with managing our money, it will be our gain (woohoo!) or loss (ouch), if the plan isn’t properly protected. Most managed plans do whatever the market does, while a properly diversified plan earns gains in bull markets and protects us from losses in bear markets and recessions. That’s why it’s important for us to be the boss of our money, and seek out an unbiased 2nd opinion on our current plan from someone who understands Modern Portfolio Theory. (All broker-salesmen say they know this, but few actually employ it.) Below are two examples of people who had faith that their financial advisor was protecting and diversifying them, and telling them the truth about that, when in fact they had a great deal to lose. E had suffered a lot of losses during the Great Recession, both in stocks and in real estate. She told her financial advisor that she wanted a conservative allocation. Her broker-salesman put her into dividend-paying stocks. E was actually invested 87% in stocks, which is appropriate if you’re about 13 years old. E was close to retirement. In a downturn, she was vulnerable to losing half or more of her wealth. F wanted to get income while also protecting his principal. His fiduciary financial advisor told him he was earning 5-7% income on his conservative investments. Yet his own statement reflected that he was really only earning 1.8%, when you factor in how much he had lost on the risky bonds that his broker purchased. Should he just hold the bonds to term, even though he had already lost tens of thousands in principal? Many of the bonds were very long-term, in addition to having low credit quality. As just one example, he had a junk bond that wouldn’t pay him back until 2074 (decades after he has died). In the meantime, it was losing a lot of money, with the potential of more principal losses on the horizon. So, what are the basics of investing? Here are some of the things we will cover in this blog. 1. Always keep a percentage equal to our age safe. 2. Overweight safe if we are nervous or would like a more conservative plan. 3. Diversify. 4. Know what is safe in a world where bonds are losing more than stocks, and banks are failing. 5. Rebalance regularly. 6. When we wait for the headlines, we’re late. 7. Stick to our plan. And here is more information on each point. 1. Always keep a percentage equal to our age safe. As we get closer to retirement, we can’t afford to lose money. Buy and hold is built on the idea that over time we can make up any losses. However, using bull markets to earn back losses is really just riding a Wall Street rollercoaster. Whether we are young or old, losing a great deal of our wealth will lower our FICO score. It might make it difficult for us to pay our bills, or, in the worst case scenario, we might lose our home. Protecting our principal from losses on an age-appropriate basis is an easy way to ensure a that our financial home is protected from any market downturn. The Dow Jones Industrial Average dropped -55% in the Great Recession (down to 6549) and took almost seven years to return to its Oct. 2007 highs. The NASDAQ Composite Index plunged -78% in the Dot Com Recession and took 15 years to crawl back to its March 2000 level. 2. Overweight safe if we are nervous, or would like a more conservative plan. Those people who overweighted safe (as our sample pie charts and email notifications prompted them to do) earned gains in the Dot Com and the Great Recessions, when most people lost more than half of their wealth. The strategy also outperformed the bull markets in between. When we are worried about the economy, or are interested in a more conservative allocation, just overweight a little safe – act a little older than we are. Stocks really are the best performers over time, as you can see it in the chart below. However, equities and equity funds can also be the most volatile, and typically suffer the greatest losses during bear markets. Most people don’t buy low because they can’t. They’ve lost too much money. 3. Diversify You might notice from the chart above that small companies perform better than large companies. As you can see in the chart below, the NASDAQ Composite Index (with more growth stocks) far outperformed the Dow Jones Industrial Average (with more value-oriented holdings) over the five-year period. We can increase performance by making sure that we have value and growth, small, mid, and large caps, and four hot industries. Check out the sample pie chart below. If you would like to personalize your own sample pie chart, just click to access our free web app, or email info@NataliePace.com with FREE WEB APP in the subject line. 4. Know what is safe in a world where bonds are losing more than stocks and banks are failing. The bank failures of March seem far away, however, all financial services companies remain at risk, which is why we continue to underweight banks and the financial industry in our sample pie charts. A lot of that has to do with the industry’s exposure to long-term bonds in vulnerable high-debt industries, with the greatest concern being commercial real estate. There are ways to earn a reasonable return that is pretty safe. It’s tricky, however. In short, we want to keep the credit worthiness high, and the duration short. We’re going to be hosting a What’s Safe? Bond Master Class this Saturday, where we will be discussing FDIC, SIPC, MMFs, CDs, bonds, annuities and more. If you are interested in joining us, email info@nataliepace.com with Bond Master Class in the subject line. 5. Rebalance regularly. Regular rebalancing is an important part of our wealth plan. Obsessively watching our portfolio is not a good idea. Neither is trying to time the markets. Once, twice, or three times a year rebalancing ensures that we are capturing gains and increasing our wealth, while protecting our investments from downturns. It is also a Buy Low, Sell High plan on autopilot. 6. When we wait for the headlines, we’re late. One of the reasons why market timing doesn’t work is that most of us are waiting for the headlines as our prompt on what to do. However, as you can see in the chart below, the recession doesn’t get announced until close to the stock market bottom. So, if we wait for the recession announcement, we’ll actually be selling low. Conversely, when everyone is excited about all the gains in the market, we’re often very close to the market top. That is why regular rebalancing and proper diversification, while keeping the right amount safe from principal losses, works better than market timing, Buy & Hold or headlines. 7. Stick to our plan. There is a lot of financial noise swirling around us all of the time. Marketing whizzes cloak themselves as financial geniuses, and then punch our emotions to a 10 in order to sell us the only thing that’s going to work when everything goes to hell in a handbasket (a product they are profiting from promoting, which can sometimes be a Pump and Dump Scheme). If we want to gamble on a meme or social media video, then consider doing so in one of our hot slices, or as an education allotment in our budget. The crypto winter, the cannabis crash and the gold/silver doldrums have taught many of us to make sure that we’re not gambling or betting the farm on any one get-rich-quick scheme. Bottom Line It’s important for us to take ownership of our wealth plan, and be the boss of our money. Learning the basics of life math can help us build a solid financial house that can protect our wealth from the volatility of stocks and the vulnerability of bonds, while also allowing us to keep compounding gains. There are, of course, a few tricks to the trade. For a complete money makeover, consider joining us at our New Year, New You Financial Freedom Retreat January 13-15th, 2024 online. Register by Halloween and you will receive the lowest price and a complimentary 50-minute private prosperity coaching session (value: $400). Email info@nataliepace.com to learn more and register now. Chances are we’re still a little complacent, even if we are also a little worried. That’s because the markets have recovered 12.8% of last year’s -19.6% losses. Never confuse a bull market with wisdom! Wisdom and time-proven 21st Century strategies are the cure. 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 Join us at our Jan. 13-15, 2024 New Year, New You Financial Freedom Retreat. Learn nest egg strategies, how to get hot and diversified, and 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 info@NataliePace.com to register. Learn the 15+ things you'll master and read testimonials in the flyer (link below) and on the home page at NataliePace.com. Register by Halloween (10.31.2023) to receive the best price and a complimentary 50-minute private prosperity coaching session (value $400). Join us for our Online New Year, New You Financial Freedom Retreat. Jan. 13-15, 2024. Email info@NataliePace.com or call 310-430-2397 to learn more. Register by Halloween 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 8-15, 2024. Email info@NataliePace.com to learn more. Register with friends and family to receive the best price. Click for testimonials, pricing, hours & details. There is very limited availability, and you must register early to ensure that you get the exact room you want. This retreat includes an all-access pass to all of our online training for a full year for two! Natalie Wynne Pace is an Advocate for Sustainability Financial Literacy & Women's Empowerment. Natalie is the bestselling author of 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 5th edition of The ABCs of Money and the 2nd edition of Put Your Money Where Your Heart Is were released in 2021. 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 Apple Podcast. Watch videoconferences and webinars on Youtube. Other Blogs of Interest Air B N Bust? Santa Rally 2023 or Time to Get Defensive? Barbie. Oppenheimer. Strikes. Streaming Wars. Netflix. Monero: A Token of Trust? 13 Lifestyle Choices to Reduce Waste, Pollution & CO2 & Save a Boatload of Dough. China Bans Apple 11-Point Green Checklist for Schools. Artificial Intelligence and Nvidia's Blockbuster Earnings Report Biotech in a Post-Pandemic World Summer Sweepstakes 10 Wealth Secrets of Billionaires and Royals. What Happened to Cannabis? Bank of America has $100 Billion in Bond Losses (on Paper) The USA AAA Credit Rating is on a Negative Watch. Lithium. Essential to EV Life. I'm Just Not Good at Investing. Investors Ask Natalie. Should I Buy an S&P500 Index Fund? Investors Ask Natalie. Bonds Lost More than Stocks in 2022. Tesla's Model Y is the Bestselling Car in the World. 2023 Company of the Year Sell in May and Go Away? Do Cybersecurity Risks Create Investor Opportunities? Writers Strike, While Streaming CEOs Rake In Hundreds of Millions Annually. I Lost $100,000. Investors Ask Natalie. Artificial Intelligence Report. Micron Banned in China. Intel Slashes Dividend. Buffett Loses $23 Billion. Branson's Virgin Orbit Declares Bankruptcy. Insurance Company Risks. Schwab Loses $41 Billion in Cash Deposits. The Debt Ceiling Crisis. What's at Stake? Fiat. Crypto. Gold. BRICS. Real Estate. Alternative Investments. BRICS Currency. Will the Dollar Become Extinct? Empty Office Buildings & Malls. Frozen Housing Market. The Online Global Earth Gratitude Celebration 7 Green Life Hacks The Debt Ceiling. Will the U.S. Stop Paying Bills in June? Fossil Fuels Touch Every Part of Our Lives Are There Any Safe, Green Banks? 8 Fires the Federal Reserve Board Needs to Put Out. 7 Ways to Stash Your Cash Now. Lessons from the Silicon Valley Bank Failure. The 2 Best Solar Stocks Which Countries Offer the Highest Yield for the Lowest Risk? Rebalance By the End of March Solar, EVs, Housing, HSAs -- the Highest-Yield in 2023? Are You Anxious or Depressed over Money? Why We Are Underweighting Banks and the Financial Industry. You Stream all the Channels. Should You Invest, Too? NASDAQ is Still Down -26%. Are Meta & Snap a Buy? 2023 Bond Strategy Emotions are Not Your Friend in Investing Investor IQ Test Investor IQ Test Answers Bonds Lost -26%, Silver Held Strong. 2023 Crystal Ball for Stocks, Bonds, Real Estate, Cannabis, Gold, Silver. Tilray: The Constellation Brands of Cannabis New Year, New Healthier You Tesla's $644 Billion Fall From Mars Silver's Quiet Rally. 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. Gardeners Creating Sanctuary & Solutions in Food Deserts. The Bank Bail-in Plan on Your Dime. Rebalancing Your Nest Egg IQ Test. Answers to the Rebalancing Your Nest Egg IQ Test. 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. AirBnBust? Many Airbnb hosts are finding it more difficult to fill their rooms and homes, and have taken to social media to air their grievances. This is happening at a time when short-term rentals are still setting records, with August setting a record of 21.2 million nights booked (source: AirDNA), despite scorching hot temperatures, wildfires and a Florida hurricane. What’s going on? Where are all of these guests staying? Is Airbnb ready to bust? Or is it just the hosts who are in trouble? Vacancies are Up Superhosts have begun complaining of vacancies, of unfair treatment in host/guest squabbles, of squatters and unsavory guests who game the system, and more. Of course, the biggest concern is that their listings are sitting idle, or that they are having to lower their prices for the first time in years. According to AirDNA, the occupancy levels for short-term rentals dipped below 2019 levels in August, at just 60.4% occupancy on average for August 2023, which is -4.2% year over year. For those hosts who are just hoping to earn a little supplemental income, this might be fine. However, there are a lot of people who purchased a 2nd home in 2021, who are expecting the income generated by short-term rentals to cover the price of ownership, at minimum. As you can see in the chart above, summer tends to be the best in terms of occupancy. November and December could dip under 50% occupancy, if the trend line in 2023 shadows the occupancy levels of 2019. Why are occupancy levels dropping while more nights are being booked than ever? There has been a surge in supply (available listings). Supply is Soaring According to Airbnb CEO Brian Chesky in the 2Q 2023 earnings call of August 2, 2023, “In Q2, supply grew 19% year over year.” Time magazine (quoting data from AirDNA) reported that “The number of available short-term rental listings in the U.S. skyrocketed to 1.38 million in September… a 23.2% year-over-year increase.” The glut in supply has two primary causes. 2021 Vacation Home Buying In 2021, with mortgage interest rates at rock-bottom, cash accounts offering nothing to savers, and Work From Anywhere gaining in popularity, many homeowners decided to buy a 2nd home. Real estate brokers talked up all of the extra income homeowners could earn on Airbnb. (Real estate brokers benefit from the commissions on the home purchase.) Our team was getting inquiries left and right about this. Should I buy a home and rent it out? Buying high in real estate is risky, even if you are banking on covering most of your costs with rental income, especially if home prices, rental income or occupancy drop. (We cover this in our Financial Freedom retreats and our Real Estate Master Class. There is also a Real Estate section in The ABCs of Money 5th edition.) 2023 Strained Family Budgets Many Americans have burned through their savings and are looking for other ways to make ends meet. Renting out an extra bedroom, turning the garage into a studio, or even building a low-cost ADU* in the backyard has become popular. This trend is also increasing the supply of available short-term rentals. *Additional Dwelling Unit More Affordable Prices? Airbnb CEO Chesky reported in the 2Q 2023 earnings call that “hosts have started lowering their prices, with more of them offering weekly and monthly discounts.” While this is great news for housing unaffordability (if the trend continues), it could be a disaster for hosts who purchased that 2nd vacation rental in the past few years, who now have to lower their prices to compete. There have been reports of some fed-up hosts leaving the short-term market, and turning to long-term tenants – off the Airbnb platform. Airbnb Revenue So far, Airbnb is showing no signs of a bust. While hosts are suffering from higher vacancies and lower prices/revenue, Airbnb is posting record revenue and profits. The company had $8.4 billion in revenue and $1.89 billion in net profit in 2022. (More hosts in more markets is working for the company.) Airbnb’s second quarter revenue was up 18% year over year, and the company is expecting 14-18% YOY growth in Q3 2023, with revenue of $3.3 to $3.4 billion. 3Q 2023 results should be announced around November 3, 2023. Before you move into an investment, the price-earnings ratio on Airbnb is a lofty 38. Additionally, the travel sector tends to be hit hard when the economy slows down or a recession finally arrives, as do most stocks. A rising tide lifts all ships, while a sinking tide can drown them. Airbnb versus Hotels Airbnb and other short-term rental websites are being blamed for everything from the problems in hospitality commercial real estate to housing unaffordability – not just in the United States, but around the world. Many cities have cracked down on Airbnb listings. Some require hosts to register with the city and pay hotel-like bed taxes. Others, like New York City and Santa Monica, California, have an outright ban on short-term rentals. Many hotels are raising their room rates and enjoying year-over-year revenue growth. However, many still have a debt hangover from the Great Recession, which was exacerbated by the pandemic lockdown and COVID protocol. A lot of beloved hotel brands are carrying a great deal of legacy debt. Wynn, MGM and Hilton are all speculative grade (junk bonds). Marriott, Las Vegas Sands and Hyatt are at the lowest wrong of investment grade (as is Expedia, the owner of VRBO). By comparison, Booking.com (Priceline) has a credit rating of A- (S&P Global) and Airbnb’s debt-equity ratio is .46 (source: Morningstar). If you’d like an updated Travel Stock Report Card (from Oct. 1, 2023), email info@nataliepace.com with Travel Stock Report Card in the subject line. Airbnb: Not the Only Game in Town Many different hosting platforms are now very active. A lot of hosts who used to be exclusively on Airbnb are now branching out to other platforms. VRBO has always been a well-known and strong competitor. However, Booking.com has added hosts to its hotel listings. Other popular platforms include TripAdvisor, CraigsList (where a lot of hosts try to get around regulations) and TravelNurses.com. While hotel prices remain higher than the average short-term rental listing, guests have an incentive to keep opting for the house-share platforms. However, will hosts find the shrinking occupancy, increased competition and lower revenue worth the trouble? Sharing platforms like Airbnb have to navigate between pleasing the hosts on their platform, while ensuring a quality experience for their guests, all while having never seen the majority of the properties they offer (unlike hotels!). Airbnb is anticipating that artificial intelligence will aid them with their customer care and dispute resolution going forward. Bottom Line The AirBnBust is happening to hosts more than the company (so far). However, travel and hospitality companies suffer greatly when the economy enters a recession, or when people can’t afford to take a vacation. With personal savings rates at an all-time low and a potential recession on the horizon, it’s a good idea to be ahead of this trend and to make sure that our personal budget and wealth plan are intact. We will be hosting a Real Estate Master Class in Spring 2024. However, if you were one of those homeowners who purchased over the last few years, hoping to monetize on Airbnb, only to discover that you’ve got a lot of vacancies, it might be a good idea to do a risk analysis through our private coaching program or to attend our January New Year New You Financial Freedom Retreat. Click to discover the 15+ things you’ll learn, to read testimonials and for pricing and hours. Email info@nataliepace.com with questions. Register for the Jan. 2023 retreat by Halloween and receive the lowest price and a 50-minute private prosperity coaching session (value $400). "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 Join us at our Oct. 7-9, 2023 Financial Freedom Retreat. Learn nest egg strategies, how to get hot and diversified, and 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 info@NataliePace.com to register. Learn the 15+ things you'll master and read testimonials in the flyer (link below) and on the home page at NataliePace.com. Join us for our Online New Year, New You Financial Freedom Retreat. Jan. 13-15, 2024. Email info@NataliePace.com or call 310-430-2397 to learn more. Register by Halloween 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 8-15, 2024. Email info@NataliePace.com to learn more. Register with friends and family to receive the best price. Click for testimonials, pricing, hours & details. There is very limited availability, and you must register early to ensure that you get the exact room you want. This retreat includes an all-access pass to all of our online training for a full year for two! Natalie Wynne Pace is an Advocate for Sustainability Financial Literacy & Women's Empowerment. Natalie is the bestselling author of 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 5th edition of The ABCs of Money and the 2nd edition of Put Your Money Where Your Heart Is were released in 2021. 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 Apple Podcast. Watch videoconferences and webinars on Youtube. Other Blogs of Interest Santa Rally 2023 or Time to Get Defensive? Barbie. Oppenheimer. Strikes. Streaming Wars. Netflix. Monero: A Token of Trust? 13 Lifestyle Choices to Reduce Waste, Pollution & CO2 & Save a Boatload of Dough. China Bans Apple 11-Point Green Checklist for Schools. Artificial Intelligence and Nvidia's Blockbuster Earnings Report Biotech in a Post-Pandemic World Summer Sweepstakes 10 Wealth Secrets of Billionaires and Royals. What Happened to Cannabis? Bank of America has $100 Billion in Bond Losses (on Paper) The USA AAA Credit Rating is on a Negative Watch. Lithium. Essential to EV Life. I'm Just Not Good at Investing. Investors Ask Natalie. Should I Buy an S&P500 Index Fund? Investors Ask Natalie. Bonds Lost More than Stocks in 2022. Tesla's Model Y is the Bestselling Car in the World. 2023 Company of the Year Sell in May and Go Away? Do Cybersecurity Risks Create Investor Opportunities? Writers Strike, While Streaming CEOs Rake In Hundreds of Millions Annually. I Lost $100,000. Investors Ask Natalie. Artificial Intelligence Report. Micron Banned in China. Intel Slashes Dividend. Buffett Loses $23 Billion. Branson's Virgin Orbit Declares Bankruptcy. Insurance Company Risks. Schwab Loses $41 Billion in Cash Deposits. The Debt Ceiling Crisis. What's at Stake? Fiat. Crypto. Gold. BRICS. Real Estate. Alternative Investments. BRICS Currency. Will the Dollar Become Extinct? Empty Office Buildings & Malls. Frozen Housing Market. The Online Global Earth Gratitude Celebration 7 Green Life Hacks The Debt Ceiling. Will the U.S. Stop Paying Bills in June? Fossil Fuels Touch Every Part of Our Lives Are There Any Safe, Green Banks? 8 Fires the Federal Reserve Board Needs to Put Out. 7 Ways to Stash Your Cash Now. Lessons from the Silicon Valley Bank Failure. The 2 Best Solar Stocks Which Countries Offer the Highest Yield for the Lowest Risk? Rebalance By the End of March Solar, EVs, Housing, HSAs -- the Highest-Yield in 2023? Are You Anxious or Depressed over Money? Why We Are Underweighting Banks and the Financial Industry. You Stream all the Channels. Should You Invest, Too? NASDAQ is Still Down -26%. Are Meta & Snap a Buy? 2023 Bond Strategy Emotions are Not Your Friend in Investing Investor IQ Test Investor IQ Test Answers Bonds Lost -26%, Silver Held Strong. 2023 Crystal Ball for Stocks, Bonds, Real Estate, Cannabis, Gold, Silver. Tilray: The Constellation Brands of Cannabis New Year, New Healthier You Tesla's $644 Billion Fall From Mars Silver's Quiet Rally. 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. Gardeners Creating Sanctuary & Solutions in Food Deserts. The Bank Bail-in Plan on Your Dime. Rebalancing Your Nest Egg IQ Test. Answers to the Rebalancing Your Nest Egg IQ Test. 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. Santa Rally or Time to Get Defensive? Can the economy hold up with Brent oil prices at $95/barrel? The S&P500® is up 11.8% on the year – making back some of the -19.33% losses of 2022. However, the market trend over the past two months has been negative, with stocks shedding -6.9%. Long-term bonds lost even more than stocks last year, with -26% returns, and continue to be problematic with elevated credit and duration risk. Will there be a Santa Rally, or will the stock slide continue? How do we protect our wealth when bonds can lose principal and be illiquid? Learn why Apple’s choices may be the determining factor in the Santa Rally, and why getting a decent yield on the safe side of our wealth plan without the risk is so tricky. In this blog we’ll cover: · Pros and cons of a more defensive plan · Why we must know what we own even it is professionally managed We’ll also outline time-proven 21st Century strategies that: · Earned gains in the Dot Com and Great Recessions (when most people lost more than half of their wealth), · Are enthusiastically recommended by Nobel Prize winning economist Gary S. Becker, · Steer clear of toxic bond losses, and, · Make buying low and selling high as easy as a pie chart Here is additional information on each point. Pros and Cons of Adopting a More Defensive Plan Cons: There is almost no downside in acting our age in our wealth plan. A lot of people think an aggressive pedal-to-the-medal approach is going to earn more gains. However, that can result in a very volatile ride on the Wall Street Rollercoaster – one that can jack our emotions around to the point that we do the opposite of what we’re supposed to do. We get disgusted with losses and sell low. Our exuberance and hope that stocks will shoot the moon entices us to buy high. On the other hand, a well-diversified plan can include hot industries that increase performance, while a regular rebalancing plan prompts us to capture gains high and buy low. We can even get a reasonable interest rate these days, though navigating the credit and duration risk is tricky. A time-proven, 21st Century system based on Modern Portfolio Theory takes emotions out of the picture. This easy strategy earned gains in the Dot Com and Great Recessions, when most people lost more than half of their wealth, and outperformed the bull markets in between. Pros to a Defensive, Diversified Plan: When we: · Keep a percent equal to our age safe, · Understand what is safe in a Debt World, · Are properly diversified, · Rebalance regularly to remain properly diversified, and, · Consider overweighting safer when there are economic storms on the horizon, We can keep earning gains, even in recessions. Wealth is like health. Eating right and exercising goes a long way to keep our bodies healthy. Smart fiscal habits create a rich life. How Did Nilo Earn Gains in the Great Recession? Overweighting safe when we are concerned about the economy or the stock market heading south means that we could actually earn gains (like Nilo), when most people lose half or more of their wealth. In December 2007, I sent out an email to our subscribers warning that the coming recession was looking to be very stark. We suggested overweighting an additional 20% safe. A 60-year-old overweighting 20% safe, would only have 20% at risk in equities. If stocks lose half, that plan loses 10% on the at-risk side, and earned 8% or more on the bond side. As importantly, there was enough cash on hand to buy stocks low. This is one of the most important benefits of keeping enough safe. Most people don’t buy low because they can’t. They are out of cash. They have to hope and pray that their plan crawls back to even – something that took almost seven years in the Great Recession, and 15 plodding years in the Dot Com Recession. Life without cash is dire, and our FICO score hits rock bottom to boot. We Must Know What We Own Getting a defensive plan isn’t as easy as asking for one. One of my coaching clients sent over her holdings for a 2nd opinion. Even though she had told her financial advisor that she had very little risk tolerance, she was actually invested as if she were a teenager with most of her assets (87%) in stocks. This plan would have lost -61% in the Great Recession. As we get closer to retirement, we can’t afford to lose half or more of our wealth and then hope and pray for years to earn back losses. So, rather than having blind faith that someone else has set up a defensive plan for us, it’s important to know exactly what we own and understand the risk levels that we are exposed to, and what a truly, safe, diversified and defensive plan looks like. (I offer an unbiased 2nd opinion through our private coaching program. Email info@NataliePace.com for pricing and information.) Learn Time-Proven 21st Century Strategies Buy and Hold has become a popular mantra again, largely because we have been in a secular bull market since the bottom of the Great Recession (March 2009). However, it’s important to never confuse a bull market with wisdom. In the pandemic, the Dow Jones Industrial Average plunged -35% in just five weeks (between Feb. 19 and March 23, 2020) before the first restrictions were announced – before Main Street knew what was going on. (The big money always moves first.) Of course, the U.S. Treasury Department and Federal Reserve, along with reserve banks around the world, printed up a lot of cash/debt to keep the world from falling into a Great Depression during the pandemic. That is not going to happen the next time around. In fact, the U.S. Congress is currently at risk of a government shutdown on October 1, 2023, and the Federal Reserve Board is continuing to tighten monetary policy, with another potential rate hike in November or December. There is a very hot debate with policymakers on how to reduce the debt, balance our budgets better and get on a path to better fiscal husbandry. The debt, combined with political chaos, has caused two rating agencies to strip the U.S. of our AAA rating (Fitch Ratings on August 1, 2023 and S&P Global on August 5, 2011). The Santa Rally Typically, the last quarter of each year is positive on Wall Street. However, December 2018 was the worst performance of that month (-9.2%) since the Great Depression. What happened? Apple: Lessons from 2018. Recently, Apple made headlines when the Chinese government restricted the use of iPhones in their government agencies. Since 19% of Apple’s revenue comes from Greater China, this is putting the company at risk of a revenue decline greater than the -1.4% percent they saw in the most recent quarter’s earnings. This is an issue because the stock market is heavily reliant on Apple’s share repurchases. The cold shower investors took in December 2018 had a lot to do with Apple curtailing their buybacks without any warning. In 2018, Huawei became the #2 smart phone maker (by units) behind Samsung and ahead of Apple. As a result of Huawei’s popularity in Asia, Europe and most countries around the world (outside of North America), Apple’s Christmas quarter in 2018 saw revenue decline by 5%. Will Huawei’s resurgence dip into Apple sales and profits this Christmas, too? (Learn more in my Apple blog; click to access.) However, Apple’s woes in China are not the only risk factors that could put coal in investors’ stockings this Christmas. The risks to the economy include the following: · $95/Barrel Oil · FOMC Rate Hike (Nov. or Dec.) · Student Loan Payments Start Up Again on October 1, 2023 · There is a risk of a Government Shutdown in the U.S. effective October 1, 2023 · Inverted Yield Curve (100% correlated with recessions) · Union Strikes – SAG-AFTRA, UAW, hotel workers are all on strike · Recent credit Downgrades of the USA & Banks, with 3 high-profile bank failures · Bonds: Duration and Credit Risk · Empty Office Buildings and Malls, with High Borrowing Costs · BRICS Currency and Alliance · When the U.S. Sneezes, the World Catches a Cold The current predictions of 2.1% GDP growth in 2023 weren’t banking on $95/barrel oil or a government shutdown. High oil prices are highly correlated with recessions. Again, rather than trying to market time or Buy & Hold, proper diversification and strategic rebalancing will keep us safe, hot, protected and diversified. Of course, we must also know how to navigate a world where bonds are losing more than stocks. Long-Term Debt Risks Credit risk and duration risk remain a problem in bonds and dividend-yielding stocks. Over half of the S&P500® is at or near junk bond status. The traditional ways of getting safe, including bonds, money market funds, CDs, or annuities, are not as risk-free as we might be hoping. That is why we spend one full day on What’s Safe at our Financial Empowerment Retreat. Getting safe is tricky, but doable. There are a number of steps that we can take to protect our wealth on the safe side of our liquid portfolio, which is not supposed to lose principle. NASDAQ Stocks Took 15 Years to Recover As we get closer to retirement, we just can’t afford to lose half or more of our wealth. $1 million caved into $450,000 (-55%) in the Great Recession, and sank to a low of $220,000 (-78%) in NASDAQ stocks during the Dot Com Recession. It took almost 7 years for the Dow Jones Industrial Average to crawl back to even in the Great Recession. It took 15 years for NASDAQ stocks to recover back to their highs set in March of 2000. Again, having a diversified plan that we rebalance once, twice or three times a year means that we are able to capture gains in the bull market, while also protecting ourselves from the losses of the bear market. Bottom Line Losing half or more of our wealth makes it hard to make ends meet, plunges our FICO score, and might even make us vulnerable to losing our lifestyle and home. The economic horizon remains too murky, with too many risks, to see clear skies and smooth sailing into the Santa Rally. Fortunately, rather than gambling on an uncertain tomorrow, we can embrace a recession-proof, economic-storm-resistant wealth plan today. It’s important to fix the roof while the sun is still shining. When we wait for the headlines, it’s too late. "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 When someone says, “let me do it for you,” prepared to be oppressed. When someone says, “let me teach you how,” prepare to fly. Join us at our Oct. 7-9, 2023 Financial Freedom Retreat. Learn nest egg strategies, how to get hot and diversified and 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 info@NataliePace.com to register. Learn the 15+ things you'll master and read testimonials in the flyer (link below) and on the home page at NataliePace.com. Join us for our Restormel Royal Immersive Adventure Retreat. March 8-15, 2024. Email info@NataliePace.com to learn more. Register with friends and family to receive the best price. Click for testimonials, pricing, hours & details. There is very limited availability, and you must register early to ensure that you get the exact room you want. This retreat includes an all-access pass to all of our online training for a full year for two! Natalie Wynne Pace is an Advocate for Sustainability Financial Literacy & Women's Empowerment. Natalie is the bestselling author of 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 5th edition of The ABCs of Money and the 2nd edition of Put Your Money Where Your Heart Is were released in 2021. 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 Apple Podcast. Watch videoconferences and webinars on Youtube. Other Blogs of Interest Barbie. Oppenheimer. Strikes. Streaming Wars. Netflix. Monero: A Token of Trust? 13 Lifestyle Choices to Reduce Waste, Pollution & CO2 & Save a Boatload of Dough. China Bans Apple 11-Point Green Checklist for Schools. Artificial Intelligence and Nvidia's Blockbuster Earnings Report Biotech in a Post-Pandemic World Summer Sweepstakes 10 Wealth Secrets of Billionaires and Royals. What Happened to Cannabis? Bank of America has $100 Billion in Bond Losses (on Paper) The USA AAA Credit Rating is on a Negative Watch. Lithium. Essential to EV Life. I'm Just Not Good at Investing. Investors Ask Natalie. Should I Buy an S&P500 Index Fund? Investors Ask Natalie. Bonds Lost More than Stocks in 2022. Tesla's Model Y is the Bestselling Car in the World. 2023 Company of the Year Sell in May and Go Away? Do Cybersecurity Risks Create Investor Opportunities? Writers Strike, While Streaming CEOs Rake In Hundreds of Millions Annually. I Lost $100,000. Investors Ask Natalie. Artificial Intelligence Report. Micron Banned in China. Intel Slashes Dividend. Buffett Loses $23 Billion. Branson's Virgin Orbit Declares Bankruptcy. Insurance Company Risks. Schwab Loses $41 Billion in Cash Deposits. The Debt Ceiling Crisis. What's at Stake? Fiat. Crypto. Gold. BRICS. Real Estate. Alternative Investments. BRICS Currency. Will the Dollar Become Extinct? Empty Office Buildings & Malls. Frozen Housing Market. The Online Global Earth Gratitude Celebration 7 Green Life Hacks The Debt Ceiling. Will the U.S. Stop Paying Bills in June? Fossil Fuels Touch Every Part of Our Lives Are There Any Safe, Green Banks? 8 Fires the Federal Reserve Board Needs to Put Out. 7 Ways to Stash Your Cash Now. Lessons from the Silicon Valley Bank Failure. The 2 Best Solar Stocks Which Countries Offer the Highest Yield for the Lowest Risk? Rebalance By the End of March Solar, EVs, Housing, HSAs -- the Highest-Yield in 2023? Are You Anxious or Depressed over Money? Why We Are Underweighting Banks and the Financial Industry. You Stream all the Channels. Should You Invest, Too? NASDAQ is Still Down -26%. Are Meta & Snap a Buy? 2023 Bond Strategy Emotions are Not Your Friend in Investing Investor IQ Test Investor IQ Test Answers Bonds Lost -26%, Silver Held Strong. 2023 Crystal Ball for Stocks, Bonds, Real Estate, Cannabis, Gold, Silver. Tilray: The Constellation Brands of Cannabis New Year, New Healthier You Tesla's $644 Billion Fall From Mars Silver's Quiet Rally. 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. Gardeners Creating Sanctuary & Solutions in Food Deserts. The Bank Bail-in Plan on Your Dime. Rebalancing Your Nest Egg IQ Test. Answers to the Rebalancing Your Nest Egg IQ Test. 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. Barbie. Oppenheimer. Strikes. Streaming. Netflix. Barbie smashes box office records for Warner Bros. Writers have a tentative deal with the studios. Actors are still on strike. Last night, the Writers Guild announced a tentative deal with the studios, which could potentially end the writers’ strike. The SAG-AFTRA union is interested in the details of the deal, which haven’t been disclosed yet. However, the actors’ strike continues. The production downtime since May is hard on the wallets of the actors, writers and everyone involved with the filmmaking process. It could also severely impact studio earnings in 2024 and beyond, if the strike isn’t resolved soon. All of the networks have programmed unscripted TV shows for the fall, which are unaffected by the strikes. Meanwhile, Barbie is breaking box office records for Warner Bros. It is Warner Brothers biggest hit in its 100-year history — bigger than Harry Potter and the Deathly Hallows Part II was for the studio. Oppenheimer is a close second to Barbie with $925.9 million vs. $1.38 billion in global box office receipts (as of early September 2023). Special shoutout to director Greta Gerwig for smashing many records, including opening weekend box office (female director) and highest grossing live-action picture (female filmmaker, global). The success of these two epic hits will boost the Q3 2023 earnings reports for both Warner Brothers, the studio that made Barbie, and Universal Pictures, the studio that released Oppenheimer. (Universal is part of NBCUniversal, which is owned by Comcast.) Does that make them great investments? Below are just a few of the things we’ll cover in this blog. Barbie (Warner Bros.) and Oppenheimer (Universal) Earnings Writers Strike a Deal. Actors are Still on Strike Streaming vs. Theatres Valuations Investing Barbie (Warner Bros.) and Oppenheimer (Universal) Earnings Warner Bros. Discovery and Comcast Corporation, the parent companies of Warner Bros. and Universal Pictures, are both heavily indebted. Both companies had flat year-over-year revenue in the second quarter (like most of the studios on the stock report card). Having an extra billion plus in revenue will certainly do wonders for both studios. However, it’s also important for investors to realize the impact that corporate debt has on these companies. Warner Bros. Discovery has been paying $900 million in interest semiannually, and lost $7.37 billion in 2022 (while paying CEO David Zaslav $39.3 million in 2022 and $246.6 million in 2021). Both Comcast and Warner Bros. Discovery are using proceeds from their blockbusters to repurchase debt that comes due in 2024 and 2025. S&P Global rates Warner Bros Discover BBB-, the lowest rung of investment grade. As an interesting aside, Christopher Nolan switched to Universal from Warner Bros. during the pandemic, when he protested Warner Bros. policy to release directly to streaming platforms (at a time when people couldn’t go to the theaters). There is talk that Warner Bros. is trying to woo him back… Nolan is quite a blockbuster box office phenomenon, with worldwide receipts of almost $6 billion (gross). Warner Brothers is expanding the London studios that made Barbie, the Harry Potter franchise and House of Dragon. DC studios will be based there, once complete. Writers Strike a Deal The Writers Guild began their strike on May 2, 2023 and struck a tentative agreement on September 24, 2023. In addition to compensation, artificial intelligence played a very central role in the dispute. The strike is not officially over until the WGA and the members approve of the terms, and the 3-year deal is inked. There haven’t been any details released about the agreement over AI. The deal could provide a framework for a settlement with the actors. Actors are Still on Strike The SAG-AFTRA strike officially commenced on July 14, 2023. However, the members have been walking the picket line with their writing colleagues since the onset of the writers’ strike. Streaming compensation and residuals have reduced the income of both writers and actors. Although both builds have superstars, the majority of the membership doesn’t make a living wage for Los Angeles, California. The Writers Guild alleges that the median wage of writers has actually gone down -14% over the past few years – -23%, if adjusted for inflation. If the writer’s deal with the studios includes strong limitations or an outright curtailment of artificial intelligence use for creative purposes, this bodes well for an early end to the SAG-AFTRA strike. We will know a lot more in the coming days. While this will be great news for hundreds of thousands, if not millions, of people whose livelihoods depend on the film industry, it is unlikely that it is going to solve the problem of inflation and unaffordability in the expensive cities, where a great deal of the studios are located. Streaming vs. Theatres Theaters are doing better than they were during the pandemic. However, they are still far below the revenue of 2019. AMC Theatres had revenue at $5.5 billion in 2019. The revenue was just $3.9 billion in 2022. An annual increase equal to the 15.56% revenue jump in the second quarter could get the sales up to $4.5 billion. Certainly, Barbie and Oppenheimer, which were both exclusive theatrical releases will help. However, a key piece of the puzzle is that AMC Theatres wasn’t able to turn a profit even before the pandemic. The company has lost money every year since 2016, with the exception of a slim net profit of $110.10 million in 2018. Valuations The studios, including Disney, Netflix, Comcast (Universal) Apple, Paramount and Warner Bros. Discovery are characterized with flat revenue growth and, with the exception of Paramount and Warner Bros. Discovery, high valuations. Price-earnings ratios range from 29 (Comcast and Apple) to 45 and 66 (Netflix and Disney, respectively). The average P/E is 17. Should a company like Netflix, with $4.5 billion in net profits in 2022, be valued at $168 billion? Should Apple, a company with negative year-over-year sales growth of -1.40% and almost $100 billion in net income be valued at $2.73 trillion – particularly when almost 20% of its revenue comes from China and there is a new government ban on iPhones? Email info@nataliepace.com if you would like a copy of our updated Studio Stock Report card. Investing In addition to having the most exciting upcoming quarterly earnings, Warner Bros. Discovery also has one of the more attractive price-earnings ratios, at just 7.23. However, as I’ve indicated above, an investment in Warner Bros. Discovery is also dogged by debt. Any company that has been around for a century is going to have a lot more legacy issues than the streaming and Internet-based companies that have only been around since the 1990s. Apple’s debt is elevated as well, with a debt-equity ratio of 1.81, largely because the company liked to park its European and Asian profits overseas, and borrow money in the USA (at a very attractive interest rate) to pay dividends and buyback its own stock. A quick end to the writers and actors strike could save the day for the studios in terms of content. However, the high valuations, debt loads, streaming wars and flat earnings make most investments in this space highly volatile. Most of the streaming stocks have seen their share prices soar and plunge repeatedly over the past five years. In addition to a hostile environment for the industry, the macro environment could be facing headwinds. The economy and the stock market have been very resilient this year, after losing almost -20% in 2022. Consumers, federal spending and businesses investing in technology and artificial intelligence have kept the economy strong amidst the rapid rise of interest rates. However, a lot of that support is expected to weaken. Student loan payments start up on October 1, 2023, after the pandemic pause. Delinquencies on credit card debt and auto loans are starting to rise. The personal savings rate has plunged to historic lows. And the government is about to be shut down because Congress can’t agree on spending cuts. GDP growth is expected to continue at a pace of about 2.1% for the full year. The Conference Board is predicting a mild recession in the first two quarters of 2024. Investors are forward-thinking. So if Wall Street pros sees signs of a contraction, stocks will weaken. 21st-century recessions have caused severe plunges in the major indices. Stocks sank -35% between Feb. 19 and March 23, 2020, during the pandemic. A million dollar investment in the Dow Jones Industrial Average dropped to $450,000 in the Great Recession, and plummeted to a low of $220,000 in the NASDAQ Composite Index, during the Dot Com Recession. One of the biggest risks to market performance for the rest of 2023 remains the ban that the Chinese government put on Apple iPhones. Apple buybacks have been a huge driver of stocks for over a decade, with almost $625 billion shares repurchased by the company. The last time Apple had a downside surprise was in the last quarter of 2018. The company ceased their buybacks that December, without any warning or announcement. The S&P500 took a dive of -9.18%, which was the worst December performance since the Great Depression. Of course, 2019 was a spectacular year for stocks. However, the secular bull market we’ve enjoyed since 2009 is quite abnormal. While staying invested for continued upside is a good idea, protecting your wealth from a downturn is also prudent. Market timing doesn’t work, but proper diversification and regular rebalancing with a capture gains mentality has been a spectacular 21st Century nest egg strategy. Bottom Line Investing in the smash hits Barbie and Oppenheimer is a lot more complicated than just cashing in on their box office success. A lot of the proceeds from both of these films is going to pay down debt. The industry is experiencing upheaval due to strikes and streaming wars. And many of the company stocks are overpriced. With individual companies, including studio stocks, it’s a great idea to have a buy low and capture gains high – early and often – policy. For your nest egg, it’s a good time to make sure that you have the right amount safe, are properly diversified and know what is safe in a year when banks have failed and bonds lost more than stocks. Full disclosure: I own positions in Warner Bros Discovery. It's time to learn the life math that we all should have received in high school. Join us at our Oct. 7-9, 2023 Financial Freedom Retreat. Learn nest egg strategies, how to get hot and diversified and 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 info@NataliePace.com to register. Learn the 15+ things you'll master and read testimonials in the flyer (link below) and on the home page at NataliePace.com. Join us for our Restormel Royal Immersive Adventure Retreat. March 8-15, 2024. Email info@NataliePace.com to learn more. Register with friends and family to receive the best price. Click for testimonials, pricing, hours & details. There is very limited availability, and you must register early to ensure that you get the exact room you want. This retreat includes an all-access pass to all of our online training for a full year for two! Natalie Wynne Pace is an Advocate for Sustainability Financial Literacy & Women's Empowerment. Natalie is the bestselling author of 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 5th edition of The ABCs of Money and the 2nd edition of Put Your Money Where Your Heart Is were released in 2021. 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 Apple Podcast. Watch videoconferences and webinars on Youtube. Other Blogs of Interest Monero: A Token of Trust? 13 Lifestyle Choices to Reduce Waste, Pollution & CO2 & Save a Boatload of Dough. China Bans Apple 11-Point Green Checklist for Schools. Artificial Intelligence and Nvidia's Blockbuster Earnings Report Biotech in a Post-Pandemic World Summer Sweepstakes 10 Wealth Secrets of Billionaires and Royals. What Happened to Cannabis? Bank of America has $100 Billion in Bond Losses (on Paper) The USA AAA Credit Rating is on a Negative Watch. Lithium. Essential to EV Life. I'm Just Not Good at Investing. Investors Ask Natalie. Should I Buy an S&P500 Index Fund? Investors Ask Natalie. Bonds Lost More than Stocks in 2022. Tesla's Model Y is the Bestselling Car in the World. 2023 Company of the Year Sell in May and Go Away? Do Cybersecurity Risks Create Investor Opportunities? Writers Strike, While Streaming CEOs Rake In Hundreds of Millions Annually. I Lost $100,000. Investors Ask Natalie. Artificial Intelligence Report. Micron Banned in China. Intel Slashes Dividend. Buffett Loses $23 Billion. Branson's Virgin Orbit Declares Bankruptcy. Insurance Company Risks. Schwab Loses $41 Billion in Cash Deposits. The Debt Ceiling Crisis. What's at Stake? Fiat. Crypto. Gold. BRICS. Real Estate. Alternative Investments. BRICS Currency. Will the Dollar Become Extinct? Empty Office Buildings & Malls. Frozen Housing Market. The Online Global Earth Gratitude Celebration 7 Green Life Hacks The Debt Ceiling. Will the U.S. Stop Paying Bills in June? Fossil Fuels Touch Every Part of Our Lives Are There Any Safe, Green Banks? 8 Fires the Federal Reserve Board Needs to Put Out. 7 Ways to Stash Your Cash Now. Lessons from the Silicon Valley Bank Failure. The 2 Best Solar Stocks Which Countries Offer the Highest Yield for the Lowest Risk? Rebalance By the End of March Solar, EVs, Housing, HSAs -- the Highest-Yield in 2023? Are You Anxious or Depressed over Money? Why We Are Underweighting Banks and the Financial Industry. You Stream all the Channels. Should You Invest, Too? NASDAQ is Still Down -26%. Are Meta & Snap a Buy? 2023 Bond Strategy Emotions are Not Your Friend in Investing Investor IQ Test Investor IQ Test Answers Bonds Lost -26%, Silver Held Strong. 2023 Crystal Ball for Stocks, Bonds, Real Estate, Cannabis, Gold, Silver. Tilray: The Constellation Brands of Cannabis New Year, New Healthier You Tesla's $644 Billion Fall From Mars Silver's Quiet Rally. 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. Gardeners Creating Sanctuary & Solutions in Food Deserts. The Bank Bail-in Plan on Your Dime. Rebalancing Your Nest Egg IQ Test. Answers to the Rebalancing Your Nest Egg IQ Test. 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. Monero: A Token of Trust? Money is a promise. Think of it as a token of trust. (It’s also a magic token of gratitude. For more on that, be sure to read The Gratitude Game.) When that promise is made by someone you don’t know, you’re vulnerable (the notoriously opaque Bernie Madoff). When that promise is made by someone who hasn’t been around very long, you’re unprotected (FTX and Sam Bankman-Fried). When that promise is made by someone who doesn’t have the means to keep the promise, you’re in trouble. Examples include a “loan” made to an out-of-work friend or family member, or a heavily indebted company that is at risk of restructuring their bonds, loans, pensions, annuities and other paper promises, such as has happened in the airlines and auto industries, but could also happen to uninsured bank depositors or with insurance company products, such as annuities and life insurance policies. With all of the risk and alarming headlines associated with “safe” products, including the banks that failed earlier this year, it’s easy to see the attraction of panacea promises. So, is crypto the cure? Should you “bank” with Monero, Bitcoin or another cryptocurrency, instead of at your low-rated local community bank or the corrupt kingmaker corporations? Let’s dive deeply into an examination of the pluses and minuses of crypto, cash and paper promises to determine the best way to keep our wealth and future safe. Below are the areas we’ll cover. Fiat Currency and Demagoguery Monero’s Team Crypto: Trading vs. Currency Protecting Our Principal Our Debt World Current Reserve Currencies & BRICS Interest Cash Cures And here is more information on each point. Fiat Currency and Demagoguery Populists and good marketers use words that stoke emotions. Once someone is on fire, it’s easier to lead them wherever you want them to go. You’ve heard the term “blind with rage.” Anger is fierce and reactionary. So, if the person on stage hammers home words that stoke fear and disgust again and again into our psyche, they can then drive our fury into the sale of their desire. In an email sent over by one of our tribe that was promoting Monero, the marketer mentioned the word “privacy” over and over again, and preached of a government plot to steal our liberty and economic freedom. There was no mention of the people behind Monero (whether they are saints, sinners or scam artists), or why anyone should trust that this relatively new crypto (less than ten years old) would protect our wealth better than banking (although, admittedly, there was a lot of ink given to the anonymous features of the coin, which appear to be true). Again, the foundation of currency is the trust that it will be protected from losses and at hand when we need to pay for something. This is something that we should be as sure as possible of. Rather than assurances (government-insured) or transparency (who is behind the operation), which was missing from the email and also from the Monero home page, the email had all of the markings of a carefully crafted paid-to-promote sales pitch. Celebrities, including Kim Kardashian, Tom Brady, Gisele, Matt Damon, and other “influencers,” have been compensated to talk up various cryptocurrencies over the past few years. In the worst case scenario, they were promoting pump-and-dump schemes or fraud. (Kim K. paid $1.26 million to settle charges by the SEC on Oct. 3, 2022.) Lesser-known influencers with fewer resources to do any due diligence rarely vet the people who are paying them to promote something. Sometimes the promoter is a serial pump-and-dump scam artist. If they get caught, they get slapped on the wrist by the SEC or another regulatory agency with a fine that is a small amount of the profits. Soon they’re back in business, with almost no downtime, sometimes under a new name or with a fresh-faced spokesperson or influencer. Monero’s Team Monero’s market cap is under $3 billion. That makes it a small company. As we teach at our Financial Empowerment Retreats, small caps are high risk investments. Risk is not a word you want to have associated with our cash. We take on risk in investments for the opportunity to earn gains and potentially a yield. In addition to being small, Monero is new – only nine years old. By comparison, Bitcoin is worth half a trillion dollars, and has gone as high as $1 trillion. Bitcoin was launched in January of 2009. All of the above concerns take Monero out of the cash column and land it squarely on the high-risk investment side of our nest egg. However, before you run off with that bet, consider that another red flag for Monero is its team. If you go to Monero’s website, you won’t find anything about the team behind the currency. However, if you do a search on the founder, you’ll quickly learn that Monero’s founder, Riccardo Spagni, was arrested for fraud and forgery in August of 2021. He has pleaded not guilty. The trial is pending. Most of the development team (aside from Spagni) choose to remain anonymous (another mark against transparency and trust). Although Monero promises privacy, there are accusations of data leaks to Interpol. And, whether you believe the reports or not, it makes sense that the only people using Monero as a currency are using it for illicit purposes. You can’t have a currency that is worth $10 one day and just $2 the next. Crypto Trading vs. Currency Another problem of relying upon cryptocurrency to replace cash is the volatility of the valuation. It’s called cryptocurrency, but it’s a better idea to think of it as crypto trading. The typical holding time for Bitcoin, the most widely held crypto coin, is 98 days – less than four months. Ethereum’s typical hold time is 51 days – less than two months. At $147.54, Monero has lost 72% from the high of $517.62/coin set on May 6, 2021. Imagine the worldwide roar and upheaval that would occur if the euro or dollar dropped by that much! The only people using cryptocurrency as a currency these days are people who are less concerned about the outlandish swings in valuation than they are with laundering their money, or with buying and selling on the black market anonymously. No business accepts crypto as payment right now, not even Tesla, a company that allowed customers to pay with Bitcoin for a couple of months in 2021. Also, think about it for a minute. The platform that promises to protect your secret identity, which might have the technological ability to do that, also surely has enough information not to do that. The founder entrusted with your faith is on trial for fraud and forgery. And the coin that you’re supposed to use instead of cash might be worth a couple of dimes instead of a full dollar, depending upon when you make your deposit and when you need to buy something. The marketing email that was sent out mentioned privacy and liberty multiple times, without once letting on about fraud, forgery, Interpol or devaluation. Protecting Our Principal The whole point of currency is that you aren’t putting your principal at risk – that you won’t lose your money. As I mentioned above, cryptocurrency is still being used for the most part as a trading platform; people (and whales) are investing in the hopes of getting rich. You don’t buy dollars or euros hoping that it’s going to soar and make you a zillionaire. And if you are trading FOREX, then you’re again investing, not saving. We always want an appropriate amount invested and an appropriate amount safe that has a low risk of losing value. As we get closer to retirement, it becomes more important to protect our wealth. Our Debt World The International Monetary Fund recently disclosed that there is $235 trillion in global debt versus only $12 trillion in foreign exchange reserves. This is unprecedented. U.S. and Swiss banks failed in the first quarter of 2023. There is a lot to be concerned about. Getting your cash and paper promises safe is so tricky that we spend a full day on it at our Financial Freedom Retreat. There are definitely some sound strategies to employ to reduce risk, keep the money in the family, stop making the billionaire corporations rich at our own expense and even save thousands annually. If we have a carefully crafted plan, we can also have an evergreen flow of income that is better diversified and protected than just stocking cash in federally-insured accounts or under the mattress. So, there is no substitute for learning what works and what doesn’t rather than having blind faith that someone else (usually a broker/salesman) is protecting us. Current Reserve Currencies & BRICS There is a new BRICS currency that was recently launched by Brazil, Russia, India, China and South Africa. It’s real. However, it’s in very early stages. None of the countries associated with the currency have built up the kind of international trust that a money token really needs to have before it is widely adopted. Yes, China, Russia and India have been increasing their gold reserves. However, as you can see in the chart below, their combined value is still much lower than the holdings in the Western world. The US has never defaulted on its debts (although the country did get a credit downgrade from Fitch Ratings to AA+ on August 1, 2023). Interest Short term U.S. treasury bills are paying 5.5% at this time. Gold, silver, and cryptocurrency do not pay interest (with the added problem of the price volatility and the possibility that you might lose your principal). Gold has been a very poor performer over the 10-year period, while silver is still worth less than half of its high of $48.70, set on April 28, 2011. Because many corporations have very low credit ratings, and there are a lot of zombie corporations, getting a safe interest rate on something that doesn’t put your principal at risk is quite tricky. That’s why we spend one full day on what safe at our financial empowerment retreat, and why I encourage everybody to have a full review of their wealth plan, including what they think are safe assets, now. Cash Cures There is no one cure for keeping our cash safe. However, there are definitely some sound strategies that will do a better job than anything you’ll receive in your email or even from your financial planner (who can only really sell you certain “safe” products that their company offers). You can learn what’s safe in a Debt World at our Financial Freedom Retreat or by getting a 2nd opinion or private coaching from me personally. Email info@NataliePace.com for pricing and information. If you are intrigued by cryptocurrency, the risk, volatility and fact that it is a trading platform and not a currency make it an investment, not a cash cure. If you are interested in a savings account or a certificate of deposit, it’s important to read the fine print, and to observe the federally insured limits. If you are being lured into an annuity, be sure to know the creditworthiness of the insurance company that is guaranteeing it because there is no backstop if the company fails. (Don’t take the bait that the company has been around for a century; AIG wouldn’t be in business, if the U.S. hadn’t bailed the company out, and we’re not supposed to do that next time.) If you have a pension, same thing. A heavily indebted company can restructure their debt, which means giving most people they owe money to a haircut on the promise. We have to pay our bills. So, we have to have cash, and we have to have cash flow. One of the ways that we address this issue in today’s Debt World is by offering solutions that reduce our bills and the amount of money that we have flying out the window each month. Don’t underestimate the power of keeping your money by not writing checks that you don’t have to write. There’s more low-hanging fruit than most of us realize in this regard. Basically we want to stop making billionaires rich, and keep thousands of that money annually, which we can then use for things we like a lot more than bills. Bottom Line Which would you rather will your children and ancestors, a home they can live in, a digital wallet that they might have trouble accessing, or a promise made by a bankrupt company? If they inherit an energy-efficient home and save thousands annually that would have made the utility company rich, imagine how much better off they’ll be in life. And if the money in the family is much more than the needs of your children and grandchildren, then think about income-producing hard assets that you purchase for a good price (housing is one). Having too much in any one thing in today’s world can be risky. Being property rich and cash poor can put your property at risk. Buying high in real estate can be one of the worst nightmares you’ll ever experience, particularly if you’ve leveraged it. Bonds lost more than stocks did last year with losses of -26%. (We saw this coming a decade ago and have been warning that we’re not getting paid to take on the risk.) Again, none of this is rocket science (because our team does the hard work behind the scenes to make it easy for our clients). Our time-proven, 21st-century track record works because it is properly diversified and rebalanced regularly. In a Debt World with so many money pits, it is essential that we are the boss of our money, that we know what we own, that we’ve allocated it accurately, and that we rebalance regularly to capture gains and keep the appropriate amount safe and diversified. The concerns are real. The solutions are actually easy as a pie chart, once you learn them. The emails that promise to protect our liberty and privacy are paid-to-promote at best and a pump-and-dump at worst, not a panacea. It's time to learn the life math that we all should have received in high school. Join us at our Oct. 7-9, 2023 Financial Freedom Retreat. Learn nest egg strategies, how to get hot and diversified and 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 info@NataliePace.com to register. Learn the 15+ things you'll master and read testimonials in the flyer (link below) and on the home page at NataliePace.com. Join us for our Restormel Royal Immersive Adventure Retreat. March 8-15, 2024. Email info@NataliePace.com to learn more. Register with friends and family to receive the best price. Click for testimonials, pricing, hours & details. There is very limited availability, and you must register early to ensure that you get the exact room you want. This retreat includes an all-access pass to all of our online training for a full year for two! Natalie Wynne Pace is an Advocate for Sustainability Financial Literacy & Women's Empowerment. Natalie is the bestselling author of 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 5th edition of The ABCs of Money and the 2nd edition of Put Your Money Where Your Heart Is were released in 2021. 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 Apple Podcast. Watch videoconferences and webinars on Youtube. Other Blogs of Interest 13 Lifestyle Choices to Reduce Waste, Pollution & CO2 & Save a Boatload of Dough. China Bans Apple 11-Point Green Checklist for Schools. Artificial Intelligence and Nvidia's Blockbuster Earnings Report Biotech in a Post-Pandemic World Summer Sweepstakes 10 Wealth Secrets of Billionaires and Royals. What Happened to Cannabis? Bank of America has $100 Billion in Bond Losses (on Paper) The USA AAA Credit Rating is on a Negative Watch. Lithium. Essential to EV Life. I'm Just Not Good at Investing. Investors Ask Natalie. Should I Buy an S&P500 Index Fund? Investors Ask Natalie. Bonds Lost More than Stocks in 2022. Tesla's Model Y is the Bestselling Car in the World. 2023 Company of the Year Sell in May and Go Away? Do Cybersecurity Risks Create Investor Opportunities? Writers Strike, While Streaming CEOs Rake In Hundreds of Millions Annually. I Lost $100,000. Investors Ask Natalie. Artificial Intelligence Report. Micron Banned in China. Intel Slashes Dividend. Buffett Loses $23 Billion. Branson's Virgin Orbit Declares Bankruptcy. Insurance Company Risks. Schwab Loses $41 Billion in Cash Deposits. The Debt Ceiling Crisis. What's at Stake? Fiat. Crypto. Gold. BRICS. Real Estate. Alternative Investments. BRICS Currency. Will the Dollar Become Extinct? Empty Office Buildings & Malls. Frozen Housing Market. The Online Global Earth Gratitude Celebration 7 Green Life Hacks The Debt Ceiling. Will the U.S. Stop Paying Bills in June? Fossil Fuels Touch Every Part of Our Lives Are There Any Safe, Green Banks? 8 Fires the Federal Reserve Board Needs to Put Out. 7 Ways to Stash Your Cash Now. Lessons from the Silicon Valley Bank Failure. The 2 Best Solar Stocks Which Countries Offer the Highest Yield for the Lowest Risk? Rebalance By the End of March Solar, EVs, Housing, HSAs -- the Highest-Yield in 2023? Are You Anxious or Depressed over Money? Why We Are Underweighting Banks and the Financial Industry. You Stream all the Channels. Should You Invest, Too? NASDAQ is Still Down -26%. Are Meta & Snap a Buy? 2023 Bond Strategy Emotions are Not Your Friend in Investing Investor IQ Test Investor IQ Test Answers Bonds Lost -26%, Silver Held Strong. 2023 Crystal Ball for Stocks, Bonds, Real Estate, Cannabis, Gold, Silver. Tilray: The Constellation Brands of Cannabis New Year, New Healthier You Tesla's $644 Billion Fall From Mars Silver's Quiet Rally. 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. Gardeners Creating Sanctuary & Solutions in Food Deserts. The Bank Bail-in Plan on Your Dime. Rebalancing Your Nest Egg IQ Test. Answers to the Rebalancing Your Nest Egg IQ Test. 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. |
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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