An Introduction

Hi. Welcome to BourGroup and my blog. Phil

Phil Bour is a CERTIFIED FINANCIAL PLANNER(tm) professional since 2004, a Magna Cum Laude college graduate and an accounting professional for over 35+ years. I love numbers, statistics and economic history.

I am also an Enrolled Agent (EA) to represent taxpayers before the Internal Revenue Service and to prepare tax returns.

"Phil"osophy: I believe that you can manage your money on your own (not necessarily through individual stock selection but through mutual funds, ETF's and other solutions) once you receive some one-time, professional guidance. Why pay annual fees when there may be little added value? For additional information, first read the "An Introduction" label at the left. Then move on to others.

Tuesday, August 2, 2011

Aftershock Survival Summit

There is a video from NewsMax circulating the Internet entitled "Aftershock Survival Summit".

I am reminded of a quote from John Anthony Scott in his introduction to Sir Thomas More's book from the 1500's called "Utopia":

"...for the less a thing fits the hearer's ways, the less credence is it always given..."

So, since I disagree with the message in this video, I also give it less credence as the quote above warns me.

Here are my “9” comments on this NewsMax video (I actually read the entire transcript):

(1) The first stock market graph shown is misleading. In 2007 the DOW hit a high of 14,200 and today, though struggling now, hit 12,800 earlier in the year, so it is only off 10% from its high

(2) The graph on the drop in the dollar also looked precipitous but a close look at the graph shows it dropping from 88 -> 74 (it is a 16% drop but the graph was really misleading)

(3)  The Federal debt held by the “public” is smaller than the total debt. Newsmax reports the total.

(4) Somehow they tried to correlate stock market movements with personal income or GDP. It is not meaningful to do so. The stock market averages increases of 6-7%, GDP average 3% or so and personal income averages even less, so of-course, when you compare the market gains to these changes it looks like it is “off the charts” out-of-control. I disagree with this approach.

(5) Inflation of 30% or 100%. Silly. Oh yes, inflation is going to return (maybe 4-5% versus the 0-2% we have had for many years). Anyway, pure “scare tactics” to believe that the largest economy in the world would go through that kind of scenario. Printing money and money growth have not resulted in inflation to-date, in part, because to have meaningful inflation aggregate demand must outstrip supply and with unemployment at 9.2% it will be hard for this to happen. Not impossible, just difficult. 

(6) Yes, China and Japan own nearly $2 trillion of our public debt. So, if they decided to go elsewhere, where would they go?

a. Guess what? The U.S. – even if downgraded from AAA to AA is still the “safest” place to keep money

b. China and Japan need our US Treasuries just as much as we need them to hold them and buy more

(7) 36% of the U.S. debt, Newsmax says, is short-term. From this, they deduce that if interest rates go up, the U.S. interest on its debt will skyrocket

a. Hmmmm…if they are correct about the 36% (it does sound reasonable), then doesn’t that mean that 64% of the U.S. debt is held in longer-term securities?

b. In addition, how much do you think the interest rate was on 10-year U.S. Treasury bonds sold in 2001? 6-7%? Yes, and those are coming due now and being replaced by 10-year Treasuries being sold at 2.7-2.9%. And what about 30-year Treasuries sold back in 1981 at 16%+ rates?

c. WOW! So the interest rates could DOUBLE from 3% to 6% and it would have minimal effect on the interest paid on U.S. debt

(8) The graph on interest on the debt started at around $600 billion. Wrong. The interest on the debt today is about $260 billion and significantly less than it was just a few years ago when it was closer to $360 billion because of the rollover of older, higher interest bonds to lower rates today.

(9) Finally, their suggestions at the end of what people should do about the future crisis to enfold is:

a. Get a low, fixed rate mortgage and don’t pay it off early (I agree for the most part, 15-years)

b. Buy Gold through ETF’s or mining stocks (This is the way to buy gold, if you do, but I’d limit the amount to 1-5% of a total portfolio if at all).

c. Buy currency ETF’s (Many advisors recommend this but it is volatile and risky and, in my opinion, not necessary for most investors)

d. Subscribe to their newsletter (I will leave that up to you; personally, no)