THE U.S. NATIONAL DEBT IS NOW MORE THAN $31 TRILLION

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The U.S. national debt has now surpassed $31 trillion. Everyday the U.S. government spends over $1 Billion in interest payment on the National Debt.

The $31 trillion gross federal debt includes debt held by the public as well as debt held by federal trust funds and other government accounts, according to the Peter G. Peterson Foundation. In comparison, the U.S. gross national product, a monetary measure of the market value of all the final goods and services produced and sold in a specific time period by countries, is $25.25 trillion according to Bureau of Economic Analysis.

In very basic terms, gross federal debt can be thought of as debt that the government owes to others plus debt that it owes to itself.

The National Debt is now more than $31 trillion. What does that mean?

America’s high and rising debt matters because it threatens our economic future, reports the Peter G. Peterson Foundation. The coronavirus pandemic may have rapidly accelerated our nation’s fiscal challenges, but we were already on an unsustainable path, with structural drivers that existed long before the pandemic.

Making the hard choices to put our nation on a more sustainable fiscal path will help ensure a stronger and more resilient economy for the future. Otherwise, staying the course means a bleaker economic future for the nation and threatens the economic well-being of all Americans.

References:

  1. THE NATIONAL DEBT IS NOW MORE THAN $31 TRILLION. WHAT DOES THAT MEAN?, The Peter G. Peterson Foundation, October 4, 2022. https://www.pgpf.org/infographic/the-national-debt-is-now-more-than-31-trillion-what-does-that-mean
  2. https://www.bea.gov/news/2022/gross-domestic-product-third-estimate-gdp-industry-and-corporate-profits-revised-2nd

Healthy Aging

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Attitude, habit and daily life choices can make a difference in your health and longevity.

Dr. Michael Roizen, M.D., founder of the Reboot Your Age program, writes in the new book The Great Age Reboot: Cracking the Longevity Code for a Younger Tomorow, 40 percent of premature deaths (premature meaning before you turn 75) are related to lifestyle choices.

According to Dr. Roizen, not enough people realize that their attitude, habits and daily life choices can make a difference in their long-term health and longevity. “The largest error is thinking that your choices do not make a difference, but making healthy choices early and consistently allows you to enjoy good health and a longer life,” says Roizen.

By the time you turn 60 years old, “75 percent of your health outcomes are determined by your habits (healthy or unhealthy) and choices”, submits Dr. Roizen.

Focus on 6 + 2

Roizen’s barometer for health success and healthy aging is “6 Normals + 2”. Here are the “Normals” and “Plus 2”, writes Jeff Haden, in Inc. Magazine.

  1. Regain and maintain normal blood pressure. The target is 110/75.
  2. Regain and maintain a healthy level of LDL cholesterol. The target is 100 mg per deciliter.
  3. Regain and maintain a healthy fasting blood glucose level. The target is 100 mg/dL or below.
  4. Maintain a healthy weight for your height. Here’s where it gets tricky. Most people use body mass index (BMI) to determine a “healthy” weight. But muscle, or lack of, matters. A 6′ tall NFL cornerback who weighs 215 pounds has a BMI of 29.2. That puts him at the high end of the “overweight” category, even though by any objective measure he’s incredibly fit. Your body fat percentage is probably a better indication of whether you’re maintaining a healthy weight.
  5. Practice ongoing stress management. Roizen’s target is to “sleep well and feel at ease in your own skin.” But don’t just think of sleep in terms of longevity; a 2018 study found that lack of sleep correlates with tension, anxiety, and lower overall mood. Sleep is good for you later, and good for you now. Aim to get 7 to 9 hours a night. For the best rest, do it on schedule — turning in and waking up at about the same times every day.
  6. Have no primary, secondary or tertiary smoke from tobacco in your body. If you aren’t familiar, tertiary smoke involves pollutants that settle indoors when tobacco is smoked. Think couches, curtains, bedspreads, etc. Your body repairs itself quickly once you quit smoking. As soon as 20 minutes after your last cigarette, your heart rate and blood pressure drop. In other words, don’t smoke. And, if feasible, try to avoid being around people who smoke.

Now for the “Plus 2.”

  1. Get a full body check up. You are what you measure, and you can’t know your numbers — and if necessary work to improve them — until you get your numbers.
  2. Keep your vaccinations up to date. Roizen recommends that everyone get an annual flu shot since it can decrease flu and lung problems as well as reduce the risk of heart attack and stroke. He also recommends people aged 50-plus get the shingles vaccine, and those 65 and over get the pneumonia vaccine.

The key is to consistently make healthy choices that help prevent chronic disease and set you up for a long life.

  • Don’t smoke, and if you do smoke, quit today.
  • Don’t drink alcohol beverages to excess, but drink plenty of water.
  • Get a good night’s sleep and practice mindfulness.
  • Eat a healthy, low refined carbohydrates, no processed food, high fiber diet.
  • Exercise 150 minutes a week.

References:

  1. https://www.inc.com/jeff-haden/a-noted-physician-says-better-health-greater-longevity-comes-down-to-rule-of-6-plus-2.html
  2. https://www.webmd.com/balance/ss/slideshow-binge-watch-risks

Stop focusing on how stressed you are and remember how blessed you are.

Cash Flow is King During Retirement

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Cash flow, or money going in and out of your household bank account, may be the most important personal financial metric for retirees. Cash flow positive retirees are financially good to go and do not worry about paying their bills.

Retirees, and their Financial advisers, often focus only on the money in side of cash flow, that is retirement income. But retirees should thoroughly evaluate the target and aim of cash flow. That is expenses or the money out side of the ledger, also.

Thus, it is essential for retirees not to skip over a thorough review of estimated retirement cash flow.

Knowledge is power. To know thyself was such an important principle that this adage was inscribed on the Temple of Apollo in Ancient Greece. When retirement savings and cash flow are on the line, do not allow stock market fear impact your investment decisions.

Reviewing expenses empowers you with information to make informed, realistic decisions. A known fear is less intimidating than an imagined, uninformed worry.

Here are some suggestions to help retirees navigate volatile markets and perform an essential cash flow assessment.

  • A cash flow management isn’t budgeting. It is a process of clarity and honesty. It helps retirees really see all their income (money in) and spending (money out). Cash flow management allows you to see what you are doing wrong (or right). Knowledge is power and financial freedom.
  • Be realistic. Health care is a huge expense, for example. So, plan realistically. Living expenses are often more than anticipated and returns on investment are never consistent. Be conservative in your estimations and assumptions.
  • Get comprehensive. Beyond the standard expenses, make sure to allot expenses for items such as continuing home repairs, occasional renovations and automobile replacement costs.
  • Don’t get lost in the weeds. It is more important to capture all the large expenses than worry about recording precise numbers. It isn’t necessary to record the past year’s expenses down to the penny.
  • Control your emotions. Retirees, like all people, are emotional. However, emotional people don’t make the best investors or managers of personal cash flow. Do not allow fear impact your investing or cash flow. As Warren Buffett said, “If you cannot control your emotions, you cannot control your emotion.”

When stocks are down and stock markets are crashing, ‘don’t watch the markets closely’ and ‘stick to your financial plan’. If you were to react to the market wild swings and all the fear everyone has when it drops, you’ll end up with less value and cash flow than you started, every time. The stock market will fluctuate up and down dramatically at times. It is not always a rational and logical place because of fear.

References:

  1. https://www.nasdaq.com/articles/cash-flow-king-when-planning-retirement-2016-08-12

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of BrowleeGlobal, LLC

© 2022 BrownleeGlobal, LLC. All rights reserved. No further distribution, reuse, or republication permitted without the written consent of BrownleeGlobal, LLC. For more from BrownleeGlobal, LLC, go to: http://www.brownleeglobal.com/.

Ian: The Most Powerful Storm Ever to Hit the U.S. Mainland

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Florida, North and South Carolina faced a massive clean-up on Saturday from the destruction wrought by Hurricane Ian, after one of the most powerful storms ever to hit the U.S. mainland caused tens of billions of dollars in damage and killed more than 20 people, according to Reuters.

Ian, now a post-tropical cyclone, was weakening but still forecast to bring treacherous conditions to parts of the Carolinas, Virginia and West Virginia into Saturday morning, according to the National Hurricane Center.

“Major to record river flooding will continue across central Florida through next week. Limited flash, urban and small stream flooding is possible across the central Appalachians and the southern Mid-Atlantic this weekend, with minor river flooding expected over the coastal Carolinas,” advises the National Hurricane Center.

The Category 4 major hurricane struck Florida’s Gulf Coast near Fort Meyers on Wednesday, with wind speeds of 150 mph, turning beach towns into disaster areas. And after landfall, it brought devastating winds and floods across Central Florida on Thursday.

Ian exhibited a larger wind field and radius of maximum winds than previous hurricanes. And, Ian tracked slowly across Florida after landfall, amplifying the effects of wind and water.

On Friday, Category 1 hurricane pummeled waterfront Georgetown, north of the historic city of Charleston in South Carolina, with wind speeds of 85 mph.

Roads were flooded and blocked by trees while a number of piers were damaged.

Around 1.7 million homes and businesses were without power in the Carolinas and Florida at 8:00 a.m. ET on Saturday, according to tracking website PowerOutage.us.

References:

  1. https://www.reuters.com/world/us/florida-carolinas-count-cost-one-worst-us-hurricanes-2022-10-01/
  2. https://www.rms.com/blog/2022/09/29/hurricane-ian-strongest-hurricane-in-southwest-florida-since-2004

Invest in Stocks of Great Companies and Hold Them for the Long-Term

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Investors are far more likely to earn the best returns by investing for the long term in the stocks of great companies.

From 1926 through the end of 2021, the S&P delivered an average stock market return rate of 10.49%. That average annual return includes dividends, but not inflation. If you adjust for inflation, the average stock market return drops to 7.37%.

In the past 50 years, the S&P 500 has gained in value 40 of the past 50 years, generating an average annualized return of 9.4%.

Yet, there’s simply no reliably accurate way to predict which years will be the good years and which years will underperform or even lead to losses. But we do know that, historically, the stock market has gone up more years than it has gone down.

Despite that, only a handful of years actually came within a few percentage points of the actual average. Far more years significantly either underperformed or outperformed the average than were close to the average.

Invest in the stocks of high-quality companies, ideally regularly across every market condition, and hold those investments for many years.

The evidence is overwhelming that investors who try to time the market, who try to trade their way to higher returns with short-term moves or who try to buy and sell based on projections of short-term peaks and bottoms generally earn below-average returns, writes Motley Fool. Moreover, those strategies require substantially more time and effort. They can also result in higher fees and taxes that further reduce gains.

If you’re looking to build wealth, investing for the long-term in stocks is an excellent place to start. Investing is the best way to compound your money.

It is recommended that you invest in a market index fund or you invest in the stocks of profitable and stable companies, and hold them for the long-term. By holding your investment for the long-term — think decades — your invested capital can experience compounding growth.

The lesson for investors is don’t get sidetracked by short-term stock movements and market volatility, which tend to stir up lots of headlines and cause investor panic or fear of missing out. Reasonable and largely stable investment returns will realize you the best returns.

To get the best returns in stock investing, use the method that’s tried and true: Buy the stocks of great companies and hold them for the long-term.

Stocks do offer some limited protection against inflation, as companies can typically raise their prices to compensate for a weakening dollar and loss of purchasing power. But stocks over the long-term have not beaten real estate as a hedge against inflation.

References:

  1. https://www.fool.com/investing/how-to-invest/stocks/average-stock-market-return/
  2. Jeremy J. Siegel, Stocks for the Long Run: The Definitive Guide to Financial Market Returns & Long-Term Investment Strategies, fifth edition, New York, NY: McGraw-Hill Education, 2014.
  3. https://www.mckinsey.com/capabilities/strategy-and-corporate-finance/our-insights/prime-numbers/markets-will-be-markets-an-analysis-of-long-term-returns-from-the-s-and-p-500

Burton G. Malkiel: Index Funds and Bond Substitutes

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Burton Gordon Malkiel, the Chemical Bank Chairman’s Professor of Economics, has been responsible for a revolution in the field of investing and money management. And he’s also author of the widely influential investment book, A Random Walk Down Wall Street.

His book, A Random Walk Down Wall Street, first published in 1973, used research on asset returns and the performance of asset managers to recommend that all investors would be wise to use passively managed total market “index” funds as the core of their investment portfolios. An index fund simply buys and holds the securities available in a particular investment market.

There were no publicly available index funds when Malkiel in a Random Walk first advanced this recommendation, and investment professionals loudly decried the idea. Today, indexing has been adopted around the world.

Additionally, Malkiel believes that investors “probably needs to take a bit more risk on that stable part of the portfolio”. One asset class that he recommends, instead of low yielding bonds, is preferred stocks. There are good-quality preferred stocks, which are basically fixed-income investments. They’re not as safe as bonds. Bonds have a prior claim on corporate earnings.

According to Malkiel, investors need some part of the portfolio to be in safe, bond like assets–such as preferred stocks, or what he calls bond substitutes, for at least some part of their portfolio.

He suggest a preferred stock of like JPMorgan Chase. He doesn’t think you’re taking an enormous amount of risk. The banks now have much more capital. They are constrained by the Federal Reserve in terms of what they can do and buying back stock and increasing their dividends. And with a portfolio of diversified, high-quality preferred stocks, one can earn a 5% yield.

And if one wants to take on even a bit more risk, there are high-quality common stocks that also yield 5% or more: a stock like IBM, which has a very well-covered dividend, yields over 5%; AT&T– you can think of basically blue chips and they might play a role.

Regarding diversification, investors do need some income-producing assets in their portfolio. But his recommendation is that you think in the diversification of not simply bonds, but maybe some bond substitutes. However, there is a trade-off; there is going to be a little more risk in the portfolio. And one needs to recognize that there is not a perfect solution.

But part of the solution for an investor, especially a retired investor, must be to revisit their spending rule. If one is worried about outliving one’s money, then the spending rate has to be less. In part, it means maybe a bit more belt-tightening.

There’s no easy answer to this. Malkiel wished there were an easy answer that there’s a riskless way to solve the problem. But there isn’t. In terms of wanting more safety, one ought to be saving more before retirement, and maybe the answer is to be spending less in retirement. Thus, on a relative-value basis, things like preferred stocks, and some of the blue chips that have good dividends, and dividends that have been rising over time, ought to play at least some role in the portfolio.

In this age of “financial repression”, where safe bonds yield next to nothing, an asset allocation of 40% bonds is too high, states Malkiel. Now, of course, there’s not just one figure that fits all. For some people it might be 60-40 would be OK. But, in general, the asset allocations that Malkiel recommended have a much larger equity allocation and a much smaller bond allocation. And if you look at the 12th edition of Random Walk book, you’ll find that he has generally reduced the fixed-income allocation and increased the equity allocation–different amounts for different age groups,

References:

  1. https://dof.princeton.edu/about/clerk-faculty/emeritus/burton-gordon-malkiel
  2. https://www.morningstar.com/articles/995453/burton-malkiel-i-am-not-a-big-fan-of-esg-investing

Update: Tropical Storm Ian

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Tropical Storm Ian continues to bring dangerous wind, rain and storm surge conditions to parts of Northeast Florida and is expected to regenerate into a hurricane by Thursday evening,

At 2 EDT, Tropical Storm Ian is located 40 miles northeast of Cape Canaveral, FL, and is located 275 miles south of Charleston, SC. It has maximum sustained winds of 70 mph and is moving north by northeast at 9 mph.

A turn toward the north is expected late today, followed by a turn toward the north-northwest with an increase in forward speed Friday night. On the forecast track, Ian will approach the coast of South Carolina on Friday. The center will move farther inland across the Carolinas Friday night and Saturday.

Tropical Storm Ian continues to bring dangerous wind, rain, flash flooding and storm surge conditions to parts of Florida as it churns in the Atlantic Ocean. Ian is expected to become a hurricane again by Thursday evening and make landfall as a hurricane on Friday, with rapid weakening forecast after landfall. A hurricane warning has been issued for the entire South Carolina coast. A tropical storm warning has been extended northward to Duck, North Carolina.

The strongest winds right now from Ian are in northeast Florida (Jacksonville), where some gusts have topped 70 mph in Daytona Beach. Additionally, some gusts over 50 mph have been recorded in Gainesville and Jacksonville, and over 30 mph gusts have worked their way along the coasts of Georgia and South Carolina.

Ian is a large tropical cyclone. Tropical-storm-force winds extend outward up to 415 miles from the center. A WeatherFlow station in New Smyrna Beach recently reported a sustained wind of 69 mph.

Source: National Hurricane Center

Update: Tropical Storm Ian

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Tropical Storm Ian is located east of Orlando and is moving over central Florida toward the east central coast of Florida. Ian has weakened to a tropical storm and is expected to turn north and north-northwest by Friday and Friday night.

At 8 AM EDT, the center of Tropical Storm Ian was located 40 miles east of Orlando and 10 miles west of Cape Canaveral, FL.

Ian is moving toward the northeast near 8 mph. A turn toward the north-northeast is expected later today, followed by a turn toward the north and north-northwest with an increase in forward speed Friday and Friday night. On the forecast track, the center of Ian is expected to move off the east-central coast of Florida soon and then approach the coast of South Carolina on Friday. The center will move farther inland across the Carolinas Friday night and Saturday.

Maximum sustained winds remain near 65 mph with higher gusts. Some re-intensification is forecast, and Ian could be near hurricane strength when it approaches the coast of South Carolina on Friday. Weakening is expected Friday night and Saturday after Ian moves inland.

Tropical-storm-force winds extend outward up to 415 miles from the center. Daytona Beach International Airport recently reported a sustained wind of 60 mph and a gust to 70 mph.

Jacksonville International Airport recently reported a sustained wind of 26 mph and a gust to 41 mph.

STORM SURGE: There is a danger of life-threatening storm surge today through Friday along the coasts of northeast FL, GA, and SC. Residents in these areas should follow advice from local officials.

The combination of storm surge and the tide will cause normally dry areas near the coast to be flooded by rising waters moving inland from the shoreline. The water could reach the following heights above ground somewhere in the indicated areas if the peak surge occurs at the time of high tide…

  • Flagler/Volusia County Line to South Santee River…4-6 ft
  • St. Johns River north of Julington…3-5 ft
  • St. Johns River south of Julington…2-4 ft
  • South Santee River to Little River Inlet…2-4 ft
  • Patrick Air Force Base to Flagler/Volusia County Line…1-3 ft

The deepest water will occur along the immediate coast near and to the right of the center, where the surge will be accompanied by large waves. Surge-related flooding depends on the relative timing of the surge and the tidal cycle, and can vary greatly over short distances.

WIND: Tropical storm conditions are occuring in parts of the warning area on the east and west coasts of Florida and should spread northward along the Georgia, South Carolina, and North Carolina coasts today through Friday. Hurricane conditions are possible within the Hurricane Watch area in northeastern Florida, Georgia, and South Carolina through Friday.

RAINFALL: Ian is expected to produce the following storm total rainfall:

  • Northeast Florida, coastal Georgia and Lowcountry of South Carolina: 4 to 8 inches, with local maxima of 12 inches.
  • Upstate and central South Carolina, North Carolina, and southern Virginia: 3 to 6 inches with local maxima of 8 inches across western North Carolina.

FLASH FLOODING: Widespread, life-threatening catastrophic flash and urban flooding, with major to record flooding along rivers, will continue across central Florida. Widespread considerable flash, urban, and river flooding is expected across portions of northeast Florida, southeastern Georgia, and eastern South Carolina tomorrow through the weekend. Locally considerable flash, urban, and river flooding is possible this weekend across portions of the southern Appalachians, where landslides will be possible as well. Limited flooding is possible across portions of the southern Mid-Atlantic.

TORNADOES: A tornado or two remains possible across east-central and northeast Florida through this morning. This threat will shift into the coastal Carolinas on Friday.

Source: National Hurricane Center

Investment Knowledge is Essential

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Government tax laws favor investing in assets over increasing your salary. The more money you earn, the more income taxes you pay. The more assets you acquire, the less taxes you pay.

In building wealth, your first step is to get clarity about your financial and wealth building goals and your purpose for investing.

Americans who don’t have specific financial and wealth building goals are unlikely to have much success managing their money, building wealth over the long-term and achieving financial freedom. 

Americans are conditioned from an early age to equate asset diversification with investment risk mitigation.

  • Mutual funds are deemed safer than single stocks.
  • A portfolio of stocks is considered safer than real estate.
  • A real estate portfolio is thought to be safer than a single business venture.

As the proverb says, “Don’t put all your eggs in one basket.”

If you aren’t educated and don’t thoroughly understand about a specific asset class, investing heavily in that single asset can be incredibly risky. But if you take the time to learn and become knowledgeable about the sector and the specific markets and properties in which you plan to invest, you can make much of that risk disappears.

The Four Benefits of Real Financial Education

Four things happen when you focus on increasing your education and increasing your knowledge of a specific investment asset:

  1. You increase the level of control you have around the investment. More knowledge allows you to be a wise and active participant in managing the asset.
  2. Your rate of return typically increases. Wise investors use their knowledge and control to make decisions that will improve performance.
  3. Your taxes go down. What most people have learned about taxes is wrong. Taxes and tax laws are essentially a framework for what kind of money is taxed and at what rates. If you do precisely the same thing when it comes to money, you will pay the same amount of tax. But the tax law is packed with incentives the government has created to encourage people to do specific things with their capital. The more knowledge you have about those incentives, the less you’ll pay in taxes. One of the first things you’ll learn is that the government favors investing in assets over increasing a salary. The more money you earn, the more taxes you pay. The more assets you acquire, the less taxes you pay.
  4. Your risk goes down. When you combine a high level of control with higher returns and lower taxes, you will have greatly reduced the risk associated with a specific asset class. Compare your average mutual fund to a multi-family housing property that you control in a market you know like the back of your hand and that generates a high rate of return with additional tax benefits. Which one feels like the bigger risk now?

The real key to a successful retirement investment strategy—or any investment strategy—is financial education that includes proven systems for building wealth over the long term and, reducing taxes and expenses.

References:

  1. https://www.worth.com/retirement-investment-strrategy-portfolio-management-financial-education/