That Was The Week That Was-2nd Week May

 I was having coffee with a client last week and was asked what I thought of financial scribbler and talking head Suzie Orman. Because small children may read this for grade school credit I’ll skip what I said exactly and following that my client said that the Suze told her listeners that people need to accumulate five to seven million dollars to retire comfortably. How in the world can regular people do that, my client asked.

The answer is that regular folks can’t. It is also one of the biggest lies that people in the financial planning business tell clients. It’s a two part lie. The first is that someone needs to accumulate a jillion dollars. Second you can only withdraw 4% to assure that you will have sufficient money for the rest of your life.

Examining the two part lie we also note that the same planners say that people should be able to earn 6%-7% with reasonable assuredness on their savings but only withdraw 4%. Now that doesn’t sound right. Right? Next the industry preaches that people can only take out 4% to ensure that their pool of money doesn’t dissipate. So why is it that some people can buy an annuity and get a total income of about 9% on their money? And why can’t the same people do the same thing without buying an annuity?

People are living longer but not forever. The lifespan of someone who is age 65 can expect to live to 83 if they are a male and 85 if female. If someone has extraordinary genes they may live a few years longer. Those not so blessed not so long. The fact is that by calculating total returns of 5%-6% earned per year plus how much really needed to live on for x amount of years a retiree can use both principal and earnings on their savings to enjoy a long happy retirement. There is no rule that states you can only take just a small percentage of your retirement pool to live on.

If you want to see how that works for you call or email me. I have some dandy calculators that’ll run  numbers for you. Call 586 295 0430. You will see for yourself you won’t need a jillion dollars…or even half a jillion..

Gold!?  It’s in Bear Territory. Ole Hansen, head of commodity trading at Saxo Bank in Copenhagen said, ‘The investment community or those trading paper gold in futures and ETPs are still heading for the exits.’ Gold which has been a currency trade has fallen 12+% in 2013. There may be more pain to come. For now the picture has changed. If you recall Goldman Sachs called it earlier in the year that gold would close around $1600. Now the estimate is $1550. This after gold closed over $1900 in September 2011.

 Results 2013…so far…so good…

Robert C. Doll, CFA, senior portfolio manager with Nuveen Asset Management, ‘The full set of economic data supports our view of a slower second quarter in a post sequesteration environment.’ In other words, don’t expect the same numbers in the second quarter…

The stock keeps on a rolling and the expenses keep a-coming. Bank of America just settled another litigation this time with MBIA for $1.6 billion, plus a $500,000 line of credit. Good news for MBIA as its stock soared. BofA said this would be a short-term hit. The bank also reported $4.3 billion in litigation expense in 2012.  a mere piffle…

Harrisburg, Pa. I’ve been there once. There are several things about the city I know. It had a flood. It has Mayflower relations living about. The airport (when I flew in) you were either landing into a mountain or off a mountain, I cannot remember which. And a some folk have a bizarre sense of gratitude. I gave a speech to a financial group and as a ‘thank-you’, the organizers gave me a a fifteen pound plaster bust of some long dead luminary, that I had to lug through several airports. Now we can add SEC fraud charges for failing to disclose financial troubles to investors. The 2009 city budget citied it has having Aaa credit when in fact Moody’s had downgraded it to Baa1. The good news is the the SEC has decided the city has had enough bad financial news that it will not fine it for its misdeeds. Currently Harrisburg is trying to avoid bankruptcy. Probably the cost of all those plaster busts they handed out to speech givers when cuff links or key chain would’ve been more appreciated.

On nothing but air markets moved to historical highs Tuesday! Excuse me, market movements are never wrong. It’s the individual investor that makes the right or wrong bet. Markets – never. So ends Econ 101.

Wednesday More of the same. Talking to a friend and we agreed that this serious market momentum hasn’t really been seen since 2000 when the Naz powered ahead on just a whiff of news on a new-dot-com product and ignored anything bad. Am I the only one remembering ‘ Irrational exuberance?’  Then it all fell apart (not saying this will), and the Naz hasn’t reached its all time high since 2000. The real news Wednesday was China. Just as I was researching China ETFs the news came out Chinese consumer inflation rose more than expected in April while factory prices fell for the 14th consecutive month! To solve this problem, which also includes slowing of economic growth from 7.9% to 7.7% last quarter the Chinese Central Bank may rely on boosting infrastructure investments and cutting taxes, said Xu, a former central bank researcher.  Chinese factories are saddled with excess capacity due to weak demand.  Food prices increased 4% last month, primarily vegetables.  Zhou Hao, China economist at ANZ in Shanghai said, ‘Monetary policy is likely to stay relatively accommodative as China’s economic recovery remains fragile.’ Still double or triple our growth and a billion people!?

Can we talk? Seriously? Much has been made of the unemployment numbers…Former US Secretary of the Treasury, Paul Craig Roberts said, ‘The 7.5% unemployment rate is not the result of new jobs generated by a recovering economy. It is the result of discouraged workers who, unable to find jobs, give up looking and, thus, cease being counted in the work force.’ The collapse in the participation rate is not a result of a return to prosperity. While the current rally, in this writer’s opinion, is nice. It reminds me of the year 2000 just before the Naz hit 5000 and hasn’t seen or been close to that number since. Central Bankers have made investments cheap by flooding the world economies with money. John Nyaradi at Dow Jones writes:

• April non-farm payrolls was mediocre. But Wall Street acted like it was a huge win.
• ISM nonmanufacturing report broadly missed expectations.
• April manufacturing posted a drop.
• Euro-zone manufacturing fell.
• EU unemployment came in at 12.1% in March.
• Buffett said that when the Fed raises rates it’ll be a ‘shot heard around the world.’ Too bad Bernanke won’t be there. He is expected to leave in January.
• Finally, 63.3% of all active adult Americans who are working fall into what the economists call the labor participation rate. That’s the lowest measure since 1979, and has actually risen as the headline employment rates continues to drop.

The Fed has said that it will start raising rates when unemployment numbers hit 6.5%. While you may think that is right around the corner, experts contend that it may be several years before that happens. In the meantime the US economy may go through another recession before rates are hiked!

Looking for the stock that’s a little off? Cramer dubs Open Table with shares up 68% year to date. Plenty of room to run, sez he. He calls it the one stock with no competition.

Finally- FDIC closes 2 banks last Friday bringing the total to an even dozen year to date.

Questions call Paul @ 586 295 0430 or write him at pstanley@westminsterfinancial.com. Share this blog with someone who cares.

SECURITIES OFFERED THROUGH WESTMINSTER FINANCIAL SECURITIES, INC. MEMBER FINRA/SIPC.