Archives for March 2012

Fed’s Balance on the Way to $5 Trillion

Here is the text portion of an interview I did with ET NOW from India last night.

http://economictimes.indiatimes.com/opinion/interviews/you-will-see-a-fed-balance-sheet-in-excess-of-5-trillion-paul-schatz-heritage-capital-llc/articleshow/12467745.cms

Heritage Capital on CNBC’s Worldwide Exchange

If you are up early, I will be on CNBC’s Worldwide Exchange at 5:50am on Wednesday, March 21.

How to Live Like a Millionaire

The lives of the “rich and famous” tend to be quite a bit different from the lives of the merely “rich.” In fact, studies show that being rich often results from a rather low-profile lifestyle.

With that said, if you want to live the life of a millionaire, here’s your guide:

Work hard.

According to ”The Millionaire Next Door,” by Thomas Stanley and William Danko, 80% of the millionaires worked and saved to generate their wealth and 80% of them are still working. About half of all millionaires are self-employed or own a business. Nearly half of working millionaires plan to toil part or full-time during the retirement years, according to a survey from Northern Trust Corp.  Millionaires are also less likely to waste time during the day; instead they are reading and doing things that contribute to their success.

Be very conservative with your money.

Individuals who build wealth tend to live well below their means.  Affluent households are heavier coupon users than those with lower incomes, according to a 2009 study by Nielsen and market research firm Inmar. In researching for the book cited above, Thomas Stanley reports that he found 11% of vehicle purchases by US millionaires were Toyotas.  Most millionaires buy and drive used cars and have never spent more than $55,000 (in 2010 dollars) on a new car. Their homes are typically worth less than $300,000 (in 2010 dollars), according to Stanley.

Worry.

More money doesn’t necessary solve money worries. According to surveys, few millionaires feel rich. They worry about having enough money in retirement, increasing health-care costs, funding their kids’ college education and paying the bills.

Take calculated risks.

Millionaires tend to be aware of their personal income and net worth statements, and have taken strategic risks to earn and grow money. They take calculated risks with an exit strategy and plan to protect the downside.

Be a bit rebellious. 

To become wealthy, you have to have the ability to resist the peer pressure to spend and accumulate possessions. You need to be willing to be different, to look for opportunities outside of the mainstream and take those opportunities when they present themselves. Perhaps this is why many male millionaire entrepreneurs had been in trouble with school authorities or the police during their adolescence, according to one study.

Delegate.

Millionaires recognize that they can’t be experts at everything and hire the best resources they can find.

Maximize Your FDIC Insurance

As of 2008, deposits in FDIC member banks are insured by the Federal Depository Insurance Corporation up to $250,000 per individual. Because an “individual” is defined in a number of different ways, your accounts can be insured well in excess of $250,000 at the same bank, if they are structured under different ownership forms and, if applicable, beneficiary designations.

FDIC coverage is $250,000 for the total of all single accounts owned by the same person at the same insured bank. This includes those opened under the Uniform Transfers to Minors Act, for a sole proprietorship or established for a decedent’s estate.

Joint accounts are insured up to a maximum of $250,000 for each co-owner. To reach that number each co-owners’ share of every account jointly held at the same insured bank is added together. Joint owners must be people, not legal entities such as corporations, have equal rights to withdraw funds, and sign the deposit account signature card.

All self-directed retirement funds owned by the same person in the same FDIC-insured bank are combined and insured up to $250,000.

Each participant in employee plans that are not self-directed is insured up to $250,000 for his or her non-contingent interest.

Revocable Trust Accounts, Payable-On-Death (POD) accounts, living or family trust accounts and irrevocable trusts are insured up to $250,000 for each named beneficiary as long as “qualifying” requirements are met.

FDIC uses the insured bank’s deposit account records (ledgers, signature cards, CDs) to determine deposit insurance coverage. So make sure your banks have the correct information that will result in the highest available insurance coverage. 

Heritage Capital on FOX61’s CT Morning News

Tune in to FOX61’s Money Matters on Tuesday March 13 between 9am and 10am for my updated Top 5 Tips for Investors in 2012.

Top 9 Tips for the Successful Investor in 2012: BONUS Tip

BONUS TIPDividend paying stocks are NOT substitutes for bonds

Over the years, investors’ attachment to dividends has swung from being the Holy Grail to the worst use of capital in the markets.  And that typically depends on how well or poorly the stock market did the previous year or two.  In the late 1990s, dividend investors were laughed at as “out of touch” and “very old school” while the dotcom mania was in full swing.  Yet after a challenging 2011, high paying, quality dividend investments are all the rage.

What is most concerning is that investors who traditionally bought high quality corporate or municipal bonds or similar fixed income instruments are now using dividend stocks as substitutes.  Any time we have seen risk averse investors throw caution to the wind for better returns, it usually ends in misery and disaster.

If an investor buys a bond that does not default and holds until maturity, he or she receives par or one hundred cents on the dollar.  The bond may fluctuate in between the purchase and maturity time, but the amount received is known.  If an investor buys some top notch stocks that pay handsome dividends, not only does that stock’s price fluctuate, sometimes wildly, but the sale price can be substantially higher or lower than the purchase price.  That exposes the investor to the possibility of significant loss of the amount invested.  Just look back to 2008 to see the utter destruction some of these high paying dividend stocks saw during the crisis.  While there are some very good benefits to high quality, dividend stock investing, it is certainly not a substitute for old fashioned corporate and municipal bond buying.

Top 9 Tips for the Successful Investor in 2012: Tip #1

It’s amazing how powerful the turn of the calendar can be.  New Year’s resolutions dominate the landscape with all of the weight loss programs and workout products at the top of the list. I’ve never been a huge “resolution” person, probably since there’s just too much I need to change and it’s a little overwhelming!

But each year, I may pick one single project that needs to get done and is manageable. Last year, my office resolution was to become paperless by the end of 2011, not exactly sexy or exciting, but important, nonetheless.  And we basically achieved that goal, although it sure does seem like we have an awful lot of paper in here still!

As investors turn the page from the very challenging and emotional year of 2011 to 2012, here are my top 9 tips for the successful investor in 2012.

1 – Take a financial inventory of your current holdings.
Make a list of all holdings on a piece of paper or Excel spreadsheet of their values at the end of 2010 and 2011 (and as far back as you have data). Compute the return from one year to the next.  Using 2007, 2008, 2009, 2010 and 2011 should give you a good cross section of market environments with a strong up year, strong down year, strongly volatile year and very average year.

Determine the composition of your portfolio: What percent is in stocks, bonds, currencies, commodities, cash, etc.? Try to understand why something did better or worse than expected and consider adding or withdrawing where appropriate.  Make sure you understand what you own and why!