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Strange Things in the Precious Metals
Issue #531, July 17, 2018

Buying Years of Retirement
Issue #530, July 09, 2018

Rent-A-Kid for Retirement
Issue #529, July 02, 2018

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


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

Outlook for 2018: Hard Assets: Part I of III

Issue #501, December 18, 2017

Hard Assets
    I’ll talk about the stock market in next week’s newsletter. Let’s talk about some other things first.
    I’ll state the most important point at the outset: I think it’s time to buy commodities.
    As I have noted many times before, Jim Rogers’ book Hot Commodities (Random House, 2004) shows that stocks and commodities alternate bull and bear markets that last about 13 to 17 years. In relation to stocks, commodities are as cheap as in 1971, and cheaper than the low in the late 90s. The other part of this equation, of course, means that stocks are currently expensive, at least as compared to commodities. 
    The best and most efficient way to invest in commodities is via the futures market. If you are comfortable with futures, have at it, but it is really not appropriate for many of my subscribers, or investors in general.
    The issue is not futures per se, but people are seduced by the potential leverage. Ex: an S&P 500 mini-future represents 50x the S&P 500. At 2,670, this = $133,500. If you have $133.5K in your account, you are unleveraged, no different than owning $133.5K of the SPY. The current margin requirement to open this position is $4,950. You could open as many as 26 positions, insane leverage for even the most sophisticated investors. If things go in your direction, it’s ambrosia. A 5% move against you, and you’re wiped out. 
    However, you can gain quite significant (mostly indirect) exposure to commodities via the stock market. The most important commodity is oil. Consider individual issues, such as Chevron (CVX) or refiner Valero (VLO) or probably better, XLE (an ETF of the largest energy stocks), or OIH (an ETG of the largest oil service stocks, such as Schlumberger (SLB).
    You can invest in the miners, such as Rio Tinto (RIO), BHP Billiton (BHP) or Freeport-McMoRan (FCX. Just broke to a new multi-year high. See chart below), or the companies that make the mining equipment, such as Caterpillar (CAT). You can invest in agriculture via John Deere (DE), or fertilizer companies, such as Potash Saskatchewan POT) or Agrium (AGU), or processors, such as Bunge (BG) or Archer Daniels (ADM). POT and AGU are testing new highs.
    We will have a bear market in stocks sometime. For those of you who like to stay fully invested, consider a rotation to commodity-related stocks. Many pay rich dividends. Think of commodities as a diversifier: when stocks are weak, they should be strong.
    I am not recommending any of the above stocks per se, rather, I use them as examples for you to conduct your own research.
    This might be a time to consider an investment in farmland. Prices are weak. Remember, the idea is to buy low. Cash rents have been down for 3 or 4 years, and will probably be down again next year. Since farmland is illiquid, lead time on a purchase is significant, so if you are interested, it’s time to start planning now.
    RMD comment: now might also be a good time if you were looking for some recreational land, with a lake for fishing, or for hunting. Try to find something with productive agricultural potential to help cover the costs. But farmland is like all rental property: it doesn’t take care of itself. If you pursue this, have someone lined up beforehand to help you. See issue #222 (8/13/12) on “Investing in Farmland”.
Real Estate
    As always, the most important factors are location (location, location), opportunity and timing. Consider each situation individually. If, when, finally, interest rates rise significantly, it will be a head wind. Watch XHB, an ETF of the largest homebuilders, such as DR Horton (DHI), Pulte (PHM) and Lennar (LEN).
    The interview in today’s Barron’s is with a man who has followed the REIT industry for 30 years. “REITs look attractively valued versus bonds…For a buy and hold investor, a 6% to 7% annual total return, including dividends, is highly plausible”.
    RMD comment: As pointed out in a recent newsletter, think of rental real estate as a bond with inflation protection.
    A bull market in gold started in December, 2015, with gold at $1,050 per ounce. I’ll discuss gold and the precious metals in an Interim Bulletin in mid-week. 
    I’ve discussed the importance of owning jewelry before. See Issues #468 (5/1/17) and #469 (5/8/17). It’s a storehouse of wealth, it’s a family heirloom (Grandma gave me this when I got married. It was her mother’s wedding ring) and because its portable wealth, it’s insurance. All “old money” has a lot of jewelry. The Economist recently had a “Watches & Jewellery” Special Supplement. I believe you should have an asset allocation of 5-10% to the precious metals and jewelry.
    I’ll discuss financial assets in the next weekend’s regular issue.         
    This is from a physician-in-training, loyal subscriber since his med school days, who purchased gift subscriptions for 3 other physicians-in-training. “I hope the investment compounds for them as it has for me”.
    RMD comment: My goal was to increase subscriptions by 20-25%. I’ll make that easy. But I’m not letting up. When you have the advantage: press it. See the details below on how to give a gift subscription, or to allow family to piggyback on your subscription.
    Why didn’t I think of this earlier? 
    I highly recommend The Republic for which it Stands: The US during Reconstruction and the Gilded Age: 1865-1896 (White, Oxford Press). I read a lot, and this book has a lot I have not read before.
    1) In the US in 1800, the total fertility rate, the average number of children borne by a woman before menopause, was 7.04, higher than ever recorded in any European country. By 1900, it had fallen by 50% (It’s about 1.84 in the US today, and even lower in China, Japan and Europe). 
    2) I love White’s humor. “On Washington’s Birthday (1866) a crowd gathered before the White House to serenade the president, and (Andrew) Johnson gave an impromptu speech that provided more evidence that he should never give impromptu speeches”. 
A Gift Subscription
    Many magazines, such as Forbes, provide the opportunity to give a gift subscription. From now through the end of the year, you can give a one-year subscription to this newsletter as a gift for $50, and I will extend your subscription for one year.
    I have always provided discounts to students and physicians-in-training. For $50, you can give 5 students or 2 physicians-in-training a one-year subscription, and I will extend your subscription one year. 
    This would be a perfect gift for your personal physician. If you are a physician, it would be a great gift for a new associate, or another physician. I’m sure all of you know at least one person who would appreciate this newsletter.
    Consider a gift subscription to your financial advisor. If you have a $1,000,000 net worth and this subscription can increase your return merely 0.1%, that’s $1,000, enough to pay for the newsletter as long as we are both around.
    Reality check: after writing this newsletter for 12 years, I can (unfortunately) assure you that the people who need this advice the most are the least likely to take it. Give the gift to someone who needs it, and will appreciate it, and read the newsletters.
    For many years I have allowed subscribers to let relatives “piggy-back” on their subscription for $25 per year, which many of you do. This is a reminder that is available.
    For new subscriptions, I need their mailing address and email. Please tell them I will be contacting them. Use my email and address listed above.
    Thank you, and have a Happy Holidays.                                                                         

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