Brexit Is Only the Catalyst – The Market Is in Bad Shape

brexit-1462470592ZSA
Brexit Is Only the Catalyst – The Market Is in Bad Shape

I have been writing about the underlying trends and technical indicators that have been signaling that this market is in bad shape. It has just been propped up. There are a long list of catalysts that can take the stock market down. Great Britain leaving the EU is just one of them. In addition, it is too early to say what the long-term effect could be. The bottom line is that the global economy and markets are walking on a tightrope with not much room for error. A move like this one destabilizes the overall balance.

I wanted to share a few resources with you.

This was a piece that I wrote last August about a pattern the Dow Jones Industrial Average was in. http://www.prudentmoney.com/2-potentially-dangerous-patterns-the-dow-jones-is-following/

Then this is part of a client letter that I wrote about other indicators that are suggesting we are about to go through a difficult time in the stock market.

If you have any questions, feel free to reach out through email – bob@prudentmoney.com

What Do You Do With an Old 401 K Plan?

AskBobHeaderQuestion- Dear Bob,

I have worked at several companies through the years and participated in 401 K plans with those companies.  My old 401 K plans are still at those companies.  I also have a few IRA’s.  Is it OK to leave everything where it is or should I be taking some actions?

Answer

When an employee leaves a company, it is standard procedure to clear out their desk and gather all of their personal belongings before leaving.  The same applies to your 401 K plan. There are a few downsides to leaving a 401 K plan at an old employer.  First, it can easily become out of sight out of mind.  I have talked to people who have completely forgotten about old 401 K plans. Second, most 401 K plans are limited in options.  By rolling that 401 K plan over to an IRA you open up limitless possibilities for investing.  Third, you have control and choice over fees and costs outside of the 401 K plan.

Finally, and most important, you have the opportunity to combine all of your accounts into one big strategy where the investments can be managed for risk and managed for growth.  In fact, you can hire someone to manage the money for you.

The best strategy for investment accounts in general is to have them completely under your control.

Now, when does it not make sense to roll over the 401 K plan?

There has to be some type of advantage for making the move.  Making a parallel move to a financial advisor who is going to charge commissions and fees and just put it in a buy and hold strategy is not much of an advantage.  You could probably leave it invested in the 401 K plan and accomplish the same thing without paying the commissions and fees.

With any financial decision always be able to understand the value that the move creates!

Bob Brooks is the host of the Prudent Money Radio Show and the president of Prudent Money Financial Services.  Through his firm, he invests and manages investments for his clientele.  To contact Bob, you can email Judy Parrish to set a time – Judy@prudentmoney.com

You Can’t Save Your Way to Retirement Part II

Couple RetirementYou Can’t Save Your Way to Retirement Part II

I find the “advice” that comes from Pop Culture Finance to be so ridiculous that I have to point it out in these pages so that you can interpret it the right way.  I already point it out in Part I.  Then I come across another article and find I need to respond again.  Here is what one recent article had to say about saving money for retirement:

“In order to retire on time, experts suggest that people in their 20s should be saving at least 10 percent of income each year. Those who hope to retire early should be saving 15 percent at an absolute minimum, said Benz.

And folks who didn’t start saving as young adults may need to stash anywhere from 35 percent to 50 percent annually if they realistically expect to retire early. While that might seem like an intimidating hurdle to clear year after year, leaping at chances to accelerate savings during “easy” years can balance out shortfalls during harder ones. “

So just like that all you have to do is save a certain percentage and you are home free?  Is it that easy?

Then there is a commercial out that harps on saving just an additional 1% to get to retirement.  The problem is that those who don’t intentionally learn about how money really works have a tendency to believe this information. They walk away with the notion that I just need to save a certain percentage and I will retire.

In reality, they may or might not be true.  It works more like the following formula:

  • You have to have a plan and establish goals
  • You have to save
  • You have to invest
  • You have to manage the money for growth AND risk
  • You have to monitor your progress against your goals

Saving is just one aspect of 5 steps to successfully reach your goals.  Saving alone won’t get you to retirement if you are failing in the other areas.

Bob Brooks is host of The Prudent Money Radio Show, Financial Advisor, and active money manager that consults and helps people plan.

Are You Taking Too Much Risk and Not Know It?

This is Not a Good Sign for the Stock MarketAre You Taking Too Much Risk and Not Know It?

Managing your risk level is critical to long-term success with investments.  It is especially important today with the stock market looking more risky than ever.  To help out Prudent Money Listeners, we are offering up two resources.  First, do you even know how you are wired when it comes to risk?  If not, take our risk survey and we will send you back a personal risk assessment which details your prudent money risk DNA.  We are wired differently.  It is important to understand your tendencies when it comes to risk. 

Second, we are going to take it one step further.  With or without the risk survey, you can now email your investment statements and we will rate your investments from 1 to 10 on the risk scale using our risk analysis methods. Oftentimes, people are taking way more risk than they realize.  We are offering this for a limited amount of time.  Knowing your risk level, helps in making investment decisions.  Make sure you know yours! Email Judy Parrish at Judy@prudentmoney.com to get started.

 

 

Is Co-Signing a Loan a Wise Move? What About a Biblical Move?

Does Your Advisor Have a Record and You Don't Know It?Is Co-Signing a Loan a Wise Move? What About a Biblical Move?

It appears that there is a lot of co-signing going on as the debt bubble in this country expands. A creditcards.com survey recently stated these statistics:

  • ½ of those surveyed have helped someone obtain a car loan
  • Nineteen percent had co-signed on a student loan and 16 percent, a credit card
  • Among the co-signers in the survey, nearly 40 percent found themselves on the hook for at least part of the bill the primary borrower didn’t pay, while 28 percent saw a drop in their credit score from that borrower’s bad credit habits.

The auto loans statistic is especially disturbing considering that car loans now have topped 1 trillion dollars in this country. That is a concerning statistic. When you see categories of debt reach these levels you typically start to see problems.

So, what is wrong with helping someone out?

In Proverbs 6., the Bible talks about putting up security for a neighbor. It says if you are in that situation get out as quickly as possible. So, does that mean you don’t help someone in need? This is a tough one because we want to help people and there is a tendency to go into these arrangement with eyes wide shut. If something goes wrong and that debt goes bad, you as the co-signer are on the hook because you “co-borrowed” with another person. Thus, the good intentions of a co-signer can turn negative and destroy a relationship.

Proverbs 6 directly and indirectly speaks to three potential dangers of co-signing a loan. First, you will unintentionally create debt if the friend defaults. Second, by signing you are as it says in Proverbs 6:3 “fallen into your neighbor’s hands.” Finally, if it doesn’t work out, that relationship is probably destroyed. So, consider the willingness to accept the following conditions if you feel led to co-sign for anther. IT will definitely alter your perspective.

So, if you are going to co-sign a loan, it is important to go into the agreement with the conditions that it is OK if one day you have to pay that money back for your friend and at the same time be ok with never being paid back. It is also important that you actually have the cash available to pay back the loan in the event that loan goes bad.  You don’t want to create debt for yourself.  You have to be OK with the potential that this agreement might damage your credit.  Finally, you have to agree to never let the debt get in the way of your friendship no matter what happens.

Co-signing looks a little different given those conditions. That would require a special relationship and special set of circumstances. Always remember that co-signing is a high risk decision.  After all, there is a reason you are co-signing in the first place. They can’t get a loan any other way.

Bob Brooks is host of The Prudent Money Radio Show, Financial Advisor, and active money manager that consults and helps people plan.

 

 

Car Manufacturers Still Using Dangerous Takata Air Bags?

mercedes-benz-1036353_960_720Car Manufacturers Still Using Dangerous Takata Air Bags?

Takata has recalled an estimated 65 million airbags because they are dangerous and potentially deadly. These airbags reportedly go off unexpectedly and the metal pieces of the airbag come apart and fly into the passenger compartment of the vehicle.

Now a new report shows that 4 car manufacturers are putting the defective airbags into BRAND NEW CARS!  The car companies are Fiat, Chrysler, Mitsubishi, Toyota and Volkswagen. The catch is that the airbags in these new cars have to be recalled by 2018 and replaced.

In this article, a senior editor with Kelly Blue Book said, “Takata’s air bags haven’t typically thrown shrapnel at occupants in their first few years after production.” Did he say that with a straight face? Well that is good to know. At least these car owners have a lower chance of getting their bodies scared by flying shrapnel in the first few years.

The even more disturbing aspect of this story is that the manufacturers are not required to inform the consumer of the defective part at the time of the sale. Would you want to buy a car that potentially could cut up your face?

This is wrong on so many levels.

The problem the article points out is simply that “the sheer size of the Takata recall — potentially affecting 65 million air bags — has made it difficult or impossible for automakers to obtain replacement parts. Takata says it is ramping up production and using other suppliers to help with demand.”

If automobile manufacturers did what was right for the consumer and not use Takata defective airbags, then they would risk making less money.  Due to supply issues, they wouldn’t be able to keep up with demand.  So, I am sure the rational was – Why not use them?  After all, they would just get thrown out anyway.

Why aren’t the politicians putting a stop to this?  I speculate that the politicians won’t take action. They want their political donors to be making plenty of money.

Let’s say that there is 99% probability that these consumers will be ok during the first two years.  What about that one or two that weren’t so lucky?  What about the even greater percentage of consumers who won’t either remember to get the recall or who are too busy with life to bother. After all, I am sure that these car manufactures are going to do the bare minimum communication wise to make sure that these recalls happen.  Do you really think that the Takata Airbag shortage is going to get better by 2018 with potentially 65 million airbags that need to be replaced?  People who are currently having to get the airbags recalled are being put on a waiting list as much as a year.

The politicians are regulating everything except what they should be regulating.  With record numbers of recalls and shoddy workmanship, the car business needs a lot of regulating.

Bob Brooks is host of The Prudent Money Radio Show, Financial Advisor, and active money manager that consults and helps people plan.

Subscribe to the Prudent Money E-Letter

Subscribe to the Prudent Money E-Letter

Join our mailing list to receive the latest Prudent Money news and helpful advice.

Thank you for subscribing to the Prudent Money E-Letter.

Subscribe to the Prudent Money E-Letter

Subscribe to the Prudent Money E-Letter

Join our mailing list to receive the latest Prudent Money news and helpful advice.

Thank you for subscribing to the Prudent Money E-Letter.

Facebook

Twitter

LinkedId