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Tuesday,  May 1 2012

Get a Prenup

By Adam O’Dell, Editor, Survive & Prosper


It’s our 90 day anniversary here at Survive & Prosper. Since we sent out our first issue on February 28, we have welcomed 19,685 of you as loyal daily readers. Our inbox has been swelling with feedback, comments and questions.

We’ll start with this comment from Patrick R, from Texas. He had a comment about Rodney’s The Trouble With Gold article. He said: “In the Trouble with Gold article you say, as far as the definition of money is concernrned, gold fails in the ‘medium of exchange’ category. This is false. India has struck a deal with Iran to pay for its oil with 45% gold.”

Adam says: Nice observation, Patrick. A few other subscribers raised this same question. This is an issue of scale. Sure, Iran and India have proven that gold can act as a medium of exchange… in limited situations and to a limited extent. And while it certainly makes gold look like money, there’s a long way to go from Iran accepting bullion to the U.S. dollar becoming obsolete. There is simply not enough gold in the world to act as a store of the entire world’s value. It will be a long, long time – probably forever – before you’re carrying gold coins in your pocket to pay for your next tank of gas.

Rick B, from Pennsylvania, wrote in with this note: “Just wanted to say you guys are awesome! Adding value to an already great service is a demonstration of your commitment to helping your customers and empowers them with as much ‘real world’ information so they can make knowledgeable investment decisions. Hats off to Boom & Bust! FYI – word of mouth is the best form of advertising and I have told every colleague and friend about your invaluable service. Thanks!”

Adam says: Thanks, Rick. We appreciate your support and for letting friends and family know about our new publication.

Doug, from Reno, emailed us to ask: “Will the governrnment be able to absorb or take over, through the Pension Benefit Corp, ALL the future airline bankrupt pensions? It did this with United Airlines when it took over the company’s grossly underfunded employee pensions. Can this continue if on a much larger scale?”

Adam replies: It’s very unlikely. The irony here is the very organization that aims to backstop underfunded pension plans is, itself, underfunded. The Pension Benefit Guaranty Corporation (PBGC) faces a double-whammy of trouble when the economy falters. On one front, its investments do poorly. On the other hand, more businesses fail during recessions. So the externrnal strain on PBGC is the greatest while its resources are the weakest.

Just take the 2000 to 2004 period as an instructive example. The PBGC’s single-employer program was running a record surplus of $9.7 billion in 2000. Just four years later it had a record deficit of over $23 billion.

Note, the PBGC doesn’t usually cover 100% of promised benefits. Pensioners always lose something.

Speaking of pensioners, subscriber Alan S, from Nashville, wrote with the following question: “What trend are we seeing in the types of housing retiring Baby Boomers are buying?”

Adam replies: Well, Alan, the house buying trend that Baby Boomers are moving through right now is the same trend that any group of people in their 60s, 70s and 80s go through. They are downgrading their homes to smaller properties.

As Harry told the audience at the Casey Recovery Reality Check Summit this past weekend, this is actually a very predictable trend. He explained that first-time buyers drive the starter home market. Eventually, we upgrade to a bigger home as our family grows.

By the time our kids are teenagers, we’re living in the largest home we’ll own (typically). “After all,” he says, “When they’re that age, they’re generally noisy and confrontational so we need space between us. They live on one side of the house. We live on the other side. Everyone’s happy.”

Once our kids fly the coup we usually buy something smaller. With the extra money, we take vacations and enjoy cruises. Or, sock more money away for our golden years. As age takes its toll, many move into assisted-living and skilled-nursing facilities.

So, to answer your question Alan, Baby Boomers are buying smaller houses or moving into quasi-healthcare facilities. This trend will continue for many years. We’re actually honing in on investment opportunities in this sector as we speak. Boom & Bust subscribers will hear more on this lucrative opportunity soon. If you’re not yet a subscriber, click here.

We also got feedback from Thomas L., who lives in South Carolina. He commented on Rodney’s article about the Bank of America: “Nice description of the very frustrating experience with BofA. I left them a long time ago. I hate banks. They are the biggest thieves I know of. I am wondering if a brokerage checking would be any better?”

Adam says: Glad we’re on the same page, Tom. As to your question, we hate to sound like uber-cynics, but brokerage-linked checking accounts are no better. The quality of service improves somewhat, as you likely have more on deposit in a brokerage checking account than the average free, retail checking account. But you still find yourself jumping through hoops at most firms.


P.S. Keep the comments, questions and suggestions coming. Email them to surviveandprosper1@gmail.com

Adam O’Dell

Using his perfect blend of technical and fundamental analysis, Adam uncovers investment opportunities that return the maximum profit with minimum risk.