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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.

The Fed’s Announcement

Issue #419, May 23, 2016

    I was going to write about the importance of maximizing the use of your biggest capital investments, but I’ll put that off until at least next week.
    Instead, I’d like to talk about the Federal Reserve. On Wednesday afternoon, the Fed announced that interest rates could be raised at their June policy meeting if the economy continues to improve. Just like a few years ago with the “taper tantrum”, the market wasn’t exactly too happy about that. Gains before the announcement quickly disappeared, and the market continued with a rough day on Thursday, although it did recover on Friday.
    What might happen should the Fed raise rates?
    1) One of the basic reasons the stock market has done so well over the last 3-4 years is that the paltry returns from fixed-income provided little competition. Over the 20th Century, stocks paid a 4-5% dividend. Presently, a stock with a 2% dividend looks pretty sweet compared to the 10-year Treasury yielding 1.8%. With rising interest rates, fixed-income investments become more competitive, hurting stocks in general, and especially the high dividend payers such as Utilities and REITs.
    2) The yield curve has flattened. In normal times, the longer the duration, the higher the interest rate. People must be compensated for tying up their money for longer periods of time. When the market senses decreased economic activity (a decreased demand to borrow money), short-term rates stay the same, or even increase, while rates on the longer-dated bonds fall. Although still a ways from inversion, the current interest rate curve is the flattest since the financial crisis, not a good omen.
    3) As I have noted for some time, currencies are the most important show in town. Rising interest rates make the US Dollar more competitive: it exploded upwards after the announcement. A 2% return on US Treasuries is much more desirable than a negative return on German, Japanese or Swiss Bonds.
    4) Commodities world-wide, the most important being oil, are priced in US Dollars. If the Dollar strengthens, hard assets, including gold, and the stocks dependent upon them, such as the miners and agricultural stocks, could weaken.
    5) Rising rates can’t help real estate. If you have a variable rate note/mortgage (hopefully none of you have anyway), take a fixed-rate note.
    6) If interest rates rise, keep the duration of your bond portfolio short. Bonds lose value as interest rates rise.
    7) I will discuss the VIX (Volatility Index) in detail in an upcoming newsletter. In general, it goes up when people are scared. If it decisively breaks above 17, it could signal trouble for stocks. 
    There are some positives to rising rates:
    A) Banks can become more profitable, because they can raise rates on their loans. The big bank stocks, JP Morgan (JPM), Citigroup (C), etc., popped after the announcement.
    B) Savers will realize a better return on their investments, although rates would have to double to return to historical standard.
    This shows, in spades, the power of central banks. We no longer have “free” markets.   
    Your Homeowner’s Insurance:
    1) Make sure it has kept pace with inflation.
    2) Increase the deductible. The standard deductible is $500. Increase it to AT LEAST $1,000, or even $2,500. It will save you hundreds of dollars a year.
    George Soros has increased his bearish bets on the S&P 500. He has also turned bullish on gold.
    RMD comment: Soros, a Hungarian Jew who fled the Nazis in WW II, is a smart guy. I pay attention to what he says. About 4 years ago he sold his gold position before the smackdown of April, 2013. He’s bearish on the S&P, at least in part because he feels the over-leveraged Chinese economy is reminiscent of ours just before the 2008 meltdown. 
    In last week’s letter, I showed the chart of Macy’s (M), which has lost more than 50% of its value in the last year. I noted that the charts of Ralph Lauren (RL), The Gap (GPS), Kohl’s (KSS) and Nordstrom’s (JWN) looked about the same, and commented this does not bode well for retail sales going forward. One subscriber thought this was more an indicator that the department store model is broken and less of a comment on retail and the economy in general.
    RMD comment: from The Rise and Fall of American Growth: The US Standard of Living since the Civil War (Gordon, Princeton U. Press). The department store not only provided much greater selection, but fixed (and lowered) prices, allowing stores to expand because clerks could service the customer, without direct input from the owner.
    In 1870, the farmer was isolated: no telephone, no automobile, no free rural delivery of mail (the farmer had to go to the PO to fetch the mail for themselves). For all of their dry goods, such as sugar, tobacco, skillets, shoes, etc., they were at the mercy of the local store owner, being gouged on both prices and the credit advanced to buy the goods. The Montgomery Ward and Sears Roebuck catalogues broadened their selection to thousands of items, lowered prices, and delivered the merchandize.
    The Great Atlantic and Pacific Tea Company (A&P) brought a greater selection of food at lower prices. Piggly Wiggly invented the concept of the super market, where the customer walked the aisles and picked up their own goods, rather than require a clerk to fill their order. Studies have shown that when Walmart (WMT) enters a community, grocery prices fall by as much as 25%. The bar code scanner increased efficiency. Amazon (AMZN) has led the Internet shopping revolution, allowing nearly infinite choices at lower prices and delivery to your door. 
    All of these changes in retail fostered growth, improved the quality of life by lowering prices and improving selection and convenience.
    Google purchased YouTube in 2006 for $1.6B. Based on revenues, Merrill Lynch recently estimated YouTube is worth $80B.
    RMD comment: I rarely watch TV after supper or on the weekends, when I can pull up just about anything I want on YouTube. Sometimes I will spend hours on Google, reading about one subject, which perks my interest in something else, which perks my interest on something else.
    Likewise, Gordon notes in American Growth (above) that almost all of the progress in the last 20 years has been in information processing, transmission and storage. This resulted in an initial pop in productivity in 1994-2004 when the effects of the personal computer and the Internet kicked in, but has had little effect since. Ex: Facebook may be a valuable company and brings enjoyment to many people, but it really hasn’t changed the human condition comparable to refrigeration or clean running water.
    Since retiring from the service, 3-star General Mark Hertling has taken a job at Florida Hospital in Orlando to help develop physicians’ leadership skills. He has written Growing Physician Leaders: Empowering Doctors to Improve Our Healthcare. He says there is a difference between healthcare, which is a business, and Medicine, which is a profession.
    RMD comment: Physicians were previously an important constituency of the hospital CEO because they controlled patient flow. Now that most patient flow is controlled by the patient’s insurance plan and many physicians are hospital employees, the CEO often considers physicians just another cost center to be controlled.
    Want to know where you stand with the hospital CEO? 1) Can you get in to see them? Do they return your phone calls? 2) Do they show you the respect of calling you “Doctor”, or do they call you by your first name?  From time to time I run into a retired local hospital administrator, years my senior, who still always calls me “Doctor”.   

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