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Fire Insurance and Income for Life Update Aug. 17 2023

 
Medicare
Fire Insurance Solutions

 

Is it time for minimizing risk in your portfolio? Update Aug 16 2023



 

Being prepared for the next market event?

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Although I have been in the markets for close to half a century, my wife on occasion worries about the inherent risk when it comes to owning stocks. To appease the concern, I built a reduced risk portfolio using what I have learned over the years.

Starting with plain old cash, I hold at least 6-9 months of our “burn rate” in savings and checking accounts which secures financing our daily life should something happen threatening our liquidity.

 

Next comes a basket of CDs. I ladder maturity dates which means buying 3, 6, 9 &12 month issues and going out to about 3 years. I don’t go out further than that as I just don’t know what will happen in the grand scheme of things years out.

 

Treasury bills can have similar characteristics to Cds, being issued by the good faith and credit of the US government. Holding both CDs and treasuries just seems a bit more diversified then all CDs. Keep in mind, selling prior to the maturity date could result in a partial loss of principal. I won’t go into details here, just know if you buy a two year CD, for example, and sell it early, you could take a haircut on the principal.

 

Next comes a smattering of corporate bonds of solid companies. I prefer large, well-known companies. Corporate bonds are debt that pay an interest rate, and generally regarded as less volatile compared to holding a stock. Here once again, I choose the shorter duration‘s that are similar to the durations listed above in my CD portfolio. I’ll also then add tax free municipal bonds, which can be free from federal and state taxes if the correct type of bonds are chosen. Just make sure you have a crystal clear understanding of each holding’s tax implications.

 

Next are two types of annuities. The first is a “Fixed Indexed” annuity. This type of annuity may offer a partial participation in stock market increases, but protects you against down market periods. Participation rates, fees, early withdrawal penalties, and terms and conditions vary with each annuity so make sure you understand all the mechanics in any annuity you are considering. Keep in mind that annuities are not US government guaranteed but instead are guaranteed by the underlying insurance company issuing them.

 

I then add what I call an “Income” annuity. This annuity offers you a certain percentage rate, depending on what age you decide to turn on the income period. In general, the longer you wait to turn on the income, the higher the percentage will be on the payments. The payments are for life fixed at that percentage rate. Holding both a growth and income annuity, since they operate differently, can be another step in my target of a wide diversification strategy with downside protection attributes.

 

Next on my list would be adding some real estate investment trusts, known as REITS. I use the publicly traded REITS which are listed in the common stock journals. REIT payments may be higher than some dividend paying stocks which why I consider them. Keep in mind that REITS can go up and down in price like a stock and payments are not guaranteed. I look for the large REITS with good analyst reviews and strong financials. Because REITS make money from the rents received from properties they own, they may not be as susceptible to stock market movements as other securities may be.

 

Next, I’ll look at called “Aristocrat “dividend paying stocks. Dividends are periodic payments to holders of the stock. Aristocrat stocks are companies that have increased their dividend payments to investors every year for at least 25 years, and some of them have track records of 30, 40, or 50 years or more of annually increasing payments. Think of a dividend payment as a thank you from the company for owning their stock. Know that dividends can be cut, eliminated or increased by the Board of Directors at any time. Although Aristocrat stocks have impressive track records, there are many great companies that also pay dividends, but have not made it onto the aristocrat list. As a general rule, the dividends from aristocrat stocks may be less than those that are not aristocratic stocks, as you may be paying for the aristocrat track record of annually increased payments.

 

Finally, not wanting to be completely out of the more volatile part of the stock market, I tend to add a few growth stocks of solid companies that I think may have a good chance of having their stock prices rise significantly over time. There is always risk, but utilizing the above strategy may reduce risk over an all stock portfolio.

 

In conclusion, since today’s market, in my opinion, seems to be more susceptible to a volatility compared to what I have seen in previous decades, I tend to lean more into a portfolio of this type when it comes to my personal holdings.

  Watching the markets so you dont have to   

(end)   

(As mentioned please use the below disclaimer exactly) THANKS   (Regulations)   

This article expresses the opinion of Marc Cuniberti and is not meant as investment advice, or a recommendation to buy or sell any securities, nor represents the opinion of any bank, investment firm or RIA, nor this media outlet, its staff, members or underwriters. Mr. Cuniberti holds a B.A. in Economics with honors, 1979, and California Insurance License #0L34249. His insurance agency is BAP INC. that can be contacted at (530)559-1214. Email: news@moneymanagementradio.com   

 


 

The hesitant FED and the Volcker Mistake Update Aug 11 2023

 

Paul Volcker

Head of the Fed 1980's

The Fed’s Hesitation

With the market’s recent rally, and inflation backing off, some investors may be thinking the worst of the current financial crisis is over.

Potential buyers of stocks might argue we have seen the inflation highs of the period, and that prices will soon return to normal, that the Federal Reserve (Feds) will back off their interest rate increase crusade and that the swallows will once again return to San Juan Capistrano in masse.

Pun intended of course on that last one.

Readers of this column will know that, in my opinion, inflation will not subside, may even go higher and that the Feds will be forced to keep interest rates higher for longer to address it. Higher interest rates are the perceived medicine to squash inflation.

In the Fed’s July 26th, 2023 meeting press release they stated: “The Committee will continue to assess additional information and its implications for monetary policy”.

In a nutshell, the Feds have indicated they have no set path and will adopt a wait and see policy as it pertains to inflation and the interest rate increases to address it.

Many investors might not be old enough to know the historical events that may be guiding Fed Chief Jerome Powell’s decision to keep interest rates elevated and continue to maintain a restrictive monetary environment.

The historical event I am eluding to is known as “Volcker’s Mistake”, and refers to Fed Chief Paul Volcker during the late 1970’s.

Volcker took over the Federal Reserve Bank as head honcho in 1979, and immediately set about the task of ending the worst inflation the U.S. had seen since the end of World War II.

Volcker raised interest rates quickly and by a lot.

As expected, the economy was subsequently hit by recession in January of 1980 which fostered massive employee layoffs and a spiraling economy.

Under intense pressure to take his foot off the brakes and provide relief to the suffering economy, Volcker quickly cut rates by seven percentage points. Although massive by today’s standards, but not so back then, a seven percent reduction in the interest rate was still considered a drastic move.

The recession did begin to subside by July of that same year but inflation stayed stubbornly high. In fact, it accelerated even faster.

As a result, the Feds credibility as inflation fighters was severely damaged. Volcker then backpedaled and had to raises rates once again which fostered a repeat of the earlier recession that was worse than the first one and lasted until 1983.

Had Volcker ignored the 1980 recession and stood his ground on interest rates, he might have avoided the inflation that roared back and the more severe recession that followed. A monetary blunder by any measure.

Fast forward to today and Fed Chief Powell is well aware of the mess Volcker made of things by acting too quickly and dropping rates too soon which spawned additional inflation and a reoccurring recession that amplified an already bad situation.

Powell does not want to make the same mistake Volcker did. He does not want to go down in the history books for the same thing nor put the economy through anything worse than what is already upon us.

For this reason, Jim Rickards of the Daily Reckoning in his July 31st, 2023 musing concluded: “The Fed is not done and more rate hikes are coming”.

Rickards ought to know. He is an investment banker with over 30 years’ experience working in capital markets, advises the Department of Defense on global finance, serves as a facilitator studying financial war games for the Pentagon and was the principal negotiator in the 1998 bailout of LTCM by the Federal Reserve Bank of New York.

I hold the opinion Rickards knows of what he speaks and agree with his conclusions that we may be far from being out of the woods as it pertains to inflation and future interest rate increases by the Fed.

  Watching the markets so you dont have to   

 

This article expresses the opinion of Marc Cuniberti and is not meant as investment advice, or a recommendation to buy or sell any securities, nor represents the opinion of any bank, investment firm or RIA, nor this media outlet, its staff, members or underwriters. Mr. Cuniberti holds a B.A. in Economics with honors, 1979, and California Insurance License #0L34249. His insurance agency is BAP INC. that can be contacted at (530)559-1214. Email: news@moneymanagementradio.com   

  

Interested in Lifetime Income possibilities that wont outgrow your money?
 

(530) 559-1214

Marc Cuniberti


 

Insurance Answers Fire and Medicare July 31 2023

 

 

 

 

 

Take the guessing out of insurance and Medicare

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Update August 1 2023

 

 

WORRIED YOU WILL HAVE ENOUGH MONEY LATER IN LIFE?

 

 

YOU MAY BE RIGHT

$500,000 START, WITHDRAWING $30,000 A YEAR STARTING

IN JAN 2000 USING THE S & P PERFORMANCE

 

OUT OF MONEY BY 2016

 

 

WOULD INCOME FOR LIFE BE BETTER SUITED FOR YOUR PLANS?

 

CONTACT ME 

(530)559-1214

CALIFORNIA INSURANCE LICENSE #OL34249

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