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2024 Market Outlook Spring (03-28-2024)

Take the Win and Be Happy. Let's go out and enjoy the outdoors before the heat comes roaring in. We probably have about six to seven weeks. You know I look back on January 12th   when I came out with my stock market prediction, which I do every year, which is a real ...CONTINUE READING              

2024 Stock Market Predictions  (01-12-2024)

In 1968, Yale Harsch introduced the concept, or the phenomenon, of the Santa Claus Rally.  It was a rally held in the last couple of weeks of December. While it does....CONTINUE READING

Bank Bear Trap  (03-16-2023)

We watched the regional bank industry experience a "Back to the Future" event. You remember the financial crisis when banks failed in 2008. Fortunately, it is not as bad as 2008, but perhaps it could have been avoided .....CONTINUE READING

January 2023 Barometer- Myth or Reality?  (02-01-2023)

Drip, drip, drip. Before I get to the January 2023 Effect, let's just recap last year. As you probably know, nothing good happened in the markets. Jerome Powell (the Fed chairman) was renamed as a serial ...CONTINUE READING

Bear Market - How long will it last ?  (08-09-2022)

Drip, drip, drip. I had a client last week tell me that this bear market just seems to drag on and on and on. She asked, “how much longer with this ....CONTINUE READING

Bear Market - How long does it take to Recover ?   (6-24-2022)

"It was announced on JUne 14th, 2022, that we are officially in a Bear Market for the S&P500. The NASDAQ index was declared to be in a Bear Market almost ...CONTINUE READING

"Put the Lime in the Coconut and Drink it All Up."   (4-29-2022)

"Inflation is funning Hot, here comes the Fed." ..."Is the Stock Market a Leading Indicator?"...Short Recession ?" What about Bonds ?" ..CONTINUE READING

Whoopty Doo. But what does it all mean..."  (2-17-2022)

"I will get to this famous Austin Powers quote later in the newsletter. But if you remember my January newsletter, I emphasized how I expected a rockier market in 2022. Well, guess what ? That's what we have gotten so far. The market is currently in  ...CONTINUE READING

Goodbye Year 2020 !  (1-6-21)

"Hit the road, Jack ! And don't you come back. No more, no more, no more, no more ! Hit the road Jack. And don't you come back no more..! " Ray Charles recorded this song in 1961 and I believe this song reflects how most ...CONTINUE READING

Economy - Recovering - Accelerating  (8-20-20)

Certainly, the most frequently asked question I get is, how can the stock market be doing so well when things appear to be so bad ?  ...Let us just focus on the stock market and this ....CONTINUE READING

April 2020 - Tough Month (4-3-20)

This may be the understatement of the year. Supposedly as we head into the peak or the peak of this coronavirus, I hope you are doing well.. this beark market is different because not only are people worried about their ...CONTINUE READING

Bear Market - Straight Talk (3-17-20)

During this recent market meltdown, I happen to look back and noticed that this was the sixth bear market that I've experienced...During this economic downturn, certain businesses are grinding to a ...CONTINUE READING

Stock Market Meltup OR Down?  (5-10-19)(# 2535097.1)

What a difference a few months make. Perhaps I don't have to remind you of the market correction/bear market in the last quarter of 2018.  It cumulated into what they call "The Christmas Eve Massacre." Traditionally, the market doesn't go dow a few days ...CONTINUE READING

Tax Man or Stretch IRA ? - Leaving a Legacy (3-28-19)

The stretch IRA concept, which I have implemented for almost 20 years, is truly one of the most powerful money/investment techniques that I know, that doesn't cost ..CONTINUE READING

Fiduciary Duty - Does your Planner owe it to you ? (2-28-19)
In 1968, Archie Bell and the Drells unleashed a hit song called “Tighten Up.”  More about the song later.  With market volatility hitting extreme levels in October and continuing into November, I'm fielding more calls, emails, and questions, not only from ......CONTINUE READING

Tighten Up Investor - Market Volatility (12-7-18)
In 1968, Archie Bell and the Drells unleashed a hit song called “Tighten Up.”  More about the song later.  With market volatility hitting extreme levels in October and continuing into November, I'm fielding more calls, emails, and questions, not only from ......CONTINUE READING

My 86-year old mother - weed stocks (07-19-18)
I bet you that title got your attention! A month ago I received a phone call from my mother and she asked me a question that I've heard multiple times from retirees over the last four or five years.  How do I exactly buy some of these companies that are selling this marijuana?   My mother said ....CONTINUE READING

Fed Raises Rates for the 7th Time (07-05-18)
I listened to our new Fed chairman, Jerome Powell, on June 13th, 2018. It was refreshing to hear the new Fed chariman speak in actual plain English.  His predessors, both feds and economists, were so .......CONTINUE READING

I have met the World's Worst Investor (5-22-18)
Over the years, I have had many clients comment to me during our initial meeting claiming to be the worst investor. I have finally met the world's worst investor last week ! He was an aeronautical engineer and he creates and runs .......CONTINUE READING

My Favorite Chart (4-23-18)
I have used an updated version of this chart for 20+ years. It represents what a long-term structural markt looks like (sometimes called a secular market). I ahve received many questions about how long this bull market ....CONTINUE READING

Who Dunnit? February stock market (02-16-18)
You as an investor have witnessed stock market declines of 1,000-points in just the first week or so of February. It's been quite a while since we have seen this kind of  ....CONTINUE READING

Can the 2018 Stock Market outperform 2017 returns? (01-15-18)
I don't think anyone can argue that the last year in the stock market was about as good as you could've hoped for.  However, going into 2018,a week goes by when I do not field questions about what direction the market is heading....CONTINUE READING

What Kills a Bull Market? (09-29-17)
Not a week goes by when I do not field questions about what direction the market is heading.  "The media pronounces that tomorrow at 9:30 sharp the market is going to crash." " The market is going down because of the presidential job approval." "The market is toast because of BREXIT." "The market is going to bust because of the .....CONTINUE READING

What is the Market cooking ?(08-24-17)
I A former professional wrestler called "The Rock" is on TV, movies, and Netflix. You pretty much can't go anywhere without seeing the personality of "The Rock." As a former wrestler, he had build his entire career on jumping up on the rope and getting the crowd psyched up by saying, "Can you smell what The Rock is cooking?" And now The Rock is thinking about running for president !  I will get back to The Rock in a little bits, but let's talk about ....CONTINUE READING

My Favorite Chart    (05-19-17)
I have used an updated version of this chart for 20+ years. It represents what a long-term structural market look like (sometimes called a secular market). I have received many questions about how long this bull market can last, and I always reference this chart to show that structural markets last for a very long time. Let me elaborate a little more on that.  When we look at the chart it says .....CONTINUE READING

“Houston, all systems go!”   (03-22-17)
Do you remember when America was on the way to the moon? Or perhaps you were too young to have seen some of the Apollo missions/rockets (years 1961 - 1975). Back then, we only had three channels on the television and the whole nation watched the countdown to the major rocket launches (i.e. Apollo Missions). Luckily for me ......CONTINUE READING

One Chart that Explains it All (02-06-17)
It's all about growth in the economy, or lack of.  Take a look below at the wonderful chart done by Oppenheimer that shows GDP (gross domestic product) since 1966 [1].  It presents an average of about 3% GDP growth.  Well, in the last eight or nine years it has been subpar. Many of .....CONTINUE READING

Is It Morning in America ? (11-16-16)
My son Nick is in a one-year countdown to exiting college and going into the job market fulltime.  He recently asked me if the election results could affect future employment opportunities.  I said,  "Nick, don't focus on politics.  Instead focus on the ............CONTINUE READING

Bull Markets Don't Die of Old Age.... Recession (8-31-16)
I have been asked numerous times how long do bull markets last? Perhaps a pundit has been on television describing the reason why the market cannot go up, because the market has aged past the normal .......CONTINUE READING

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Market Outlook Spring 2024    

Take the Win and Be Happy 

Let's go out and enjoy the outdoors before the heat comes roaring in. We probably have about six to seven weeks. You know I look back on January 12th   when I came out with my stock market prediction, which I do every year, which is a real gamble, but I went ahead and committed it to paper. I said I thought we would end up with an 8% to 12% return for 2024. So far, right on target. I want to go back and rehash some of the indicators that I mentioned back in January   https://www.romanojohn.com/Our--Newsletters.11.htm    for reasons to be happy about the market. And then I'm going to talk about some new ones.

• Federal Reserve Policy: The Fed is expected to continue lowering interest rates, which is seen as positive for the stock market.

• Impact on Industries: Lower interest rates are expected to stimulate demand in various industries related to housing, such as construction, manufacturing, and home appliances.

• Impact on Investments: With the Federal Reserve easing, yields on money market accounts, CDs, and savings accounts are likely to drop, potentially leading some investors to allocate more funds into the stock market.

• Stock Buybacks: a move that could reduce the supply of available stocks and potentially drive-up prices, making it an opportune time for investors. Expected buybacks are up to 1 trillion this year. (1)

• Wealth Effect: Positive stock market performance and increase of housing values tends to stimulate consumer spending, further boosting the economy.

I’ve Saved the Best for Last

Thanks to advancements in artificial intelligence, I'm witnessing anticipated boosts in productivity that border on the incredible. We're talking about achieving productivity gains in the double digit.  Ordinarily, the U.S. economy sees growth rates of 2% to 3% annually, but projections indicate a significant surge beyond that range. While the exact extent of this growth remains uncertain, it's expected to mark the most substantial productivity leap for American workers since the internet.  I do know that when companies enhance productivity, profits follow suit, ultimately propelling market dynamics.

Reflecting on my own journey, I recall being advised early in my career that I wouldn't reach my full productivity potential until I enlisted assistance to handle administrative tasks. Taking heed, I promptly acquired such support. Consider, if you will, whether you're now retired or if you have conversations with younger generations, the pervasive challenge of administrative burdens faced by many Americans. They often find themselves mired in paperwork and tasks they'd rather not undertake. Imagine the potential productivity gains if everyone had access to one or two assistants.

While such resources might not have been feasible in the past due to various constraints, the advent of artificial intelligence raises intriguing possibilities. Could AI provide virtual assistants to alleviate mundane tasks for everyone? I know I couldn't do what I do without my administrative help. And this is where the productivity is going to come in. It will be great to see.

Many Thanks

I wanted to thank you all for the great referrals. Back in January, I mentioned that we wanted to bring in some new clients, and I think we had a target of 24. And we have done about 40% of that. And that's all thanks to you! You referred us to some of your kids, and your friends, and we really appreciate that. Let's take the stock market wins in 2023 and 2024 and be happy. Have a great spring!

Best Regards,  

John Romano, CFP®

Office Phone #: 352-753-8590

Email: john@romanojohn.com

References:

1. https://www.vox.com/future-perfect/24108787/ai-economic-growth-explosive-automation

Data contained in this newsletter is obtained from what are considered reliable sources; however, its accuracy, completeness, or reliability cannot be guaranteed. 

John Romano, CERTIFIED FINANCIAL PLANNER™, has over 30 years of experience in the financial field. John is a Registered Representative with Securities America, Inc. (a member of the FINRA and SIPC) and an Investment Advisor Representative with Securities America Advisors. He has prepared hundreds of reports for retirees to assist in their retirement income planning needs. He is dedicated to providing portfolio analysis, dividend and income information, and investment management services to retirees (and those preparing to retire) in The Villages, Florida, and throughout the United States. 

Securities are offered through Securities America, Inc. Member FINRA/SIPC, John Romano CFP® Registered Representative. Advisory Services are offered through Securities America Advisors, Inc. John Romano Investment Advisor Representative. Romano Income Strategies and Securities America are not affiliated. Trading instructions sent via e-mail may not be honored.

Please contact my office at (352)753-8590 or Securities America, Inc. at (800) 747-6111 for all buy/sell orders. Please be advised that communications regarding trades in your account are for informational purposes only. You should continue to rely on confirmations and statements received from the custodian(s) of your assets. The text of this communication is confidential, and use by anyone who is not the intended recipient is prohibited. Any person who receives this communication in error is requested to immediately destroy the text of this communication without copying or further dissemination. Your cooperation is appreciated. Guarantees are based upon the claims-paying ability of the insurance company. Past performance does not guarantee future results. 

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2024 Stock Market Predictions   

Santa Claus Delivers/John's Predictions for 2024/Hey, I Need Your Help...

In 1968, Yale Harsch introduced the concept, or the phenomenon, of the Santa Claus Rally. It was a rally held in the last couple of weeks of December. While it does not work every year (nothing does), it sure worked this year. The long-term investor in 2023 who did not get head faked out of the market was rewarded as they should be.

John's 2024 Prediction

Well, it's about that time when everybody starts making their stock market predictions for 2024. Well, here's my two cents. The market's going to go up, and it's going to go down. Hey, I can't go wrong with that one, right? Keep reading on to get the real prediction.

Data points

Based on data points, not your Aunt Nervous Nelly, who tells you over the holidays every year that the stock market is going to crash and it's going to be like the Great Depression. Instead, let's look at some recent data points:

• Interest rates are not only not going to be rising, but they will be actually going down. I believe this will stimulate the housing market because there is so much pent-up demand. People weren't moving and weren't buying because of the close to 8% mortgage rate, but I believe as rates get closer to 5 or 6%, they will.

• Also, the ancillary industries that are directly related to the housing market, whether it's construction, manufacturing, furniture, concrete, timber, copper, refrigerators... these industries will pick up, and unemployment will go even lower.

• Speaking of unemployment, it's already historically low, and you know what they found about the consumer? As long as they have no fear of losing their jobs, they will keep spending.

• This is the real biggie. The Fed is seemingly not going to be raising rates, but indeed, the prediction is to lower rates two to four times this year.

• The onshoring boom of bringing back factories to the U.S. is up, and last year, it's up a staggering 71% year over year, and over a two-year period, 131%. COVID taught us that we not only need to shorten the supply chain but also to move more of these important factories back to this country.

• Small and mid-cap stocks have joined the bull market party, which leads to a much broader market.

More importantly, I believe the fear of COVID has faded. Now, I'm not downplaying the severity of the virus. But after having it and watching everybody I know have it at least one time in 2023, we have just learned to live with it. The morbidity of sheltering in place, hiding in your house, being scared to even talk to people, much less going outside, had a tremendous effect on the psyche.

Just the optimism of going out and living life, enjoying the activities, can’t help but improve your optimism. If you're going to be an investor, you're normally an optimist, thinking that you're going to be around sometime in the future to enjoy these funds. But if you are at home, sheltered in place, scared to move, it leads to some real pessimism, which I think is bad for investing. Now, I could be off base on this, but I don't think so.

Age of Aquarius

I heard this song called Let the Sunshine In over the holidays by a band called the 5^th Dimension. They were talking about the stars and moon being aligned. [1]

VERSE: When the moon is in the Seventh House, And Jupiter aligns with Mars, Then peace will guide the planets, And love will steer the stars
CHORUS: This is the dawning of the age of Aquarius, Age of Aquarius, Aquarius, Aquarius

My Final Prediction

I’m not sure if the stars and moon are aligned, but I think the data points for a good stock market in 2024, so here you go, drum roll, please... My prediction of the market return is 8 to 12%.

Thankful

You know, it seems like over the holidays, I always run into an investment advisor whom I've known my whole career. He's about ten years older than me, and our conversation always centers on how lucky we both are to be in this investment advisory business. There's no thought of retiring for him or for me. It's a great business, not only monetarily but also because it allows me to do the things I want.

Over the decades, I've had the chance to help hundreds if not thousands of retirees to live not a worry-free retirement (because there's no such thing) but worry less about their biggest fear, which is running out of money. And I know this because my clients tell me this on a weekly basis. Indeed, I get calls and letters from their loved ones saying things like thanks for taking care of my mom or dad. Furthermore, some of my clients are in their seventies and eighties, and I normally do three-way calls with not only them but also their children.  Their children want to be involved, but they're probably at the peak of their careers right now, and they're probably still raising their own families. It's just comforting to them to know that somebody is down here looking out for Mom or Dad.  So, thank you greatly for letting me serve you.

I need your help.

Hey, I need your help. As many of you know, I get all my business from referrals. I've told the team in 2024, I think I'd like to bring in about 20 or 24 new clients. So, if you know:

• One or more of your children who have the bulk of their net worth in a 401k and are getting no help.
• Somebody you know is getting ready to retire, and they are wondering how to create income streams.
• A friend who just lost a spouse who took care of all the financials.
• Any person that you know who is not happy with their current advisor.
• If you have a good candidate call Margaret at our office, or email us.

Please send us the contact information so my office team can reach out to them. We may not do business with them, but we will treat them like we treat you.  

It may not be the age of the Aquarius, but let’s have a great year!

Sincerely,

John Romano, CFP®

Office Phone #: 352-753-8590

Email: John@RomanoJohn.com

Data contained in this newsletter is obtained from what are considered reliable sources; however, its accuracy, completeness, or reliability cannot be guaranteed.

John Romano, CERTIFIED FINANCIAL PLANNER™, has over 30 years of experience in the financial field. John is a Registered Representative with Securities America, Inc. (a member of the FINRA and SIPC) and an Investment Advisor Representative with Securities America Advisors. He has prepared hundreds of reports for retirees to assist in their retirement income planning needs. He is dedicated to providing portfolio analysis, dividend and income information, and investment management services to retirees (and those preparing to retire) in The Villages, Florida, and throughout the United States.

Securities are offered through Securities America, Inc. Member FINRA/SIPC, John Romano CFP® Registered Representative. Advisory Services are offered through Securities America Advisors, Inc. John Romano Investment Advisor Representative. Romano Income Strategies and Securities America are not affiliated. Trading instructions sent via e-mail may not be honored. Please contact my office at (352)753-8590 or Securities America, Inc. at (800) 747-6111 for all buy/sell orders. Please be advised that communications regarding trades in your account are for informational purposes only. You should continue to rely on confirmations and statements received from the custodian(s) of your assets. The text of this communication is confidential, and use by anyone who is not the intended recipient is prohibited. Any person who receives this communication in error is requested to immediately destroy the text of this communication without copying or further dissemination. Your cooperation is appreciated. Guarantees are based upon the claims-paying ability of the insurance company. Past performance does not guarantee future results.

References:
[1] https://genius.com/The-5th-dimension-aquarius-let-the-sunshine-in-lyrics

 

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Bank Bear Trap  

 

 

 

 

 

 

 

 

 

 

 

 

We watched the regional bank industry experience a "Back to the Future" event. You remember the financial crisis when banks failed in 2008. Fortunately, it is not as bad as 2008, but perhaps it could have been avoided. Make sure you read the last section of this newsletter because there is some good news.

Janet Yellen, the treasury secretary, whose job is to monitor the bank industry, just a few days before the crisis unfolded on March 10th, spoke at a climate conference. Her presentation said that climate change would likely become a source of shocks to the financial system in the coming years(1).  While she's up there talking about the weather, the banking industry actually had a financial shock. In essence, there was an old-fashioned run on the banks because of facts, not rumors, getting out that some regional banks had more liabilities than assets.

In the SVB case, they were the first bank that experienced a known problem and had received so much money and deposits in 2020, 2021, and 2022 that they were out buying 10-year treasuries. Unfortunately, these 10-year treasuries, the yield was 1.5%(2). So, the Fed starts raising rates like they had talked about for a couple of years, really in 2022, and as most people know, when interest rates rise, the principal value of bonds drop.   You may wonder why the banking industry was covering, in essence, one-day deposits with 10-year bonds. In other words, if your depositors wanted their money, you had to sell those bonds at a loss.

Please see the chart below from an article by David Sacks(3). His illustration better explains what's going on with the banks than anything I've seen. This illustration shows the banking industry's bond portfolio on the bottom and how much value it lost as the Fed raised rates(top of the chart). Losses are in hundreds of billions of dollars.
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

The Four Steps to the Banking crisis:  
Step #1: The government prints and passes out free money to anybody who can fog a mirror, plus passes multi-trillion-dollar spending bills, which causes the worst inflation we've seen in 40 years.
Step #2: To combat inflation, the Fed raised rates very aggressively, driving down the principal value of the bonds banks had purchased. 
Step #3: This made a few of the banks technically insolvent. If there was a run on the banks - oops.
Step #4: Yes, Mildred, there was a run on the banks.

No Soft Landing Here

Chairman Powell has been saying for months that they are hoping to have a soft landing, which equates to raising rates enough to lower and calm inflation without triggering a monetary crisis. Well, you can't really say mission accomplished with this one!

Fortunately, the government will step in and ensure no depositors are hurt, regardless of the amount they hold at a bank. Banks will be forced to tighten up, and their costs will increase due to having bailed out the few affected banks. Banks will have less money or will be more reluctant to loan money.  Currently, 30% of the loans in the country are done by regional banks(4). Do you expect more loans or fewer loans? I expect fewer loans, so we'll have less economic activity.  But hold on; there might be some good news for you.

Hidden Gem
It’s time to go long. Believe it or not, there's a gem in the coal mine caused by the fed raising rates. It may be time for you to go long with certain investments. Specifically, I'm talking about fixed income, whether a bond for three to five years, a CD for one to four years, or even a multi-year guaranteed fixed annuity for two to seven years. It's been many years since I've discussed this concept of going long. The last time was back in 2007 - 2009, and interest rates peaked in that business cycle. At that time, you could get 5- 7% on the above-mentioned investments and lock in a maturity date of 2 -5 years. Then we saw rates decrease for years.

Why do you need to go long? It’s not just football terminology. Going long refers to a maturity that exceeds one year. You go long if you think interest rates will decline or the economy is entering a period of uncertainty. Consider going long to lock in a decent return. I believe we'll see rates start going back down in about a year and a half.

Right now, the sweet spot on these kinds of investments looks anywhere from one to four years. Of course,  every investor's situation is different. You can't just willy-nilly and go out and take advice from a newsletter without consulting with a qualified investment advisor. As always, please feel free to call me with any questions.

Sincerely,

John Romano, CFP®
Office Phone #: 352-753-8590

Email: john@romanojohn.com

John Romano, CERTIFIED FINANCIAL PLANNER™, has over 30 years of experience in the financial field. John is a Registered Representative with Securities America, Inc. (a member of the FINRA and SIPC), and an Investment Advisor Representative with Securities America Advisors. He has prepared hundreds of reports for retirees to assist in their retirement income planning needs. He is dedicated to providing portfolio analysis, dividend and income information, and investment management services to retirees (and those preparing to retire) in The Villages, Florida, and throughout the United States.

Securities are offered through Securities America, Inc. Member FINRA/SIPC, John Romano CFP® Registered Representative. Advisory Services are offered through Securities America Advisors, Inc. John Romano Investment Advisor Representative. Romano Income Strategies and Securities America are not affiliated. Trading instructions sent via e-mail may not be honored. Please contact my office at (352)753-8590 or Securities America, Inc. at (800) 747-6111 for all buy/sell orders. Please be advised that communications regarding trades in your account are for informational purposes only. You should continue to rely on confirmations and statements received from the custodian(s) of your assets. The text of this communication is confidential and use by any person who is not the intended recipient is prohibited. Any person who receives this communication in error is requested to immediately destroy the text of this communication without copying or further dissemination. Your cooperation is appreciated. Guarantees are based upon the claims-paying ability of the insurance company. Past performance does not guarantee future results.

References:
(1) https://home.treasury.gov/news/press-releases/jy1325
(2)  https://gulfnews.com/special-reports/biggest-bank-collapse-after-2008-global-recession-how-svb-spectacularly-failed-after-rate-heresy-becomes-reality-1.1678543355308

(3) https://thefederalist.com/2023/03/14/dont-blame-depositors-for-bank-failure-blame-biden-and-svb-management/

(4) https://www.marketwatch.com/articles/torsten-slok-economic-outlook-banks-aac85353?mod=search_headline 

January 2023 Barometer Effect - Myth or Reality?  

Before I get to the January Effect, let's just recap last year. As you probably know, nothing good happened in the markets. Jerome Powell (the Fed chairman) was renamed as a serial inflation killer. His mission impossible, which he decided to accept, was to raise rates to kill inflation and hopefully have a soft landing.

It was tough on almost all areas of the markets with the Fed raising rates very aggressively, there was no place to hide if you owned almost any asset class. Equity markets took a beating, bond markets had a tough year, real estate properties declined, and even Bitcoin took a major beat down - the tide was definitely going out. So long 2022, it's good to see you go.

With the purge of last year's market, is there a light at the end of the tunnel? So far in the month of January with positive returns in the 4% to 5%, have we turned the corner? Let's talk about the January Barometer Effect. The January Barometer Effect was first discussed by Yale Hirsch in the seventies. His study, which was just updated in 2022, showed for the last 50 or so years, that if the market had a positive return in January, it predicted a positive return for the year.

Here is what I expected:

• In 2022, we had a bad market in a decent economy.
• In 2023, we expect a worsening economy in a decent market.
• New market leaders will not be the big tech companies (Google, Facebook, Amazon, Netflix) but more big industrials, Boeing, Caterpillar, and John Deere.
• China's economy will tank for the next three to four months as Covid takes a massive toll, but their economy should start expanding toward the end of summer.
• International markets have started out with the best year we've seen in the last 10 or 15 years.
• Bond yields are looking rather well.
• We will probably not have a soft landing.
• Home prices will, and have probably already dropped around 15% to 20%, but there will not be a 2008-2009 collapse because of lack of supply.
• Demand will continue to cool for all high-ticket items that require financings such as homes, boats, and RVs.
• Ukraine could be the wild card if there's not a negotiated settlement soon.

As always, my job is to rotate portfolios in the right sectors, but the tide is coming in this year, unlike last year when it was definitely going out. So far, so good.

Best Regards,

 John Romano, CFP®

Office Phone #: 352-753-8590

Email: john@romanojohn.com

 John Romano, CERTIFIED FINANCIAL PLANNER™, has over 30 years of experience in the financial field. John is a Registered Representative with Securities America, Inc. (a member of the FINRA and SIPC), and an Investment Advisor Representative with Securities America Advisors. He has prepared hundreds of reports for retirees to assist in their retirement income planning needs. He is dedicated to providing portfolio analysis, dividend, and income information, and investment management services to retirees (and those preparing to retire) in The Villages, Florida, and throughout the United States.

Securities are offered through Securities America, Inc. Member FINRA/SIPC, John Romano CFP® Registered Representative. Advisory Services are offered through Securities America Advisors, Inc. John Romano Investment Advisor Representative. Romano Income Strategies and Securities America are not affiliated. Trading instructions sent via e-mail may not be honored. Please contact my office at (352)753-8590 or Securities America, Inc. at (800) 747-6111 for all buy/sell orders. Please be advised that communications regarding trades in your account are for informational purposes only. You should continue to rely on confirmations and statements received from the custodian(s) of your assets. The text of this communication is confidential and use by any person who is not the intended recipient is prohibited. Any person who receives this communication in error is requested to immediately destroy the text of this communication without copying or further dissemination. Your cooperation is appreciated. Guarantees are based upon the claims-paying ability of the insurance company. Past performance does not guarantee future result.

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Bear Market- How long will it last ?  

Drip, drip, drip. I had a client last week tell me that this bear market just seems to drag on and on and on. She asked, “how much longer with this Chinese water torture?” My response was, “well, I’m not too sure about this Chinese water torture thing, but I and most investment advisors are watching the Fed's next two or three rate raises - as the next opportunity the Fed can raise rates would be in September, November, and possibly in December.” I believe that after these three rate raises, they will have sufficiently raised rates enough to slow the economy down, and with it, inflation.

The economy is already slowing down. Home sales are going down, car sales are going down. Even Walmart is complaining that they're not able to sell merchandise on their non-produce side of the store. As mortgage rates have hit a 15-year-high, home sales and new home starts have dropped very significantly. It's interesting to me, that if you look at some of the car lots 7 - 8 months ago there were no new cars on the lots, and now you noticed the lots are starting to fill back up.

When do bear markets end? Well, Mark Hulbert published an article, CLICK HERE ON THE LINK TO READ:

https://www.marketwatch.com/story/the-stock-market-typically-bottoms-before-the-end-of-a-fed-rate-hike-cycle-heres-how-to-make-that-bet-pay-off-11661850439  (1).

He studied multiple bear markets and their correlation to the Fed rate rise. He noticed in the last six bear markets, that the market bottomed out 2 months before the last Fed rate rise. He also studied the performance of the stock market after the bottom. Ultimately, the average 1-year return of the S&P500 after the market bottomed was 25%. I believe the last rate hike will be in December, so it is possible the market will find a bottom and course in October.

The biggest wild card out there today is Europe because to quote a phrase from the HBO series Game of Thrones, “Winter is coming.”(2)

Energy prices have quadrupled in Europe primarily for two reasons, Putin's control of the natural gas pipeline and our dependency on green energy. I believe energy costs will not only make it a challenge for the industry, but I think that this winter we will see wholesale rationing. Europe is looking at a much more intense recession than we face.

Riddle me this. Since California has announced the phase-out and the complete ban on gas combustion automobiles in 2035 – how is this going to work? California now has about half a million electric vehicles with about 22 million gas autos. Over Labor Day, because of the power outages, they asked people not to charge their electric vehicles. If the electric grid cannot handle half a million vehicles today, then how in a few years can it handle 25 million? The answer is it can’t!

Don’t fight the Fed. When it is all said and done, I believe that the Fed is on the right course of raising rates. It will in all (most likely) worsen the economy. However, I think most Americans would rather have a short-term worsening economy versus multiple years of high single-digit inflation.

Best regards,

John Romano, CFP®
Office Phone #: 352-753-8590 Email: john@romanojohn.com

John Romano, CERTIFIED FINANCIAL PLANNER™, has over 30 years of experience in the financial field. John is a Registered Representative with Securities America, Inc. (a member of the FINRA and SIPC), and an Investment Advisor Representative with Securities America Advisors. He has prepared hundreds of reports for retirees to assist in their retirement income planning needs. He is dedicated to providing portfolio analysis, dividend and income information, and investment management services to retirees (and those preparing to retire) in The Villages, Florida, and throughout the United States.

Securities are offered through Securities America, Inc. Member FINRA/SIPC, John Romano CFP® Registered Representative. Advisory Services are offered through Securities America Advisors, Inc. John Romano Investment Advisor Representative. Romano Income Strategies and Securities America are not affiliated. Trading instructions sent via e-mail may not be honored. Please contact my office at (352)753-8590 or Securities America, Inc. at (800) 747-6111 for all buy/sell orders. Please be advised that communications regarding trades in your account are for informational purposes only. You should continue to rely on confirmations and statements received from the custodian(s) of your assets. The text of this communication is confidential and use by any person who is not the intended recipient is prohibited. Any person who receives this communication in error is requested to immediately destroy the text of this communication without copying or further dissemination. Your cooperation is appreciated. Guarantees are based upon the claims-paying ability of the insurance company. Past performance does not guarantee future results.

References:
(1)  The stock market typically bottoms before the end of a Fed rate-hike cycle. Here's how to make that bet pay off. - MarketWatch

(2)  https://ew.com/tv/2019/03/27/game-of-thrones-best-quotes/

 

Bear Market- How long does it take to recover ?  

It was announced on June 14^th, 2022, that we are officially in a Bear market for the S&P 500. The NASDAQ index was declared to be in a bear market almost 3 months ago.  

Personally, this is my fifth or sixth bear market as an investment advisor and I can't remember one of these bear markets as being fun for anybody.

There is hope, but first, let's talk about what got us here.

• The government passing out trillions of pre-monies over the last two or three years.
• The Fed cutting rates to zero and pumping trillions of dollars into the economy.
• Threatening oil companies make it harder to borrow money to bring on new production.
• The war in Ukraine.

These four factors, plus a few others have led us to the highest inflation rate we have seen since the 70s. One of the new pastimes in America is when you were on your way to work to check out the oil prices and on the way out you check to see if they had gone up very much. So, America is witnessing the highest inflation that we've had in this country since the late 70s.

Jerome Powell (inflation killer)

Well here comes the inflation killer Jerome Powell 'The Fed Chairman'. He is aggressively raising rates to shut off demand. This is the only tool that the Fed has left to fight inflation. You must shut off demand for high ticket items which people were borrowing money on at almost not zero rates, but close to that.

Home Prices for example. Just three or four months ago you were able to get a 30-year mortgage at a rate of 2.90%, now that same 30- year mortgage rate is close to 6%. So, raising rates will shut off demand for big-ticket items - whether it's a home, a boat, a second home, a car, or anything where people normally borrow money and pay for it over time.

Unfortunately, when you shut off demand for these kinds of items, unemployment goes up. And then what normally follows that rise is a recession. The signal of a Recession is having two-quarters of GDP being negative or zero, and we've already done that in the first quarter, who knows where we're at in the 2nd and 3rd quarters.

Good news

As soon as the Fed see these rates taking effect going forward and shutting off demand, they will not be as aggressive in raising rates or maybe even slow the whole process.

What to expect from the stock market?

The average bear market lasts anywhere from 7 - 9 months. The method to count the time in a bear market is once a bear market is declared(June 14^th S&P500) you go back and start counting the months the market started going down. In this case, it was January of 2022, so we will already be at month 6 or 7 therefore we are much closer to the end than the beginning.

In 10 of the last 12 bear markets, if you would have bought the S&P500 the day that a bear market was declared, you would have averaged 22.7% in the next 12 months(1).

The stock market is always 6 - 9 months ahead of the economy. And this year when the market started to go down, in January, it was spot on. Again, this is a Fed-induced recession whereas demand and prices dropped, the chairman will slow the rate hike.

One last caveat.

In the Bank of America article published June 17, 2022, by Barbara Kollmeyer, she explained that in the next phase, once the bear market stops, then a bull market starts. The average bull market lasts about 64 months, and she is projecting “the S&P will be at 6,000 by Feb. 28^th”(2), almost a double from here.

Remember what sectors lead the last bull market almost never lead the new one.

Best Regards,

John Romano, CFP®

Office Phone Number: 352-753-8590

Email: John@romanojohn.com

John Romano, CERTIFIED FINANCIAL PLANNER™, has over 30 years of experience in the financial field. John is a Registered Representative with Securities America, Inc. (a member of the FINRA and SIPC), and an Investment Advisor Representative with Securities America Advisors. He has prepared hundreds of reports for retirees to assist in their retirement income planning needs. He is dedicated to providing portfolio analysis, dividend and income information, and investment management services to retirees (and those preparing to retire) in The Villages, Florida, and throughout the United States.

Securities are offered through Securities America, Inc. Member FINRA/SIPC, John Romano CFP® Registered Representative. Advisory Services are offered through Securities America Advisors, Inc. John Romano Investment Advisor Representative. Romano Income Strategies and Securities America are not affiliated. Trading instructions sent via e-mail may not be honored. Please contact my office at (352)753-8590 or Securities America, Inc. at (800) 747-6111 for all buy/sell orders. Please be advised that communications regarding trades in your account are for informational purposes only. You should continue to rely on confirmations and statements received from the custodian(s) of your assets. The text of this communication is confidential and use by any person who is not the intended recipient is prohibited. Any person who receives this communication in error is requested to immediately destroy the text of this communication without copying or further dissemination. Your cooperation is appreciated. Guarantees are based upon the claims-paying ability of the insurance company. Past performance does not guarantee future results.

References:

1. https://www.marketwatch.com/story/those-who-buy-stocks-the-day-after-the-s-p-500-enters-a-bear-market-have-made-an-average-of-22-7-in- 12-months-11655224023
2. https://www.marketwatch.com/story/based-on-history-the-next-bull-market-is-just-months-away-and-could-take-the-s-p-500-to-6000-says-bofa- 11655475414?mod=search_headline

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“Put the Lime in the Coconut and Drink it All Up."  -Baha Men (1) 

 

Do you remember the song Put the lime in the coconut? It was originally released in 1972 by Harry Nilsson and redone by the Baha Men. The narrative of the song presents a woman who had a stomachache late in the evening, and she called her doctor. He didn't want to see her, so he told her to put the lime in the coconut and drink it all up. You may be wondering what this has to do with the stock market.

Negative GDP Numbers Just Came Out

For the first quarter of 2022 negative GDP numbers were reported for this period of time. This is the first negative GDP numbers we've had since the second quarter when the pandemic had shut the country down. Now, don't worry, the same people who said inflation was transitory say they are not concerned about a recession.

What About Bonds?

I've had a lot of questions about bonds lately. Unfortunately, you can't buy bonds at this time because as interest rates rise, bond values drop. Fact is, the S&P is down about 15-16% as of the end of April. And the average, high-quality bond is down about the same percentage. Bonds react very negatively to rising interest rates.

So, What Have I Been Doing?

I've spent the last 4-5 months repositioning portfolios away from large growth companies which do terrible during recessions. The stock market has been pricing that in by going down on these particular sectors. Growth has been the best sectors for many years. Well, it isn't anymore. The good news is there are other types of companies, which most people would characterize as consumer durable companies, such as utilities, energy companies, grocery stores, auto parts stores, railroads, and health care, which are doing just fine.

So, Dr. John says has put the lime in the coconut and maybe add some rum and drink it all up. And as always, I stand ready to make changes to your portfolio based on the current conditions.

Sincerely,

John Romano, CFP®

Office Phone Number: 352-753-8590

email: John@romanojohn.com

John Romano, CERTIFIED FINANCIAL PLANNER™, has over 30 years of experience in the financial field. John is a Registered Representative with Securities America, Inc. (a member of the FINRA and SIPC), and an Investment Advisor Representative with Securities America Advisors. He has prepared hundreds of reports for retirees to assist in their retirement income planning needs. He is dedicated to providing portfolio analysis, dividend and income information, and investment management services to retirees (and those preparing to retire) in The Villages, Florida, and throughout the United States.

Securities are offered through Securities America, Inc. Member FINRA/SIPC, John Romano CFP® Registered Representative. Advisory Services are offered through Securities America Advisors, Inc. John Romano Investment Advisor Representative. Romano Income Strategies and Securities America are not affiliated. Trading instructions sent via e-mail may not be honored. Please contact my office at (352)753-8590 or Securities America, Inc. at (800) 747-6111 for all buy/sell orders. Please be advised that communications regarding trades in your account are for informational purposes only. You should continue to rely on confirmations and statements received from the custodian(s) of your assets. The text of this communication is confidential and use by any person who is not the intended recipient is prohibited. Any person who receives this communication in error is requested to immediately destroy the text of this communication without copying or further dissemination. Your cooperation is appreciated. Guarantees are based upon the claims-paying ability of the insurance company. Past performance does not guarantee future results.

References:

1. https://genius.com/Baha-men-coconut-lyrics

2.  https://www.cnbc.com/video/2022/04/05/81-percent-of-americans-believes-the-u-s-will-experience-recession-this-year.html

3.  https://www.google.com/search?q=s%26P+500+returns+2020&spell=1&sa=X&ved=2ahUKEwjJvsfD0LT3AhUaTTABHSESCDsQBSgAegQIARAy&biw=1536&bih=722& dpr=1.25

 

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Whoopty Doo, what does it all mean…?

If you were an Austin Powers movies fan, whenever he got a lot of data points, he would blurt out of

frustration, “Whoopty Doo, what does it all mean...? (2) Well, basically it means we're in a rising interest rate environment, probably headed in a recession in around two years.

The bad news

• Interest rates are heading up.
• Some stock market sectors are going to underperform. And indeed, some companies with business models predicated on low-interest rates probably won't be around here in a couple of years.

The good news

• You will probably see a little better rates on your savings/checking accounts.
• Prices will come down and so will inflation. Some stock market sectors are going to not only do well but flourish in this environment.
• Companies that have reasonable business models with products that people will need will move to the forefront - think energy, transportation, consumer staples, banks, agriculture, commodities, and utilities.

The proper way to deal with not only this correction but more importantly, the economy, is to consistently rotate into the sectors that outperform in that kind of environment. My job is to find those sectors and rotate in. But this is exactly how I've been managing my clients' accounts for years.

Sincerely, John Romano, CFP®

Office Phone Number: 352-753-8590

Email: John@romanojohn.com

John Romano, CERTIFIED FINANCIAL PLANNER™, has over 30 years’ experience in the financial field. John is a Registered Representative with Securities America, Inc. (a member of the FINRA and SIPC), and an Investment Advisor Representative with Securities America Advisors. He has prepared hundreds of reports for retirees to assist in their retirement income planning needs. He is dedicated to providing portfolio analysis, dividend and income information, and investment management services to retirees (and those preparing to retire) in The Villages, Florida, and throughout the United States.

Securities offered through Securities America, Inc. Member FINRA/SIPC, John Romano CFP® Registered Representative. Advisory Services offered through Securities America Advisors, Inc. John Romano Investment Advisor Representative. Romano Income Strategies and Securities America are not affiliated. Trading instructions sent via e-mail may not be honored. Please contact my office at (352)753-8590 or Securities America, Inc. at (800) 747-6111 for all buy/sell orders. Please be advised that communications regarding trades in your account are for informational purposes only. You should continue to rely on confirmations and statements received from the custodian(s) of your assets. The text of this communication is confidential and use by any person who is not the intended recipient is prohibited. Any person who receives this communication in error is requested to immediately destroy the text of this communication without copying or further dissemination. Your cooperation is appreciated. Guarantees are based upon the claims-paying ability of the insurance company. Past performance does not guarantee future results.

References:

1. https://markets.businessinsider.com/news/stocks/jeff-gundlach-economic-recession-possible-this-year-consumer-sentiment-weakens-2022-2
2. https://viebly.com/austin-powers-quotes/
3. https://www.bloomberg.com/news/articles/2022-02-10/fed-s-bullard-backs-supersized-hike-seeks-full-point-by-july-1/ https://markets.businessinsider.com/news/stocks/fed-rate-hikes-front-load-james-bullard-inflation-credibility-cpi-2022-2/ https://www.livemint.com/economy/feds-james-bullard-supports-raising-interest-rates-by-a-full-point-by-july-11644549964159.html

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Goodbye Year 2020 ! 

The year 2019 was an easy year to be an investor and It was an even easier year to be an investment advisor! The tide was coming in. The wind was at our back. The fish were really biting - It was hard not to have great investment returns.

And, well, 2020 was a whole lot of different. Not only were the fish not biting, but the tide was also going out and we had a category five hurricane that was blowing at us, that came out of nowhere! I find it hard to believe that many people did not have a few, if not many, sleepless nights in 2020 worrying about themselves, their family, and their loved ones.

From an investment advisor’s perspective, it once again proved to me that you better have and utilize a rules-based investing plan.

Last year's headlines between the pandemic, the election, and the economy, I had some perspective investors that told me they were sitting there in cash or running for cover. 2020 was not as quite as good as 2019, but still in my book gave a solid investment return.  Anytime you can get close to a double-digit return it is a win.  If you can get that kind of return while it seemed like your very way of life was going to be changed forever - Then it's a double win! If nothing else went right for you in 2002, at least the market performed.

RULES-BASED INVESTING

I first started using an investment process called Tactical Asset Allocation Using Relative Strength in the year 2000.  That year signified what I believe was the end of the buy and hold strategy.  It was also the start of another bad Bear market that ran for a couple, two or three years.  Most investing strategies work well in Bull markets, but it is even more important to investors, how do they perform in Bear markets?  We have had several Bear markets in 2000-2002, 2008-2009, and then we just went through a short-term bear market February through April of 2020.

HOW DOES THIS STRATEGY WORK?

I think the easiest example to use is a professional Football coach.  When you watch these coaches from the sidelines, you know to them it is not just a game, right? The game means more to the coaches than the rest of us, yes. You don't want to see your team lose, and it is just a game, but as soon as the game is over, you've probably gone onto something else.  While you are watching these coaches on the sidelines, you think their head is going to blow off their shoulders!  You look at their faces and you know that their blood pressure is way up. 

It’s obvious that the game is very important to them.  It is not just about the money and they want to win.  In professional football, there are probably three or four different quarterbacks that are all vying for the number one position.  Your job as a coach is to put the best player on the field. 

Well,  specifically, the NFL calls this an efficiency rating.  This efficiency rating is broken down by performance on the field, touchdowns, completions, interceptions, games won, games lost, etc., and they assign each player an efficiency rating.  The higher the ranking in the world of football, this is a better player than somebody else with less of a ranking.  It makes sense.  Put your strongest player on the field, not just at the quarterback position, but at all positions. 

IN THE MARKETS NO EFFICIENCY RATING, BUT PERFORMANCE MATTERS

There are about 100 plus sectors that you could allocate money to whether it's transportation, retail, health care companies, financial companies, energy companies, you get the picture.  But we have even a much better rating than the efficiency rating.  It is a performance rating.  Now, the performance rating of not only the whole market but each sector is done on a daily, weekly, monthly, annual performance.  So, it is very simple to see which sectors are outperforming now. 

For example, if the transportation sector has gone up 10 or 12 percent in the last three months and the entertainment sector has dropped 30 percent, there is no question in anybody's mind which sector is stronger, right?  My job as an investment advisor is to allocate money in stronger versus weaker sectors. Now my job is not to predict which sector I think is going to do better.  My job is not to predict who is going to win the election.  My job is not to listen to the media that tells me this or that.  My job is not to listen to economic forecasts.  My job is to focus on which sectors are the strongest and rotate my clients into those. 

What I tell my clients, I certainly do not know where we're going to be in six months, but I will tell you where the right place to be is today.  If the sectors change, we are going to change with it.  (Of course, you must weigh the tax consequences of any investment decisions.)  Frequently, I get a question of how long can these sectors keep outperforming?  I have seen some sectors outperform for 10 years, some sectors just for 3 or 4 months.  Just think for a minute of some of the high-flying companies today.  Whether it is Amazon, Microsoft, Tesla, or Apple - how many years have these companies been outperforming?

JANUARY 2021 FORECAST -(Drumbeat - dum, dum, dum, dum, dum, dum, dum.)

Here's what you have been waiting for.  So, what is John's forecast for 2021? I am only going to give you a forecast for right now.  Unfortunately, while there are still millions of people who are not doing well in America, I think unemployment is at 6.7 percent, something like that.  The reality is springtime is coming.  The vaccine is here.  Yes, the rollout is going to be difficult, but that is just like anything that you try to do in masses.

THE GOOD NEWS
I look around and the housing market is smoking.  The international markets have finally come alive in the last two, three, four months.  I have not seen this trend in many years.  The big industrial companies are operating, not quite at capacity, but ramping up.  And now, here come hundreds of billions of dollars in more stimulus money.  Household net worth rose 3.2 percent in the third quarter to $123.52 trillion, as stock portfolios and real estate prospered (3).  The Institute for Supply Management said its manufacturing index rose to 60.7% in December from 57.5% in the prior month, marking the highest level in almost two and a half years. Manufacturers have expanded for seven months in a row since the economy reopened last spring (2). Even more importantly, there is a tremendous pin-up demand for people to spend money.  If you are retired, I bet there are a lot of trips, excursions, and outings that you canceled in 2020 that you are just sitting there saying, boy, as the pandemic recedes, I am going to be making it up this year.

WELL, OKAY.  WHAT ARE THE TOP SECTORS?  I THOUGHT YOU WOULD NEVER ASK...
Some of these sectors have been performing exceedingly well over the last five, six, seven, eight months.  Technology companies, housing companies, big-box retailers, work at home software, cybersecurity.  We are now seeing the market broaden out.  Small to mid-cap companies are outperforming.  Emerging markets, international small caps.  We are even seeing commodity prices move up, if not to an all-time high.  I believe lumber right now is trading up to the highest level it has seen in decades.  The price of copper is going up.  Even oil has moved up from its historical lows. 

But even more importantly, I sincerely hope that you take care of yourself and your loved ones until we can get to the spring, and hopefully put the brunt of this awful pandemic behind us. 

Sincerely,

John Romano, CFP®

Office Phone Number:  352-753-8590
Email: John@romanojohn.com

 

John Romano, CERTIFIED FINANCIAL PLANNER™, has over 30 years’ experience in the financial field. John is a Registered Representative with Securities America, Inc. (a member of the FINRA and SIPC), and an Investment Advisor Representative with Securities America Advisors. He has prepared hundreds of reports for retirees to assist in their retirement income planning needs. He is dedicated to providing portfolio analysis, dividend and income information, and investment management services to retirees (and those preparing to retire) in The Villages, Florida, and throughout the United States.

Securities offered through Securities America, Inc. Member FINRA/SIPC, John Romano CFP® Registered Representative. Advisory Services offered through Securities America Advisors, Inc. John Romano Investment Advisor Representative. Romano Income Strategies and Securities America are not affiliated. Trading instructions sent via e-mail may not be honored. Please contact my office at (352)753-8590 or Securities America, Inc. at (800) 747-6111 for all buy/sell orders. Please be advised that communications regarding trades in your account are for informational purposes only. You should continue to rely on confirmations and statements received from the custodian(s) of your assets. The text of this communication is confidential and use by any person who is not the intended recipient is prohibited. Any person who receives this communication in error is requested to immediately destroy the text of this communication without copying or further dissemination. Your cooperation is appreciated. Guarantees are based upon the claims-paying ability of the insurance company. Past performance does not guarantee future results.

References:

(1)  https://www.google.com/search?ei=enn0X6ecBY7r5gK4rHwCg&q=hit+the+road+jack+lyrics&oq=hit+the+road+jack+&gs_lcp=CgZwc3ktYWIQARgAMgcIABDJAxBDMgIILjICCAAyBAgAEEMyBAgAEEMyBAgAEEMyAggAMgIIADICCAAyAggAOgQIABBHUNoLWNoLYOoYaABwAngAgAFHiAFHkgEBMZgBAKABAaoBB2d3cy13aXrIAQjAAQE&sclient=psy-ab

(2)   https://www.marketwatch.com/story/u-s-manufacturers-grow-faster-in-december-despite-coronavirus-surge-ism-finds-11609859979

(3)  https://www.pymnts.com/economy/2020/us-household-worth-reaches-all-time-high-of-123-trillion/

 

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Economy is Not Just Recovering but Accelerating

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John Romano, CFP®

305 Skyline Drive, Suite 3, Lady Lake, FL 32159

Phone: 352-753-8590

Email:  John@RomanoJohn.com

 

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Stretch IRA or the Tax Man ?

Stretch IRA or the Tax Man, leaving a legacy

The SECURE Act (which became law 12-20-19) changed the Inherited
IRA rules for most people who inherit IRAs in 2020 or later and
replaced it with a 10-year payout provision for most non-spouse
beneficiaries. The below information is now mostly historical (except
for those grandfathered in before the Secure Act changed).
 

Check with your financial representative about your Inherited IRA and
what rules apply now to yours: 

 

Dear Folks,

I wrote this in August 2018, but I thought it would be timely, since we are in the tax season now.  I hope you enjoy it !    - John

==========

Leaving a Legacy for your Family:  Stretch IRA or the Tax Man 1

The other day I was listening to the Beatles channel on Sirius Radio and the song came on called, “The Tax Man” by Eric Clapton and George Harrison.  And it goes like this:  

“Let me tell you how it will be.
There's one for you, 19 for me.
Because I'm the tax man.
Yeah, I'm the tax man.”

I'm sure there was a reason these rock stars were singing the blues about paying a huge amount of taxes.

Let's assume you're not a rock star.  What is it you can do you to help your beneficiaries minimize taxes upon your demise?

Leave them a legacy through a Stretch IRA

The stretch IRA concept, which I have implemented for almost 20 years, is truly one of the most powerful money/investment techniques that I know, that doesn't cost anything.

Background of the Stretch

In the late 1990's, 401(k) rollovers had gotten huge and IRA's were pretty hard to have if you were going to put aside $2,000 a year, in order to have a huge IRA 15 - 20 years down the road.  People had rolled over their 401(k)'s into IRAs, and a lot of them had $1 million.  There was very little planning on how this sum of money was going to be passed down to beneficiaries.  

It would be best to discuss your stretch strategy goals with your heirs early on. With a clear understanding of the process, beneficiaries can take the proper steps to receive the greatest benefit from the account. Over time, the stretch strategy could result in an important legacy for your heirs if they choose to take advantage of it—and it can be especially rewarding to know that your children or grandchildren can benefit from substantial savings over time as a result of your generosity.

In the 90's

I had a client whom I'll never forget. He was from Germany and he was as stubborn as a mule.  His wife had predeceased him a couple years prior and he said, “John, I've lived in a mobile home my whole life.  I've sacrificed mainly because my kids don't have anything - they have no retirement plan and they're going to have a bleak retirement.  My goal is to make sure that this money passes on to them.”  I explained to him, “Well, upon your demise, there are a few ways you can do it. I explained some options to him and ultimately conveyed that we could set up a stretch IRA and not only set it up but counsel them on the correct actions to take.”This client wasn't having any of the latter.  He said, “No John, I want them to pay the taxes on it and that's it,” and there was no more further discussion.  Well, I'll never forget when his kids finally did inherit the money—back then they were from California—they lost almost 45% of it due to state and federal income taxes.  It was one of the first times I had ever seen somebody lose that amount of money to taxes.  It was sad, and it didn't have to happen that way.  

============================
Concerned about Staying Retired, running out of Money?  
Visit our new Stay-Retired website and view the “10 Retirees” video.
============================

Most of the time, when people pass away, they just want to get everything over with quickly and that's when they make big mistakes.  You'll see some people do things they would actually never do.  They'll sell the home at a discount just to get rid of it within a week or two.  It's important to meet with someone who can say, “We understand that you're just trying to get this over, and you're in a lot of pain because you just lost a loved one.  But let's just hold on and see if there's a beneficial way to inherit this money.”

Fortunately, There Is

It's called an inherited IRA or stretch IRA.  The mechanics are very simple. But just because the mechanics are simple doesn't mean that people do it. (It's just like losing weight, everyone knows how to diet) A stretch IRA is a method that avoids a large sizeable tax bill to the beneficiaries. If children or grandchildren are named this stretches the lifespan of the IRA. This extends tax-deferred growth for years beyond the life of the original account holder.

With a stretch IRA, the account holders name their IRA beneficiaries. Those younger relatives then take RMDs that are small enough to trigger minimal taxes. The rest of the inherited account can continue to grow tax-deferred and increase in value.

Let's say upon your death, let's say you have two beneficiaries and $1 million in an IRA, if an account has been titled properly, the beneficiaries have an option to either pay the tax or continue the IRA as an inherited/stretch IRA.  

You may be thinking, “Why would anybody want to pay the tax?”  Folks, it's back to the prior example.  They don't know.  They're trying to deal long distance with somebody.  They're dealing with somebody, maybe the money is still in a 401(k), and they're just trying to get the stuff done and off their desk.

The cool news is a stretch IRA doesn't have to be for a relative.  It can be for any beneficiary.

Mechanics of the Stretch

It's really fairly simple. With this strategy, you name your non spouse (obviously if your spouse is still alive, then you should probably name your spouse as beneficiary) as your IRA beneficiary. He or she rolls your IRA into an inherited IRA in his or her name and starts taking RMDs at age 70.5. Your child or beneficiary names a member of the younger generation (such as your grandchild) so when your child dies, the grandchild beneficiary starts taking the small RMD's and now they have their own stretch courtesy of you.

Family Dynamics

Let's say your name is John Smith and you have your two sons Joe Smith and Melvin Smith as beneficiaries. Now, one of your sons is a frugal guy, and realizes that he doesn't have enough money saved for retirement (There are very few people walking around today with pensions, so you either save it or you just try to exist on Social Security, which is tough).  The other son, Melvin, now Melvin is a party guy and he's not thinking about 20 years down the road.  He's thinking about right now, what he could do with that money, what kind of car he could buy, what kind of house he could have, his standard of living, and to heck with it, he may not even live that long. In many families, you'll have two siblings that are fairly opposite with their outlook towards money.

Furthermore, people who have trusts, name their one more responsible son or daughter as the trustee and executor.  And they always tells that son/daughter “Please look after your sibling, financially after I am gone.”  The sibling who wants the money, Melvin, is going to be badgering the other one.  The other one is going to say, “He wants this, but I know what my parents wanted me to do,” and then they're just torn.  

As you know, with any IRA, if you're IRA owner and you reach age 70-1/2, you have to do required minimum distributions, which are based on your life expectancy (RMDs are calculated each year and must begin no later than December 31 of the year following your death.) The stretch IRA will have to do required minimum distributions, but they're a lot less, because for example, at age 40, your life expectancy is probably 40 -  so you're going to be taking about 2.3%  which is very minimal.

Pay Less Taxes, Pay Later

I don't know who coined this phrase, but this phrase, “Pay less taxes, pay later,” really hit the nail on the head. Whether it's a tax-deferred annuity, whether it's tax-free municipal bonds, or whether it's IRAs/401(k) s, everybody would rather have their money working for themselves.  They would rather pay fewer taxes and pay it later.  Most people understand that if you have a lot more money working for you, you're going to end up a lot better down the road.

Can you imagine the difference to your beneficiaries if they were to receive the full value of your IRA?  For example, let's just use a $1 million IRA, and something happens and you pass away.  If your beneficiaries cash it in because they're being given bad advice, they don't know what they're doing, or they just get impatient, they're going to lose 45%.  That is a huge tax bill.

So the name of the game is, instead of losing that hypothetical $450,000 in the above example, you keep that money that was going to go to taxes working for your new beneficiaries, for their lifetime, and even possibly your grandchildren's lifetimes.

Take a second and go back and think:  If you had an extra $450,000 working in some kind of investment, I don't care what the return was, for the last 40 or 50 years, how much more would you be worth?  How better would your retirement have been?

Mind Blowing Legacy

So let's say your grandchild is in college and every month he receives a check from your inherited IRA that says, “Favorite grandson BDA deceased owner name IRA.” The deceased owner is you- for the rest of the beneficiary's life they are getting a check courtesy of you.

So what is a BDA IRA account? It is an inherited IRA, which is also called a beneficiary distribution account IRA. It is important that the IRA custodian registers the account properly.  This is the key.  If this is not done properly, then this whole concept does not work.

Now, if the beneficiary is NOT a spouse, this is where it gets a little bit trickier.  A non spouse beneficiary must move the funds into a BDA IRA in his or her name and take life expectancy payments accordingly. For example, let's say you have two kids, the two above-mentioned kids, one is a spender, and one is not.  Regardless, what has to happen or should happen - the IRA should be split.

Spend this and start your own retirement

In a lot of cases, people will have, you know, let's say half their money in IRAs and half their money maybe in homes and brokerage accounts and what not. I have had a lot of success when I sit down and talk to talk to these beneficiaries, I say, “you know, if you are like a lot of people out there today, you probably do not have enough savings for retirement, you probably do not have a pension,” and I review the above mentioned two courses of action.  In many cases I will say to the beneficiary, “your parent had half their assets in IRAs and the other half in brokerage accounts. Let's do this; we can get the other half of the money that is non IRA to either invest, spend, or whatever you would like to do with it. But let's go ahead and set up this IRA as your own retirement plan.”

When you have beneficiaries with different outlooks, there is a smart way to distribute assets at death and there is also a dumb way.  If you have ever been involved in a settlement of an estate worth a significant value with more than one beneficiary, you know exactly what I am talking about.  There is not a whole lot of logic between a couple beneficiaries, their spouses, children, and a big pile of money.  It is important for this to be taken care of on the front end because I tell you, in most cases; it will not be taken care of in the tail end.

Certain things have to be implemented at certain times.  The main problem, as we mentioned before is the first time somebody has died and that has left them money, they do not know what they are doing.  It is real hard for them to get advice.  So they will call up wherever the account is being held and they will talk to some 24-year-old representative.  Do not let them make a mistake.  If there is a way I could help you, if you have any questions there are multiple ways to reach out to me. Either shoot me an e-mail, a phone call, come to the office or even Skype with me. And if you are not a client, I would be glad to explain this whole process to you about the benefits.  I have done this for decades.  

The SECURE Act (which became law 12-20-19) changed the Inherited
IRA rules for most people who inherit IRAs in 2020 or later and
replaced it with a 10-year payout provision for most non-spouse
beneficiaries. The below information is now mostly historical (except
for those grandfathered in before the Secure Act changed).
 

Check with your financial representative about your Inherited IRA and
what rules apply now to yours: 

Sincerely,

John Romano, CFP®

John Romano, CERTIFIED FINANCIAL PLANNER™, has over 30 years experience in the financial field. John is a Registered Representative with Securities America, Inc. (member of the FINRA and SIPC), and an Investment Advisor Representative with Securities America Advisors. He has prepared hundreds of reports for retirees to assist in their retirement income planning needs. He is dedicated to providing portfolio analysis, dividend and income information, and investment management services to retirees (and those preparing to retire) in The Villages, Florida, and throughout the United States.

(1).  Securities America does not offer tax advice

Securities offered through Securities America, Inc. Member FINRA/SIPC, John Romano CFP® Registered Representative. Advisory Services offered through Securities America Advisors, Inc. John Romano Investment Advisor Representative. Romano Income Strategies and Securities America are not affiliated.
Trading instructions sent via e-mail may not be honored. Please contact my office at (352)753-8590 or Securities America, Inc. at (800) 747-6111 for all buy/sell orders. Please be advised that communications regarding trades in your account are for informational purposes only. You should continue to rely on confirmations and statements received from the custodian(s) of your assets. The text of this communication is confidential and use by any person who is not the intended recipient is prohibited. Any person who receives this communication in error is requested to immediately destroy the text of this communication without copying or further dissemination. Your cooperation is appreciated.

John Romano, CFP®
305 Skyline Drive, Suite 3, Lady Lake, FL 32159
Phone: 352-753-8590

Email:  John@RomanoJohn.com

============================
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The SECURE Act (which became law 12-20-19) changed the Inherited
IRA rules for most people who inherit IRAs in 2020 or later and
replaced it with a 10-year payout provision for most non-spouse
beneficiaries. The below information is now mostly historical (except
for those grandfathered in before the Secure Act changed).
 

Check with your financial representative about your Inherited IRA and
what rules apply now to yours: 

Fiduciary Duty - Does your Financial Planner owe you ?

DOES YOUR BROKER/FINANCIAL PLANNER HAVE A FIDUCIARY DUTY TO YOU?

There is a lot of confusion with the different financial advisor designations. There is very little transparency on how a financial adviser gets paid. You know how your doctor is paid and your mechanic or hairstylist is paid. But even more importantly, investors want to know who is looking out for them. Well, basically it comes down to this.  

There are two standards that advisors and financial planners are held to - the suitability standard and the fiduciary standard.  The suitability standard gives advisors the most wiggle room; it simply requires that investments must fit clients' investments objectives, time horizon, and experience. ¹

How to discern among Financial Advisors:
Many investment advice providers are not trying to rip people off. But it's hard for average investors to know which type of advisory is held to what type of standard- suitability or fiduciary.

The  suitability standard  may have the potential for conflict of interest pertaining to compensation, which can vary greatly from one product to another.  And if you're operating under this, you don't have to disclose your conflicts of interest.  So, what that means is often the products that are best for the broker have higher costs for the investor.

The other standard of care, the fiduciary standard, basically charges advisors with putting their client's best interest ahead of their own.  For instance, states with two identical products but with different fees and advisor under the fiduciary standard will be compelled to recommend the one with the least cost to the client, even if it meant fewer dollars in the company's coffers in his or her pocket.  

Unfortunately, many investors can't distinguish among financial planners and advisors.  Here are some common questions that should be asked :

Question #1 – Are you acting under the fiduciary standard?
Question #2 – What licenses do you have?
Question #3 – Are you a registered investment advisor?
Question #4 – Are you a CFP®?

I have a dual fiduciary obligation, not only being an Investment Advisor Representative, but also being a CFP®.  

The CFP's board most recent code of ethics and standard of conducts include a range of important changes (their website is www.cfp.net ), including expanding the application of the fiduciary standard that always requires a CFP® to act in the best interest of the client when providing financial advice.  I provide financial advice.  

As an Investment Advisor Representative, I am regulated by the SEC or State Securities regulators both of which hold advisors to a fiduciary standard that requires them to put their client's interests above their own.  It consists of a duty of loyalty and care and simply means the advisor must act in the best interest of his or her client.

Once you understand the differences, you have the option to choose someone who best fits your needs.

References: [1] https://www.bankrate.com/investing/how-the-fiduciary-standard-protects-you/

 

Sincerely,

John Romano, CFP®

John Romano, CERTIFIED FINANCIAL PLANNER™, has over 30 years experience in the financial field. John is a Registered Representative with Securities America, Inc. (member of the FINRA and SIPC), and an Investment Advisor Representative with Securities America Advisors. He has prepared hundreds of reports for retirees to assist in their retirement income planning needs. He is dedicated to providing portfolio analysis, dividend and income information, and investment management services to retirees (and those preparing to retire) in The Villages, Florida, and throughout the United States.

Securities offered through Securities America, Inc. Member FINRA/SIPC, John Romano CFP® Registered Representative. Advisory Services offered through Securities America Advisors, Inc. John Romano Investment Advisor Representative. Romano Income Strategies and Securities America are not affiliated.
Trading instructions sent via e-mail may not be honored. Please contact my office at (352)753-8590 or Securities America, Inc. at (800) 747-6111 for all buy/sell orders. Please be advised that communications regarding trades in your account are for informational purposes only. You should continue to rely on confirmations and statements received from the custodian(s) of your assets. The text of this communication is confidential and use by any person who is not the intended recipient is prohibited. Any person who receives this communication in error is requested to immediately destroy the text of this communication without copying or further dissemination. Your cooperation is appreciated.

John Romano, CFP®
305 Skyline Drive, Suite 3, Lady Lake, FL 32159
Phone: 352-753-8590

Email:  John@RomanoJohn.com

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Tighten Up Investor - Market Volatility

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