It is now July, with only 2.5 months until an election where three branches of of government, the House, the Senate, and the Presidency, are up for grabs. As an investment based retiree, unlike pension based retirees, this can have serious short term impact on the economy and our money. We know that Ron Burgundy (Biden) is planning to raise corporate tax rates, individual taxes, capital gains taxes, estate taxes, eliminate fracking, and require green energy that has not crossed over in cost with existing solutions. Oddly enough, this is happening in a stagnant economy driven by COVID-19. All of these things add up to a stagnant GDP, corporate offshoring, reduced tax basis, higher cost, and an overall hit to the market.

Of course you know Mr Burgundy. Being a retiree, I had time to watch the debates and follow the primaries. It is very clear that this candidate is being handled. If you actually listen to him, you note his limit is around 3 sentences, before he misstates, stumbles, or munges words together. He is making George W, a truly handled candidate and inept president, look like a Rhodes Scholar. As you may recall, I supported The Bern with my wallet in the primaries. Him, along with Tulsi, spoke their true beliefs, and were honest, unlike most every other candidate. So how did we end up with JB? The establishment picked him, because Bernie was cranky, and unbending in his socialist beliefs.

The Blue side is on a very precarious timeline, however. For this Thin Blue Timeline to come together, they need a few key factors to be be in place on November 2^nd. Those factors are: The current death spiral in Blue Cities must end. The crime rates in these cities must come down. The economy must not recover. Ron Burgundy must severely limit his unscripted appearances. The employed people in the middle between Red and Blue who are silently biting their lip keeping quiet, making economic and safety decisions for themselves and their family, must be convinced that the Blue side can better serve their basic needs.

The death spiral in the deep Blue Cities has happened faster than anyone could have anticipated. The willingness of segments of the population to loot and destabilize these areas is a disaster. Real civil rights activists are mortified. Trashing and looting your local Target and Foot Locker does not hurt a well insured corporation. But thousands of jobs lost amongst people that need jobs, is devastating. This, along with the pandemic, has crushed not only retail, but bar and restaurant also. STEM (science, technology, engineering, math) based college grads are not being hurt, and most other college grads are doing better than average. These people are on the more progressive side of the tax bracket, meaning they pay the vast majority of the taxes. So now you get into the big swirly toilet bowl: No jobs. No public safety. Business shuts down or relocates. Visitors such as tourists and business people stop coming. People move away. Tax base declines. This all results in a simple scenario where taxes have to increase and there are fewer high income people to pay, so lower income earners are forced with skyrocketing costs. Then, go right back to No Jobs, and rinse and repeat the entire cycle. For a blue wave in November, this has to stop. Calling for increased taxes is a severe body blow and a boon for the Red. There are blistering hot real estate markets in places “Not New York, Not New Jersey, Not California, Not Seattle, Not Portland, etc.” Myself, along with multiple friends, have contacted industry professionals for local bargains, and effectively been laughed out of the room. People are leaving, and investing elsewhere.

Public safety is of key concern. As a person of color, you are somewhere between 500-1000 times more likely to be killed by another person of color than a police officer**. Infants and toddlers are being killed every week by people of color and it is a horrible state of affairs. I personally cannot say how I would react to a situation where my job every day was to strap on a gunbelt and bullet proof vest, and work in an environment where getting injured or killed is a real possibility. That in no way justifies bad police conduct and that has to be corrected. I just cannot tell you for sure I would approach everyone with compassion, when I know some percentage want to gun me down. BUT, it also does not justify reducing or eliminating policing. Areas that have done this have seen immediate jumps in violent crime and deaths, at levels we have not seen for decades. These numbers will not be ignored throughout the next two months. When you see any union jump to the Red side, as major police unions are now doing, it represents a tectonic shift. Blue cities must get crime under control, and quickly. November looms large.

The stock market has recovered the majority of the losses. The economy in general, however, is still struggling. A key fight needed to win by the Blue is extending the extra $600 per month unemployment and keep people at home in any way possible. This keeps employment low. In addition, any future lockdown is a benefit for a more negative economy. A market and economy with positive trajectory works against the Blue Wave, and needs to be retarded until November. The context of the next stimulus package is critical.

Ron Burgundy did extremely well in his basement, doing nothing but watching the President hurt hisself. DT is an egomaniac narcissist and it shows under stress. Unfortunately, Mr Burgundy can’t hide out until November, and will have to make public appearances where he talks, much to the chagrin of the establishment. Coupling this with the rage he has been known to fling himself into when challenged, makes the next 2.5 months problematic. John McCain, as a candidate, had two glaring problems. The first was his choice of Vice President, and the second was his obvious short temper, which put people off. Both of these items, along with no being able to effectively complete sentences, will grind at the electorate. Selling across the board tax increases and higher gas prices due to no fracking is going to be a tough sell, and he will need to be carefully managed until election day.

What this comes down to is how will middle America react. The deep Blue and the dark Red have already decided their votes. If the middle sees increased crime and severe degradation in our once proud cities, and increased taxes they are going to lean Red. If they see a bungled COVID response and minorities getting abused by cops, they will lean Blue. You can take all the polls you want. They are going to be completely worthless. When people have a personal stake in the elections, they tend to show up and vote how they feel best protects their own needs, and they don’t answer questions. It is going to be a fascinating two months.

**these are Chicago stats only. I have not dug into, or do I understand, the FBI database.

I hope I am wrong. This is only one of many potential scenarios due to the Chinese COVID-19 Crisis.

We may be in an economic war and not even know it, the likes of which has never been seen. This may threaten our sovereign nation, and put us on a path to becoming Greece or Italy: A great place to visit with some amazing agriculture whose government and people are bankrupt.

Ponder this Possibility:

China restarts industry at full bore. We know they lied about the virus, and that they are continuing to lie about infection and death rate, but they take it to a new level. Workers are sacrificed for the cause, and media coverage is not allowed. Families are paid a stipend if someone passes from the virus, and told to keep quiet or pay consequences. Herd immunity is achieved in short order, unlike every developed nation in the world. Preparations are made for an all out global industrial assault on all levels. China does not produce oil, they buy it, so they stockpile oil, sopping up the excess essentially for free, powering their country for nothing, and take advantage of any global shortage in future with price gouging. They gather liquidity through cheap debt, and start buying bankrupt and insanely discounted businesses and property outside their borders, driven by the goals of their hundred year plan. Since they already sacrifice people while spending infinite money on acquiring things in line with their goals, this is not a new behavior that needs to be learned. That will allow them the access to technologies and property they have been willing to steal in the past.

To believe this takes three things. First, you have to believe that China puts economic success ahead of public safety. Check. Second you have to believe that China is willing to produce non factual data and coverage of a situation to benefit them. Double check. Third you have to believe that China will take advantage of any situation to produce economic gain, no matter how morbid. To quote my old pal, Scooby Doo, “Ruh roh…”

On the US side, we elect a president with the following traits: lack of understanding of international business and how to deal with the Chinese government, an increase taxes sentiment, and a willingness to put forth the government as the entity that provides wealth to the masses. Enter Joe Biden, who as a bonus, appears to have lost some of his mental sharpness over the years. Playing chess for all the marbles with China won’t end well. When he gets flustered in a negotiation and starts munging his words together, a pushup contest will not help. The democrats are blinded by their hatred of Trump, putting forth a candidate based on his chance to win, not his skill and honesty. With Sanders you knew what you got; hopefully the convention comes to its senses and realizes a flipped Biden/Cuomo ticket is the answer, and Biden needs to go back to VP and not President, where he is not dangerous.

These bankruptcies have a hidden consequence. The US energy industry, specifically oil and natural gas, loose infrastructure, driving up production costs. With our delivery cost moving well north of $50 a barrel, we never come back on line, completely eliminating the US energy independence and making us pawns of Russia and the Saudis.

In addition, there continues a growing sentiment toward socialism, with policies being implemented that put the government in charge of upwards of 50% of our economy, including health care and private industries. How would you like to see the spluttering operations effectiveness of the United States Postal Service put in charge of FedEx and UPS? The urge to continue to move large parts of the public sector into the government management becomes overwhelming, yet we know from history that the government is incapable of cost effective management and efficiency in virtually every single instance. Have you ever flown Al Italia or looked at its financial history? Did you just shiver a bit, because I did.

Instead of turning on our factories and businesses, bringing people back to work, which will no doubt cause increased exposure to COVID-19 and more deaths, we turn on the printing presses and print money. Large chunks of the population choose not to go back to work because unemployment benefits are lucrative, and these benefits continue to get extended ad nauseum. Business tax rates are increased, dampening the economic impact of even the very successful businesses, holding down employment rates. All this creates a situation of low employment, exacerbated by a lack of workers in areas where they are really needed, essentially killing business expansion and effectiveness.

Personal tax rates of any household with an income above four times the Federal Poverty Rate approach 50%++, crushing consumer confidence and spend, and driving down our economy and the stock market valuation. (note 4X FPL is a rate already relied upon by the government for Obamacare, so it is a pre disposed line in the sand)

In parallel with the stock market tanking, liquidity evaporates as bankruptcies cascade, taking down many of the financial institutions.

The result: A nation with high tax rates on those who have almost any level of success, that struggles with liquidity and is at the mercy of other nations for money and energy. It will have large swath of the population dependent upon the government for wealth, and the economy will be dependent on tourism and agriculture.

There you have it: there exists a plausible scenario where the United States becomes Italy/Greece.

Small businesses, people who are not eligible for unemployment and starving, and all major business, economic, and even the majority of political leaders have come to a realization that if the economy does not start up in some fashion by June, there will be nothing left. There is no amount of printed money and hard work that will patch it up. It will be bread lines and years of depression. Technically, what will happen is this will evolve from a break in the supply chain problem, to a liquidity problem. That means that bankruptcies and non payments will extend beyond a 2-3 month break, and start pressuring weaker financial institutions. If they begin to fall, its hard not to picture a domino effect that sweeps the nation.

I try hard to be apolitical, and am a firm centrist but with a healthy distrust for government and a belief in the hard work and innovation of Americans. I believe we have president with whom I don’t agree with the approach in many cases. However, If I worked at Apple, Dell and Microsoft early on I would tell you the exact same thing about those leaders. I have worked with numerous people like that in an executive team at a Fortune 100 company, and am somewhat immune to the noise and bluster. Just judging outcomes, I see 4 major phases that have been dealt with in unthinkable short order. First we eliminated travel from China. Its now known they intentionally covered up the virus for weeks, and most likely propagated the virus from a lab, not a wet market. Stopping their population, who we know was significantly infected, was a huge milestone. Second, we had to have more beds to treat the ill as we would be overwhelmed. That was answered with a parallel of many different solutions, and we are now dismantling many of the extras we built. Third, we had to fix a projected shortage of ventilators, which was done in record time, especially given their complexity. Of course biggest of all we had to, as a nation, flatten the curve, which has now happened. As a bonus, our much maligned health care system did such an amazing job that the death rate of diagnosed that this rate has come in under 4%, and will likely head lower. Compare this to our first world friends in Europe and you see we are the leader in the world.

So what comes next: three simple, yet critical and complicated milestones. First, all the resources and innovation need to execute rapid and whole scale testing. We have all gained massive confidence in our health care leaders, who after this will be awarded medals and cold hard cash, and if we get these rock stars more data, they are going to evolve and knock this virus in the dirt. We hear talk of this but have not seen real stats showing exponential improvement yet. Nirvana here is any of us drive to a local or hospital, or even Walmart, and get a free drive through test with result within 2-3 days.

Next is deployment of enhanced therapies for those diagnosed. This is already in action, and trials should be done within 2 months. With cut back of regulations, this will almost surely happen rapidly.

And of course lastly, a vaccine. Deployment of this will end the threat. With the money behind this, the result is almost a given and the question is when.

If you can isolate all the other noise, including politics and the media, China and WHO, the impacts of the lockdowns, what you really need to gauge are those three things. The sooner they are done, the sooner they can mow the yard and re-open the Best Western just down the street from me.

Take care, stay safe, and if you have an extra penny or two, support a local business any way you can.

This is steeped in the Asian principle that everything from a wet market is nasty and has to be cleaned. Unfortunately the processing plants in the US are likely just as bad as wet markets so this is relevant here. It is the only meat Mary has ever asked me to cook over again. She brought this from Asia, and learned it from her mother, who learned it from… The cleaning prep is the secret sauce and it adds very little flavor but the chicken in the end just melts in your mouth. I would like to tell you that it somehow transforms the meat but that is not founded in knowledge. This is the critical part of recipe and is absolutely required. The spice rub is super easy, and can be your choice. There are so many rubs available that you can dial any flavor you like. The work is all in the prep, and the cooking is just an opportunity to drink beer!

The Chicken: Dark meat is best due to more moisture and a higher fat content. We are buying the huge packs of thighs at well under $1.00 per lb. I really don’t recommend skinless cuts of chicken; you will overpay and also not get the juicy content. You can do other cuts, but you have to be aware of different grilling times.

Cleaning the Chicken: Put the chicken in a large mixing bowl, and cover with water and one third cup of sea salt. Work a bit with your hand, and let stand for 5 minutes. Rinse and Repeat. Cover with water for the third time, and 1/3 cup turmeric.  Work the chicken and let sit for 15 minutes. Drain and rinse lightly. Note that the turmeric will penetrate the chicken and turn it yellow. That is good! Pat dry the chicken with paper towels.

The Rub: I like an Allspice dry rub, meaning I add nothing else. Give each piece a light coating, work it a bit, and throw it into meal size packages. You can freeze the packages with the rub on board and the flavor turns out fantastic! If you want to eat a batch right away, let it sit in the fridge for at least a couple hours. More time is more better and 24 hours is really preferred. A special note here: use caution with the amount. Remember, your meat is cleaned and will super absorb any rub. Don’t make it a crust. Both myself and Junior have over-spiced.

For chicken thighs, I am cooking them on the grill, skin side down to start, closed lid between 400-500 for 16 minutes without touching them. These are monster thighs and that time may vary with size. The indication that the first side is done will be that the piece now feels slightly solid with a spatula, and the skin is browned but not black. The fat from the skin will bubble up and keeps the chicken moist, and you can choose to eat the crunchy skin or discard. Then flip and finish to 155 degrees internal temp which takes another 12+ minutes. Pull and cover with tin foil and a kitchen towel and let sit for at least 10 minutes to finish cooking. Note that chicken must hist 165 degrees to be done, so you have to let it finish, and just like steak, letting the cut sit for a few minutes completely changes the taste. There you have it!

Special Notes:

*Mary takes the same cleaned chicken, debones, and freezes in Thai spice. This will cook your insides also!

*It should be obvious, but if you want to add heat, add some cayenne to the Allspice. Again, use caution as the prepped chicken is super absorbent to any rub.

*I have tried standard western spice with Emeril’s Chicken Rub, and Kent Rollins River Ranch spices and it turns out great.

This is a typical fall/winter recipe, but when you are locked down, you have both time and the desire for some really nice food for distraction. It is a from scratch recipe that has quite a few ingredients, but its actually pretty simple. With a prep time of about 20 minutes, and a bake time of about an hour, with little effort you can have a huge loaf of Pumpkin Bread that will fill your families right up. Please comment below on what you are eating and cooking, as we are all doing more of that than we ever have!

Dry Ingredients:

1 ¾ cup Flour. Use a Spelt flour or the like for a health boost.

½ cup Sugar. Use Demera cane sugar if you can.

1/3 cup Brown Sugar.

2 ½ teaspoons baking powder.

Dash of baking soda. I don’t know why.

½ teaspoon salt.

4 teaspoons spice mix. Make 2/3 of the mix ground cinnamon, and the rest allspice or nutmeg with a touch of cloves. The cinnamon is the key here, and I usually just add allspice. Allspice is the hidden key to life.

¼ cup chopped walnuts. Optional but damn nice.

1 nice handful of raisins. Optional. Don’t use the old pellets in your pantry. Fresh ones only or skip it, please!!

Wet Ingredients:

1 cup pureed pumpkin. Canned is good. You can also substitute banana, or do a mix of the two. You can also bake an acorn squash and use it.

½ cup Almond milk. Yup, keep it healthy here.

4 teaspoons cooking oil. I use either light olive which is filtered, or rice bran. No flavored oils.

1 teaspoon lemon juice.

1+ teaspoons maple syrup.

2 teaspoons vanilla. Real vanilla and real maple syrup are the secret sauce here.

Mix the dry ingredients and wet ingredients separately, then combine. If you don’t you are going to have a tough time mixing the pumpkin and the flour. Put in a standard large loaf pan that has been oiled and floured.

Bake at 365 degrees for 50 minutes. The top should be nicely brown. When you check with a toothpick, note it is not a cake and may come out with a little residual. As long as its not soupy, its okay.

I am dabbling in tiny amounts of investing, and actually buying individual securities for the first time in 20 years. This is mainly to keep my brain engaged, be able to evaluate my Financial Advisor’s performance effectively through this Black Swan Event, and make enough to buy a fancy new bike next year!

I have to insert a disclaimer: COVID is real, it’s deadly, and it’s way worse than the flu. I have a close friend who is on a ventilator under paralytic meds. Given my own medical history with respiratory issues, I fall firmly in the category of ‘underlying medical issues’ so I have strong reason to be wary. I am not making light of it in any way and have taken personal measures to combat this.

What interests me is the evolution we are going through. People are breaking into three groups:  those in Pandemic Panic who are actively flailing, the Hunker Down crowd that ignores all input and hope it goes away, and the Sharks who are scheming. PP folks are panic’d in public and social media. They are fueling a fire, not helping the situation, and adding more problems. Add to it there is a portion of them trying to promote identity politics in the middle of a global health crisis that are just worthless humans. The HD folks, which I am vastly familiar with having roots in a small town in Idaho, have a safe full of guns, boxes of loaded ammo, a stash of dried food, and are happy being left alone. They want it all to go away, but if they get an inflammatory email about martial law, there may be problems with this crew. The Sharks include those carefully assessing where to put their money, and those businesses that evolve while their rivals choke and die. In 18 months, the losers in the economy will be gone, and the new winners will emerge. The Sharks are already making those bets today. Right now there are more questions than answers, but change is inevitable. No matter how much stimulus, certain businesses will die, and others will become wildly successful.

I break the Sharks into two groups. The first group, we will call them Nursing Sharks, are historical genius’s. They are passive, but when they lock on a target they won’t stop. They evaluate the technical details of stocks over time, including market cap, performance, dividends, market share etc and pick the ones at high discounts with amazing histories and fill portfolios. The second group, we will call Great White Sharks, are light on their feet, can evolve, slash at everything with a few clean misses, and attempt see how this will forever change us. This major reset will not only cull the weak, but it will reward the smart. We may never have things that involve massive crowds, face to face meetings, and poor hygiene practices. The Great Whites are figuring out how to monetize that now. Don’t bet against Bezos, for example, expanding his scope vastly. Among Great Whites, he is King!

I talked with a close friend who is in advertising, and was amazed at the amount of front line business info he possessed. I had been doing lots of on line research and had forced myself to look at the news and even business media, and I learned more in 20 minutes from him, in a locked down state, Idaho, than any other source. He told me about a restaurant that closed its doors and rapidly converted to delivery of family style meals and was killing, while the rivals are sucking. You know on a grander scale that Amazon and Walmart are hiring as fast as they can for on line ordering. Schools and offices are going to increase the use of on line meetings as they find them to be just as effective in many cases. If we come out of this and end the irrational inflation of higher education, it will fundamentally change our economy.

I harvested a list of observations from my friend and other sources, and I freely plagiarize that list here:

Winners:
Lawn and Garden:  People are staying home, and hardware stores are considered essential.  Go get your potting soil, clean up your garden, and learn to compost. How cool.

Restaurants:  On line family style delivery as I stated. Those with effective delivery models will do well.

Zoom, Go to Meeting: Quite obvious. Zoom has had an incredible run.

Appliances: Who would have thought, but when you stare at that shitty fridge every day, all day, it appears to piss you off. Go online and get a new one.

ATV: Transportation is essential, and people are gearing up to head to the hills away from it all.

Digital media ads: This is going to be a generation of Rock Stars. Get your two year degree on line in this field for cheap and make bank.

Vitamins: On line sales rocking. Hmm maybe I need more iron or a nice B complex??

Handymen: I had one do some outlet work yesterday and asked if he was busy.  Even though it was 3pm, he wanted to get to one more job because he had a full slate for future. I don’t know if this falls in the essential category or not.

Losers:
Spa, Salon, Barber, Acupuncture, etc: Thank you, thank you, thank you, whatever motivated me to sell my commercial rental full of these businesses in 2019.

Jewelry: High touch and first to go on list of things to cut.

Photo/Events: None happening.

Hotels and Casinos: If your model is time with a client in your facility, forget about it. Remember the hole 2008 created in Vegas? It was not the first to recover.

The losers remind of something I have said, but never really absorbed: in a shitty economy, people never back off buying booze and cigarettes; everything else goes away. Recognizing what is essentially booze and cigarettes to the masses may be the key to investing!

A crisis is a terrible thing to waste!

With the outbreak of the coronavirus, there are many actions to contain control, and develop a vaccine. You don’t hear of anyone really trying to get to the root cause, and I don’t mean the conversation about whether it came from an exotic bird or a snake. The question that should be asked is what is going on in China, and why do health scares spiral out of there on a regular basis? Whether its air quality, food quality, or thousands of dead infection pigs floating down the river, what drives this?

I have written about China in pieces and parts, but given the coronavirus outbreak, it is time to put it in one place. It is impossible for someone in the US to picture what goes on in China regarding health. We take for granted things that Chinese nationals have to watch out for and live with. The actions and direction of the government is known to enable human rights violations in detention, execution, and other other freedoms, but their health policies are far more fatal than those things.

The fundamental difference between the US government and China is the belief that the first priority of the government is the protection of its citizens. Sure, in the US, the government occasionally gets confused and tries to dip into things like income redistribution, fairness, and happiness, but that is always a short lived event. In China, the governments priority is NOT the protection of its citizens. Its priority is economic development using any means necessary. You see this in day to day life in China, but also how it acts in international markets. The Chinese government reacts when there is money at risk, usually not pro-actively. As China slowly recedes from being a world economic leader, this is the cause.

The most obvious problem is lack of a free press. Even though our major press outlets are very politically biased, there is always a young and hungry journalist looking to out someone, and the internet is always available. If there is a lettuce contamination issue or a city with consecutive days with unhealthy air, we are going to know about it. Sure, the FDA may be swayed by political lobbyists in Congress, but you just can’t poison the public in the short term and get away with it. You can feed them chips and burgers and give them type 2 diabetes, but that still gets challenged through a free flow of information. How many people die each year of air pollution in China? No one knows, but if you see it for yourself you would be mortified. Visibility is measured in yards, not miles, every day, in major cities.

I had a work colleague come back from a business trip in China, and he was floored. His background is not that of an environmentalist by any stretch. He has a lifted 4WD diesel pickup, a Harley, and a top of the line water ski boat. This is a pretty close quote from him: ‘I don’t consider myself an environmentalist at all, but when you see that, you know there are global implications’.

The beautiful buildings built for the Olympics in 2008 now look like they are 100 years old covered in dirt and filth. The government continues to pursue a path of massive coal fired electricity, with modern handling of waste generated not being priority. Four days on the street not moving will result in an eighth inch of film covering your car.

I was going through customs in Taiwan a few years back, and got overwhelmed with a stale diesel/construction smell. I looked around to find that a group of Chinese nationals in a large tour had just arrived, and were following the guide with the flag to customs. These were not unclean people. Chinese are generally very clean and fastidious, and take their public appearance seriously and this group was no exception. Their clothes, given whatever city and province they were all from, were saturated with the local environment they where they lived. d

While visiting a friend in Shanghai a few years ago, I learned her and her husband, who were approaching retirement age, had recently come to the conclusion that a small amount of red wine could be beneficial to their health. They had begun brewing some in their apartment. I asked her why they just didn’t go to the store and buy a some, and she explained counterfeiting and rebottling was a regular practice and you took your life in your own hands buying wine in the store. That can be said for most packaged foods. Frozen horse meat lasagna, fake rice, and contaminated baby formula all point to a market that is a free for all with few real controls. Wet food markets sell anything (bats, snakes, live birds, lizard, anteaters, dog to name a few), and unhealthy farm practices generate mass illness. This problem, and their actions, are not just localized issues, as we now see with COVD-19.

When negotiating a factory expansion with a high ranking local government official, I mentioned that we had the best employee retention and treated our people extremely well and would continue to do so. After translation, his reaction was quite simply, ‘So What??’. Later my local team explained that this was not in any of his metrics for yearly bonus payments, nor would it impact his ability to move up within the party. Protecting citizens is not rewarded in the communist party. Meeting objectives that feed the parties 100 year plan is.

One way this impacts us today in the US is that we have to pull back and move supply chain and manufacturing due to COVD-19. China has become an unstable partner in these areas, with poor employee practices. Hundred hour work weeks and high suicide rates have been clearly documented on factory campuses such as Foxconn who manufactures I-phones. In addition, using local contractors for construction is a tangled web of graft and bribery, poor quality and cheap materials, and nepotism that make it extremely difficult for a US based company to navigate. If you ask any of their companies to build something for you, it is a given that they will reverse engineer your product, and if they find it valuable, they will produce and sell it themselves. Making consumer products during the day for foreign companies, then using the exact tooling and process at night for their own sales, is not a myth. In the final analysis, its revenue, and the measure of prosperity as defined by the bureaucracy, that matters.

As we work to achieve a healthy environment, preserve nature, and improve our food supply with quality options, at some point we get diminishing returns. There should always be progress here and we need to leverage the use of the internet to enlighten our population but at some point we need to expend some energy pressuring China through economic and manufacturing sanctions to straighten up their act. The world wide impact of China’s policies will continue to grow. Although the US took actions recently executing the first real trade deal with China, it barely scratches the surface.

The best way to combat this is develop a Plan B. De risk supply chains and manufacturing by dispersing them to Vietnam, Thailand, and the like. Be aware that LCG (big business acronym for low cost geography), comes with risk you have to mitigate. Create alternative markets and trade partners like India. Wake up US companies to the fact that free is not usually free, and that no matter what you think or are told, the Party is involved in every aspect of business. Both Intel Samsung have major semiconductor plants in China, and must be now regretting those decisions. Let us focus on environmental concerns and stop encouraging China and other LCG countries to destroy the planet. Mostly, we need to educate the average US citizen about what is going on in China.

There is an overwhelming amount of information on how to be stronger, fitter, and more healthy. Every day, you will see a 30 second sound bite on how to lead a better life with a new diet or exercise program. Who knows what to believe? There is also small populations of people who lived very long and healthy lives, and you have to wonder why is that. They didn’t have the internet to guide them, so how can that be? It is very hard to tell the difference between someone who is simply looking to transfer some of your wealth into their pocket versus someone who is really trying to help you feel better. How do you fight through all of this? Simply follow these five steps.

1. First, if you think anyone’s 5 easy steps will meet your every need and turn you into tall, well muscled athlete, you are crazy. The methodology to solve any problem is the same: define your problem(s), research and gather all the information you can using well qualified opinions and data, develop a plan and try it, check the result and repeat the process until you get the desired result.

Your current health, the area in which you live, the food that is available to you, your financial status, and many other factors all play a part. Don’t believe me, any one source on the internet, your doctor, or your friends as the single defining source. Focus on things that are not opinions, but are backed up by real data and proof. Anyone can write or say anything, and many sources of information are driven by a financial return that may or may not be aligned with what you really need. To blindly follow what your doctor says, to take a supplement because it has a slick add that says it will improve your health, to ingest herbs recommended by the local hippie, or to jump on the latest diet all fall into the same bucket of dirty water. Those things may or may not actually help you. For every problem, please, do your own research and ask your own questions, and judge proven results.

2. Convert to a plant based diet. There is overwhelming research that says people with plant based diets on average will live longer, and perform at a higher level in athletics. 90-95% of what you take in should be plant based. Beyond that you need to eliminate processed and genetically modified foods as much as possible, like enriched wheat flour, snack foods, any kind of soda, fast foods, sugars and artificial sugar substitutes. By converting to whole grains and eating the entire fruit, you add healthy fiber to your system and increase total intake while reducing calories consumed. There is so much information available it could be overwhelming, but if I had to pick one source of information I would go with Blue Zones, by Dan Buettner. This is a study of pockets of people with extreme extended life cycles, what they eat and how they live, and what all these pockets have in common. It is not extreme like many sources, and is focused on overall well being within the area where people live. The Mediterranean Diet has been offered as a benefit to type 2 diabetes patients from the American Diabetes Association, as another example of this.

3. Burn at least 750 active calories per day. This can be anything, from work, to walking or running, biking, or any combination. Its important that you do what you enjoy, because the key here is that you need to do it every day. There just is not that many sedentary lifestyle 100 year olds on the planet for a reason; the key is to move your ass. Not only is this healthy, but it creates a sense of accomplishment and progress that becomes a reward system in your brain. When this becomes a habit, your brain will signal if you are being lazy and calm you when you complete the work. A easy visual reward system will help your brain motivate you. Consider getting a motion watch, like a Fitbit. They are dirt cheap, between $25-50, and count your step motion. If you can, take it to the next step and get a watch with heart rate data, and even a GPS to track motion. The top of the line feedback system is a Garmin, that will record your heart rate and analyze resting and active states, and also includes proprietary software that analyzes the state of stress, along with steps and mileage you do while running, hiking, or biking. Track these things and enjoy the process.

4. Train your brain to be rewarded for right things. The brain drives addiction, rewards your achievement, makes you stop at In N Out, and causes almost all diets to fail. Do not underestimate or forget about it. You are basically an animal, and your instinct is that success will give a positive reward, and failure will give a negative reward. If you feel like you are making progress, things become easier and you tend to do more. By eating the right food and burning active calories, you will see outcome based results. Positive things will happen, like body shape change, A1C drops, blood pressure drops, weight drops, and you will feel more energy. Don’t skip the step of rewarding yourself. Write down the change and track the result, or note how your waist size changes in pants you wear. Learn to associate doing 15000 steps per day with feeling healthy, and record the improvements in your appearance. Take a picture when you hike to a place you previously could not make. Success breeds success.

As important as the feeling of daily accomplishment is to learn to avoid artificially enhanced pleasure activities. Your brain naturally seeks these out, and may or may not align with your sense of accomplishment. Shooting heroin falls in the same bucket at eating a cheeseburger with fries and a shake. They produce an instant reward in your brain, soaring the pleasure meter to its max. You will find yourself willing to sacrifice the sense of accomplishment and well being for the sense of pleasure, and in most cases that is destructive. By recognizing how your brain reward system work, you can work to eliminate bad habits and increase good habits.

5. Foster a sense of community. Whether a friend, a spouse, or relatives, it is important to foster a sense of well being with other humans. The saying ‘you are your friends’ is true. If you hang out with a hard drinking, hard smoking crew that eats at the bar, guess what you are going to do? If you hang out with VR gamers that lock themselves in a room eating junk food all day, how is that going to turn out? If you get on a biking forum and find friends that like to hit the trails with you, the result will be not only be pleasurable but will produce healthy change. Not everyone is going to want to live healthy lifestyle, but you can seek out areas and people where those things are present.

An anecdote for life: Someone in my circle suffers from type 2 diabetes, and claims to spends $thousands per month on medications and supplements. That person did an extended stay trip of a few weeks to Ecuador, saw a weight loss drop of ‘20 lbs’ and significant improvement in A1C. That result was attributed to only whole and natural foods being available, and being required to walk everywhere. That person came back to US and went right back to the old ways. Well, here is some news: you can walk and get exercise in the US, and you can also eat healthy here. You don’t have to move to Ecuador.

An Update on Peer to Peer Lending through Lending Club

This has evolved over time into one of my most favorite investments. It am targeting this fund to become an income stream during a Bear market. That means that I have 18 months of cash so I can avoid selling market funds during low pricing periods.

Here is why I like this investment:

First of all, the returns crush any CD or money market. This regularly returns over 8%. Over time, a static portfolio, will return 5% if you don’t reinvest funds in new notes, but I enable auto invest, so the monthly payments are used to buy more notes. These $25 notes are a part of someones much larger loan, so each monthly payment is $.75 to $1.50. By reinvesting, for about every 25 notes, I get enough to buy a new note. That does a couple things. It reduces risk of default by spreading it over many notes; I have well over a thousand notes. It also provides higher return because people tend to default later in the loans life. That is strange because the best time to default is at the first payment. The penalty is the same as later, but you get the most money. Human nature is that most people have good intentions, and try to pay off debt, but may eventually they may choose to default.

Second, the funds are what I call semi liquid. On one end of the spectrum is real estate, which is very static, and the other end is money market which you can access within a few days. If you stop re-investing in LC and have payments accumulate in cash, you can access the cash in equal installments. That will provide the income stream I am looking for.

Lastly, all data represented is net of any fees, which are 1%. You don’t have fund transfer fees, mutual fund management fees, financial planner fees, etc. There are not multiple people taking a dip in your wallet! I don’t know if there are origination fees on the borrower side, but it does not impact my returns.

The data is available at a detail that is impressive and its also easy to understand. The most prominent item on the summary page is your adjusted estimated net annual returns. This takes into account the interest rate of your loans, the age and current status of each loan. It discounts your returns based on a historical model using every loans current status. As your money churns, this number stays accurate to your current portfolio. You can also see the pre loan evaluation, the loan grade before issue, and the payment history of every individual loan. Will I ever dig into a mutual fund, looking at individual stocks and judging their PE ratio? No Way! For some reason, I am willing to spend time doing deep dives in this portfolio. It turns out people are getting loans for two reasons: debt consolidation and medical expenses.

Also, you know I always preach that you have to look at taxes. In the case of Lending Club, you will receive a 1099 at the end of the year that reports the interest earned, minus fees associated with the account.

My evaluation to date, which of course can change, is that Lending Club has become a sticky portion of my portfolio in the under 10% category, and has a very useful spot as a potential income stream during a stock downturn. My concern is around unemployment rate. If people start to loose their jobs, charge offs could increase.

I encourage you to think about each portion of your investment, understanding risk, return, liquidity, and tax status. My result may be different from yours, and I don’t claim to be 100% accurate. I am a simply a user of the product.

The Original Post:

In one of my searches on side hustles, I found an interesting niche of peer to peer lending, or what is basically crowd funding of unsecured loans. My first reaction was not positive. I had watched documentaries of the sketchy behavior of unsecured loan companies, where people who were in tough spots were taken advantage, and basically had their life ruined. Title loans, pawn shops, and payday and title loans all fell into the same category for me: business that charge ridiculous interest rates to people that can’t afford basic living expenses. As I dug into this more, my opinion swayed.

The most recommended site appeared to be Lending Club. This is a crowd funding site where investors fund unsecured loans which are graded and managed. The rates charged here are based on probable ability to repay. Interest rates range from 6-8% for grade A loans, to 23-29% for grade D loans, but the effective rate after defaults for all grades is just less than 5% over the life of the loan. That is a fascinating number. Those in the low grade loans have massive default rates, so to achieve a reasonable return, the high rate is clearly justified. Lending Club provides stats, by class, and adjust loan criteria regularly to ensure that performance. I did not know this!

I started investing here, with my favorite method, which is a small amount and get a feel for performance, access and information, and have become a huge fan.

Loans, graded from A to G, with 5 sub grades each, are given to applicants with interest rates that range from 6% to 30%. The interest rate of my personal portfolio today is 11.6%, meaning I choose the higher grade loans, focused on A and B level. After non payments, or charge offs as they call them, that 12% should eventually hit 4.7%. In the first year, my return has been over 10%, but most loans don’t get charged off till later, and with 1-2 year terms, it takes over a year to see the actual returns.

I use automated investing, and the loan positions are only $25, so I have hundreds of loans. The more loans you have, the less variation and less risk to an individual charge off. The site has good analytics to show you this model. Payments received each month are re-invested, based on my % of loan grade choices. Its no effort, but I still look at it regularly and play with analytics they have available. Based on these analytics, I chose a higher grade portfolio for risk reduction, and after I was comfortable with the site and its functions, i soon invested enough to get over the 200 loan mark to reduce variation. I have currently gone well beyond the 200 loan threshold. Lending Club has a $44 billion dollar history, and regularly reviews loan grading methods, and has analytics on major economic upturns and downturns. I find this history, and their publications, a valuable source of information that I don’t get elsewhere. If the SnP 500 takes a 20% dip, it doesn’t translate to a dip in these returns. This fund is not impacted by auto sell triggers which are so prevalent in the market today. If you see a downturn where unemployment spikes on the other hand, you can expect to get hit.

Keep in mind I have a ‘pattern’ in which I like to invest. I want to try something out at a low commit level, and proves it does as advertised. If all is well, the performance is as stated, and it looks like they provide simple and easy tools I can navigate, I increase my exposure. If I don’t like it, then see you later. Also, I look for things that tend to cycle at different times. I don’t want my entire portfolio to cycle as the stock market cycles. The current correlation between the bond and stock market is very high, so standard portfolio theory, 100 minus your age for stock exposure, may not be the gold standard. If you do have to invest like that, you better being doing it with a low fee account.

With the focus of the industry on the millennial investor who is extremely comfortable on line, there is a growing industry of high tech investment options, like Lending Club, but also in Private Equity, which previously was relegated to the $multi million portfolios. These tend to be low entry point to start, with high on line content and control, and almost always have an app on your phone where you can transact at least 80% of your business. If you are smack in the middle of the investment world, with a standard portfolio of stocks and bonds, not getting access to private equities or other high end investment options, you now have ways to get out from under the standard Financial Advisor model. These things were just not available 10 years ago.

Solid returns, hands on modeling data, little work required, vast financial history, etc, so whats not to like about Lending Club? These funds differ from my investment portfolio in that I cannot put in a request, and over the course of a week, get access to my money. You can trade your loans, but risk loosing money. If you want your cash, you terminate auto re-invest and let the money come in as payments are made and the loans clear. I put this in my bucket of illiquid investments and treat it as such. Its not the largest part of my portfolio, but it may actually be the most enjoyable, while delivering great returns.

Statistically speaking, there are greater than nine chances of ten that you have the wrong financial planner.

The question is ‘how to hire a financial advisor’, or, ‘is my current financial planner the best I can get.’ The answer for the much of the population is just don’t hire one. How can that be, given the onslaught of advertising and publicity around this industry that clearly just wants to help you to financial independence? People in the FIRE movement (financial independence retire early) have known this for years. They invest directly in Index funds. You get a very decent return, and are only dealing with fund fees, so if you pick the right fund, you are under .5% fees and don’t experience the double dip of a financial planner and the fund. With the recent advent of low fee roboadvisors, and crowd funding options, the need for a financial planner is waning.

If you want financial planning help, it must include full service, from budgeting, account consolidation in a single data base, and risk adjustments. Most of all, you must get a promise of a portfolio that is risk reduced and will outperform index funds. Even though I consider myself an effective user of on-line accounts, I still choose to have a large portion of my portfolio held by a financial planner, simply because I want higher returns and lower risk that I can generate myself.

90% or more of Financial advisors are salesmen that offer some services to get you on board. They are compensated by your fees up front, which most of the investing population is aware of, and also by commissions from the funds and entities in which you invest. Read that again: they are incentivized by moving you into certain funds, or salary incentives by getting your money into funds. This is either done by their bosses, who brow beat them into funding certain areas, or direct compensation.

I caught my Fuktart Firm moving portions of my money into their new funds they had just created. So without my knowledge, they put me into funds that put the fees in their pocket, moving me into brand new funds with no history. These fees are hidden with the funds and are hard to find unless you are willing to read the individual fund prospectus and statements, btw. I was seething mad. By the way, this is not a tiny firm, but one of the three largest firms in the US. This behavior is common.

There is a way to avoid this insidious behavior. There are financial planners using a Fiduciary standard that are audited regularly to ensure they are working your best interest. Having talked with a few of them, the all quote the 90/10 rule, where they believe only 10% of advisors follow this standard. The other standard used is “suitability”. This means that you will be delivered products that suitable for your situation, but may not be optimal. They can have high fees or low returns, and that is acceptable. So 90% of the time, you will be working with a financial advisor who makes money from having and moving your assets, not making you money. BTW I am not kidding nor did I make up the “suitability” term; look it up as its most likely being applied to your portfolio.

There are firms that openly bandy about the term Fiduciary but that can be a falsehood. You should look for an advisor that is a Certified Financial Planner, and one who is listed by NAFPA, the National Association of Financial Planners. There are standards and certifications beyond that that are very useful, but this is what the call ‘table stakes’ in Vegas. These are pay for play guys, and take payment up front form you. They do not receive any money from funds, nor any other compensation, like travel bonus, etc from funds.

Some planners call themselves Fee Based. That means they take your money and receive no direct compensation from funds, but receive other perks from funds. Stay away from them also. This term was developed as a marketing scam by investment firms to trick you into thinking they are not evil. Your first question with all financial planners is tell me exactly how your and your firm is compensated. If the answer is anything other than ‘you pay me’, thank them and walk away.

The problem here is that to be effective, most of the CFP firms have higher minimums. You may find firms that take $100K as a min, but typically you are looking at $500K or more. Haven’t we all seen the commercial on TV explaining how high minimum firms are elitist and evil? How do you bridge this gap? Quite simply, do it yourself. Don’t go to some guy or gal that makes you feel good and lightens up your wallet. Use a roboadvisor, layer on a few high interest CDs, or invest directly in index funds. Remember, the average investment return for the US population is 1.9%. You can easily achieve over 4% in the long term if you don’t panic and sell out during the downturns. You are not launching the Space Shuttle here; save as much as legally possible pre tax, and as much as you can after that by reducing expenses.

This is not a job interview and you can discriminate in this process. You will want someone with a little grey hair that has some experience. I personally was looking for a person mid 40’s, who realized they needed to get their personal retirement laser focused. In addition, I needed firm who communicated well in person, and also effectively over the computer. I expect same day call backs on my messages and not meetings that were weeks out. I was looking for someone who showed extreme confidence in beating the market, not producing standard market results.

I was surprised how few made it past the simple test of fee based and NAFP certified. I found 2 in Vegas, a couple in Salt Lake City, and three in the Boise Valley. I interviewed two, and also interviewed Personal Capital, on on-line CFP, who met all the criteria but was on line based. With Personal Capital, you could use their budget and investment software for free, and optionally could use their CFPs. We ended up choosing a firm in Vegas, due to proximity, experience, and their technical use of Dimensional Funds, which is an entire blog unto itself. If you have a smaller account, Personal Capital is a great option.

Again, we did not move 100% of our money to the new FP. We maintained some peer to peer lending in Lending Club, some REIT money in Fundrise, some real estate investment, and a small Roboadvisor account with Betterment to make sure my service level with the FP is appropriate.

Good luck!!

Potential Financial Advisor Questionnaire

Advisor:

The Basics. Eliminates 90% of advisors.

*Do you follow a Fiduciary standard? Does your company receive audits to guarantee such?

*Are you a CFP? NAPFA member?

*How are you compensated? Fee only or Fee based?

How do they work with you. Make sure you can have a successful working relationship.

*how do you communicate w/ clients? Face to face, remote, or both?

*Who will be my advisor? How old and what qualifications?

*What is your minimum account size?

*What is your average account size?

*Over a ten year period, what is your expected returns? How does that compare to Index funds?

*Do you follow a classical or modified investment strategy model?

*Do you do passive or active investment?

*how often do you rebalance?

**Do you “eat your own cooking’, meaning do you follow your own advice? Is your mother or some other close relative also using your service? Do you consider yourself personally successful with this advice?

Things specific to your situation.

*What have you seen to be the largest expenses for retired people?

*Are you familiar with Obamacare requirements and have you helped achieve those objectives for clients?

*Have you used a tax harvesting strategy?

*Explain how you handle the milestone ages in retirement (59.5, 65, 85)