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The Coming Bear Market: Part II How to Prepare
Issue #492, October 16, 2017

Some Observations on Cemeteries
Issue #Interim Bulletin #491A, October 12, 2017

The Coming Bear Market: Part I: The Myth of Buy and Hold Forever
Issue #491, October 09, 2017

The Market makes New Highs
Issue #490, October 02, 2017

The Importance of a New High
Issue #489, September 25, 2017

A Little Insurance: Wealth, War and Wisdom
Issue #488, September 18, 2017

Some Observations
Issue #487, September 11, 2017

How to be Successful in Your Career
Issue #486A, September 07, 2017

How NOT to Buy a Home
Issue #486, September 04, 2017

This Week in the Market
Issue #485, August 28, 2017

Is the “Trump Bump” Running Out of Gas?
Issue #484, August 21, 2017

Gold is on the Move
Issue #483, August 14, 2017

The Importance of Estimation
Issue #482, August 07, 2017

Buying Art and Collecting: Part II of II
Issue #481, July 31, 2017

Buying Art and Collecting in General, Part I of II
Issue #480, July 24, 2017

Physicians need to be More Forceful: Follow-up
Issue #479, July 17, 2017

Physicians need to be More Forceful
Issue #478, July 10, 2017

Your First “Real” Investment
Issue #477, July 03, 2017

Leasing a Watch: Don’t
Issue #476, June 26, 2017

The Importance of Your Children having a Job
Issue #475, June 16, 2017

The Problem with Medical Student Debt is—the Med Schools
Issue #474, June 12, 2017

Critters and Varmints in your Home and Yard
Issue #473A, June 07, 2017

Leveraged ETFs
Issue #472, May 29, 2017

Leasing a Vehicle: Don’t!
Issue #471, May 22, 2017

Issue #470, May 15, 2017

More on Buying Jewelry
Issue #469, May 08, 2017

Buying Jewelry: Gold, Diamonds and Pearls
Issue #468, April 30, 2017

Thomas Sowell: Part III of III
Issue #467, April 24, 2017

Thomas Sowell: Pat II of III
Issue #466, April 17, 2017

Live Close to Where You Work
Issue #465, April 10, 2017

Medtronic in Hospital Management
Issue #Interim Bulletin #464A, April 07, 2017

Thomas Sowell: Part I of II
Issue #464, April 03, 2017

A Political Contribution a an Investment: Part II of II
Issue #463, March 27, 2017

A Political Contribution as an Investment: Part I of II
Issue #462, March 20, 2017

Buffett Selling Vacation Home
Issue #461, March 13, 2017

Advanced Placement (AP) ourses
Issue #460, March 06, 2017

The Importance of a Credit History
Issue #459A, March 02, 2017

A Credit Card Scam
Issue #459, February 27, 2017

The Electronic Health Reord
Issue #458, February 20, 2017

Issue #457, February 13, 2017

Platinum and Palladium
Issue #456, February 06, 2017

Economic Outlook for 2017: Part II of II
Issue #455A, February 02, 2017

Economic Outlook for 2017: Part I of II
Issue #455, January 30, 2017

A Story From Vegas
Issue #454A, January 25, 2017

Land Donation Deals and the IRS
Issue #454, January 23, 2017

The Theory of Gambler’s Ruin
Issue #453, January 16, 2017

Student Loans: But Wait, There’s More!
Issue #452, January 13, 2017

A Second Home
Issue #Interim Bulletin #451A, January 04, 2017

The Consumer Confidence Index
Issue #451, January 02, 2017

Social Security
Issue #450, December 26, 2016

My Outlook for 2017: Part II of II
Issue #449, December 19, 2016

My Outlook for 2017: The Market
Issue #448, December 12, 2016

Medicine in 20 Years
Issue #447, December 05, 2016

Higher Interest Rates
Issue #446, November 28, 2016

Trump and the Markets: The Bad and Ugly
Issue #445A, November 23, 2016

Trump and the Markets: The Good
Issue #445, November 21, 2016

Negative Trends: The Suits aren’t Makin’ Steel
Issue #444, November 16, 2016

The New DOJ Fiduciary Rule
Issue #443, November 07, 2016

Barron’s Conference, Part IV of IV
Issue #442, October 31, 2016

Barron’s Conference, Part III of IV
Issue #Interim Bulletin #441A, October 26, 2016

Barron’s Conference, Part II of IV
Issue #441, October 24, 2016

Barron’s Conference, Part I of IV
Issue #440, October 20, 2016

This Newsletter
Issue #439A, October 12, 2016

Memoirs of US Grant: Vol II
Issue #439, October 10, 2016

More Points on Collecting, Investing and the Economy
Issue #Interim Bulletin #438A, October 05, 2016

Personal Memoirs of US Grant
Issue #438, October 03, 2016

Ideas for a High School Part-Time Job
Issue #Interim Bulletin #437A, September 29, 2016

Collecting, Investing, and the Economy
Issue #437, September 26, 2016

Free College
Issue #436A, September 22, 2016

A Military Commitment to Pay for Med School
Issue #436, September 19, 2016

When a CD isn’t a CD
Issue #435, September 12, 2016

I Made a Mistake
Issue #Interim Bulletin #434A, September 07, 2016

What is Your Spare Time Worth?
Issue #434, September 05, 2016

Credit Cards and Bonus/Loyalty Points
Issue #433, August 29, 2016

The Write-off of Student Loans
Issue #Interim Bulletin #432A, August 25, 2016

412 Retirement Plans
Issue #432, August 22, 2016

Join the Club
Issue #Interim Bulletin #431A, August 18, 2016

The Case for Precious Metals and Hard Assets
Issue #431, August 15, 2016

When the US went off the Silver Standard
Issue #430, August 08, 2016

Why NOT to Open a Restaurant
Issue #429, August 01, 2016

Some Tips on Life Insurance
Issue #428, July 25, 2016

More Observations on Negative Interest Rates
Issue #427, July 18, 2016

Issue #426, July 11, 2016

Is a PhD Worth It? Part II of II
Issue #425, July 04, 2016

Is a PhD Worth It? Part I of II
Issue #424, June 27, 2016

Avoid Part-time real Estate Agents
Issue #423, June 20, 2016

Issue #422, June 13, 2016

The Problem with Auction Reserves
Issue #421, June 06, 2016

Make Full Use of Your Capital Investments
Issue #420, May 30, 2016

The Fed’s Announcement
Issue #419, May 23, 2016

Quit While You’re Ahead: A True Story
Issue #418, May 16, 2016

The Precious Metals
Issue #417, May 09, 2016

Negative Secular Trends: Part Ii of II
Issue #416, May 02, 2016

Negative Secular Trends: Part I of II
Issue #415, April 25, 2016

Not Winning is not the same as not Losing
Issue #414, April 19, 2016

Behavioral Economics: Part II: Weaknesses
Issue #413, April 11, 2016

Behavioral Economics: Part I: Valid Points
Issue #412, April 04, 2016

The Most Important Books I’ve Read
Issue #411, March 28, 2016

Secret to Success: Take Risks and do Things Differently
Issue #410, March 21, 2016

The Over-Priced Food Presentation Hustle
Issue #409, March 14, 2016


By Robert M. Doroghazi, M.D., F.A.C.C.

412 Retirement Plans

Issue #432, August 22, 2016

    A long-time subscriber, savvy investor, careful with his money, who has given me ideas for several newsletters, heard great things about 412 Retirement Plans, so asked my opinion. From Investopedia: 412 is “A defined benefit pension plan…(that) must be funded by guaranteed annuities, or a combination of annuities and life insurance”.
    I recommend against 412 Retirement Plans:
    1) after studying them, I didn’t understand them, and realized I could not adequately explain the plan to you.
    Peter Lynch of Fidelity Magellan fame had Peter’s Principle #3:
Never Invest in any Idea You can’t Illustrate with a Crayon.
    Chapter Nine in The Physician’s Guide to Investing: A Practical Approach t Building Wealth, is “Invest in What you Know”. Some of you might take this as a challenge and say “I’m going to spend as much time as I need to understand them”. It’s not worth it.
    2) My #1 reference book for investing is Suze Orman’s The Road to Wealth: The Answers to More than 2,000 Personal Finance Questions. The book makes no mention of 412 plans. Suze doesn’t consider them worthy of comment.
    Furthermore, the subtitle of the chapter on annuities, the main vehicle to fund the 412 plans, is “Buyer Beware”. Whole life and annuities are always the first recommendation of the agent because they are—by far—their most profitable product. If you receive the recommendation on the 412 Plan from the agent selling the annuities, you are receiving punk advice.
    3) I was a 3rd year med student. The instructor said “You never had to convince people that penicillin works”. If you think about it, that’s profound. As applies to this discussion, for whatever reason(s), the investing public has determined they don’t think 412 Plans are a viable investment vehicle. If you are doing something different than everyone else, you’re either really right, going where no man has gone before, or much more likely, you’re really wrong.
    4) I don’t believe there is ever a good time to buy an annuity, and with interest rates so low, now is particularly bad. Many companies have stopped offering annuities because they can’t even guarantee a 3% return. When interest rates rise, anything based on fixed income will suffer.
    5) Some people become too enamored with retirement plans, doing almost anything, including investing in complicated things they don’t understand, and really aren’t in their best interests, to avoid paying taxes. Unfortunately, many people don’t use them as much as they should (or at all), but I believe some use them to the neglect of non-retirement savings. Remember that all money in a traditional pre-tax retirement plan will be taxed on withdrawal. Consider every dollar you have in such plans to be worth about 70 cents. Remember also: whenever the government makes the rules, they can change them. For the average hard working doc at the height of their earning capacity, making about $250-500K per year, about one-half of your saving should be in structured retirement plans, and the rest outside of such plans. It gives you much more flexibility.
    Avoid 412 Retirement Plans. 
    Why would anyone ever build a 2-story outhouse? I can’t imagine that the basement would be very popular. Talk about the dirty end of the stick. Answer at end of newsletter.
    Because of globalization, money now easily moves around the globe. Some of the money created from thin air, Quantitative Easing or bond buying by the Bank of Japan, the Bank of England, the European Central Bank, and, of course, the Federal Reserve, will eventually end up in our economy and stock market.
    Since the beginning of my financial writing, I have emphasized the importance of buying quality. I have also repeatedly noted that one $10K collectable has double the value of 10 items worth $1K. I was recently talking to a compulsive shopper. They have (and I’m not kidding) far more than 100 watches that are Fossil and similar-priced brands (say $50 each). Many are still in the original wrapper and have the price tag (obviously never been worn). Their dream is to own a Rolex.
    RMD comment: 150 X $50 = $7,500, which would buy a lower end but still very nice Rolex. Junky stuff looks junky—because it is. And it has zero resale value. A little delayed gratification will allow you to buy the premium material.
    Some simple, common sense advice about getting and keeping a job:
    1) I turned 16 in March, 1967, and immediately applied for a job at Graham’s Book Store in Granite City, IL. The form asked “Qualifications”. Although I had mowed lawns for years, and really done just about anything to make a buck, I never held a “real” job. Mom said put “willing to work hard”. I put that on every job application I ever filled out.
    2) From a now-retired high school teacher: when employers contacted the school for information on a potential employee, the #1 thing they wanted to know was not grades or extracurricular activities, but—attendance. If they hired someone, they wanted a person who would show up.
    3) This is from a Human Resources person who hires engineers (obviously well educated people). The first place they go is—Facebook, to confirm things the applicants claimed, and to look for inappropriate behavior. Would you want to hire someone for an important, responsible position (or any job), who posts a photo smoking a joint, or drunk, or mooning someone, or say they will be on the next “Girls Gone Wild” video?
    RMD comment: I believe Facebook is so popular because it is pure narcissism. You post something you hope hundreds, or thousand, or more people will see. I don’t think anyone who holds a job, or wishes to hold a job, or any position of responsibility, has anything to gain from posting personal things on Facebook. 
      I was listening to “Ain’t We Got Fun” on YouTube. I thought the song was from the Great Depression: it was a foxtrot from 1921. I also thought the lyrics were
“There’s nothing surer, the rich get rich and the poor get poorer,
In the meantime, in between time, ain’t we got fun”.
    Actually, they are:
“There’s nothing surer, the rich get rich and the poor have children.”
“There’s nothing surer, the rich get rich and the poor get laid off.”
      There was a great article in the Wall Street Journal on 8/16 entitled “Writing off Student Loans is Only a Matter of Time”. It will be the subject of the next newsletter. Until then, continue to pay on your student loans, but don’t make any extra payment on the principal. 
    In areas where there are many feet of snow, such as Alaska, an outhouse could easily be buried during winter, necessitating a second story. Think about having to do your business at 40 below zero. Makes you really appreciate indoor plumbing.


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