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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

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


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

This Week in the Market

Issue #485, August 28, 2017

    I’ve talked a lot lately about currencies, and rightfully so, because they’re the big game in town. Immediately after Trump’s election, the dollar soared, breaking to a new high. But that was a false breakout. The dollar has since weakened, and this week the US Dollar Index broke below the support level of 92.6, closing at 92.52, down a full percent for the week.
    What are the implications of a weaker dollar?
    1) Commodities are priced in dollars. Commodity prices go up when the dollar weakens. Copper has been very strong, and is right at a multi-year high. Copper miner Freeport-McMoran (FCX) has shown strength. . Natural resource stocks, such as miner Rio Tinto (RIO, see chart below) should do well. RIO pays a 5.5% dividend.
    With dollar weakness, you would expect the biggest and most important commodity of all, oil, to be strong, but it hasn’t been. I believe this is a supply issue. Hydraulic fracturing (fracking) has revolutionized the North American oil industry, and all of the other oil producing countries around the world, like Russia, Saudi Arabia, and Venezuela, just can’t stop pumping because they really need the dough.
    Gold is in a bull market. It is at significant resistance right now at $1,300, and is due for a rest or even a pullback. We’ll talk more about this when the precious metals and the precious metal miners break out.
    2) One of the reasons the dollar is weak is because interest rates are soft. The 10-year Treasury closed at 2.169%, at the very bottom of its recent range. The interest-sensitive Utilities are strong and at a new high.


    There was an excellent interview in this week’s Barron’s with Doug Ramsey of the Leuthold Group. He feels the most likely scenario for the market is that we have started a pullback which will probably amount to the S&P 500 falling 6-8% from the recent peak. He then sees the market going to its final bull market high later this year into sometime next year.
    I think his most important point, though, is what he sees after this market peak. He notes that both stocks and bonds have never been this over-valued at the same time. They feel a standard portfolio of 60% stocks and 40% bonds will have difficulty generating a 3-4% return over the following 8-10 years. That sounds far-fetched to people accustomed to higher returns, but it happened in the 30s, the 70s, and the 2000s.
    If this comes to pass A) Insurance companies, endowments, and pension funds, especially the already under-funded public pension funds, are going to be “in for a world of hurt”. B) If you are nearing retirement, you may need to make an adjustment. In 1999, a lot of the folks who planned retiring in 2000 were still working in 2005. C) It will show the fallacy of buy and hold forever. D) Traders will do better, and actively managed funds will almost certainly out-perform index funds. 
    The average price of a new home sold last month in the US was $313,700, +6.3% over the same time last year.
    RMD comment: Let’s put that in context. The average salary in the US is in the upper 50s, so say $60K. I think a good metric is not to buy a home that is more than 2 ½ times your yearly income. Some people stretch that to 3x, or at the height of the housing bubble, it was even higher. A similar metric is for student loans not to be more than 1x expected income. The reason for these metrics is simple: you just don’t have enough money to service the debt. 
    Anyway, $313K is more than 5x the average salary in the US. It means that 1) the average family in the US can’t afford the average new home, 2) more and more new homes are built by the big, publically-traded builders, who like to build high-end homes simply because they are more profitable, 3) it explains the continued strong demand for starter homes. Ex: in Columbia, homes less than $200K often have multiple bidders, while the market is slow for those above $400K. 4) The average family is being priced out of many markets. 5) It also means the price of the average new home is rising much faster than inflation.
    An interview in this week’s Barron’s mentions “smart beta strategies”.
    RMD comment: this is quite interesting. I need to do more research, and will make it the topic of a newsletter in the near future.
    Many of you may have already noticed this, at least subconsciously: whenever the “presentation” of merchandise is changed: new wrapper, different, often more glitzy, advertising, displayed differently or more prominently, the first thing you must say to yourself is “Vigyaz”, Hungarian “look out for danger” (Uncle George’s favorite warning when he had a big hand in Hungarian poker). You can be sure that the price has been raised, or you are getting less for the same price. Check it out, and you’ll see what I mean.
    One great thing for me personally about writing this newsletter is the expertise of the subscribers. When I have a question about almost anything, there is someone I can ask for their opinion. Earlier this year I need new tires for my BMW: a subscriber told me exactly the factors to consider. I was approached last week by a private equity firm about buying this newsletter. An attorney told me he had a client that did business with them, and they are a first-class outfit. Another subscriber checked with his contacts in the area, and noted my operation was really far too small to interest them. Both were correct.
    RMD comment: it is a sign of strength, not weakness, to ask for help when you need it. The worst physicians are those who think they know it all and treat patients out of their area of expertise.
    Or think they know as much about finance as they do about Medicine and get hosed.
    I’m reading The Other One Percent: Indians in America (Chakravorty, Kapur, Singh, Oxford U. Press). “India-born lived overwhelmingly in married-couple family arrangements, as a result of which they were able to diminish the well-recognized economic difficulties of single-parent, esp. female headed, households”.
    RMD comment: Those making immigration policy heed to read this book. Send us your best, brightest hard-working people who want to live the American Dream.     



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