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Spend smart, invest sucessfully and live the life you want.

Should I Invest in Gold?

Written by Ted Hunter on May 17, 2012 — 1 Comment

I've been asked that question a lot, especially in the last month or so. Over the past year I have consistently advised against investing in gold and that advice has been pretty good as the price really hasn't changed much. I do believe there will come a time when owing some gold will be a very good idea, but I don't believe we've reached that point as yet for a variety of reasons.

Right now, the world is running to the U.S dollar as the #1 safe haven. I believe we will reach a point, however, when the dollar will become anything but a safe haven. The wasteful runaway spending of the federal government for the last 10+ years, the printing of over a trillion dollars a year for going on the 5th year now, and the low probability that our elected officials will ever do anything meaningful about the currently massive level of our government’s debt and unfunded obligations will all eventually come home to roost.

I am convinced that high inflation, driven by a significant and possibly major erosion of the dollar has become unavoidable, that it's just a matter of time. Such an event is almost certain to cause a big increase in the price of gold. The question is when, and there I haven't a clue. Can we make it another 10 years? No way.  5? Highly doubtful. 2-3 years? Maybe. There's just no way to predict when the value of the dollar will begin to drop.

So what do you do? My best advice is to wait for the first reliable signs that the dollar is beginning to slip relative to other currencies and/or that inflation is taking off and that the price of gold has begun to rise in response. At that time, despite gold having already risen some, it will be my recommendation to buy a modest amount of gold. I will continue to track the situation and keep readers updated through my Smart Alerts, so sign up if you are interested.

There is also another approach that some recommend—to buy if the price drops a little further yet, say to $1500 an ounce. Many people advocate such a strategy, but I do not, as the risk that the price of gold could drop a lot further before it begins its rise is just too high. Believing that, I'd rather wait for the above events to have reliably begun.

Even if the price drops to $1400, I still hesitate for several reasons. With gold in the grips of traders, as it is currently, the situation is just too unreliable for my taste. Take the price low enough and I'll probably do a little buying but that point is a good deal lower than today's prices, maybe in the $1250-$1300 range, depending on how things play out.

Also, I expect the situation in Europe to get worse yet, and when it does European banks are likely to be forced to sell a lot of their gold holdings to cover their losses. India is also a truly major gold buyer and pressure is rising inside the Indian government to greatly reduce that by further increasing tax rates on gold purchases. Their economy isn't doing well and they appear to feel that more investment money should be diverted away from gold to things that can help their economy, which gold does not. Both of these foreign influences have the potential to drive the price down, and possibly by a lot.

In summary, I believe gold will end up a very desirable investment at some point, but the best bet is to give up any possible gains that might occur in the short term and wait for the first clear signs of erosion of the U.S. dollar and/or that inflation is taking off and gold prices have begun rising in response. When that happens I believe it will be a good idea to own some gold, say 10% of assets. This is what I plan to do.

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We See Through the Lies!

Written by Ted Hunter on May 10, 2012 — Leave a Comment

Earlier this week, a New York Times article came out that really caught my attention. It was disappointing to see the typical economic spin that encourages people to invest with the financial services industry NO MATTER WHAT taken to such great lengths, but was also encouraging to see that the article was in response to a terrific new trend by their customers. People are really starting to catch on that it’s not a good idea to invest in the stock market, especially not at this time, and have been pulling their money out. Now, that’s great news.

I've been saying for a long time now to get out of the stock market as the risks are currently just too high and the devastating loss of people's assets over the last 12 years is far too likely to continue.  I'm so relieved to see that people are finally starting to take action.

I want to take a moment to break-down the extent of the dishonest spin put forward by the article. For starters it asserts that, “American stocks have doubled in price in the last three years”. Well, here are some more facts: In the last 12 months the stock market has gone up only 1.5%, with inflation at least 2.5%. Since January 1, 2000 the stock market has gone up a whopping 3%. That’s 3% in total for 12 years versus inflation up over 30%. The article’s carefully selected date range is extremely misleading, to say the least!

And sadly, for years and years tens of millions of American’s have trusted and bought the spin and just kept on dutifully losing their money to the industry. In fact, on average, American’s have seen a 50% loss of the assets they entrusted to the advice of the financial services industry over the last 12 years.

I am so glad to see the tide starting to turn! It was so good to read that, “In April, the average daily trades in American stocks on all exchanges stood at nearly half of its peak in 2008”.  Also that, “domestic stock mutual funds, which were drained of more than $400 billion since the start of 2008, compared with an inflow of $52 billion in the four years”  and that “the outflow has continued into 2012”.

It shows me that people are seeing the truth and are beginning to depend on themselves. This is truly the way to achieve financial success. Depend on yourself, not any stock market, government and especially not on the advice of the vast majority of the financial services industry.

Millions like me never bought into the financial service industry’s losing game and are doing just fine, having avoided losing money through market drops. We rely on ourselves to spend smart, save a lot of money and see to it that our money is invested successfully.  If you haven’t already joined this growing group, what are you waiting for? It's time to take full control of every aspect of your money, do what works and live the life you set out to live. As for what works, it’s laid out on www.moneysmartonline.com and covered every week on my radio show. Happy reading (and listening).

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One Message Stands Out

Written by Ted Hunter on April 26, 2012 — Leave a Comment

If there is one message that stands out with all that's going on in this country it is this:

The only way to create lasting financial security and erase stress related to money is to depend on yourself. Don’t count on the stock market or money from the government, and especially don’t rely on the advice and guidance from the Financial Services Industry. This industry manages the savings and financial plans of most Americans, but does not know how to create profit for their customers; rather they are trained to successfully market the idea that they do. It’s an industry whose track record has been devastating to the finances of most Americans over the last 10-15 years.

I describe these pitfalls in more detail and provide links to several studies (including one done by Harvard) which clearly demonstrate them at: http://moneysmartonline.com/advice/invest-successfully.

Managing your own finances, including your own savings, is the way out of common financial pitfalls. My goal with Money Smart (the book, the website, the blog, the radio show) is to help you solve the financial problems that so many have encountered over the past decade and to help you build a solid financial future for yourself and your family.

Millions of people like me never bought into the destructive financial system and advice being marketed by the Financial Services Industry and the majority of the financial media. We just kept on doing what works and avoided losing money when so many were losing their life savings.

So what is it that works?

The old adage, "it's not how much you make, but what you do with it that counts" is true. There are several factors involved, but one critical element of this is to spend smart, really smart, and then use those savings to support your financial goals. You probably think you already know how to spend smart. I thought I did too, until I spent 3 years doing the research for this Money Smart project, picking the brains of the insiders in industry after industry. I can't tell you how many times I was surprised to learn that I had left a lot of money on the table. Forced to support myself other than food and a roof over my head since I was 9, I’ve had 63 years of business building, investment and financial success. I thought I pretty much knew it all. Well I didn't. I was pleased to learn even more about spending smart.

None of us knows it all, and small bad habits can really add up over time. Smart spending is one important way to be sure that we don’t end up spending a lot more money each year than necessary and also an important way to find more money to save each year.

While there are several aspects to being Money Smart, if you learn how to spend really smart, put it into daily practice and then make smart use of those savings, it will take you a long way to seeing to it that money adds to your life, rather than taking away from it through stress. You really do get to live the life you wish.

Here are two links to start you off:

Learn some key smart spending strategies to help you save thousands each year on the things you already pay for and to help you save 15% to 20% of your money.

Learn the surprisingly simple steps of how to invest and also when and where to invest.

As you proceed, never doubt that you can succeed when it comes to managing your money. What you'll find is that it's really quite straightforward. So keep going and never stop believing in yourself.

 

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Posted in Manage Your Money, smart spending choices, Spend Wisely, Spending Tips | Tagged , , , , , ,

4 Ingredient Recipe for Financial Success

Written by Ted Hunter on April 11, 2012 — Leave a Comment

I've had 63 years of business experience; 63 years of trial and error since my father set me up with a paper route at the age of 9, telling me he would only pay for the roof over my head and food from then on. He was true to his word and while it was harsh by today’s standards, it sure was effective. That’s when I got serious about making my way and have certainly made my share of errors along the way. What I’ve learned is that the recipe for success is the faithful practice of just four basic ingredients.

Achieving success, whether in business or personal finance, is within reach of everyone. It’s not about your IQ, the privilege you were born with, your good looks, your education, or anything else of the sort. In fact a few years back I came across a big study (Successful Intelligence: How Practical and Creative Intelligence Determine Success in Life by Robert J. Sternberg) that looked at why people succeed and while reading the list of reasons I could only nod and smile because it sure rang true with me.

Creating success comes from the faithful application of some very basic traits that anyone can adopt. Following are the four that together are a winning combination. Do them consistently and the chances are excellent that you will win. Break even one of them reliably and your odds of success drop dramatically.

  1. Always believe in yourself. Always have a positive attitude that you can and will find your way to success, because you can. Ignore any false doubts that may crop up and look instead for ways to stay focused on success. Learn what you need to and make adjustments where necessary, but don’t lose confidence. Adjustment and learning, especially through trial and error, are part of the process that leads to success.

  2. Be disciplined. Do what you said you would; what you know in your heart you need to do, to get what you want. Lay out the necessary steps and stick with it.

  3. Don't make the same mistake twice. Take an honest look at your progress and when you make mistakes take note so you can avoid making the same mistake again. Do your best on this and especially try to avoid making the same mistakes over and over again, as so many people do their whole lives. Be willing to try something new and keep moving forward.

  4. Understand that none of us is good at very many things and so reach out and use the talents of others. It’s really just common sense, so be very open to using the strengths of others and sharing your strengths with them.  If certain parts of your plan require skills that challenge you, look for creative ways to collaborate or barter with those who do possess the skills and talents you lack.

Straightforward, right? The trick is in the consistent doing. Keep with it, bringing yourself back to these winning habits as many times as you need to and you will find success in whatever you set out to accomplish.

When you are working to achieve financial goals, consider this. Roughly 90% of Americans now face problems with money, yet the other 10%, well over 10 million people, do not. Why? They don’t rely on “experts” but depend on themselves to manage their money and make financial decisions. They practice the 4 key steps listed above and do what works. Even when relying on input from others, their decisions are informed and self-made. It is no coincidence that depending on yourself is an underlying theme or principal behind all four of the steps to success listed above.

If you’re already in the 10%--great. For you, Money Smart will only help things go even better.  If you’re in the 90%, make the switch by taking charge of your money and depending on yourself.

A good way to start creating financial success is to listen to Money Smart Radio this Saturday when I’ll be providing a straightforward and easy to follow explanation of exactly how to invest. Using my simple approach and avoiding common pitfalls, you’ll be able to outperform 95% of the experts. After that, in the weeks and months to come, we’ll roll on and cover the rest of what you need to know to fully manage all aspects of your money.  A lot of the information is already on www.moneysmartonline.com, so you can also turn there. And of course, it is in my book, Money Smart.

So don’t be fooled that personal money management is very complicated, because it’s not. Learn what you need to about creating financial success through Money Smart, and stick with the four traits above to find your success.

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High Inflation is Coming—What to Do

Written by Ted Hunter on March 29, 2012 — Leave a Comment

Over the last 22 years I’ve made 4 major forecasts; when to get into the stock market and when to leave; when to invest in real estate and when to get out. Now I’m making another major call: high inflation is coming and it's very important to understand what it will mean to you and what to do about it.  High inflation means higher prices, yes, but it has major implications for your current investments and for your financial plans in general, so it’s best to position yourself in preparation for it now rather than getting caught losing big.

For the past 10 years inflation has averaged an artificially low 2.5%, vs.  an average of almost twice that for the 30-40 years prior to that. It's been about 30 years since we faced really high inflation and I remember it well. Over the course of 3 years prices rose an average of 7-8% per year for a whopping total of 25% increase. That could very well happen again. Imagine all of your expenses going up that much. If your income doesn’t rise to match, inflation can end up being a very serious problem.

Mortgages have the potential to be dramatically impacted by rising inflation. Interest rates will rise significantly with rising inflation and the difference between locking in at the current artificially low lending rate of 4% vs. a very likely 6-7% is a jaw dropping 50-75% increase.  Imagine a mortgage payment that jumps 50-75%, and that's what I believe we will be facing.  So, if you're among the millions of homeowners that do not have a long term fixed rate mortgage, I urge you to run, not walk, out the door right now and get one. If you do have or get one, then not only will you not be hurt, you're likely to win, big-time, paying off your house with cheaper dollars in the future. As your income rises overtime with inflation and you're making a third to half more (in inflated dollars), you still get to pay back the fixed amount you owe which is in old (un-inflated) dollars, dollars that are worth only a half to a third of the inflated dollars you're making at that point in time.  Now that’s a deal!

Next, if like most people you're putting away savings in a retirement or other long-term account, its typical these days that half or more is in fixed income. This means that part of your portfolio is in fixed rate bonds, CD’s or other assets with a fixed rate of return. While there has been a good reason for this up to now given the state of the stock market, it’s not smart to maintain this going forward. Avoid getting your money locked into investments that will take more than about 12 months to mature or at some not too distant point you'll end up losing as much as half that money or more.

To understand this, say you invest in (buy) a 20 year treasury bond paying 4% interest. Then interest rates go to 6% for a 20 year treasury and you want to sell it (probably to invest in the higher return bond).  No buyer will pay you the full amount you have invested for a bond that pays 4% when they can buy one paying 6%. You will be effectively stuck with the bond for the duration or need to take a loss. You’ll have no choice but to cut your selling price until the amount they pay for it gives them a 6% yield on their money. In this instance your investment is now effectively worth 23% less. You will have just lost 23% of your money. The longer the time until a fixed income investment matures, the worse the drop in its value for each percent of rise in interest rates. If the maturity is shorter, the drop in value is less than it would be for one with a longer maturity.  For example a bond with a 10 year maturity drops 13.5% if rates rise by 2%, rather than the 23% of a 20 year bond.

The bottom line is that a lot of money is likely to be lost for those that do not take the time to understand the effects of inflation and make sure your fixed income investments are changed to short term now before interest rates change much. It’s potentially nasty stuff, especially since I believe we're looking at rates going up a lot more than 2%.

To learn more about the effects of inflation and what you can do about them, I recommend listening to Money Smart Radio this Saturday or, if you can't, listening to the podcast that will be up at www.MoneySmartOnline.com/Radio by Tuesday, April 3, 2012.

My favorite adage is true once again when it comes to rising inflation. Understanding the problem is 90% of the solution. Once you do you're in a position to do something about it. Inflation can be painful to think about—a good example is the rise in gas prices—and our first impulse is to avoid thinking about it. However, the last thing you want to is nothing. Time is on your side right now, so use it to your advantage. Listen to this week’s Money Smart Radio, then begin the steps that will be in your best interest, going forward.

 

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MONEY SMART BLOG   Recent articles…

Should I Invest in Gold?

I've been asked that question a lot, especially in the last month or so. Over the past year I have consistently advised against investing in gold and that advice has been pretty good as the price really hasn't changed much. I do believe there will come a time when owing some gold will be a very good idea, but I don't believe we've reached that point as yet for a variety of reasons.

We See Through the Lies!

Earlier this week, a New York Times article came out that really caught my attention. It was disappointing to see the typical economic spin that encourages people to invest with the financial services industry NO MATTER WHAT taken to such great lengths, but was also encouraging to see that the article was in response to a terrific new trend by their customers. People are really starting to catch on that it’s not a good idea to invest in the stock market, especially not at this time, and have been pulling their money out. Now, that’s great news.
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