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Retired Money: Should Retirees speculate?

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My latest MoneySense Retired Money column has just been published, and looks at whether speculation has any place in the portfolios of retirees or those almost retired. Click on the highlighted headline to access the full column: Should retirees speculate? 

As I confess in the piece, even at the ripe old age of 67, Yours Truly has been known to indulge in the odd speculative investment, not always with positive results. You may have seen the oft-used distinction between “Serious Money” and Play Money, aka Fun Money or Mad Money. Mad Money typically means investing money you “can afford to lose,” which usually means relatively small amounts in individual stocks.

No one wishes to lose money, of course; on the other hand, the inevitable trade-off is risk and return. These days, young Millennial day traders congregate at the Robinhood platform: since the Covid crisis hit many of the most popular trades there would strike retirees as unabashed speculations: betting, for instance, that depressed airlines, hotels and cruise line stocks will soar once a Covid vaccine is available. The operative word with this cohort seems to be FOMO: Fear of Missing Out.

The advisors consulted in my MoneySense column say no more than 10% of your total equity portfolio should be allocated to speculations like penny stocks, marijuana, cryptocurrencies or other flyers. To me, speculations should be managed just like a venture capital fund approaches investing in risky startups: Of five specs, they figure one may go to zero, three break even and you hope the fifth results in the proverbial 10-bagger or even 100-bagger, assuming you’ve identified the next Apple, Amazon or Netflix.

Analogy to Las Vegas

While being governed by the 10% rule — which means the more you have the more you have available to speculate — personally I imagine myself in Las Vegas and set limits on what I intend to gamble with. (Let’s use that word, for in a way that’s what it is). Continue Reading…

First-time Homeowner? Follow these 3 tips for a smooth financial transition

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By Gary Bordeaux

Special to the Financial Independence Hub

Becoming a homeowner is an exciting, pivotal and sometimes overwhelming time in a person’s life. A home is likely the largest investment you’ll ever make, so it’s important to go into it with a clear head and a solid (yet still flexible) plan. Even though everyone’s experience will be different, there are still some things that remain similar for everyone adjusting to life as a homeowner. If you’re embarking on this journey and could use some direction, keep reading. Here are three tips to keep in mind that will ensure this transitional time is the best it can be.

1.) Make essential upgrades that will improve functionality and save money

When you purchase a home, you’re also purchasing any essential items that might come with it, such as appliances, water heaters or even a home security system. Since all of these are major parts of a home, pay attention to their condition regardless of what the inspection report says.

It’s not uncommon for new homeowners to have to spend money right off the bat on either repairing or replacing these types of items. This adds up, so pay attention to where (and how) you’re spending your money. So, while it might be tempting to go on shopping sprees for new furniture and home decor, try to wait it out until you have a grasp of how everything is working. There’s not much worse than being short on funds when you need them most!

For instance, maybe your new home came with an older water heater that doesn’t heat efficiently. Maybe it’s too small to meet your needs, or maybe it just doesn’t work consistently. A simple call to a firm like this water heater company in Thousand Oaks can determine the best course of action to take to ensure your hot water situation improves quickly. A more efficient water heater also means more money saved, so you can go ahead and buy that new piece of art for your new mantel.

2.) Prioritize Convenience

When you purchase a home, you might have certain things in mind that you’d like to do, such as installing new flooring or painting throughout. Both can be costly and time consuming, and both have one thing in common. They’re much easier to do when your new home is empty, before you’re actually living in it. This is a situation where it’s important to prioritize what will make your life easier, especially when the projects are inevitable. As you’ll quickly figure out, you will have plenty of decisions to make along the way and some will carry more weight than others.

3.) Get a Home Maintenance Plan together (and stick to it)

As a new homeowner, you will quickly realize how there is always something that needs to be done. If you don’t set up some sort of schedule or guide to manage to-dos, your new adventure can quickly become a huge source of stress. Since nobody needs that, make sure you don’t skip this part. Breaking it down seasonally is a great place to start, also including recurring tasks such as cleaning and landscaping. Continue Reading…

Book Review: The New Long Life

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By Mark Venning, ChangeRangers.com

Special to the Financial Independence Hub

“In the face of longevity, if we want to reimagine age then we must first decouple the idea of a simple link between time and age. That requires imagining your age as malleable… It is this malleability that underpins the redesign of life stages.” Andrew J. Scott & Lynda Gratton, The New Long Life, 2020

Back together in The New Long Life: A Framework for Flourishing in a Changing World, Scott and Gratton have written the sequel to their highly lauded well-structured book from 2016, The 100-Year Life: Living and Working in and Age of Longevity. In the first book, the scene was set for deconstructing the concept of a traditional three-stage life; one where we shaped from 20th century clay, our social policies and societal norms, essentially into a lockstep world of education, employment, retirement.

Scott and Gratton challenged our minds, that if we were to look at the promise of living a longer life that would mean the lockstep three-stage experience would evolve and stretch, and we would have to reimagine a multi-stage life, more fluid, perhaps not so orderly. It would mean we would need to rethink how we finance this potential longer life, transform our personal journeys and as suggested now here in the sequel: rediscover our human ingenuity.

For all the side steps and jump-starts that a fluid and frequently interruptive multi-stage life may bring us, we will need to be better as masters of our own transitions.

“Human ingenuity has led us to extraordinary new technologies and substantial gains in healthy life expectancy. Yet … the answers to the question we have posed will be solved with social ingenuity.”

Continuous advance of technology and longevity

One of the great powers our two authors have is the ability to draw linkages between factors that are now shifting our society, and a prime example of that is both the continuous advance of technologies and longevity. By extension, this particular linkage recasts our notion of work and careers, wealth and health. What we do, where and how we work and for how long we choose to work. All this in mind the question left for us is: in what ways will we as individuals, employers, educators and governments reshape our society?

To answer that, The New Long Life poses leaning forward questions and threads many plausible possibilities around all this transitioning we will undoubtedly face regardless of age. Human questions is where the book begins and then nourishes our minds sprinkling ideas at us, somewhat like fish food for thought, right through each chapter. This is what makes this book together with the first, one masterful opus. Thus, my recommendation is to begin with a read of The 100-Year Life. (Reviewed by Mark here.) Continue Reading…

Stock markets predicted the U.S. election

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By Dale Roberts, Cutthecrapinvesting

Special to the Financial Independence Hub

What else could we write about? The news and stock market news and social media was just swamped with election fever and fervour. Yes the elections in the US stole the spotlight. There was not much light left for any other topic. And election predictions were everywhere. The predictions mostly got it right as they also got it wrong. The stock markets predicted the US election outcome. But there was certainly no massive Democratic (blue wave) as had been predicted by many pollsters.

Image by Tumisu from Pixabay

The US stock market has a very good record of predicting US presidential election outcomes. Since World War II, the stock market has predicted the outcome 88% of the time. That record just improved as US stocks (the S&P 500) predicted a Joe Biden victory.

As I had offered in my weekly MoneySense column …

… when the S&P 500 fell in the three months leading up to the November vote during a presidential election year, the incumbent president or party of the outgoing president has lost the election

As the political sayin’ goes …

It’s the economy stupid.

And in 2020 another global event played into that narrative …

It’s the pandemic stupid.

And certainly those two events are connected; the pandemic killed the economy.

Related post: How does the pandemic end? With a cold.

The stock markets also cheered the election

It appeared that the stock markets also found or looked for any reason to embrace the election, coming and going. The markets offered generous gains on Tuesday (election day) and then the gains continued throughout the week.

From this CNBC post …

Despite the uncertainty around the presidential vote, Wall Street notched its best weekly performance since April. The S&P 500 and Nasdaq jumped 7.3% and 9%, respectively, for the week. The Dow rose 6.9% this week. The S&P 500 also posted its biggest election week gain since 1932. Continue Reading…

The U.S. Presidential election, Economy and Gold: What’s Next

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By Nick Barisheff

Special to the Financial Independence Hub

Global stock markets suffered the worst first quarter in their history in 2020, as the COVID-19 pandemic rattled markets. After slowing 5% in the first three months of 2020, the U.S. economy shrank by a whopping 33% in the second quarter. If you think these numbers are bad, it is only going to get worse. The second wave of the pandemic is forcing governments around the world to renew lockdown measures that will push the U.S. economy, and most western economies, to the brink.

Chaotic elections, a battered economy

This is all happening at a time when the U.S. just conducted the most chaotic presidential election in its history in November. Rioting and civil insurrection are occurring in U.S. cities, and crime is accelerating. Lawsuits over mail-in ballots have already started across the country. What’s more, the nomination of Amy Coney Barrett as successor to Ruth Bader Ginsburg promises to be hotly contested, as the choice of nominee will have huge implications following the election. If the election result is disputed [as it was within days of the November 3rd vote: editor] the U.S. Supreme Court may end up deciding whether Trump or Biden will be president for the next four years.

If the global pandemic, civil unrest in many U.S. cities, war looming in Armenia, thus pulling Russia, NATO and the European Union into a conflict were not enough, the U.S. economy, as well as most western economies — including Canada’s – are going to get a whole lot worse.

Overvalued markets, declining corporate profits

U.S. equity markets and corporate profits were already on a divergent path well before COVID-19 hit, and this trend will only continue – especially if the second wave forces more closures and lockdowns in the fall and winter. Restaurants, hotels, travel and tourism, airlines, and small businesses across the country are barely hanging on. Bankruptcies are set to skyrocket.

Coming defaults in the real estate sector

One of the biggest economic issues — one that hasn’t received a lot of attention — is the wave of defaults that will hit all areas of the real estate sector. Financial districts of major cities are ghost towns. It’s just a matter of time before large tenants terminate or default on their leases. Developers are stuck in a rut, as demand has collapsed.

Mortgage defaults and collapsing real estate markets will in turn lead to problems in the banking sector. In fact, mortgage delinquency rates in the U.S. climbed to 8.2% at the end of June – the highest level since 2011. More than 8% of all U.S. mortgages were past due or in foreclosure.

The U.S. Presidential Election, The Economy, and Gold | Nick Barisheff

To keep the economy from collapsing, the U.S. Federal Reserve and other western central banks are going to have to print even more money, which will only exacerbate the bubbles in the financial markets and margin debt levels. What’s most worrisome is that all these factors — declining markets, a shrinking economy, and the second wave of the pandemic — are morphing together just as the U.S. is about to face one of the most chaotic presidential elections in history.

How should investors proceed?

What are investors to do? If you listen to the media or those in the industry, the mantra is to stay invested for the long term. That strategy works well during long bull markets. However, this strategy doesn’t make sense when you’re standing on the edge of a precipice — which we are today. Continue Reading…