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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

Escheat
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

Contracts
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

Embezzlement
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

The VIX
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

The War on Cash
Issue #408, March 07, 2016

Precious Metals: Don’t Jump in Yet
Issue #407, February 29, 2016

The Bear is Growling
Issue #406, February 22, 2016

The Importance of Showing Respect
Issue #405, February 15, 2016

The 80-20 Rule of Thumb Pareto Principle
Issue #404, February 08, 2016

Some Tips on Commercial Real Estate
Issue #403, February 01, 2016

Economic Outlook for 2016
Issue #402, January 25, 2016

Selling Short: Part II of II
Issue #401, January 18, 2016

Short-Selling. Part I. How it Works
Issue #400, January 11, 2016

Who Can You Trust, and How to Spot a Con Man
Issue #399, January 04, 2016

Outlook for 2016: Part II of II
Issue #398, December 28, 2015

My Outlook for 2016, Part I of II
Issue #397, December 21, 2015

Want to Live a Long Time?
Issue #396, December 14, 2015

Some Tips on Retirement
Issue #395, December 04, 2015

Negative Interest Rates
Issue #394, November 30, 2015

What if the US Dollar Breaks to New Highs
Issue #393, November 23, 2015

How to Decrease Student Debt by 25%
Issue #392, November 16, 2015

The Importance of Buying Life Insurance when you are Young
Issue #391, November 09, 2015

Barron’s Conference, Part II of II
Issue #390, November 02, 2015

THE PHYSICIAN INVESTOR NEWSLETTER

HELPING PHYSICIANS ATTAIN FINANCIAL SECURITY
By Robert M. Doroghazi, M.D., F.A.C.C.

My Outlook for 2017: Part II of II

Issue #449, December 19, 2016

    Interest Rates:
    The 35 year bull market in bonds is over. Consider: the 10-year Treasury now pays almost 2.6%. If you buy a 10-year Treasury, that’s what you will receive, year-in and year-out; 2.6% per year until 2026.
    The “standard” portfolio for those with a 30-50 year time horizon, such as pension funds and University endowments, is 60% equities and 40% fixed income. Although the market has rallied hard since the election, the strong pop in interest rates has caused a similar loss in the bond positions, so that the average portfolio has seen little net gain.
    Here is what I recommend:
    1) 2.5% has been significant resistance over the last 3 years on the 10-year Treasury. There was strong action this week to go through that level. At present, speculators (“dumb money”) have a huge net short position (they think rates will go higher, decreasing the value of bonds), while commercials (the “smart money”) have a huge net long position. In the short-term, rates may come down—or—the shorts may be forced to cover, driving rates higher.
    2) Even with the rate increase to 0.5-0.75%, the Fed is still behind the curve. The 2-year Treasury is most closely related to Fed policies, and it ended the week at 1.27%.
    3) After the next mean reversion, rates will most likely again head higher, and over the course of approx. 3-5 years, will probably normalize, with the 10-year around 5%.
    4) I have several subscribers who inherited a laddered bond portfolio (the wealthy would often do this with municipal bonds). Ex: a 10-year bond matures every 3 months, with the proceeds rolled into another 10-year bond. These folks have experienced years of pain. Now their income will increase as rates increase.
    5) This is probably the most important point of this letter. I believe you should decrease your allocation to fixed-income. I am not referring to cash reserves of at least 6 months living expenses that all prudent people should have, but rather the allocation to fixed income in your investment portfolio. As Peter Lynch notes “Over the long term, it’s more profitable to own the company (stocks) than to loan it money (bonds)”.
    In Issue #305 (3/17/14) I discussed Warren Buffett’s Model Portfolio. Buffett calls long-term Treasuries “Certificates of Confiscation”. He recommended a portfolio of a small amount of cash to take advantage of buying opportunities, otherwise, put everything into an S&P 500 Index fund. The average business cycle is 5-6 years, so if you are less than 50 years old and more than 10-12 years (2 business cycles) from retirement, I would suggest you take Buffett’s advice. For those nearing retirement or even in retirement, I believe you should also consider more stock exposure. Bonds provide income and insurance in a downturn. Only stocks (and real estate) provide growth and can track inflation    
    Real Estate:
    The higher interest rates go, the more of a drag it will place on real estate. Likewise, if rates go up slowly, and not a lot (define that how you like), the market will adjust.
    There is a pent up demand for single family homes. Last week it was reported that the Homebuilders Index was up 7 to 71, the highest since 2005, and the largest monthly jump in almost 25 years. Households are being created faster than homes, esp. starter homes, are being built. If you buy a home, or if you currently have a variable rate note, be sure to take a fixed-rate mortgage (see below). Remember: you must own a home at least 5 years to be able to cover the “round trip” fees to buy and sell, which usually total about 10%.
    As interest rates rise, those on the fence will realize they need to fish or cut bait. If they want a home, now will be better than later.
    If the economy and wages improve, and there is tax reform, it will be a positive.
    Lumber futures are higher. They often lead interest rates (see above) and the housing market, suggesting home-related stocks will do well next year.
    Currencies:
    This is always the big dog, and it looks like the US Dollar is breaking out to new a new 14-year high. A strong Dollar hurts commodities, the commodity-producing countries, and emerging markets in general, because their trade is usually denominated in US Dollars (one benefit of the US to have the world’s reserve currency). A strong Dollar will eventually hurt big US multinationals, but not right now.
    Also note that for many years our 10-year Treasury was about 1.5-1.7% higher than the German 10-year. That has now widened to above 2%, meaning there has been a significant change in the fundamental picture.
Precious Metals:
    Gold isn’t going anywhere with the Dollar flexing its muscle. If you were looking to pick up some physical gold and silver as an insurance policy against future inflation, now would be a good time. Gold is currently over-sold and due for a pop, but otherwise, direct your investments elsewhere.

    Summary:
    1) For the intermediate term, months, the stock market should continue to perform well. Stick with it.
    2) The 35-year bull market in bonds is over, and rates are headed higher.
    3) Decrease the allocation to fixed-income in your investment portfolio, and redirect the proceeds to equities.
    4) In the intermediate term, the precious metals aren’t going anywhere.
    5) Much of this depends on Mr. Trump behaving, both personally, and not starting a trade war, and the Republicans able to implement their agenda of cutting taxes and simplifying regulation. At present, the market feels pretty good about the chances.
                                                        RMD
    It is hard to think of a bigger waste of money than Private Mortgage Insurance (PMI), which is required if you have a down payment of less than 20%. I don’t blame the banks for requiring PMI: they are just protecting their interests. When you are finally able to drop PMI, you will realize that you have received nothing in return. Note also that PMI usually doesn’t automatically drop off when your home equity exceeds 20%. Rather, you often need to refinance (which entails more fees).
    RMD comment: Don’t buy a home unless you have a 20% down payment. Also remember there are all kinds of other expenses to start a household, such as appliances, furniture, yard tools, etc., so plan to have another $10K in addition to the down payment. 
    This is from a subscriber who is as tuned in to Academic Medicine and the politics of Medicine as anyone on my recent newsletter “Medicine in 20 years.
    “Terrific Commentary. One thing that may end up different than you predict is that if there are more mid-levels (Nurse Practitioners and Physicians Assistants), they will need MD supervision. This would be similar to our Fellow’s Cardiology Clinic: they see the patients, then I pay a short visit to confirm the decisions. One Cardiologist supervises 5 or 6 Fellows. With Primary Care, one physician could supervise even more NPs. Every other point you make is 100% on target”.
    The average salary in the NBA is $5.2M per year. The average playing career is about 5 years, so the average NBA player pulls down $26M in their lifetime (this doesn’t count endorsements). The average physician’s salary is $250K per year. Over a 25-year career (paying off student debt over a good part of the time), the average physician will make $6.25M.
    RMD comment: Is the average NBA player worth 10-20 more to society than a physician? The market place says they are. I make this point to show the priorities in our society, and because policy makers in government and the insurance industry will continue to squeeze physician’s income.
    Had my 5th colonoscopy last week. Clean (I’m 65, that’s it). The preparation is clear liquids the day before, so I drank plenty of apple juice and cranberry juice. I always look at the nutrition labels. Cranberry juice: 15 cal/oz. Apple juice: 13.75 cal/oz.
    RMD: as if I needed another reason to drink Coca-Cola, its only 11.75 cal/oz.
    When I showed up they asked for a picture ID.
    RMD (thinking): Do you guys think I’m going to fake this? 

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