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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.


Issue #422, June 13, 2016

    This is one of those newsletters that are meant to instruct you on a basic topic.
    Definition: “The VIX is the ticker symbol for the Chicago Board Options Exchange (CBOE) Volatility Index, which shows the market’s expectation of 30-day volatility. It is constructed using the implied volatilities in a wide range of S&P 500 index options”.
    The VIX is quoted in percentage points and represents the expected range of movement in the S&P 500 index over the next year, at a 68% confidence level (one standard deviation). Ex: if the VIX is 15, this represents an expected annualized range (with a 68% probability) of less than 15% up or down. To calculate the expected volatility range for a single month, divide not by 12, but by the square root of 12 (approx. 3.46). A VIX of 15 would infer a range of +/- 4.33% over the next 30-day period. 
    There are futures and options traded on the VIX (As I always note: futures and options are leveraged instruments, to be used only by sophisticated investors who understand them completely and follow the market daily. i.e., they aren’t for the average physician, or for the average investor). VIXY is an ETF based on VIX short-term futures and VIXM on VIX Mid-term futures.
    A boring market is almost always headed higher, thus the phrase “never short a dull market.” Market turning points are characterized by high volatility: the market doesn’t know what to do. Is it going up, or is it going down? A high VIX doesn’t necessarily indicate direction, it just says the market might move so much in either direction. But in practice, the VIX is called the “fear index”, because markets fall 5 times faster than they go up. Note that the VIX will still be high (but should be falling quickly) at the turning point from bear to bull market.
    The average VIX from 1990 to October, 2008 was 19.04. The all-time intra-day high was 89.53 on October 24, 2008.
    I’ve been watching the VIX more recently, and I’m impressed how it seems to anticipate the direction of the market. There have been days when the DJIA was down 100 points, and instead of also being down, the VIX barely budged. By the end of the day, the market had rallied. Likewise, there have been days where the market was up by 100 points, and rather than falling as one would expect, the VIX barely budged. By the end of the days, those gains had evaporated.
    For the last 3 months, the VIX has touched 17, and then backed off. It was +2.39 (16.33%) on Friday, to close at 17.03. If it keeps headed higher, the market will almost certainly turn lower. Keep your eye on DJIA 17,400.
    Bill Gross, currently at Janus, previously at PIMCO, posted a marvelous piece on June 3 entitled “Bon Appetit!” I suggest you read it for yourself.
    His basic thesis is that the returns of the last 40 years will not be repeated. Interest rates fell for 30 years, resulting in a 7%+ return on bonds. With the 10-year US Treasury at 1.65%, and the yield on many bonds in the Euro-zone and Japan negative, considering that interest rates will rise sometime, an investor will receive, by definition, 1.65% return if the bond is held to maturity.
    RMD comment: 1) if you have to sell before the bond matures and interest rates rise, you will be forced to take a discounted price. 2) Considering the Fed’s stated goal is 2% per year inflation, your real return (purchasing power) is zero.
    Considering that stocks traditionally command an “equity premium” over bonds, add 3% to 1.65% = an anticipated return of about 4.65% on stocks for the next 10 years.
    To quote Gross, “Returns (on any asset, stocks, bonds, real estate) will be low, risk will be high, and at some point “intelligent investors” must decide that we are in a new era…that demands a different approach”.
    RMD comment: Maybe gold? This week the German 10-year bond closed at 0.02%. Think about that. You work hard, save your money, and on $10,000 of hard-earned capital you will receive exactly $2 a year for 10 years, barely enough for a plain cup of coffee at Starbuck’s. If you wanted a hazelnut mocha latte, you would have to save up for 2 years. This will not end well. In fact, that is the question: how will this end? How will the Fed normalize interest rates? Gross later said it will end like a ‘super-nova”, either an explosion or a collapse. 
    In Newsletter #12 (3/19/07) I said I was neutral to negative on Long-term Care Insurance. The more I think about it, the more negative I have become.
    1) The benefits are not open-ended. You receive a set amount, say 3-5 years in the nursing home, and then benefits stop.
    2) If you never need the benefits, you have nothing for your years of premiums.
    3) $2M in liquid assets generates enough return to cover the cost of a NH: you are “self-funded”, and the $2M is still in your estate.
    4) The people who run out of money and go on Medicaid stay in the same NH at the same level of service as those who are self-pay.
    5) If you must buy LTCI, it is mandatory to make sure the premiums are fixed. I recently spoke to someone in their late 70s who is getting killed by the escalating premiums. When the time is approaching that they might need the benefits, they are almost to the point they can’t afford it. If they are forced to drop the policy, they receive nothing.
    This is from an original subscriber regarding last week’s letter about auction reserves.
    “Reserves are a symptom of seller arrogance. The big auction houses give estimates that are accurate: these are smart people who do this for a living. The reserve means you don’t like their estimate and think you know better. I never bid on items with a reserve and find that they rarely sell”.
    Older brother John was an MP (Military Police) in the Air Force from 1958-63. He pulled his weapon twice, and fortunately, never had to fire it. They carried a .45 semi-automatic. He said while in the US, they did not keep a bullet in the chamber: when on foreign soil, there was always a bullet in the chamber.
    1) On Guam, a drunken Marine tried to enter a restricted area, and knocked John down. When John hit the ground he pulled his weapon.
    2) At Sawyer Air Force Base on the Upper Peninsula of Michigan, there were 2 “Christmas Tree” areas. Jet fighters and B 52 bombers sat on the runway, ready to take off at any time. It was Sat. night, an airman was walking toward the B 52. John instructed him to stop. He kept walking toward the bomber. When the man, who was quite drunk, heard the “click-click” of John chambering a round, he looked around, appreciated for the first time where he was, and promptly passed out.
    I will play in the Senior’s event (50 years and older) at the World Series of Poker in Las Vegas next weekend. The next newsletter may not be posted until Tuesday.         

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