Doctors cannot cure a patient in severe pain by pumping him full of painkillers; they need to accurately diagnose the root cause of the pain before treatment. Without an accurate diagnosis, it is nearly impossible to fix a problem, medical or otherwise.

And the stakes are high: a misdiagnosis can trigger treatment that may compound a problem instead of making it better. That's exactly what happened with the bank bailout five years back: the “cure” set in motion new challenges for seniors and savers.

Forget all the technical mumbo-jumbo. Here are the need-to-know facts: for generations seniors and savers could invest the bulk of their retirement nest egg in safe, interest-bearing CDs, government bonds, and utility bonds. That, coupled with Social Security, allowed for a comfortable retirement. Those 6-7% yields are gone, as we all know.

Was the 2008 financial crisis properly diagnosed and treated? That depends on whom you ask. Most Americans, however, don't think so. According to Pew Research, “Five out of eight Americans surveyed (63%) earlier this month believe the US financial system is no more secure in 2013 than it was before the economic crisis of 2008.”

In September, Sheraz Mian broke down the 2Q earnings reports of the S&P 500 companies in Zacks Earning Trends:

“Yes, the total earnings tally reached a new quarterly record in Q2 and the rest of the aggregate metrics like growth rates and beat ratios look respectable enough. But all of that was solely due to one sector only: Finance. … Finance results have been very strong, with total earnings for the companies that have reported results up an impressive +30% on +8.5% higher revenues. Excluding Finance, total earnings for the remainder of S&P 500 companies that have reported would be down -2.9% from the year-earlier period.”

Too-big-to-fail banks are certainly succeeding. The report continued:

“Earnings growth was particularly strong at the large national and regional banks, with total earnings at the Major Banks industry, which includes 15 banks like J.P. Morgan and Bank of America.”

Pew Research also reported that 33% of people it surveyed thought things were more secure in 2013 than they were in 2008. Those people must work in the financial sector.

The problem continues to grow. And it's a problem that affects us all. While the Federal Reserve holds down interest rates and floods the banking system with money, the retirement dreams of several generations are being destroyed.

As interest rates tumbled, investors ran to bonds, utilities, dividend-paying stocks, and master limited partnerships (MLPs), which offer better yields. As one subscriber mentioned to our team, “at least they have a better chance of keeping up with inflation.”

Sure enough, the stock market came back to new, all-time highs. So now both the banks and Wall Street are happy. But where does that leave us?

In the middle of 2013, Mr. Bernanke uttered the word “taper,” sending the stock market into a tizzy and gold prices soaring. This was a preview of things to come. Many of the investments I mentioned above took a dive, as they have become interest-rate sensitive. Take utility stocks, for example. In September, I highlighted how these stocks took an immediate 11.2% tumble. Since then, although the Fed has tried to calm the markets, there is still real cause for concern.

I'm worried, but I refuse to throw down my cards. Doug Casey recently reminded us of one of his basic principles: “My preferred investment style is to look for opportunities where no one else is looking.” If we invest along with the crowd, we can expect to get caught in the rushing tide, regardless of its direction.

While the Federal Reserve has been trying to keep things under control, don't be lulled to sleep. Interest rates may have turned the corner, and it is time to review your portfolio with that in mind. Here are five questions to ask about your current investments.

  • Is this investment likely to get caught in the outgoing tide if the Fed gets serious about tapering?
  • How has this company performed in other down markets?
  • Can the company's fundamental business thrive in both good and bad economic times?
  • Is the dividend safe?
  • Should the market turn down rapidly, what should you expect from this company?

At Money Forever, we put trailing stop losses on our portfolio picks for a darn good reason: We cannot afford large losses with our retirement money.

Invest where no one else is looking. All too often these are called “out of favor” investments. That implies there is something wrong with them, and people avoid them accordingly. Seventy-three years on the planet, however, tells me something different. There are many attractive people at every high school prom, but very few are crowned king or queen. The same principle applies to investments.

The real challenge is finding those attractive opportunities that have been overlooked by the majority of investors. Where should we look? Can we do the research ourselves? If we want to take on that challenge, do we even have the time and skill set?

Or could we turn to our stockbrokers? It's not likely. Years ago, my broker and I wrote to her company's research department in New York, asking for advice in a particular market sector. The “research department” sent a summary similar to what I now get from my online broker. Our request was probably handled in less than two minutes. Their analysis: buy their recommendation because 8 of 10 companies rate it as a “strong buy.”

No kidding! That was where everyone else was looking. It was the last investment I wanted to make.

The good news is: we have other options. Folks like Doug Casey saw a great void in the retail market, and investment newsletters began to flourish.

Fast forward to 2013… I asked our team of analysts for tips on looking where no one else was. We started our search with a basic premise: maximizing income and appreciation while avoiding catastrophic losses.

With modern tools, an analyst can put in a few variables and get a list of candidates without breaking a sweat. That works well until everyone picks the same investments. Real research takes a lot more time and effort. With that said, here are four tips for finding hidden gems.

  1. Being #1 is not always an advantage. In our special report Money Every Month, we ranked the top dividend-paying stocks by dividend yield and payment date. It is common to stop at the stock with the highest yield. But there are a lot of good companies further down the list. They may pay a smaller dividend, but they are just as solid and much less volatile. If there is less money pouring into these stocks, there is less risk of losing dividend income if the stock tumbles and everyone exits.
  2. Big does not always mean bad. There are some large companies that have a strong worldwide presence with a good dividend yield. While they may not be #1 name in the industry, they do very well. These stocks don't necessarily have tiny dividends—just not enough to catch the eye of yield-starved investors. It just takes time to find the right ones. It can be done; I know because we have some in the Money Forever portfolio.
  3. Find investments where potential growth outweighs interest-rate sensitivity. If the primary driver in market price is not solely the dividend, the investment won't be as affected during a period of rising or dropping interest rates as it might be otherwise.

    In the Money Forever portfolio, we have a convertible bond fund with a good yield, but its performance is affected by the performance of the underlying stocks. The one we selected has a large share of defensive stocks in sectors we are comfortable with, thereby reducing risk and raising the potential for appreciation.

  4. Understand how various sectors react in a down market with rising rates. Concentrating on defensive sectors reduces risk. A company can have good dividends with growth and appreciation, but it might be a terrible investment in a downturn. The financial sector is a prime example: The dividends are good, and a strengthening economy can make the sector grow, but those dividends won't pay off if another 2008 is just around the corner.

    The term “bond bubble” is being tossed around a lot lately. Should this bubble burst (much like the real estate bubble before it), the financial sector will be dramatically affected.

It has been five years since interest rates tumbled. We don't need any more proof to know the political class is either unwilling or unable to fix the problem. We can't sit around and wait for the good old days to come back, nor can we afford to just follow the crowd. We have to deal with our problem to have enough for retirement and make it last.


Sometimes laughing at yourself can be humbling; it can also be a great learning experience. I recently had an exchange with one of our regular readers; he wanted to know if our premium subscription was worth the money. With my marketing background, I have always believed that you should put the value before the cost. We discussed how our team is educating readers on subjects they are unlikely to read about elsewhere. And the Money Forever portfolio is doing quite well, to boot. Some subscribers have mentioned that their gains have paid for our services for many years to come. I told this particular reader that the current promotional price is $8.25/month, and if we can't bring more value than that to our subscribers, we wouldn't be in business. His response was humbling: “Gee, I didn't know that was the price. Had I known that, I would have signed on weeks ago.”

So much for my marketing expertise!

On a recent trip to Vermont, we cut a short video outlining what we're all about and how we fit in to the big picture—your big picture. I urge readers to take a few moments to watch. The best part is this: You can sign up for the subscription, download my book, and all our special reports and back issues. If, after you have read through them, you decide this is not for you, you can cancel within 90 days and receive 100% of your money back. And you can keep the material as our thank-you for looking us over.

On the Lighter Side

Obama has officially nominated Janet Yellen to head the Fed. I shared my thoughts on this news long ago. Ms. Yellen is not concerned about inflation, and she wants the Federal Reserve to continuing to buy US debt. She is, however, concerned about unemployment… or so she would have us think.

If that's true, I have a humble suggestion: eliminate all federal taxes. That will spur the economy and create millions of jobs. Then let the Federal Reserve buy all of the US debt instead of the mere trillion dollars a year it's buying now. She will be heralded as a genius for bringing Camelot to us all. Heck, if just printing money to pay the government's bills is OK, why not go all out?

In the meantime, Congress is fiddling with the debt ceiling and trickling a lot of misinformation down through the press. As long as I'm making suggestions, I have one for Congress: if it wants to raise the limit, it should also cut domestic spending and military spending. They are sure fretting over those ideas. This is absurd.

Last week I was in a small family restaurant in Fountain Hills, Arizona, and a note scrolled across the television screen. It was about some federal agency that has 7,000 federal workers. They furloughed 6,000 nonessential workers and 1,000 remained on the job.

The restaurant owner and I looked at each other, bewildered. What the hell is a nonessential worker? As tough as times are today in the private sector, if a person is nonessential, he doesn't have a job. Tough economic decisions are made regularly in the private sector, but seemingly impossible for our so-called leaders to even understand, much less act on.

I don't want my raise my blood pressure (or yours) to rise further, so let's get to the funnies, finally…

We can always count on our dear friend Toots for some clever puns:

  • A grenade thrown into a kitchen in France would result in Linoleum Blownapart.
  • Two silk worms had a race. They ended up in a tie.
  • A hole has been found in the nudist camp wall. The police are looking into it.
  • Time flies like an arrow. Fruit flies like a banana.
  • Two hats were hanging on a hat rack in the hallway. One hat said to the other, “You stay here; I'll go on a head.”
  • I wondered why the baseball kept getting bigger. Then it hit me.
  • A sign on the lawn at a drug rehab center said, “Keep off the Grass.”

Until next week…