January 3, 2017 Meeting Notes

We had an excellent meeting on January 3, 2017 on the patio at Mulligan’s.We welcomed 3 new people attending for the first time.  All attending had a great time. 

Here are some of the topics we covered and notes:

1.      2017 Forecast – Strong dollar, strong US equity market, just as volatile as 2016. All but short term bonds are in trouble. Spread between US 10 Year and Global is highest ever. Inflation will increase, who knows what taxes will be. If you have cash, buy on dips. Debt looks good, floating rate debt (bonds) is conservative. There will be surprises!

2.      Have a one or more specific Goals
a.      College
b.      Debt elimination
c.       Retirement

3.      Have a Financial Plan
a.      Plan for existing investment portfolio(s) 
b.      Where to put new contributions 
c.       How to reduce investment expenses 
d.      Active vs. Passive Funds/ETF’s 
e.      Tax plan for the next 2 years, reduce SS tax by having cash if necessary 
f.        Cash-Emergency plan for the next 2 years (maintain 1 year cash or Roth) 
g.      Have core of Market Index’s BEFORE individual stocks 
h.      When to Buy and When to Sell, story or chart changes. Don’t overdo it! 
i.        Proper Allocation – Remember you already have an inflation adjusted $1M Bond, $58,600 = $1.17M @ 5% Bond Yield (Social Security)
j. When to buy and sell stocks

4.      Eliminate all Debt, except house mortgage
a.      Mortgage can be cash flow benefit or SWAT

5.      Retirement 
a.      Reduce expenses, but no pain (see BOGO)
b.      Plan Social Security maximum
c.       Generate income to fill GAP 
d.      Plan for RMD
             i.      Remember at 6% yield/growth, principle will last 20 years. 70 – 90 Years old 
             ii.    Plan on taking lump sum at year end for following year. 
e.      Understand real “Income Investing” 

6.      In Case of Emergency Plan – Written & Updated

7.      Ideas to Enhance Income 
a.      Short term stock trading – follow the trend 
b.      Selling Calls on stable Dividend Stocks 
c.       Sell Puts on volatile “in the news” stocks

8.      Use BOGO – Mindset
a.      Remember $1 cash saved is worth $1.15 – $1.27 profit on investments 
b.      2% on Credit Card 
c.       5% Amazon 
d.      20% on gas 
e.      20% at Golf Club

Click this link to get a list of “7 Best Monthly Dividend Stocks for 2017” as presented by Michael Henning. Some of us already own some of these stocks.  CLICK HERE.


Should You Worry About The National Debt – Don’t, Here’s Why!


Is our national debt so high that it’s a major issue to American’s? Is America going bankrupt? In this article I’ll try and put our national debt into perspective that most people can understand.

First let’s understand what debt actually is, it’s the rental of money. The rent payment is like interest. Almost all American’s have experienced this, they take out a loan to buy a house or car. Maybe they use credit cards. Corporations too have experience here, they borrow money, through RLOC (Revolving Line of Credit) loan’s and bonds. If you generate enough income, debt can easily be handled. Some debt is very long term, like a home loan, say 30 years. Without debt our economy would come to a screeching halt.

The primary issue in measuring debt is, how healthy is the payer and how does the debt compare to the assets. People usually don’t think about the assets involved. Corporations track their Debt to Equity (shareholders equity). This is also known as Leverage Ratio. Debt can also be measured as compared to Assets (accounting period). Let’s take a look at Apple, Dec 2015 Apple had a Debt/Equity ratio of 129%, $171 Billion in Debt, $119 Billion in shareholder equity. However, in the same accounting period, Apple had 59% debt ratio (debt to assets). Would we all admit that Apple is a pretty health company, you bet!

Saying that the US Government debt is $20 trillion is a worthless piece of information. Why, because what is the US debt being compared to? Let’s keep in mind that the “US Government” is all of us and more. The US Government has a lot more flexibility that any family or corporation, they control the currency, interest rates and the ability to raise money. Some people will indicate that the national debt represents 102% of US GDP, sounds pretty scary, right? It shouldn’t. Let’s look at an average USW household with a $168,000 mortgage and $55,000 in income, their debt to “personal GDP” would be more than 300%! So the main issue isn’t necessarily the amount of the debt, but the ability to make payments.

Last year the US total interest payments on the national debt was about $225 Billion, but the government pulled in $3.2 trillion in revenue. Therefore the debt payment was about 7% of revenue! That doesn’t sound so bad, right!

Furthermore, some of the $19 trillion in debt is owed to the US Treasury and other parts of the government. For example, Social security buys Treasuries, the Federal Reserve holds about $2.5 trillion of the $19 trillion of total debt. However, the vast majority of US debt is owed to American institutions and us citizens. Pretty much all of us hold US debt through bonds held in our retirement and stock funds. By comparison, the Chinese ONLY hold about $1.4 trillion of our debt, yet we all hear how dangerous this is.  If China was to further dump US debt (they have been sellers in 2016) they would take a huge hit as most bond investors well know.

The government loans money to itself and us American’s. We love US debt as does the rest of the world, that’s one reason why the dollar is so strong. Our bonds pay a very safe, higher yield than the rst of the world.

Think about it this way, if the government spends $1 billion more than it receives in taxes, that money doesn’t just disappear. It flows into the hands of workers or companies or institutions. Even if you think this is wasteful spending, the fact is these dollars are moving from the public to the private sector.

All things being equal, many economists believe it’s preferable to have rising government debt and private-sector surpluses than the other way around.

US debt is an important issue but make sure you put it in prospective!

Smartest Guys in the Room – eh, eh, Underperform – Really!


Extensive studies now prove that most of the claimed “smartest people” underperform when it comes to picking stocks and running Mutual Funds and ETF. A recent Wall Street Journal article “The Dying Business of Picking Stocks” clearly provides proof that MOST of the people who claim to be the “experts” can’t even outperform a simple Index, like the S&P 500 index. Most of the big name mutual funds do not outperform the dirt cheap Vanguard 500 Index Fund.


Click here to read the entire article

Bank of America Preferred – A Really, Really Good 6% Situation


Most people who follow my blog know that I like Preferred Shares in my High Yield IRA account. High on my list are bank preferred shares, which tend to be a very reliable source of income.

Here is a really special situation that you might want to take advantage of.

The Preferred Stock is BAC-L, Bank of America, 7.25% Non-Cumulative Convertible Preferred Stock, Series L. This is a $1,000 par value preferred, that pays $72.50 a year in “qualified dividends”. The key to this stock is the “Convertible” designation, these shares won’t be called because the conversion price is probably not achievable.  It is convertible into 20 shares of BAC if the common trades above $65 (130% of $50) for 20 out of 30 consecutive days. However the current BAC common price is about $16.

Normally I would never buy a preferred stock well above its par value ($1,000), it is currently trading at $1,213. However, this is a 6% yield even at a premium. In addition, if you look at a multi-year chart, there is a lot of price support at current levels.

Bank of America sold this preferred back during the financial crisis and is now stuck with it. They can’t call it! They could repurchase the shares in the open market, but this would further drive up the price.

This is a great deal!

I bought another chunk today using a limit order at $1,213.