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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.

The Bear is Growling

Issue #406, February 22, 2016

    A bear market is defined as a drop of 20% or more in the major averages. Some bears are especially vicious. From 1929 to 1932, the DJIA lost almost 90% of its value. When inflation was factored in, the bear market of the 70s was almost as nasty. From the high in 2007 to the low in March, 2009, the DJIA was down about 55%. In the “average” bear market, the losses are about 35%.
    About 70% of the performance of an individual stock is due to the fundamentals of the company, about 30% to general market conditions. At a major bear market bottom, 85-98% of all stocks are down at least 20%.
    Point #1 of this discussion:
In a bear market, no stock is immune.
Essentially all lose money.
    All of the standard investment advice is to “buy and hold”. Consider this: if investing didn’t require any thinking, we’d all be rich. Periods of under-performance and over-performance last about 15-18 years. Compare the current S&P to the market peak in early 2000: now add in the dividends but subtract inflation (and taxes), and you are barely positive. 16 years of near dead money, with some nasty volatility in between.
    The really rich people don’t believe in buy and hold forever. Bernard Baruch was long gone from the market before the crash of 1929: he sold “too early”. Warren Buffett dissolved his partnership in 1969, and sold all of the stock in the retirement accounts of the employees at Berkshire Hathaway in the days before the 1987 crash. Sir John Templeton was an early investor in the Japanese boom of the 60s and 70s, but was out long before the NIKKEI peaked at 38,915 on December 29, 1989. 26 years later, the NIKKEI is still down about 60%. I turn 65 next month, and I hope I have a lot longer to go, but I’ll bet any subscriber one ounce of gold that the NIKKEI won’t return to its previous high while I’m still looking down at the dirt.
    Point #2:
Buy and Hold is a Myth
    Right now we’re down about 10% from the highs of May, 2015. If this is an “average” bear market, investors still face loses of 20% or more. Note also that most of the losses in a bear market occur in its final death throws.
    Point #3:
Take any bounce as a chance to sell,
To create defensive positions.
    There are counter-trend rallies in all bear markets. They are sudden, often explosive, and can turn on a dime without notice. It’s easy to get drawn in. Nobody will watch a TV channel that constantly preaches doom and gloom (even if they are right), so the talking heads on TV are always too positive.
    Point #4:
Don’t get caught in the “bear trap”.
    Bear markets cost years of your financial life. If the major averages drop 20% more from here, it requires a gain of 25% to get even. To make up a 33% loss from the highs of 2015 requires a gain of 50%.
    Point #5:
A Bear Market will cost you
3-5 years of your Financial Life.
    Please be careful. If you are no longer working, and live off your investments, it is standard advice to have 3 years of living expenses in cash and cash-equivalent vehicles (such as CDs and Money Market) so you can ride out bear markets and not have to sell while prices are down just to meet living expenses. The older you are, the less you can afford to try to ride it out. Don’t get mauled by the bear.
    Volatility is already high, and will almost certainly increase. The VIX anticipates there will be 1-2 days every week where the market will be up—or down—more than 1%. Volatility is not only nerve-wracking, but you can easily get whipsawed, buying and selling at the exact worst time. Having a lot of cash will make it much easier to sleep nights and avoid bad decisions.

    Next week I’ll talk about the action in the precious metals, and what to look for to confirm that the bottom might be in, and we are again in a bull market in gold. In the meantime, watch the financial stocks, the ETF XLF, a basket of our largest financial stocks, and the European banks, already down 25% this year. The German economy is the 4th largest in the world, but their largest bank, Deutsche Bank (DB), is down more than 40% this year. If it gets into trouble, it will make the implosion of Lehman Brothers look like the minor leagues.
                                                                      RMD
    Since the beginning of my financial writing, my basic message has been “work hard, save your money, and stay out of debt”. I recently learned another reason to work hard—you have less time to spend the extra money that you make.
    RMD comment: It doesn’t get any better than that.
    I received an interesting comment from a female physician about 40 years of age regarding last week’s newsletter about the importance of showing respect and addressing people as Mr. or Mrs. or Doctor. She notes that she is called Jane or Mrs. Smith as often as she is called Dr. Smith.
    Do females in our society still not command as much respect for similar success as a male? Ex: In Phishing for Phools: The Economics of Manipulation and Deception (I have an autographed copy), Akerlof and Shiller note that white females are quoted higher prices by the salesman for the same car than white males. Black females and black males are quoted even higher prices.
    RMD comment: 1) in The Physician’s Guide to Investing, I note that females would do well to take along a male when entering any negotiation, if for no more than “backup or muscle”. 2) Looks like we could all do a little better by putting ourselves “in the other person’s shoes”.
    There is a statistic that looks at how far you can drive a car on the salary the average worker makes in one hour. It is now 371 miles, the highest ever, surpassing the previous high of about 340 miles in 1999.
    RMD comment: In inflation-adjusted terms, salaries have been relatively flat. The 2 big contributors here are 1) the drop in oil prices, and 2) the improved fuel efficiency of autos. Ex: 100 years ago, a Model T was about 6 month’s salary of the average worker. In 2015, the average salary was about $55K. So compare the current car costing $27.5K to the Model T. I also find it interesting that the average vehicle is still about 6 months of the average worker’s salary.
    Also, note that auto fatalities show the progress of technology (seat belts, airbags, medical care, etc.). Fatalities peaked in 1979 at 51,093, with a US population of 225M. In 2013, there were 32,719 fatalities in a population of 316M. 40% less fatalities in a population that is 45% greater. Pretty impressive.   
    In 2014, NFL Commissioner Roger Goodell took a pay cut from $44.2M to $34.1M.
    RMD comment: The average physician in the US makes about $250K per year. Is Mr. Goodell more valuable to society than 135 physicians—or 500 nurses? I don’t think so, but the marketplace says he is.
    I talked with a lady who previously worked in health care who now works for a company that does opinion surveys. One was for an important federal agency. 50 addresses were chosen at random. She went up, knocked on the door, introduced herself, and offered the people $100 to complete a 1 hr. survey (she admits it took at least 3 hours). Only 3 people agreed to take the survey, and they were clearly of the lower-socio-economic classes, who participated because they needed the money.
    RMD comment: 1) these surveys are clearly not representative. 2) It’s hard to believe people answer such questions truthfully: Someone you’ve never met before comes up to your door and asks you how much money you have in your bank account? C’mon, dude. 3) Setting unachievable goals, especially when your job depends on the results, at the least can cause people to bend the rules, and at the worst, causes outright cheating to satisfy the boss.   
    I highly recommend Kissinger: Volume I: 1923-1968: The Idealist. I’ve learned a lot I didn’t know about Kissinger, and I love Niall Ferguson’s style.
    I was going to make some comments about “The War on Cash”, but the more I read, the more I think this is worthy of a newsletter of its own.
    I’ll be traveling next weekend, so the next newsletter may not come out until Monday or maybe even Tuesday.   

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