Today's Value of Diversification

Stock markets closed noticeably lower today, with the major USA stock averages falling near 1/2 percent to 1% each for the Dow Jones, S&P 500, and Nasdaq.

Money poured into bonds and Gold today. The 10 and 30 year Treasury obligations rose nicely as their interest rates fell. Those bond's closing rates fell about 1/8 of 1% today - that's a big move in a single day. We follow and invest in the corresponding exchange-traded funds for the Treasury market; IEF and TLT.


IEF is the 7-10 year U.S. Treasury Note, and TLT is benchmarked to the 20 year U.S. Treasury Bond.

IEF rose 1% today, while TLT rose 2% today.

Gold shot up $15 an ounce today on the commodity exchanges, good for a 1% gain.

So taken all together, a diversified portfolio of stocks (Dow Industrials), bonds (TLT), and Gold - you're very likely to have made a little money today - about 0.7%.

On the next blog, I will look at the last bear market in 2007-2009  and compare the performance of the three asset classes of stocks, bonds and Gold during that period.

2020 Changes Affecting Your Finances

2020 could be an important year for your financial planning?

If you are considering buying an insurance-related product, you should listen up! The insurance industry will be implementing - I'll say updating - their insurance pricing guildelines (called mortality tables) as they relate to life insurance, annuities, and similar benefits-based polices.

The reason; American's are living longer. Think 'mortality' which means basically how long you are expected to live. Webster's dictionary defines it as "the relative frequency of death in a specific population; the death rate".

This is BIG news: the last update was in 2001, and the industry had been using those tables to price insurance costs to consumers. Once it is phased in, I see it affecting two types of insurance products being utilized by many of us today.

The good news: Life expectancy's are longer, so life insurance costs are apt to drop. Looking at the Social Security tables on mortality; the government says that in 2000, the average death of a 65 year-old man would occur at 80.9 years, and a women was 84 years. Their 2020 projections are at ages 82.2 for men and 84.7 for women. 


You can also think about this in terms of Social Security. The longer you wait to claim it, the larger your monthly check will be. There are "rumors" out there that the age will be raised to collect social security in the near future. The Government can delay paying you. They can change the rules anytime. Annuities and life insurance are governed by contract law, and not subject to the whims of Uncle Sam or your lawmakers.

The challenge: Living benefits. Think annuity payouts to you, or Long Term Care payments when you can't provide for yourself. Also, the guaranteed "lifetime income" feature of immediate and deferred annuities - and Long Term Care riders on policies will have higher costs because the money will have to be paid out over longer periods. 


In sum, ladies and gentlemen, folks have to act fast to obtain a more favorable solution to their life insurance, annuity and long term care needs. What can you do now?

Get your papers in order. Pull out your policies and arrange a time to review them with me. Perhaps I can help you with a better solution before the rates and terms change.

Thanks for reading. Pass this along to your friends also who may benefit.

Barry L. Unterbrink
Chartered Retirement Planning Counselor
(954) 719-1151 w 
(954) 560-3622 m / text
(954) 642-2253 fax

Time to Play Defense; Protection Outweighs Profits

Today's market action took a chunk of the year-to-date gains off the table, as the stock averages - Dow, S&P 500, and Nasdaq all declined by multiple percents (losses of 2.4 to 3% on those three indexes).

Protection of your money and defensive actions may be warranted depending on your appetite for or aversion to risk. Since the Dow Jones made its recent high in mid-July near 27,300, the defensive sectors of our economy have gained, while the rest show negative returns. 

Of the 10 S&P sectors, 8 are down; just Utilities and Real Estate show gains of about 2.5% each.

Gold's been on a tear, gaining about 8% this month so far, closing in on $1,550 an ounce after today's 2% gain or $30 an ounce pop! I show that a portfolio of 60% stocks, and 20% Gold and 20% bonds would be down about 1% this month vs. being down 4% if you held no gold. That's quite a value. In the past year, Gold's up $340 per ounce or +28%, and if you read my blog - I'm usually harping on owning some Gold to offset your investing risks in stocks.

Bonds were about even to up/down 1/2 percent today. But just look at this chart of the interest rates bonds are now paying. This is the 10 year U.S. Treasury Bond, which pays 1.53% today. It paid over 3% last November. The interest income you receive has been cut in half if you buy the bond today. 

This is very worrisome to savers and investors in bonds, CD's, annuities. It will favor borrowers / debtors with variable rate loans, or for folks refinancing homes, etc. The 30 year conventional mortgage averaged 2.92% last week.

Going out to 30 years, that bond is paying 2.03% today, the lowest in recorded history. Do the math considering the latest 12 month consumer inflation rate of 1.83%.

                       2.03% Government Bond
                     - 1.83% Price Inflation last 12 months
                     ----------
                       0.20% Your Real rate of return on the bond.
                 
Oh, and subtract taxes at just 12% - the lowest tax bracket now.
That would knock off about 1/4th percent off the Bond Yield, so now you your money is moving backward, a 0.05% loss.

Sure, many bonds pay more than 2%, but they are riskier. 
Run the numbers at 3% or 4% bonds and you get a +1% to +2% gain after taxes and inflation.

So in sum, be careful out there. Allocate your money amongst stocks, bonds, Gold and some cash. This 10-1/2 year old BULL market in stocks will end someday. Let's be prepared for the next BEAR market.

Thanks for reading. Pass this link along to those who would benefit please. http://moneyruminations.blogspot.com