Archive for August, 2015

How to be richer in retirement without saving more money

From Bloomberg:

Would you rather lose 15 pounds or have your 401(k) balance rise 15 percent this year? Most people chose the latter in a recent nationwide survey of 1,000 401(k) plan participants. What those people might not fully realize is the financial payoff from losing those 15 pounds and being healthier in retirement.

About 35 percent of the 25-to-70-year-olds in the survey commissioned by Schwab Retirement Plan Services were unwilling to sacrifice their quality of life today — to cut down on dinners out or on vacations — to save more for retirement. But the bigger issue is that many people simply can’t afford to save more. What those people can do is lessen the future bite of health care costs by focusing on their health now.

For a little inspiration on the fitness front, consider these price tags on future health:

  • $220,000: This was Fidelity’s estimate of what a 65-year-old couple retiring in 2014 would need, on average, to cover out-of-pocket medical costs over the course of their retirement. It assumed the couple did not have retiree health insurance through a former employer but had traditional Medicare insurance coverage. Fidelity’s estimate for 2015 costs is due out later this year.
  • $17,000: That’s the annual jump in cost for every year that the couple is in retirement before age 65. So over four years, the couple could incur an extra $68,000 in medical costs.

Committing to regular exercise might even help you earn more money. A 2011 study from Cleveland State University found that men who exercised three or more times a week had about a 6 percent earnings gain compared with men who didn’t. For women, the gap was about 10 percent. (Women also seem to pay a greater penalty for being overweight.) The reason for the gap isn’t really known, though exercising improves mood, which could improve productivity.

Another way to prepare for medical costs is to get familiar with how health-savings accounts work, if your company has a high-deductible health care plan. This Mayo Clinic article lays out many of the pros and cons. Among the pros: The account travels with you from job to job, and you have control over how the money’s spent. (Granted, shopping around for medical care isn’t something most of us really long to do.) The cons include, well, needing to shop around to get the most out of your HSA money, plus the fact that an unplanned illness could wreck your health care spending budget.

Individuals can contribute up to $3,350 a year in an HSA this year, and $6,650 for a family. Employers may seed it with some money. The reason financial planners get all goo-goo-eyed about these accounts is that they are “triple tax-free.” You put pretax money in them, it grows tax-deferred, and you aren’t taxed on the money you use for medical reasons. That’s in contrast to a “use it or lose it” flexible spending account. After age 65, you can pull money out and use it for non-medical reasons, and you’ll pay regular income tax on it.

Crux note: If you’re worried about retirement savings, you should check out Dr. David Eifrig’s latest report on little-known ways to maximize your Social Security benefits. It could help you earn as much as $200,000 more in retirement. Get all the details right here.


Recommended Links

UNTIL SUNDAY

Income Intelligence–Doc Eifrig’s extraordinary research that’s perfect for you if you’re worried about falling stock prices–is now available at a huge discount. Don’t wait. Offer expires Sunday when price goes up dramatically. Go here to learn more…

Saturday, August 29th, 2015 Invest, News, Wealth Comments Off on How to be richer in retirement without saving more money

Doing this could save you tens of thousands of dollars in retirement

From Bloomberg:

Would you rather lose 15 pounds or have your 401(k) balance rise 15 percent this year? Most people chose the latter in a recent nationwide survey of 1,000 401(k) plan participants. What those people might not fully realize is the financial payoff from losing those 15 pounds and being healthier in retirement.

About 35 percent of the 25-to-70-year-olds in the survey commissioned by Schwab Retirement Plan Services were unwilling to sacrifice their quality of life today — to cut down on dinners out or on vacations — to save more for retirement. But the bigger issue is that many people simply can’t afford to save more. What those people can do is lessen the future bite of health care costs by focusing on their health now.

For a little inspiration on the fitness front, consider these price tags on future health:

  • $220,000: This was Fidelity’s estimate of what a 65-year-old couple retiring in 2014 would need, on average, to cover out-of-pocket medical costs over the course of their retirement. It assumed the couple did not have retiree health insurance through a former employer but had traditional Medicare insurance coverage. Fidelity’s estimate for 2015 costs is due out later this year.
  • $17,000: That’s the annual jump in cost for every year that the couple is in retirement before age 65. So over four years, the couple could incur an extra $68,000 in medical costs.

Committing to regular exercise might even help you earn more money. A 2011 study from Cleveland State University found that men who exercised three or more times a week had about a 6 percent earnings gain compared with men who didn’t. For women, the gap was about 10 percent. (Women also seem to pay a greater penalty for being overweight.) The reason for the gap isn’t really known, though exercising improves mood, which could improve productivity.

Another way to prepare for medical costs is to get familiar with how health-savings accounts work, if your company has a high-deductible health care plan. This Mayo Clinic article lays out many of the pros and cons. Among the pros: The account travels with you from job to job, and you have control over how the money’s spent. (Granted, shopping around for medical care isn’t something most of us really long to do.) The cons include, well, needing to shop around to get the most out of your HSA money, plus the fact that an unplanned illness could wreck your health care spending budget.

Individuals can contribute up to $3,350 a year in an HSA this year, and $6,650 for a family. Employers may seed it with some money. The reason financial planners get all goo-goo-eyed about these accounts is that they are “triple tax-free.” You put pretax money in them, it grows tax-deferred, and you aren’t taxed on the money you use for medical reasons. That’s in contrast to a “use it or lose it” flexible spending account. After age 65, you can pull money out and use it for non-medical reasons, and you’ll pay regular income tax on it.

Crux note: If you’re worried about retirement savings, you should check out Dr. David Eifrig’s latest report on little-known ways to maximize your Social Security benefits. It could help you earn as much as $200,000 more in retirement. Get all the details right here.


Recommended Links

UNTIL SUNDAY

Income Intelligence–Doc Eifrig’s extraordinary research that’s perfect for you if you’re worried about falling stock prices–is now available at a huge discount. Don’t wait. Offer expires Sunday when price goes up dramatically. Go here to learn more…

Saturday, August 29th, 2015 Invest, News, Wealth Comments Off on Doing this could save you tens of thousands of dollars in retirement

You probably didn’t see it in the news, but Japan just set the stage for a uranium rally

From Henry Bonner in Sprott’s Thoughts:

Investors bid up uranium stocks briefly on Tuesday, August 11, after Japan re-started a nuclear reactor.

Back in April, we saw a short-lived rally in uranium stocks. But the recent news from Japan could put uranium stocks on a more durable trend higher, says Steve Todoruk of Sprott Global Resource Investments Ltd.

Uranium stocks collapsed after the Fukushima earthquake in Japan back in 2011. Japan idled its fleet of 48 nuclear reactors. The price of uranium tanked from around $56 per pound to around $28 by mid-2014. It sits at around $35 per pound today.

According to Steve, it may just be a matter of time before Japan brings back its nuclear power generators, which could bolster the share prices of uranium stocks.

Steve discusses the implications of Japan’s recent re-start in his note below:

READ MORE: Why America is NOT Normal – Dr. Ron Paul’s 8 facts prove how bad things really are

Japan lacks reliable energy sources of its own and is dependent on importing fuels.

A tiny amount of uranium provides a tremendous amount of energy at an affordable cost. It was an obvious energy choice for decades.

But then came a powerful earthquake in 2011, which caused a partial meltdown at Japan’s Fukushima nuclear power plant.

Japan responded to the disaster by shutting down all of its reactors. Many other countries followed suit, either shutting power plants down outright or slowing construction of new plants.

Fear of a nuclear disaster gripped the world. Uranium — and uranium stocks — became hated.

The vast majority of these companies saw their share prices crumble. The biggest and most well-known uranium mining company in the world, Cameco Corp. (CCJ.US) plummeted from $42 per share in February 2011 down to $18 by December 2011. It continued lower to below $13 by late July 2015.

Denison Mines (DNN.US), a well-followed uranium exploration company, saw its share price fall from $4.15 down to $1.20 over the same timeframe. By last month, it had dropped to around $0.42.

Most nuclear reactors around the world do not bear the same risks as the plant that was affected by the quake. For one, they are not built on major fault lines with active volcanism, as in Japan.

And even in Japan, there had not previously been a catastrophe of this magnitude at a nuclear plant.

Existing reactors will likely be re-enforced to avoid similar accidents in the future. And new plants can be built to avoid these risks.

Uranium: A Comeback

This first reactor re-start does not drastically increase uranium demand on its own. But it does suggest that uranium could return to favor.

The news caused a slight bump in uranium mining stocks.

Cameco was jumped 4%. Uranium explorer Nex Gen Energy was up 8% and Uranium Participation, a company that stockpiles uranium reserves, was up 3%. Denison went up around 10% the day of the news, but then pulled back. Fission Uranium also “popped” 7.5% higher before pulling back. Uranium miners Paladin Energy, Energy Fuels, and Uranium Energy have also seen their shares rise generally this month.

It will likely take several years for Japan to re-start all of its idle nuclear plants. Each successful re-start could serve as an additional boost to uranium stocks.

If the rest of the world sees Japan go back to nuclear energy without incident, I believe that nuclear power will gradually stop being so “hated.”

Where to invest?

Cameco was a very well-performing stock during the last bull market in uranium.

As a big producer, it was a “go-to” for funds and regular investors. It rose from around $4 in early 2003 to a higher of over $56 in mid-2007.

Another big mover was Hathor Exploration, which had co-incidentally made a brand new uranium discovery near Cameco’s mines in Canada.

Discovery plays often make the biggest moves thanks to the potential for a takeover offer.

Today, Cameco would likely still be a “go-to” stock for large funds seeking uranium exposure. It is the only large miner today to produce only uranium. By comparison, there are around 10 to 15 big gold producers to choose from.

In exploration, the most well-followed story today is likely Fission Uranium Corp., which has recently announced a merger with Denison Mines. NexGen Energy has also received attention from investors with a new discovery near Fission’s “RRR” project.

Smooth Re-Starts Could Mean Higher Uranium Prices

A second reactor is scheduled to re-start in October, according to Japanese officials. So long as these reactors come back on line without incident, I expect uranium to get a lift.

Steve Todoruk is following this trend closely and is offering a complimentary review of your uranium stocks. You can contact him at 800-477-7853 or e-mail him at stodoruk@sprottglobal.com.

Saturday, August 29th, 2015 Invest, News, Wealth Comments Off on You probably didn’t see it in the news, but Japan just set the stage for a uranium rally

Should you invest more in bonds when you’re closer to retirement? Actually, no…

From Dan Ferris, Editor, Extreme Value:

The traditional notion of retirement says you should take bigger risks in the stock market when you’re young.

You have more time to make up for losses than when you’re older. As you age, you should take less and less risk, so you won’t lose your retirement money.

This strategy is called “Glidepath investing.” And it could ruin your retirement.

Let me explain…

SEE ALSO: Dr. Ron Paul Describes Exactly What America’s Next Crisis Will Look Like

The emotional appeal of Glidepath investing is obvious. Young people feel like they’re going to live forever, so it feels better to them to take more risks. Buying more risky stocks and fewer safe bonds feels right.

Older people feel they have more to lose and might not be able to support themselves one day, so they tend to be more risk averse. For them, buying fewer stocks and more bonds feels safer.

There’s an army of financial planners and other “helpers” out there selling products designed to get you to retirement with a big, safe nest egg, based on this feel-good notion.

However, research suggests that what feels good isn’t necessarily what you should do…

Investor and researcher Rob Arnott of Research Affiliates published a report in September 2012 called, “The Glidepath Illusion.” Arnott says Glidepath investing will make you less money because it will lead you to put less money in higher-return investments (stocks).

Arnott studied 141 years of stock and bond returns from 1871 to 2011. From these data, he hypothesized a range of possible outcomes. In general, Arnott found evidence that the range of outcomes from doing the opposite of Glidepath investing was superior to the range of Glidepath-based outcomes.

It’s well documented that stocks outperform bonds over the long term. Glidepath investors wind up putting a bigger percentage of their assets in stocks when they’re younger and have less to invest. They put a higher percentage into bonds when they’re older and have more to invest.

That’s the basic error. Investors put fewer dollars into higher-return investments, then interrupt the compounding process to put more dollars into lower-return investments. So they make lower returns than if they had done the opposite of Glidepath investing.

Glidepath investing is a good recipe for feeling good, but a poor one for making as much money as possible in stocks and bonds. Arnott’s conclusion is worth quoting and keeping close at hand as a reminder…

Investors who are prepared to save aggressively, spend cautiously, and work a few years longer (because we’re living longer), will be fine. Those who do not follow this course are likely to suffer grievous disappointment… No strategy can make up for inadequate savings or premature retirement.

Save aggressively. Spend cautiously. Let your investments compound as long as possible before drawing them down. That’s sound advice.

Sadly, it makes perfect sense that the financial services industry is once again doing exactly the wrong thing for clients. Don’t trust financial planners and brokers. They’re commissioned salespeople. They’re incentivized to sell investments, NOT to make you money in stocks and bonds.

For as long as my health holds out, I’ll stay productive and hopefully get well compensated for my efforts, saving aggressively and spending cautiously. I recommend you do the same.

Good investing,

Dan Ferris

Saturday, August 29th, 2015 Invest, News, Wealth Comments Off on Should you invest more in bonds when you’re closer to retirement? Actually, no…

This expert says the Fed has turned the stock market into a ‘hall of mirrors’

From Justin Dove, Editor, The Crux:

The Fed has turned the stock market into a ‘hall of mirrors’…

At least that’s what Jim Grant is warning. Grant writes one of the most popular newsletters in the financial industry, Grant’s Interest Rate Observer. Grant is well-known for having warned his readers profusely about the housing bubble before it burst in 2008.

And in 2012, then-presidential candidate Ron Paul told voters he would elect Grant to succeed Ben Bernanke as chairman of the Fed if he were elected to office. Grant’s book The Forgotten Depression: The Crash that Cured Itself is a must-read for those who believe the Fed’s manipulation of the markets does more harm than good.

Earlier this week, Grant sat down with Reason TV to discuss the recent turmoil in the markets…

“Confoundingly to me, people have come to be quite accepting of the value attached by fiat to these pieces of paper we call currency,” says Jim Grant, who’s the editor of Grant’s Interest Rate Observer.

“Are prices meant to be imposed from on high, or discovered by individuals acting spontaneously in markets? The readers and viewers of Reason know the answer to that but they’re regrettably in the minority.”

Grant sat down with Reason magazine editor-in-chief Matt Welch on Tuesday to discuss the underlying causes of the recent market turbulence, why we don’t really “have interest rates anymore,” and how the classic jazz song “It’s Only a Paper Moon” provides a fitting metaphor for the equities market.

READ MORE: Why America is NOT Normal – Dr. Ron Paul’s 8 facts prove how bad things really are

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The ‘ghost of 1937?? The last time the Fed made this mistake, stocks fell 50%

From Justin Spittler, Analyst, Casey Research:

One of the most brilliant investors in the world just made a stunning call…

Ray Dalio is the founder of Bridgewater Associates, the world’s largest hedge fund. Dalio manages nearly $170 billion in assets. He has one of the best investing track records in the business. When he speaks, we listen.

Dalio has been saying for a long time that governments and businesses around the world have borrowed far too much money. He thinks their high levels of debt have created an extremely fragile and dangerous situation.

The stats back up Dalio’s view. In the United States, government debt as a percentage of gross domestic product (GDP) is 102%…its highest level since World War II.

READ MORE: Why America is NOT Normal – Dr. Ron Paul’s 8 facts prove how bad things really are

Countries around the world are in a similar position. Japan’s debt-to-GDP ratio is at 226% and climbing. In Italy, government debt/GDP jumped from 100% in 2007 to 132% in 2014.

Dalio explained how these extreme debt levels are one reason for the recent market volatility we’ve been telling you about…

These long-term debt cycle forces are clearly having big effects on China, oil producers, and emerging countries which are overly indebted in dollars…

In an article published yesterday, Dalio said the Fed should start another round of quantitative easing…

Quantitative easing (QE) is when a central bank buys bonds or other assets to lower interest rates and boost asset prices. It’s mostly just another name for money printing.

The Fed started QE in a desperate attempt to stave off disaster during the 2007-2008 financial crisis. It launched the first round in November 2008…a second round in November 2010…and a third round in September 2012. It stopped its last round of QE last October.

The first three rounds of QE fueled a big bull market in US stocks. The S&P 500 has gained 113% since the Fed started QE in 2008.

Dalio thinks the Fed should bring QE back. It’s a bold call, and one that most economists disagree with. Most economists expect the Fed to raise rates soon. Raising rates would tighten monetary conditions…essentially the opposite of QE.

Dalio is worried the Fed won’t get it right…

Dalio thinks the Fed will raise rates, even if it’s just to “save face.” He pointed out that the Fed has threatened to raise rates so many times that not raising rates would hurt its credibility.

Dalio’s big concern is that the world is too indebted to handle a rate hike. He thinks it could cause a financial disaster like a stock market crash, or worse.

In a letter to clients earlier this year, Dalio made a comparison to 1937, when the world was in a similar situation of having way too much debt. He explained that the Fed made a huge mistake by raising rates, and it caused the stock market to plummet 50%.

The danger is that something similar could happen if the Fed raises rates today.

SEE ALSO: Dr. Ron Paul Describes Exactly What America’s Next Crisis Will Look Like

We asked Dan Steinhart, executive editor of Casey Research, for his take…

Here’s his response…

I don’t know what the Fed’s going to do. That’s a guessing game. What’s important is Dalio’s point that we’re in an extremely fragile situation. The world has too much debt, and the Fed’s margin for error is tiny. If it takes a wrong step and stocks plummet 50%, it could cause a bigger financial crisis than in 2008.

So the real question is, do you trust the U.S. government and the Fed to manage this dangerous situation?

I don’t. This is the same Fed that blew two huge bubbles in the last twenty years. First the 1999 tech bubble…then the even bigger housing bubble, which almost took down the whole financial system when it popped in 2007.

And keep in mind – this is all a gigantic experiment. The Fed is using tools, like QE, that it had never used before the financial crisis. No one in the Fed, the U.S. government, or anywhere else knows how this is going to work out.

Who knows…maybe the Fed will surprise us and successfully guide the economy through this dangerous period. But that’s not an outcome I’d bet my savings on.

Dan went on to explain two things you can do to prepare for another financial crisis…

One, own physical gold. Unlike stocks, bonds, or cash, it’s the only financial asset that has value no matter what happens to the financial system.

Two, put some of your wealth outside the “blast radius” of a financial crisis. We wrote a new book with all of our best advice on how to do this. And we’ll send it to you today for practically nothing…we just ask you to pay $4.95 to cover our processing costs. Click here to claim your copy.

Saturday, August 29th, 2015 Invest, News, Wealth Comments Off on The ‘ghost of 1937?? The last time the Fed made this mistake, stocks fell 50%

This is the $500 billion problem facing oil companies today

From Bloomberg:

At a time when the oil price is languishing at its lowest level in six years, producers need to find half a trillion dollars to repay debt. Some might not make it.

The number of oil and gas company bonds with yields of 10 percent or more, a sign of distress, tripled in the past year, leaving 168 firms in North America, Europe and Asia holding this debt, data compiled by Bloomberg show. The ratio of net debt to earnings is the highest in two decades.

If oil stays at about $40 a barrel, the shakeout could be profound, according to Kimberley Wood, a partner for oil mergers and acquisitions at Norton Rose Fulbright LLP in London. West Texas Intermediate crude was up 3.8 percent to $40.06 a barrel at 8:13 a.m. in New York.

READ MORE: Why America is NOT Normal – Dr. Ron Paul’s 8 facts prove how bad things really are

“The look and shape of the oil industry would likely change over the next five to 10 years as companies emerge from this,” Wood said. “If oil prices stay at these levels, the number of bankruptcies and distress deals will undoubtedly increase.”

Debt repayments will increase for the rest of the decade, with $72 billion maturing this year, about $85 billion in 2016 and $129 billion in 2017, according to BMI Research. About $550 billion in bonds and loans are due for repayment over the next five years.

U.S. drillers account for 20 percent of the debt due in 2015, Chinese companies rank second with 12 percent and U.K. producers represent 9 percent.

In the U.S., the number of bonds yielding greater than 10 percent has increased more than fourfold to 80 over the past year, according to data compiled by Bloomberg. Twenty-six European oil companies have bonds in that category, including Gulf Keystone Petroleum Ltd. and EnQuest Plc.

Pressure Builds

Gulf Keystone can “satisfy all its obligations to both its contractors and creditors” after authorities in Kurdistan, where the company operates, committed to making monthly payments for crude exports from September, Chief Financial Officer Sami Zouari said in an e-mail.

An EnQuest spokesman declined to comment.

Slumping crude prices are diminishing the value of oil reserves and reducing borrowing power, even as pressure builds to find replacement fields.

Some earnings metrics are already breaching the lows of the 2008 financial crisis. The profit margin for the 108-member MSCI World Energy Sector Index, which includes Exxon Mobil Corp. and Chevron Corp., is the lowest since at least 1995, the earliest for when data is available.

“There are several credits which simply won’t be able to refinance and extend maturities and they may need to raise additional equity,” said Eirik Rohmesmo, a credit analyst at Clarksons Platou Securities AS in Oslo. “The question is: Would they be able to do that with debt at these levels?”

Credit Ratings

Some U.S. producers gained breathing space by leveraging their low-cost assets to raise funds earlier this year and repay debt, Goldman Sachs Group Inc. wrote in a Aug. 6 report. This helped companies shore up their capital and reduce debt-servicing costs.

That may no longer be an option because energy companies have been the worst performers in the past year among 10 industry groups in the MSCI World Index.

SEE ALSO: Dr. Ron Paul Describes Exactly What America’s Next Crisis Will Look Like

Credit-rating downgrades are putting additional strain on the ability of oil companies to raise money cheaply. Standard & Poor’s cut the rating of Eni SpA, Italy’s biggest oil company, in April while Moody’s Investors Service downgraded Tullow Oil Plc’s debt in March.

Spokesmen for Eni and Tullow declined to comment.

The biggest companies, with global portfolios that span oil fields to refineries, will probably emerge largely intact from the slump, Norton Rose’s Wood said. Smaller players, dependent on fewer assets, could have problems, she said.

“Clearly, those companies with debt to pay will have one eye firmly on oil prices,” said Christopher Haines, a senior oil and gas analyst at BMI in London. “With revenues collapsing and debt soon to mature, a growing number of companies may find themselves unable to meet repayment schedules.”

Saturday, August 29th, 2015 Invest, News, Wealth Comments Off on This is the $500 billion problem facing oil companies today

This is the ultimate guide on where to park your ‘emergency’ cash

From Dr. David Eifrig, MD, MBA:

No one talks about how to manage your cash.

As regular readers know, we suggest holding cash in an emergency fund and in your portfolio. If you’ve followed our advice, you likely have tens, and maybe hundreds, of thousands of dollars in cash.

But you need to give some thought to where you put it…

As with every investment, when you look at where you put your cash, you need to balance yield and risk.

Some of these cash accounts I’m going to cover today are 100% risk-free. Others claim to be low-risk, but may have hidden risks that are difficult to understand.

We’ll start with the lowest-risk, most “pure” cash accounts… And we’ll proceed through investments that could offer a higher yield.

Checking and Savings Accounts

The safest cash accounts are FDIC-insured checking and savings accounts with banks.

FDIC insurance means that even if the bank makes disastrous loans or a bank manager absconds with the money in the vault, the Federal Deposit Insurance Corporation will make depositors whole, up to $250,000.

These accounts are liquid, meaning you can access your cash almost instantly via online banking or at a branch office.

Checking accounts are a good example. You can write checks directly from your account. However, they pay little in interest. I recommend keeping your checking balance just high enough to avoid any overdrafts. Or do what I do and link your checking accounts to your savings account for overdraft protection.

Savings accounts offer better yield, with the same safety.

Were it not for historically low interest rates, this would be a Golden Age for savings accounts. The advent of secure online banking has removed geography from the equation. So smaller banks looking to boost deposits often offer higher rates to anyone.

Big national banks, like Bank of America and Wells Fargo, offer savings accounts that currently yield 0.01% and 0.03%, respectively. You can do much better with a little searching. Websites like Bankrate.com or Nerdwallet.com/rates can help you find the best rates.

A word of caution: Always read the fine print to be certain that your account is FDIC-insured. Just because you’ve walked into an FDIC-insured institution (or visited their website), it doesn’t mean every account is insured. These banks offer all kinds of products and many don’t fall under the FDIC’s watch.

Money Market Accounts

One such FDIC-insured product is a money market account, or MMA.

MMAs, sometimes referred to as money market deposit accounts, will usually have higher minimum deposit requirements than savings accounts, though this can be as low as $500 in some cases.

If you meet those minimums and have your checking accounts covered, MMAs almost always pay a higher rate than savings accounts. So use them when you can.

Again, you can use the tools at the websites we’ve mentioned to find the highest rates on MMAs.

For both savings accounts and MMAs, regulations state that you can’t have more than six transfers per month into or out of the accounts. So it takes a little planning to make sure that your checking balances can handle whatever you need.

Certificates of Deposit

Certificates of Deposit, or CDs, have many of the benefits of savings and money market accounts… For example, they’re FDIC-insured, with no risk of loss unless our entire government collapses… with just one drawback.

However, that drawback comes with a higher yield, and it just may be the perfect place to place your cash depending on your needs.

The risk they do carry is liquidity risk. When you put your cash in a CD, you agree to leave it there for a particular amount of time, between three months to five years.

If you want to get it back before then, you need to pay a penalty.

Since the money is locked up, the bank will give you a higher interest rate. You can collect about 1%, or even 1.15%, on a one-year CD from some of the more competitive banks… with higher yields for longer time periods. Check the websites we’ve recommended to find the best rates.

Given that your money is locked up, CDs work better for the cash allocation of your portfolio as you approach retirement, not your emergency fund.

Money Market Mutual Funds

All the prior cash accounts have a major advantage: They are FDIC-insured. The peace of mind that should give you can’t be overstated.

When you branch out into money market mutual funds (or MMMFs), you do not have an FDIC guarantee. You now face the risk of loss. You have become an investor, and not a saver.

That’s not how MMMFs are sold, though. They are sold as ultra-safe places to hold your cash savings. You’ll see language from fund companies like, “[the fund] seeks to provide current income and preserve shareholders’ principal investment by maintaining a share price of $1.”

This $1 share price is the central focus of MMMFs. You buy shares for $1 and the fund invests that cash in short-term securities. By law, the investments must expire within 90 days.

When the fund makes money, its share price doesn’t rise. Instead, it creates more $1 shares and adds them to your account. If you check your balance, it doesn’t look like you’re an investor. It looks like your dollars are growing.

Here’s the trick with MMMFs…

They are exceptionally safe… until they aren’t.

MMMFs use a wide range of securities to generate their returns. There is a massive market of short-term securities that you’ve likely never explored.

They use securities like short-term Treasury bonds and T-bills, but they also use things like overnight repurchase agreements, or repos. This is a complex system whereby a bank will borrow $99.99 overnight and pay back $100 the next day. Of course, this is happening on the scale of trillions of dollars.

This system is called the “shadow banking” system. It works flawlessly almost all the time. But when things go wrong, there’s trouble.

This is what happened in the financial crisis. In 2008, the short-term paper markets froze up. People were too scared to lend to one another, even overnight loans to the biggest banks. The market was in a panic.

A few funds got themselves into trouble. The Reserve Primary Fund was one of the largest and most respected funds, with $68 billion in assets. In particular, it had a big pile of securities issued by Lehman Brothers. Since everyone was in a panic, the fund couldn’t figure out what these loans were worth.

The fund was unable to maintain its $1-per-share value. This is known as “breaking the buck.”

Investors in the Reserve Primary Fund had their cash frozen while the fund sorted things out. It was more than a year before a court ordered the fund to pay out whatever funds it did have to shareholders.

Some people had hundreds of thousands of dollars in “cash”… but they couldn’t access a penny.

Now, trouble like this doesn’t happen often. Prior to 2008, not a single fund broke the buck in the 37-year history of MMMFs.

So you shouldn’t fear MMMFs… but you do need to understand what’s happening with your cash when it no longer has FDIC insurance.

There are also some tricks you can use to ensure you get the best MMMFs.

The shadow banking system is a highly efficient market. That means if a fund has a higher yield than its competitors, it’s taking on more risk.

You should also back out the fees. For instance, take two funds that each yield 1% after fees. You would think that they have the same risk. However, one might charge a 0.5% management fee and the other might charge 0.25%.

That means the fund with the higher fees has to use riskier investments to get the same yield. In this case, the low-fee fund is unequivocally better than the high-fee fund.

And diversification will benefit you here as well. If you have a substantial amount of cash and you don’t want it frozen during a crisis, spread it around a few different MMMFs managed by different investment companies. Three different funds should be enough.

MMMFs do have some remote risk, and right now their yields are not high enough to justify taking those risks relative to FDIC-insured accounts.

MMMFs, on average, yield only about 0.01% today. When you look up funds, you’ll see it quoted as the seven-day yield. This uses the fund performance from the last seven days to determine its annual yield.

Considering you can earn much better than that in an FDIC-insured savings account, we consider MMMFs mostly off the table until interest rates rise.

MMMFs might not be such a great investment then, either. The U.S. Securities and Exchange Commission has drawn up a new set of rules for MMMFs to make them safer. The trouble with MMMFs comes partly when everyone tries to withdraw their funds at the same time.

So, effective October 2016, MMMFs used by individual investors can deny you access to your money for up to 10 days, or they can charge a redemption fee of 2%.

To make that worth it, MMMFs are going to have to yield a heck of a lot more than they do today.

To sum up:

Most people don’t spend too much time thinking about their cash.

But sitting down and taking a rational look at your cash needs can provide for emergencies and immediate needs without sacrificing long-term returns.

And making sure you hold your cash in the right place can help you sleep well at night while keeping inflation off your back.

Here’s the good thing about getting your cash investments in order: Once you do, it takes little time to keep things in order.

If you’re an income investor, you should be successfully generating cash month after month and quarter after quarter. This essay should help you know what to do with it.

Here’s to our health, wealth, and a great retirement,

Dr. David Eifrig

Crux note: Yesterday, Doc hosted a special live training event where he revealed the secret behind his extremely successful Income Intelligence newsletter. If you missed it, don’t worry… We’ve put together a special follow-up presentation to make sure you have all the information you need to maximize your income.

Doc has also agreed to extend a second offer for those who couldn’t tune in… Until midnight on Sunday, August 30, you can get not one, but two full years of Income Intelligence for less than a cup of coffee a day (a savings of more than 25%). And by signing up today, you’ll have six months to see if his service is right for you. To learn more about this incredible offer, click here.


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Saturday, August 29th, 2015 Invest, News, Wealth Comments Off on This is the ultimate guide on where to park your ‘emergency’ cash

Doc Eifrig: You won’t see this analysis in the mainstream media…

From Dr. David Eifrig, MD, MBA:

Everywhere I went, the bears had me surrounded…

Two weeks ago, I attended the inaugural Sprott/Stansberry Natural Resources Symposium in Vancouver, Canada. The conference was flush with knowledge on the mining and resource exploration business… (If you didn’t attend, I encourage you to consider a visit next year).

I planned to spend my time the way I usually do… notebook in hand, asking people about opportunities and dangers in the markets, and where they see individual sectors headed.

But this time, you turned the tables on me.

Many subscribers and many Alliance members (our highest level of subscribership) discovered me and surrounded me daily with worried questions about another financial crisis and stock market crash.

And when I brought up over cocktails how cheap certain sectors still were, a few guys at the table replied that actually “P/E” ratios were at all-time highs…

The scared investors were talking about the Shiller cyclically adjusted price-to-earnings (“CAPE”) ratio. The CAPE ratio is similar to a typical P/E ratio, but it uses the last 10 years of earnings to show a more long-term view. Right now, it appears to show that markets are wildly overvalued (though nothing like their absurd levels during the dot-com mania).

Here’s the current chart:

Of course, fear mongers rarely quote the CAPE ratio until it shows them what they want. But it’s more important to note that the extreme valuation of 26.45 is just an illusion of the past.

I can predict exactly where the CAPE ratio is going, even if nothing changes in the market. It’s a simple prediction: It will drop quickly over the next four years…

But stocks don’t have to fall for it to happen.

The current CAPE number is wildly skewed due to earnings numbers from the 2008-2009 crisis. At the time, companies took massive write-offs as they readjusted asset values on their books. The real businesses behind stocks suffered during the recession and earnings did decline, but a lot of the drop in earnings was an accounting illusion from asset adjustments.

Until we get to 2018 and 2019 and the 10-year “look-back” no longer includes the 2008-2009 financial crisis, the CAPE ratio will appear high. However, as we progress and include more and more successful quarters, the CAPE ratio will drop even if stocks stay at current prices.

By chopping out the anomalous quarters and leveling them off, we’d put today’s CAPE ratio at about 22. That’s 17% lower than where it is now. We think that’s a fairer appraisal of the market’s current value, and it signals that stocks aren’t as overvalued compared with their historical levels.

As time passes, you’ll see the CAPE ratio as a harbinger of a market collapse fade from conversation. Something else will take its place, we’re sure.

The economy is grinding higher, and the market is reasonably priced in our view. You don’t need to be fearful.

Here’s to our health, wealth, and a great retirement,

Dr. David Eifrig

Crux note: As Doc mentioned, he still sees plenty of safe opportunities in this market… especially for generating income. Yesterday, he hosted a special live training event where he revealed the secret behind his extremely successful Income Intelligence newsletter. If you missed it, don’t worry… We’ve put together a special follow-up presentation to make sure you have all the information you need to maximize your income.

Doc has also agreed to extend a second offer for those who couldn’t tune in… Until midnight on Sunday, August 30, you can get not one, but two full years of Income Intelligence for less than a cup of coffee per day (a savings of more than 25%). And by signing up now, you’ll have six months to see if his service is right for you. Get all the details on this special offer right here.


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Saturday, August 29th, 2015 Invest, News, Wealth Comments Off on Doc Eifrig: You won’t see this analysis in the mainstream media…

WARNING: These popular heartburn drugs may increase your risk of a heart attack

From Dr. David Eifrig, MD, MBA:

If you take Prilosec or Nexium, read this immediately…

More than 20 million Americans take a prescription medication for heartburn. But some of the most popular drugs might increase your risk of a heart attack.

A recent study in the medical journal PLOS ONE analyzed electronic medical records for 3 million Americans and found that taking a type of heartburn drug called a proton-pump inhibitor (PPI) was associated with a 20% higher risk of having a heart attack. Popular PPIs include Prilosec, Prevacid, and Nexium.

More important, this higher risk appeared even in people younger than age 45 who were otherwise healthy.

SEE ALSO: Dr. Ron Paul Describes Exactly What America’s Next Crisis Will Look Like

We need to remember that this study covered the “big-picture” analysis. Researchers still need more studies to determine the cause-and-effect relationship. But right now, scientists believe PPIs shut down nitric oxide production. Nitric oxide plays a key role in the widening of blood vessels to control blood flow. That makes us take these results seriously.

So if you’re currently taking a PPI, talk to your doctor about lowering your dose. You can also switch to an over-the-counter H2-blocker drug (these include Zantac, Tagamet, and Pepcid). H2 blockers do not have the same heart-attack risk.

You can also cut back on heartburn triggers like cigarettes, alcohol, and caffeinated drinks like soda and coffee. Spicy foods, including pepper, garlic, and raw onions, as well as citrus fruits like oranges and lemons, all cause heartburn flare-ups.

And don’t forget to protect your heart with exercise. Even a 30-minute walk will help. Or do what I do and try a 15-minute high-intensity-training workout. You can get most of the benefits of a week’s worth of aerobic exercise in just 15 minutes.

Here’s to our health, wealth, and a great retirement,

Dr. David Eifrig

Saturday, August 29th, 2015 Invest, News, Wealth Comments Off on WARNING: These popular heartburn drugs may increase your risk of a heart attack

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