1. Telecommunications: its Days Are Numbered

    Telecom stocks are the worst group in the history of the world. Well maybe that is offensive. So like Kathy Griffin, Bill Maher and Stephen Colbert, I will apologize. I used the politically incorrect term, world. Let’s start over.

    Telecom stocks are the worst group in the history of the first half of 2017. The S&P 500 Telecom Sector is down 10%. Ok, there now that’s better. Still, a 10% drop in a market that has risen 9%, I am sorry but that just sucks.

    Things are so bad that The Standard & Poor’s Corporation is actually thinking of eliminating the Telecom Index altogether. So let’s take a look at why this is happening and see if we can find some hidden values that investors are overlooking.

    Going, Going Almost Gone

    S&P’s consideration in eliminating the Telecom Index is based on the reality that it isn’t worth saving. To be an Index, there has to be stocks. All the way back in the 1990’s there were 17 stocks in the Index. Today there are only 4 and that may be reduced further in the coming months.

    If so, it would leave AT&T, Verizon and Century Link as its only members. Mergers over the past 25 years have whittled the numbers. S&P might consider adding T-Mobile to the index, but Japan’s SoftBank is already pursuing it.

    The very monopoly that the United States Congress broke up in 1984 (AT&T) has come full circle in 2017.

    Wireless Pressures: The Squeeze Is On

    In the final analysis, just AT&T and Verizon are the big factors in how the S&P Telecom Index performs. The common thread here is the health of the wireless business. It been great for years but now new forces are at work.

    Cord cutting, the act of shifting from fixed location viewing on cable TV to the Internet and mobile devices is pushing demand for AT&T/Verizon mobile services to record levels.

    Add to that the public’s entire fixation on texting not to mention the upsurge from SnapChat, Instagram, as well as the enhanced video sharing capabilities of Twitter and Facbook and you have demand that is exploding.

    In telecom language that means there is a shortage of bandwidth and that spells the need for big investment bucks at the AT&T/Verizon duopoly. Ok, no big deal, it just a matter of money and then getting a return on that investment. Not so fast, here is where the squeeze comes in.

    After researching the topic we learned that wireless prices have fallen 13% over the last year. Seems like those “Unlimited Plans” have been wildly popular with everybody but company profit margins and the investors that have been watching.

    Ouch! Was this an economic faux pas? In the short run, it may turn out to be but there may have been other considerations like competing against the big cable giants.

    On one side of the coin, people have abandoning cable because of its high cost. Yet, under their old plans, for AT&T/VZ to provide enough bandwidth for all that incremental video would certainly have run the average consumer bill through the roof. Either way, the short-term focused stock market isn’t exactly thrilled.

    The Hidden Nuggets

    If the S&P Telecom Index does go the way of the Sony Walkman, the rules committee at Standard & Poor’s will probably merge it into the Utility Index where it properly belongs. This is where investors will find greater joy.

    This is when the overlooked value of AT&T/Verizon will receive greater attention. The value is in the dividends. Both stocks sport hefty 5% dividend yields. And they have enough cash to continue growing the payout in the years ahead.

    These two stocks may not be as risk free as the 10 Year US Government Note but these days the government is only offering about 2.2% and the government is over $20 trillion in debt.

    We aren’t in the business of making investment recommendations, just observations. You can, and should, consult a qualified investment advisor for their recommendation. With a new unlimited plan, you can talk to them all you want. You can even share photos.

  2. Politics of The Absurd

    Before getting started, I have an important confession to make.

    I am politically agnostic. I have responsibly taken my citizenship obligations and voted every Election Day since turning 18. But lately my heart has begun to follow the Hippie Party campaign slogan of 1968: Vote For Nobody, because nobody has ALL the answers!

    While others are passionate about their political beliefs, my passion tends to run to the absurdity of the political process. Take for example the Democratic Party. Unquestionably this group is in the worst shape in decades. Consider their situation.

    Identity Crisis

    To be a Democrat is to be a person favoring social justice, helping your fellow citizen looking out for the environment, protecting the rain forests and smoking a little weed. All of these have their virtues.

    Today the political map in America is bifurcated. More baby boomers are retiring everyday while more millennials make up the lower end of the age spectrum.

    These two groups represent over 90 million Americans. This may not sound like much compared to 320 million in the US population. But remember, only about 130 million voted in the 2016 election, so 90 million is potentially a powerful block.

    It combines the idealism of youth with the aches and pains of old age reality. These two groups have been the core of the Democratic Party for decades. Now this voting block is bigger than anytime in history.

    Unfortunately the Democrats are nowhere to be found. They control neither houses of Congress. Only 13 states are under Democratic governorship. The Party is so bad off these days the even Hilary Clinton is being accused of disserting the ship.

    Clinton to the DNC: Your Ship Has A Hole In It

    In a recent interview at the 2017 high tech Code Conference she claimed the Democratic National Committee is nearly bankrupt and that she, single handedly, had to bail them out. She claimed the DNC had nothing that could help her campaign, no data, nada. This makes the Russians look really stupid for hacking into the DNC data bank in the first place. What a waste of money. Cyber hackers don’t come cheap.

    Cheep Sports Metaphor To The Rescue

    In situations like this a sports metaphor always comes in handy.

    We are now in the bottom of the ninth inning with two outs, nobody on base. Attempting to tie the score with one swing comes the proposal for single payer health care!

    Nationalized Healthcare: Avoiding Solutions When Ever Possible

    The idea of a single payer healthcare system was one of Bernie Sanders favorite campaign issues. It sounded so appealing when The Bern talked about it. His passion made him a popular figure.

    But The Burn didn’t even get nominated. (Maybe those Russian had something to do with it.)

    When you are down 37 Statehouses in the bottom of the ninth inning, there is nothing like taking a loosing idea from 2016 and making it the centerpiece of the party’s first attempt to get back in power.

    Desperation Is Gaining Momentum

    Single payer bills are being proposed in several states: New York, New Jersey, Rhode Island, Massachusetts and, of course, California. As you might imagine, each of these states are Democratic strongholds.

    California is the state with the highest chance to get any traction. State Senator Ricardo Lara is the author of the bill that would mandate much more comprehensive access and no out-of-pocket costs.

    There are only a few small issues to be addressed. A single payer system will cost $400 billion just for California: a tidy little sum. Half of this will come from taking away existing public healthcare programs. (Always a risky move) The rest will require $200 million in higher taxes (everybody loves more taxes).

    Good luck with the first $200 million of the plan. Donald Trump knows what it is like messing with exiting programs under the Affordable Care Act. And then there is the issue of the added taxes.

    Is it truly a zero out of pocket healthcare plan if you must pay $200 million more in taxes? California recently legalized weed. Perhaps politicians are depending on that to get voters to buy into the plan. Inhale the burn.

  3. The Most Important Things Financial Planners Overlook

    Ever notice how many top 10 lists there are these days? No matter what you are considering, somebody has a 10 best and worst list for about everything.

    The financial planning industry is no different. In fact they have taken the task one step further. The other day I noticed a Top 10 list if you wanted to retire at 40, 50 or 60. There was another Top 10 list if you wanted to start a savings plan at 40, 50 or 60.

    In addition to having these clever marketing tools, the industry has developed professional certifications to educate and increase professionalism in the business. Kudos to all you CFP’s.

    The whole idea of the planning is to make sure you have enough dough to last and still have enough left over to pass along. This way your funeral will be well attended and lots of good words will be said. We all want that.

    With credit to the Aegon Center for Longevity and Retirement we are reminded of the single most important point most financial planners ignore.

    You may have enough money to last you until your 100 but if you are not in the right health and state of mind you won’t last anywhere near that long. There will be tons of well off beneficiaries of your demise attending your funeral. They will be literally gushing with wonder stories, but what good does that do?

    Work Hard, Die Late

    The facts on America’s health are appalling. We may have the most advanced health care but the highest level of obesity. Some studies place the level of either severely overweight or clearly obese as high as 70%. These same studies revealed that less than 40% of these tubbys felt they had a weight problem.

    Here is one finding from Aegon that supports this point. Some 57% of the subjects in their study claimed that they eat healthy. It takes a lot of Kale to support a 350-pound person. Somebody is in denial.

    Obesity is big contributor to diabetes while stress is a big part of stroke and heart disease. Only 17% of the Aegon subjects practiced stress-reducing habits like meditation and relaxation exercises.

    It’s All In The Mind

    American healthcare offers more plans offering regular checkups and health maintenance programs. We also have access to more health clubs per capita than any country in the world.

    Owners of these facilities make fortunes selling memberships that never get used. In the final analysis, they depend on America’s tendency of consistently breaking New Years Resolutions.

    In the final analysis, achieving and maintaining good health well into retirement is a mental game that should start every bit as early as financial planning. Not only can poor health later in life have potential devastating effects on finances, they can reduce you earnings potential in the first place. Subjects in the Aegon showed 31% of retirees did so early because of poor health.

    Another part of the retirement planning mental game, according to most experts, is having a nice long bucket list to keep the blood flowing. If taking out the trash seems to be the only regular non-work activity, it is time to allocate some more “me time”.

    Mental strategies from the experts include things like: using your business skills at planning, time management and goal setting. Lots of retirees like to play golf. Turn your game into a scheduled series of goals. Tuesdays can be used to knock 3 strokes off your chipping and putting. On Fridays focus in hitting your drives down the center of the fairway. In other words, put the same purpose into your leisure activities that you did in you business. Most importantly, have multiple activities that involve physical and mental challenges.

    If you follow the advice of these experts, there will be fewer people at your funeral but the stories will be much more interesting.

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