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The Dark Side of Student Loans
Issue #528, June 25, 2018

The Cost of Out-sourcing Convenience
Issue #527, June 18, 2018

Social Security: 66 or 70?
Issue #526, June 11, 2018

Student Loans: There’s (Unfortunately) a Lot More!
Issue #525, June 04, 2018

Co-signing a Note
Issue #524A, May 31, 2018

The Knight Frank Luxury Index and Collectables
Issue #524, May 28, 2018

The Importance of Diversification: The Myth of Diversification
Issue #523, May 21, 2018

How to Save Thousands on Your Food Bill
Issue #522, May 14, 2018

MoviePass and Other Things
Issue #521A, May 10, 2018

Degree Inflation, Long Training Periods, and “Certification”  Part III
Issue #521, May 07, 2018

Degree Inflation, Long Training Periods, and Certification” Part II of III
Issue #520, April 30, 2018

Follow-up on Several Things
Issue #519A, April 25, 2018

Degree Inflation, Long Training Periods, and “Certification”: Part I of II
Issue #519, April 23, 2018

The Kids Birthday Party Hustle
Issue #518A, April 18, 2018

A Pension Question: Part II of II
Issue #518, April 16, 2018

A Physician is an Executive
Issue #517A, April 11, 2018

A Pension Question: Part I of II
Issue #517, April 09, 2018

Is the Correction Over?
Issue #516A, April 05, 2018

Used Car Dealers, Student Loans, the Chinese, and Uncle George’s Rule
Issue #516, April 02, 2018

Starter Homes
Issue #515, March 26, 2018

Redecorating: Beware!
Issue #514, March 19, 2018

NASDAQ Closes at Record High
Issue #513, March 12, 2018

A 40% Chance
Issue #512, March 05, 2018

Several Things
Issue #511, February 27, 2018

Human Capital, Education and Wealth
Issue #510, February 19, 2018

Another Stock Market Update
Issue #509A, February 18, 2018

Some Thoughts on Savings
Issue #509, February 12, 2018

A Stock Market Upfate
Issue #508S, February 10, 2018

Who Can You Trust? Part II of II
Issue #508, February 05, 2018

The Christmas Decoration Pre-worn Jeans Hustle
Issue #Interim Bulletin #507A, February 03, 2018

2018 Outlook for Financial Markets
Issue #507, January 29, 2018

Who Can You Trust? Part I of II
Issue #506, January 22, 2018

Life Insurance Settlements
Issue #505, January 15, 2018

Commodities and Buying the Breakout
Issue #504, January 08, 2018

Buffett Wins His Bet
Issue #503A, January 04, 2018

Practice Real Estate and Free Agency
Issue #503, January 01, 2018

Outlook for 2018: Part III: Stocks and Bonds
Issue #502, December 25, 2017

My Outlook for 2018: Part Ii: Precious Metals
Issue #501A, December 21, 2017

Outlook for 2018: Hard Assets: Part I of III
Issue #501, December 18, 2017

More Thoughts on Bitcoin
Issue #500A, December 14, 2017

Fees and Good Relations with Bankers
Issue #500, December 11, 2017

Salvator Mundi
Issue #499A, December 07, 2017

Should You Rent or Own a Home?
Issue #499, December 04, 2017

A Gift Subscription
Issue #Interim Bulletin #498A, December 02, 2017

Stocks vs Real Estate: Asset Allocation: Part II of II
Issue #498, November 27, 2017

When Good Enough is Fine
Issue #497A, November 22, 2017

Stocks vs Real Estate: Asset Allocation. Part I of II
Issue #497, November 20, 2017

The Saudi Arrests and the Perils of Foreign Investing
Issue #496, November 13, 2017

Gambling and Las Vegas
Issue #495, November 06, 2017

Some Tips on Auto Insurance
Issue #494, October 31, 2017

Bitcoin and the Digital (Crypto) Currencies
Issue #493, October 23, 2017

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


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

A Little Insurance: Wealth, War and Wisdom

Issue #488, September 18, 2017

    Almost a month ago North Korea threatened to attack Guam. Trump said we will responds with “fire and fury”. I thought about writing this newsletter at that time, but was concerned that any mention of possible nuclear war would label me as an alarmist and hurt my credibility. Then along comes 2 hurricanes and Kim launches a missile over Japan (and then another missile) so I’m going to write about some common sense things you should do to prepare for a natural or man-made disaster.
    Before getting started: My fear of a nuclear war is no higher than 6 month ago. For all of the bellicosity (on both sides), Kim’s family has been in power in N. Korea for 70 years. They know how to play international politics. I believe the chance of him picking a shooting war with us is almost zero. I don’t believe a major conflict, much less the use of nuclear weapons, is imminent. Neither does the best gauge of the totality of public opinion, namely the stock market. The South Korean KOSPI and the Japanese NIKKEI remain strong. When they drop 5-10% in one day is when you should get worried. It’s like when the policeman with the bomb-sniffing dog starts to run away from a backpack sitting on a bench: time for you to run too.
    Let’s start with the basics. You should have enough supplies to make it 30 days without electricity. First on the list is water, and of course enough canned goods. You should have batteries and a BQ grill with several canisters of propane to prepare food. Because the banks will almost certainly be closed, you should also have plenty of cash. A little “Guns, Ammo and Liquor” (see Issue #252 (3/11/13) wouldn’t hurt either. 
    Now let’s talk about if there is armed conflict, a nuclear war, foreign invader or social unrest. One of my earliest newsletters (Issue #41, 6/2/08) reviewed Wall Street legend Barton Biggs’ book Wealth, War and Wisdom. If there is anyone who was a main stream establishment guy, about as far from a toothless tattooed hillbilly as it gets, it’s Biggs, which makes his discussion all the more credible.
    His main point was that once or twice during your lifetime, something very bad is going to happen. We are complacent in the US. It’s been 150 years since there has been a war here, and 2 centuries since foreign soldiers have been on our soil. He notes also that wealth breeds complacency. He used the German Jews as the example. By WW I, they were integrated into German society, especially among the merchant class and the intelligentsia, and had fought for the Kaiser. He also noted that by 1940, except for a lucky few like Einstein, they had been exterminated.
    Wealth also breeds envy. During good times, it’s just envy. But when society breaks down, it could get ugly. Think of far right, or the far left, or some guy who just wants to even the score with you. These folks don’t give a hoot how hard you worked and sacrificed to get where you are
    When there is armed conflict in your country, financial assets fare the worst. Sovereign debt, government bonds and notes, are often wiped out. Would you rather have a piece of paper or a blanket and some food? Stocks do poorly, and if you’re on the losing side, might be worth nothing.
    Developed real estate often doesn’t do well. One bomb and your home, store front or factory is rubble. And forget about the insurance company paying on your policy.
    Farm land does much better. It, or a second home, is also a place to retreat to escape the mobs. Stock it with provisions and a weapon to defend yourself. There are areas now in big cities, like the South Side of Chicago, that are terribly dangerous. If society breaks down, they will be totally lawless.
    Don’t count on your safe deposit box. If whoever is in power wants what’s in it, they will just take it. Have portable wealth. Plenty of cash. But gold, diamonds and jewelry are even better. Art is portable wealth, although in this circumstance don’t expect top dollar. Biggs even suggests you bury some gold on your land (remember, it doesn’t rust, tarnish or decay) and tell no one outside your family.
    He also suggests that you have 5% of your wealth outside the country. RMD comment: it is nearly impossible to open a foreign savings account. Then you must get there, and even then, it might be gone. There are Jewish families from WW II still haggling with banks in Switzerland. Canada would be my first choice, and then Australia. RMD second comment: Right now one Bitcoin could buy almost 3 oz. of gold. Let’s see how much its worth if this goes down.
    Diversify, diversify, diversify. Hopefully something will hold its value.
    Since the beginning of my financial writing I have recommended you own a second home and/or recreational property. This is just an added (potential) benefit. Think of the rest of my advice as an insurance policy: you hope you never have to use it, but if stuff happens, you’ll be glad you have it.
    Last Tuesday on CNBC, Ray Dalio of hedge fund giant Bridgewater said (again) that you should have a 5-10% position in gold/the precious metals, and gave all the reasons that I always give relating to depreciation of the US Dollar.
    RMD comment: China wants terribly to challenge the US as the world’s great superpower, and to do this it needs 2 things; 1) a stronger military, esp. a stronger navy, and 2) nothing will happen, though, until the dollar loses its status as the world’s reserve currency. I believe the Chinese are stockpiling gold so at some time in the relatively near future (say within 5 years) they will issue a gold-backed Yuan. (I wrote that last week. Yesterday there was a post on that China was nearing the announcement of an oil futures contract denominated in Yuan and convertible to gold. This would allow anyone, including Russia and Iran, to avoid the shackles of the US Dollar). 
    A long-time subscriber, a very sophisticated investor from Canada that I met at a Barron’s conference almost a decade ago, challenged my comment in the last newsletter that it costs 1% of the value per month, 12% per year, to own a home.
    RMD comment: insurance is about ½% per year (the chance of your home burning down is less than 1 in 100). Property taxes are at least 1% per year, and more in the high-tax states. Construction is depreciated over 35 years, which amounts to about 3% per year. The time cost of money, depending on the stock market, is between 6-10% per year. Thus it costs about 12% of the total value per year, 1% per month, to own a home. I don’t mind be challenged: I stand behind what I say. A difference of opinion is one thing, but if I’m wrong, I am willing to learn and stand corrected.
    The newsletter 2 weeks ago about “How NOT to Buy a Home” looked at things from the perspective of the young man whose father-in-law co-signed for the mortgage. The more I think about it, the more I believe the father-in-law, a retired firefighter living on his pension, made as bad, or worse, a mistake.
    1) If the kid turns out to be a ne’er-do-well, or even worse, an outright crook, what’s this guy supposed to do if he’s stuck with the home and the mortgage, or if the kid tries in some way to take the house?
    2) Issue #156 (5/9/11) was “Co-signing a Note”. I can think of no reason to co-sign a note. The fact that a co-signer is required means that the borrower, on their own, is unworthy of being lent the money. If there are only 10 things you ever remember from reading this newsletter, one should be:
                                  Never co-sign a note.

    A subscriber said “By now you’re aware that by logging on to Equifax to see if you’ve been hacked, you wave your right to sue”. I just couldn’t believe that, so I asked an attorney, who said “It negates your ability to sue in court: you are still able to bring an individual arbitration. They are trying to prevent class actions”.
    Three Equifax execs sold $2M of stock after the data breach occurred, but before it was publically announced. The company said they were not aware of the breach.
    RMD comment: I learned long ago (the easy way, someone told me) that the appearance of a conflict of interests is a conflict of interests. These execs are going to have some serious explaining to do.
    Last week I mentioned that my termite inspector said he was doing many fewer inspections for homes being sold, and I took from that that home sales was down. The next day in Barron’s, Randall Forsyth noted that residential and commercial construction was down. I used this as an example of getting investment ideas from your daily life.
    On Tuesday I was talking to a man who sells Caterpillar (CAT) equipment. RMD: “Are you moving much steel”? Man: “the first quarter was good, the 2nd quarter weak. The 3rd quarter weaker. The 4th quarter is going to be even worse”.
    RMD comment: Ten years ago when the first iPhone came out, cousin Tony was at a mall in NJ. The only people in the mall were at the Apple (AAPL) store, so he bought AAPL and made some nice money.   
    The mixture of my subscribers has changed over the last 5 years. Previously it was 2/3 physicians, 1/3 non-physician investors. Now it’s 60% docs, 40% investors. Ex: recently I met a physician-in-training who is hundreds of thousands of dollars in debt. I gave him a lot of personal advice, and told him I’d be glad to answer any questions. He declined a $50 yearly subscription. To paraphrase the Emperor “So be it young Skywalker”.
    In contrast, I have subscribers that manage 10 and 11-figure sums, who gladly take a subscription for just one idea per year. One of my best newsletters (unfortunately), is “Why won’t Physicians Pay for Good Advice” (Issue #59, 3/2/09). My best personal observation (again unfortunately) is “what’s obvious to some people isn’t obvious to most”.

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