Insurance Deductibles as a Consumer Shopping Device

Unlike Government services, whose charges bear no relation to the cost of providing what’s being offered, private insurance is based on cost experience to the company. Therefore, the consumer can easily shop the exact service wanted, at its lowest charge.

The higher the deductible in a policy, the less administrative and outlay expense to an insurance company and the more the consumer can receive per premium dollar. The principle makes it possible for the purchase of maximum coverage for catastrophic events.

Policies that pay for every small bill cannot accomplish this for the insurance consumer. (See the Earl J. Weinreb NewsHole® comments and @BusinessNewshole at Twitter.)

Investing Overseas

Many large American companies do business overseas. Investing in the S&P 500 will therefore give you a measure of global diversification.

If you buy overseas investments to broaden strategy, there are emerging or developing, as well as developed countries in which to participate. Using indexed funds or exchange traded funds (ETFs), you can invest around the globe with varying regional emphasis.

Use indexed funds which are not hedged against currency value changes. This also helps diversify against inflation in the U.S. and acts as a currency hedge. (See the Earl J. Weinreb NewsHole® comments and @BusinessNewshole at Twitter.)

The U.S. is Fast Becoming Another European Financial Disaster

Add the total obligations of the U.S., and you find much higher debt in terms of GDP and other standards than that of Europe and even Greece.

Yet, America is supposed to be the leader of the free world, not a tiny, struggling country. We are called on to be a global leader,  as an economic catalyst,  and a defender of democratic principles.

Unfortunately,  politicians responsible for the financial crisis-to-come, as the result of U.S. debt, may be out of office when disaster occurs.

And the blame then will be placed on the shoulders of administrations who will attempt to clean up the impossible mess.(See the Earl J. Weinreb NewsHole® comments and @BusinessNewshole at Twitter.)

Will Your Working Wife be Cheated on Her Social Security?

Mrs. Jones  worked and had Social Security taxes deducted from her earnings.Mrs. Smith never worked and thus never paid Social Security taxes.

In our example: Their husbands, Mr. Jones and Mr. Smith, both worked and paid Social Security taxes. Both Mr. Jones and Mr. Smith earned the same income for the same number of years and retired at the same time.

Their spouses, Mrs. Jones and Mrs. Smith retired. .Both received one half of their husband’s benefit.

Obviously. Mrs. Jones paid taxes and got no benefits in return. She got the same as Mrs. Smith who made no contribution.

If Mrs. Jones was entitled to more benefits than Mr. Jones, she would get merely some extra compensation, not the full compensation for her contributions.

I have written repeatedly why private Social Security could be fair and remunerative, while Uncle Sam dispenses a pseudo and unfair plan. (See the Earl J. Weinreb NewsHole® comments and @BusinessNewshole at Twitter.)

Official Financial Upheaval

Left-leaning politicians  make a mess out of an ordinary economic cycle and blame it on others.

What was a simple sub-prime mortgage problem, that normally would lead to a minor recession, has become a near Depression and Stagnation, comparable in many ways to that of the 1930’s, because of political meddling and bumbling.

The Great Depression observers see how Franklin D. Roosevelt over-reacted with spending. Then he over-taxed and over-regulated business and created a Depression psychology that prevailed until World War II, which acted as a giant economic stimulus.

The same political meddling and bumbling is occurring today. The extraordinary spending has produced a crises, in the form of senseless, business-stifling regulation and taxes. (See the Earl J. Weinreb NewsHole® comments and @BusinessNewshole at Twitter.)

The Rule of 72 to Measure Interest Rates

The Rule of 72 is a quick way to get an approximate reading of interest rates or total returns.

Example: An investment takes about 12 years to double. How much is the annual return?  Simply divide 72 by 12 and you get 6. It thus takes about 6% return for the investment to double.

What if the investment doubles in six years. Then divide 72 by 6 for an answer of 12. The investment is producing returns at about the rate of 12% a year.

Just divide 72 by the number of years to get an idea of return. Or 72 by returns to get the number of years for the approximate time to double the principal.(See the Earl J. Weinreb NewsHole® comments and @BusinessNewshole at Twitter.)

Daily Securities Prices and Your Strategy

Stock market prices are set, as pros say, at the margin. In other words,

just a relatively few current traders set the price of your holdings. Even though you may be a long-term investor sitting on the securities market sidelines.

So, if that is your investing strategy, it makes sense to be disciplined and keep to your original strategy. Avoid daily market influences on that strategy. (See the Earl J. Weinreb NewsHole® comments and @BusinessNewshole at Twitter.)

Chinese and also India Gold

Gold jewelry bars and coin ownership have lots to do with gold commodity pricing. As opposed to the influence of gold investors and traders who have no interest in the metal in the form of jewelry.

This preference varies by country. It’s been conventionally very high in China and in India, In the U,S, it’s use is primarily when the inflation risk is high, but primarily when the dollar’s value becomes risky as a reserve currency.

The value of gold can go higher if the Chinese government begins to think more like Americans running from the weak dollar. (See the Earl J. Weinreb NewsHole® comments and @BusinessNewshole at Twitter.)

Learn to Look at Compound Interest Tables

Most investors are not familiar with the impact of compounding returns. For example,  how much does 1% more return actually mean over five years, or more?

Or how much you save over twenty years by holding mutual funds with management fees of 0.3%, as compared to funds where fees are 0.7% or 1.0% annually.

So they have no idea of how to measure the performance of their investment holdings.

Yet such tables can be had at no cost from the internet or standard directories. (See the Earl J. Weinreb NewsHole® comments and @BusinessNewshole at Twitter.)

Your Comfort Factor When Investing

You should not just seek comfort when investing, so you can sleep nights, Also consider the risk you can take, taking into account  your age and family situation. Most media financial suggestions never concern themselves with these essential factors.

Think  before you invest about risk/reward considerations. You do sometimes have to strive for less to sleep nights. (See the Earl J. Weinreb NewsHole® comments and @BusinessNewshole at Twitter.)

Higher-Priced Stocks as an Alternative to Penny Stocks

As a follow-up to my advice against buying so-called penny stocks:

Does it always make any difference in quality buying higher priced stocks? Not if you still cannot determine genuine value.

And most analysts on Wall Street cannot truly do this from outside the companies they attempt to evaluate.. Analysts really are often guessing at what goes on in the companies whose stocks they look at.

It’s the reason why I always suggest investment in low-cost, indexed mutual funds or exchange traded funds (ETFs). (See the Earl J. Weinreb NewsHole® comments and @BusinessNewshole at Twitter.)

“”Penny” Stock Traps

So-called penny stocks can’t be bought or sold for pennies any more. They can be priced for a few dollars a share.

By definition, they are  any very low-priced shares of small companies sold in limited markets. Share values are often doubtful at best.

Their managements’ or promoters issue large numbers of shares, where pricing is thus low, but where values  are often minimal, if they exist at all.

Yet, those who ought to know better buy them. They think something priced low has to be a bargain. That assumption provides the best way to get fleeced. (See the Earl J. Weinreb NewsHole® comments and @BusinessNewshole at Twitter.)

Are Junk Bonds Really Junk?

There’s a decided error that has been perpetuated for many years in the lexicon used by both Wall Street professionals and Main Street average investors. It concerns the use of the term “junk” bonds.

The term denotes bonds whose credit ratings are less than what are considered prime.

Because of the term’s public misconception, too many investors avoid these bonds, despite the fact they have an important role to play in an investor’s portfolio.

The risk of potential defaults can be completely minimized when the bonds are in diversified holdings such as low-cost mutual funds or ETFs. Defaults are factored into bond pricing, which, for the most part, can often provide excellent investment opportunities.

Moreover, the use of duration principles can make any bond investment portfolio easily managed.(See the Earl J. Weinreb NewsHole® comments and @BusinessNewshole at Twitter.)

Should You Buy a Variable Annuity?

                           

The early-withdrawal penalty and the early surrender fees of an annuity make it useless for short-term saving. With a variable annuity you pay higher tax rates and expenses for your funds  than you would pay elsewhere.

You would have to hold an annuity for about fifteen years for the benefits of tax deferral to outweigh the extra costs.   
                        

Annuity buyers should therefore exhaust all other tax-deferral options before considering that option. (See the Earl J. Weinreb NewsHole® comments and @BusinessNewshole at Twitter.)

Should You Invest in an Annuity in a Retirement Account?

 

                           

Annuities provide  tax deferrals as do IRAs and 401 (k)s.

So never invest in an annuity inside a tax-advantaged account such as an IRA or 401 (k), as you would get no added tax benefits. (See the Earl J.Weinreb NewsHole® comments and @BusinessNewshole at Twitter.)

Annuity Negatives

You can't withdraw prematurely from an annuity without being penalized. Fixed and equity-indexed annuities are subject to these early  surrender fees, specified in the contract, usually before seven years.

                           

What’s more, earnings are taxed as income, not at the long-term capital gains rate.

Moreover, annuities usually charge more than 1% a year for the death benefit, something you may not require as your objective..(See the Earl J. Weinreb NewsHole® comments and @BusinessNewshole at Twitter.)

Look at Percent Profit Margins, Not Misleading Big Profit Sums

The public gets mislead when they look at so-called big profits of companies, and not the percent of profits. And politicians take advantage of this fact when they organize their class warfare against business.

Companies deal in big numbers, which can mean little. What is important are their percentages of profit or loss which can be significant or minuscule.

A perfect example are the petroleum companies which earn a small percentage, a few cents on the dollar after taxes, but the total dollars appear huge when added up in one sum.(See the Earl J. Weinreb NewsHole® comments and@BusinessNewshole at Twitter.)

Ignorant Financial Media

I have constantly criticized the mainstream media as being too politicized to properly educate the public. The financial as well as ordinary media bear guilt.

One example is the way they seek out scapegoats such as Wall Street or major banks; never athlete pay; just those evil top executives.

Another example: When someone in the financial community shorts securities while also buying for the long term, that investor is automatically deemed to be a crook by those who are not steeped in legal, risk control financial strategies. (See the Earl J. Weinreb NewsHole® comments and @BusinessNewshole at Twitter.)

The Risk of the “Winners Curse”

The expression has often been used by Wall Street over the years.

In an auction or  any bid for a securities purchase where the “winner” gets to make  the purchase, that buyer may well overpay. 

Actual facts wouldn’t suggest the purchase. Yet  so many investors feel they have made a great deal of an investment that reflects this very phenomenon. (See the Earl J. Weinreb NewsHole® comments and @BusinessNewshole at Twitter.)

Defaults May Not Truly Hurt Corporate Bonds

Securities analysts and media pundits often warn buyers of the danger of holding corporate bonds with lower grade or “junk” status. They usually advise the public to beware of potential defaults, especially when times are bad.

That can often be investment nonsense.

Financial media  go to optimistic or pessimistic extremes. True, defaults are bad. But potential defaults are always priced into the bond prices.

Therefore,  when default rates sometimes go to 10% and higher in recessions, interest rates accommodate, and the investor may still be way ahead of the game. So, the adjusted return could still be better than other investment returns available.

And most of all, diligently use duration principles. I have commented extensively on the explanation of duration. (See the Earl J. Weinreb NewsHole® comments and @BusinessNewshole at Twitter.)

Trying to Out-smart Other Investors?

I have done my independent research over the years; the evidence is clear.

Investors don’t have to out-smart someone else in order to succeed. Investing isn’t a Zero-Sum Game where there is a loser for every winner. Yet, that is the way most would-be investing pundits operate.

No one has a monopoly on smart strategies, or when to use them. For every seller, there is a buyer, probably just as smart, and informed.

The fact is, there is no perfect investment strategy. Sticking to one’s disciplined strategy is the answer. Discipline, I found, is the solution because it logically helps tilt odds for investment success in your favor.

Adjusting the odds for success favorably is the ultimate investment goal. Discipline of strategy, rather than constant changing of investment ideas does the trick over the long run. (See the Earl J. Weinreb NewsHole® comments and @BusinessNewshole at Twitter.)

The Three Types of Annuities

                           

There are three types of annuities:

           

One: A Fixed annuity. You get a guaranteed rate of payment and return for a set period.  Rates will never drop below what’s guaranteed. You won't lose funds. However, you lose the potential for earnings growth. Inflation is a decided risk when you are assured fixed income.

                           

Two: A Variable annuity. Funds are invested  similarly to mutual funds. You anticipate substantial gains but fund values can fall. You'll pay relatively high management fees. Moreover,, your beneficiaries will pay taxes on any earnings accumulated during your lifetime. If not in an annuity, such gains are unrealized and tax-free  capital gains.

                       

Three: An Equity-indexed annuity. You get a set rate and fixed payments but  more opportunity for growth. The annuity is tied to an index such as the S & P 500. (See the Earl J. Weinreb NewsHole® comments and @BusinessNewshole at Twitter.)

The Media and Our Useless Financial Regulation

The financial and general media are to blame for not explaining what they report as blurbs. They talk about regulation without putting it in laymen’s terms. They do not properly explain financial risk.

Risk was never overcome by regulation and the media can more fully explain this, if they ever truly tried to find facts out for themselves and report them so the average person could understand.

Example: Fannie Mae and Freddie Mac were risky semi-government agencies who were instrumental in our subprime debacle. There was no lack of regulation. But the 2008-2009 financial meltdown has  resulted in even more useless and restrictive regulation. (See the Earl J. Weinreb NewsHole® comments and @BusinessNewshole at Twitter.)

Buying an Annuity Includes Buying Life Insurance

                       

You buy an annuity with a lump sum payment or you can make a series of payments Your payments grow tax-deferred at a fixed or variable rate.

An annuity always includes a life insurance factor.]with a death benefit. You pay for that benefit.

The question to ask yourself up front:  Do you need or want that death benefit at its cost? (See the Earl J. Weinreb NewsHole® comments and @BusinessNewshole at Twitter.)

The Real Odds of Winning a Lottery

Folks buy lottery tickets because of the tremendous "payoffs." The politicians behind the sales know it.

If the payoff is 60 cents on the dollar, the buyers don’t seem to care. Most would buy lottery tickets if the payoff were 10 cents on the dollar.

And I haven’t yet considered the added bite of income taxes, to make  the lottery a joke for its players.(See the Earl J. Weinreb NewsHole® comments and @BusinessNewshole at Twitter.)

Vetting Financial Experts

Financial experts are all around but no one is vetting them for  expertise. Be careful. That can be dangerous for longer-term investors who permit themselves to be impressed by the advice the “expert” offers.

No Wall Street or financial community commentator or analyst has had to pass a genuine business-achievement test to determine expertise.

Forget about those fancy letters that many have attached after their names. They’re supposed to signify the experts had passed some test, or belong to a group who have. The public assumes this testing and association bestows a knowledge that members know what they are talking about when it comes to financial business operations. 

Passing a test of conventional thinking doesn’t necessarily confirm expertise.(See the Earl J. Weinreb NewsHole® comments and @BusinessNewshole at Twitter.)

The Federal Debt is a Major Burden

The U.S. is spending itself into its own version of a bankrupt Greece and other overseas countries. The problem: Unlike Greece and the others, the free world depends on us and the sanctity of our dollar and its convertibility.

The reported federal) debt only tells us what the government partially owes to the public. It doesn't  account for hidden obligations, nor to what's owed to seniors, veterans, and  retirees.

The federal government financial condition worsened drastically last year, beyond the new debt taken on to meet the budget deficit

The deficit between spending commitments and revenues last year now equals more than one-third of the America’s gross domestic product.

Corporations would be required to count these new liabilities when they are taken on

or borrowed.

The  administrations still insists that future growth will cover this gap. But we are talking about years and years of at least 5% to 7% annual GDP growth. This is unlikely when there is nothing in the future to entice a vibrant economy but job-defeating inflation, higher interest rates that accompany inflation and the specter of higher taxes and regulation.(See the Earl J. Weinreb NewsHole® comments and @BusinessNewshole at Twitter.)

Media-Preferred Securities Picks

Media-preferred securities lists are good for filling space for radio/TV/cable, newspapers, magazines and blogs. They make up content for investors thinking of ideas.

Those lists do little for investors  because those who devise lists are usually off the mark.

It’s very difficult to pick securities that are going to go up in a short time. Top executives in the companies themselves know little about how well their corporate securities will do in the market-place, where conditions other than their company’s fortunes affect market value. How can you depend upon a analyst working from a perspective outside the company?

That is why index funds so often outperform managed security portfolios. (See the Earl J. Weinreb NewsHole® comments and @BusinessNewshole at Twitter.)