Cheat Sheet Q&A:

Topic:  Getting starting investing in your 40’s

I need your help figure out what to do to start investing. I am a 40-year old (working since) 1998 (locally). I have no kids and no wife, but planning on it.  I have a school loan, and a mortgage.  I hardly saved all throughout the years that I worked, but I have about $8000 in the bank. I have no retirement plan, except for (a pension).  I would like to start investing the $8000 or part of it instead letting it sit in my saving account.
Do you have any ideas for me?

Bottom Line:  Let’s get started…

1. Open a Roth IRA account and max it out:  I recommend using either Fidelity or E*TRADE because of the ease of use and the ability to freely reinvest dividends automatically for free
2. Take the additional money after you’ve max out your Roth IRA and open a regular investment account with the same brokerage
3. Take any additional money you have at the end of each month after you’ve paid all of the bills and split it into two camps:  Debt reduction & Investment account
4. Take the 50% and begin to pay off debt starting with the highest interest debt first.  Save your mortgage for last as the interest paid is tax deductible but once that’s your only debt pay it off as well

What’s a key number to save each month if possible?  If you can average investing $500 per month and you start with $8000 right now you’ll be able to save over $500,000 by the time you’re 65.  How?  The average stock market rate of return is 8.4%.  $8000 in principal plus $500 per month at an 8.4% rate of return equals more than $500,000 that will be income producing because of your reinvested dividends.  Along with a pension and Social Security you’ll be on a pretty good path for retirement.

As for what to invest in…  I can only be so specific but I prefer companies that:

• Have more cash than debt on their balance sheet
• Pay a dividend that yields more than what you can earn through fixed rate investments
• Is growing revenue year over year

If you have a topic or question you’d like me to address email me:  brianmudd@clearchannel.com

President Obama hits post election low in approval - implications:

Bottom Line:  It’s not unusual to find a President reach a certain undesired status in their second term.  It’s hard to create a list of Presidents who were more successful in their second terms that were more successful in their second terms than their first(FDR).  It is a bit early to reach the injured bird status – at least in the polling age.

If history is a guide though…  President Obama has reached lame duck status.

It’s been awhile since I’ve discussed how I go about analyzing polling data to project outcomes.  I take the average of all polls during a window of time and use history to project outcomes.  I’ve found this to be highly effective (most recently projecting the outcome of the President Election while accurately projecting the outcome of 49 of 50 states – ironically only missing Florida which was decided by less than 1%).  So let’s get down to business.

Since the three D.C. scandals have surfaced we have four polls to average and project.  What are the results? 

President Obama’s average approval rating:

• 47%

President Obama’s average disapproval rating:

• 48.25%

In the polling age we’ve never had a President with a net disapproval rating in a second term (in the polling age of course) ever pass major agenda items.  That would place President Obama officially in lame duck status if history is in fact a guide.

EHarmony meets employment:

Bottom Line:  There are many employment sites already so what’s so special about another one that’s going to launch later this year? 

EHarmony is working on its second site that will go live later this year.  This one will be an employment based site that will use the same EHarmony approach to the job market.  They will look to provide (29) levels of compatibility to pair potential employees with employers.  It’s certainly an interesting concept and there’s no denying the success of EHarmony, more than 500 people are married everyday as a result of meeting on EHarmony.com

Google's new music service is anything but revolutionary:

Bottom Line:  Full disclosure – I do have a dog in the the hunt.  We are an iHeartRadio group.  But that potential conflict isn’t why I’m not impressed by Google’s new streaming music service, All Access.  It’s that there isn’t any thing new here and what’s worse is that they’re going to charge for it.

In a world of Spotify, Pandora and iHeartradio, Google music doesn’t deliver anything that can’t be found with the existing streaming companies.  You create your own playlists of music and store them in the cloud.  Perhaps if you’re a Google groupie it will be nice to seamless work within the Google Cloud environment.  But here’s what is a huge disincentive…  They are going to charge for the service.

Unlike iHeart, which is free and can do more, the All Access service will come with a monthly price tag of $9.99.  They are offering an initial 30 day free trial period and if you decide to subscribe during the trial they’ll provide the service at $7.99.

http://www.bbc.co.uk/news/technology-22542725

Affordable health care - part of a solution could rest in 3D printing:

Bottom Line:  Since we don’t seem to be doing anything to combat the rising cost of healthcare, 3D tech might be the best chance we have to reduce cost.

By now you may have seen the prosthetic hand that was 3D printed and shown to be fully functional (if you haven’t click the link below).  What’s even more impressive – the price.  A typical prosthetic hand costs about $10,000.  So how much would the material cost be for a 3D printed model?  Try $150.  That’s not a typo.  As viable body parts and other medical adaptation via 3D printing is created, we may have a big aid in controlling the cost of healthcare.

http://mashable.com/2013/05/14/makerbot-robohand-3d-printed-hand/

 

The world's most expensive cup of coffee:

Bottom Line:  How much would you pay for a cup of Joe? $6?  Even that may seem high.  I don’t think anyone could imagine a cup going for $610,000, but that’s exactly what recently happened.  

Ok so this is a bit misleading.  It’s about who the cup of coffee will be with.  Apple CEO Tim Cook auctioned off a coffee date with himself for the benefit of the RFK Foundation.  The winning bid was $610,000.  

While we don’t know the id of the winning bidder, it’s been identified as a rights group.
http://thenextweb.com/apple/2013/05/14/coffee-time-apple-ceo-tim-cook-auction-closes-at-610k-with-86-bids/

Today's Cheat Sheet is brought to you by The Web Success Agency:  http://www.websuccessagency.com/

Cheat Sheet Q & A:

Topic:  Annuities

I enjoy your show and listen daily before work. I was wondering what you thought of annuities, either fixed or variable. I am 53 years old and saving for retirement, and thinking of transferring an IRA into an annuity to keep it safe from the volatility of the stock market. I haven't heard you talk about them on the show. If you don't recommend annuities, what other places would you recommend for retirement savings?

Bottom Line:  I’ve received many questions regarding annuities of late and I’m going to tie them all together with today’s entry.  There is a reason I haven’t addressed annuities previously.  The investor and retirement planner in me doesn’t care for annuities generally.  That’s not to say that they don’t make sense for you.  I’ll begin by outlining my retirement plan best practices:

1. A mortgage is not a retirement plan (have you home paid for before entering retirement)
2. No principal reduction (unless you’re extremely wealthy)

Those first two rules are designed to protect you from worst case scenarios in retirement.  It’s terribly sad to see seniors live long healthy lives only to outlive their money and potentially become homeless.  So with those principals established are annuities an option?  Yes, they could be.  The reason you haven’t heard me address annuities, is that I’ve always been intellectually conflicted by them.  Why? 

It begins by addressing what an annuity is?  In its simplest form it’s an investment insurance product.  You provide the company with your money and they promise a rate of return that’s reliable (either in a lump sum or payouts that could last for your entire retirement).  So how is it that a company is able to take your investment dollars and pay out a return?  They are profiting off of your investment dollars of course, and making more from your money on average than you are. 

The average fixed rate annuity return is currently in the 3-4% range.  Like all insurance companies they take the premiums and/or investment dollars you provide them with and invest them.  Most commonly in equity investments (stocks) which ironically they often purport to protect you from. 

The average rate of return in the stock market is over 8% per year.  Paying out 3-4% per year enables even the average annuity company to potentially earn an average of 4-5% off of your money per year (and that’s if their investment advisors are only average).  Intellectually I’d rather have a top notch investment advisor working on my behalf.  A typical investment advisor fee is around 1% per year.  That could lead to you maximizing the benefit of your investment dollars rather than enabling the annuity company to do so.  Now there is a trade off of course.  In years in which markets are lower you’re protected and will still receive your rate of promised return.  If the rate of return is enough to meet your retirement objectives that might just make the annuity approach the right one for you.  Now on the Fixed vs. Variable rate options.

I don’t recommend variable rate annuities period.  Yes your upside potential can be higher with a variable rate of return but for retirement purposes it doesn’t make good sense.  Having a varied income stream that is unpredictable is less than ideal when entering retirement.  Some years you may have little or no income from that investment.  Additionally variable rate annuities generally carry additional annual fees that fixed rate annuities don’t (often 1.5% per year) that can be higher than higher than obtaining an outstanding investment advisor.

So what have I done to construct retirement portfolios?  I’ve constructed portfolios of equities that pay reliable, stable and often growing dividends along with occasionally bonds or other investments that provide income. 

I track the income stream performance of those portfolios more than the stock price performance.  In other words regardless of what the financial markets are doing at any given time, as long as the income produced by the retirement portfolio is stable or growing it’s on the right track…

Hopefully that’s helpful.

If you have a topic or question you’d like me to address email me:  brianmudd@clearchannel.com

Florida perceived as 2nd best state for biz:

Bottom Line:  Yesterday I shared the 2013 Kauffmann Foundation study that showed that overall the business climate in Florida could be a lot better as we checked in with a C- this year.  Perception though is reality right?  So let’s look at Florida’s business climate through the perspective of business executives. 

More than 700 business execs were asked to rate states based on operating a business.  The results were outstanding for Florida. 

Our state ranked #2 in the country in overall.  It is worth noting that quality of life was a factor in this survey so perhaps that helps bridge some of the divide from the Kauffman Foundation findings. 

This clearly bodes well for our state as companies look to relocate or grow.  We need look no further than last week’s announcement by Hertz (they’re relocating their global headquarter to Florida) that we could benefit from this perception.

Btw, Texas was #1.  For the complete rankings, click the link below:

http://chiefexecutive.net/best-worst-states-for-business-2013

Winners and loser for 2014 Individual health insurance plans and the breakdown on subsidies:

Bottom Line:  Research firm Milliman identified where costs changes will occur with individual health insurance plans heading into next year.  The results were interesting.  Who will pay the biggest increase?  Younger men.

Men under the age of 30 will pay an average of 56% more for their health insurance plan. 

Who could actually benefit?  Middle aged women.  Women between the ages of 30-64 could actually see a net decrease in premiums.  In the link below is a graph so you can check what the likely outcome for you are based on your age and gender. 

Additionally we have info regarding the percentage of people who will receive Government subsidized health insurance next year.  Ready for it…  It’s 57%.  Yes 57% of the population will receive Government subsidies for the new mandates under the affordable care act.  Any individual with an annual income under $45,000 per year or family of four up to $92,000 per year!  So in addition to paying higher premiums overall next year for you, if you’re part of the 43% you’ll also be paying for the 57%...

http://money.cnn.com/2013/05/14/news/economy/obamacare-premiums/

Google ups storage shared across all services:

Bottom Line:  Here’s a quick hitter.  Starting today Google has upped the amount of storage you’ll receive for free to 15GB and they’ve allowed you to share that storage across these products:

• Gmail
• Google Drive
• Google+ Photos

http://thenextweb.com/google/2013/05/13/google-now-offers-15gb-of-free-shared-storage-across-drive-gmail-and-google/

Cheat Sheet Q & A: 

Topic:  Update on warrantless mobile device searches in Florida

Bottom Line:  As a follow up to yesterday’s story regarding the 7 weeks to 4 month backlog of iPhones seized by law enforcement agencies for Apple to decrypt…

A listener brought a recent court ruling in the Florida Supreme Court to my attention (great assist – thank you). 

The case was Smallwood vs. State of Florida.  Without getting into too much detail of the case (there was an armed robbery at a store in Jacksonville in 2008.  The suspect was apprehended and without a warrant law enforcement viewed pictures on the phone.  The use of those pictures without a warrant was challenged.  The ruling came down just two weeks ago (May 2^nd) from the Florida Supreme Court preventing police can not search a mobile device without a warrant.  So as it currently stands in Florida you don’t have to turn over a mobile device to be searched without a warrant.

For the complete case detail the pdf below is below (copy and paste it if needed to view):

www.floridasupremecourt.org/decisions/2013/sc11-1130.pdf‎

If you have a topic or question you’d like me to address email me:  brianmudd@clearchannel.com

A first of its kind report – the ADPApril private sector employment report:

Bottom Line:  Each month on the Wednesday before the first Friday of the month we receive the ADP private sector employment report, which is the most widely studied employment report outside of the Government non-farm payroll number.  For the first time ADP is breaking out the individual states.  So what happened in Florida’s private sector in April?:

Changes in Florida State Nonfarm Private Employment:           

Total gain:  +9570

• By Sector                                         

• Goods-producing                                                         - 500
• Service-providing                                                      10,070

• Select Industries:
  • Natural Resources/Mining and Construction                 350
  • Manufacturing                                                              - 850
  • Professional and Business Services                           2,250
  • Trade, Transportation and Utilities                              2,460

So much like the rest of the country we continue to see the job growth coming from the service sector.  On the bright side the April ADP national number showed 119,000 jobs added in April.  Adding 9570 jobs represents 12.4% of the job growth nationally in April.  Florida’s population represents 6% of the national population, so Florida’s job growth rate was twice the national average.

Florida’s ease of doing biz study 2013:

Bottom Line:  Each year the Kaufmann Foundation studies the overall small business friendliness of each state.  So how does the Florida Small Business climate look in 2013?  Not so great. 

In 2012 the Kaufmann Foundation rated the overall small biz climate in Florida a mediocre C.  In 2013 it’s even a little worse at a C-.  So where do we fall short?

We’re a C at:

• Ease of starting a business
• CZoning
• CTraining & networking programs

Our Best area at a B+ is:

• B+Tax code

As for the regions of Florida and how they rank for business friendliness is:

Best

1. Northeastern Florida
2. East Central Florida
3. Tampa Bay
4. Southeastern Florida
5. North Central Florida
6. Southwestern Florida
7. Northwestern Florida

Worst

Loading…

For the complete report click here:

http://www.thumbtack.com/fl/#2013/state

We don't do margin around here ok?:

Bottom line:  If you’ve been worried about the possibility of a stock market topping or even bubble forming you can use this story as a cog in that argument.  We’re seeing near record margin trading taking place in the stock market right now.  Margin trading is the practice of borrowing against your investment principal.  Not only is this practice extremely risky, as you risk not only losing your principal but also money you’ve borrowed, but it also is playing the odds that aren’t in your favor.

The average market rate of return is 8.4% per year.  Typical margin rates even in this low interest rate environment are 7%-10%.  That means that one must outperform the market just to break even!  This is a practice I don’t believe we should be involved with.  Now for the story at hand.

We hit the all time high of margin borrowing in July of 2007 with $381 billion borrowed and invested.  The nice investment gains of recent years has led to a renewed interest in margin trading and it appears as though we’ll soon hit a new record as $380 billion is currently margined.  If you think about July of 2007, that was three months before the peak of the stock market until this year.  The current level of borrowed money in the market could indicate we’re set up for another downturn.

http://www.cnbc.com/id/100732197

Notebook paper goes high tech:

Bottom Line:  So plenty of e-ink devices have been around over the years (devices which record your writing on them).  Sony is soon to become the first to replicate the traditional piece of notebook paper using technology. 

Yesterday Sony announced a 13.3 inch e-ink tablet.  The 13.3 inches matches the size of a traditional piece of notebook paper.  As one writes on the e-paper they’ll be able to share the document through Wi-Fi that will be enabled with this device.  The docs will convert to PDF’s if so desired.  For the prototype click the link below:

http://www.engadget.com/2013/05/13/sony-13.3-inch-prototype-e-paper-tablet/

Will President Obama switch to an iPhone?  Apple's about to arrive in Washington:

Bottom Line:  It’s been well documented that the President is a big fan of his Blackberry and has been cited with it all over the world over the years.  That may soon change – and not just with him.  By the end of the week it would appear that the Defense Department will clear Apple mobile devices for use for the first time in the military. 

There are more than 600,000 active mobile devices within the Defense Dept. currently so there could be a sizeable win in the offing for Apple here depending upon how many owners of those devices have been waiting for the opportunity to switch.

http://allthingsd.com/20130511/pentagon-will-clear-iphone-and-ipad-next-week/?reflink=ATD_yahoo_ticker