Quote of the Week

 “Change will not come if we wait for some other person or some other time.  We are the change that we seek” – Barak Obama

Tech Corner

Before I get started, I want to give you a “heads up” on one of the most interesting videos I have seen on the Ukraine War. Google “Russia’s Catastrophic Oil and Gas Problem”. This video explains so much about why Russia invaded Ukraine and how it will turn out to be a colossal mistake for Russia. This one is an absolute must watch.

Last week was a terrible week for the markets. The S&P 500 was down -5.04%, the Dow was down -4.56%, and the Nasdaq was down -5.89%. Then if it couldn’t possibly get any worse it did yesterday (Monday) with the Indexes down over -4% in one day. The markets are flat today (Tuesday) which is something of a surprise because normally after such carnage the markets tend to rebound. Not good

I have two things to talk about this week.

As many of you know we have been mostly positioned in bonds and cash since the end of January. I wish we had been in cash the whole time because our bond positions have been hurt by rising interest rates. We were doing fine in our bond positions just until Putin invaded Ukraine at the end of February. Inflation started to shoot up and the bond market had the worst month in forty years. Pain hasn’t stopped with inflation taking off due to higher gas prices, food prices, and shelter costs continuing up.

Fortunately we did lower our bond exposure last week on Hedgeye’s recommendation just before what was expected to be a hot Consumer Price Index (CPI) report. It turned out to be a good move as interest rates went up again. Remember when interest rates rise bond prices decline and visa versa. The issue is where do we go from here with our bond positions. Our plan in the near term is to do nothing because we don’t know where this all is going. Just a note, we are treating the stock market just like a rattle snake, staying away.

I went to a bond manager that I highly respect to get her take on the bond market. This is what she said:

“We remain highly convicted that over the next  6-12 months of this cycle you want to be in long bonds, however getting to the inflection point has been longer than we expected. We had been calling for a sharp hook-down in growth May/June which has been correct (In fact this is MUCH worse than we thought coming into the year), however bond yields have not yet coupled with this outlook. Where this goes in the next week or month, we aren’t certain as we are in dislocation territory.

What we do know is that we are in historic energy crisis which is exacerbated by an underreported refining  crisis in the US and that we are now concerned that we are at risk for a financial crisis. Again, we are positioned for this collapse and the recoupling of bond yields to the growth/macro outlook”.

The economy is clearly in trouble if you listen to small businesses. Just look at the following graphs. The National Federation of Independent Business (NFIB) gives a good indication of what small business thinks and what they are up against. As you can see:

-Small Business Sentiment Forward Outlook is at an all-time low going back to 1990

-The price small business are paying for goods is at an all-time high going back to 1986

-Small business optimism is the second lowest point except for the Great Recession of 2008-2009 and appears to be going straight down

-The cost of compensation in other words wages is at an all-time high

Where this all goes I don’t know. We could be at an tipping point and we have to see which way it tips. We have small positions in the US dollar, gold, utilities, and bonds, but we are mostly in cash.



Tom’s Thoughts

Long Term Care Basics

Have you noticed that people are living a lot longer than they used to?  The Queen, Warren Buffett, etc, etc.  While medical science can keep us looking down (versus up) at the flowers, our bodies and minds may wear down and we can become incapacitated – not necessarily totally helpless but needing assistance with activities of daily living i.e. long term care.  The following article from Broadridge Forfield is a long-term care primer that you may find useful.

  1. What is long-term care?

Long-term care refers to the ongoing services and support needed by people who have chronic health conditions or disabilities. There are three levels of long-term care:

  • Skilled care: Generally round-the-clock care that’s given by professional health care providers such as nurses, therapists, or aides under a doctor’s supervision.
  • Intermediate care: Also provided by professional health care providers but on a less frequent basis than skilled care.
  • Custodial care: Personal care that’s often given by family caregivers, nurses’ aides, or home health workers who provide assistance with what are called “activities of daily living” such as bathing, eating, and dressing.

Long-term care is not just provided in nursing homes–in fact, the most common type of long-term care is home-based care. Long-term care services may also be provided in a variety of other settings, such as assisted living facilities and adult day care centers.

  1. Why is it important to plan for long-term care?

No one expects to need long-term care, but it’s important to plan for it nonetheless. Here are two important reasons why:

The odds of needing long-term care are high:

  • Approximately 52% of people will need long-term care at some point during their lifetimes after reaching age 65*
  • Approximately 8% of people between ages 40 and 50 will have a disability that may require long-term care services*

*U.S. Department of Health and Human Services, Last modified: November 14, 2017

 The cost of long-term care can be expensive:

For many, the cost of long-term care can be expensive, absorbing income and depleting savings. Some of the average costs in the United States for long-term care* include:

  • $7,756 per month, or $93,075 per year for a semi-private room in a nursing home
  • $8,821 per month, or $105,850 per year for a private room in a nursing home
  • $4,300 per month for an assisted living facility
  • $1,603 per month for services in an adult day health-care center

*Cost of Care Survey 2020, Genworth Financial, Inc., December 2, 2020

  1. Doesn’t Medicare pay for long-term care?

Many people mistakenly believe that Medicare, the federal health insurance program for older Americans, will pay for long-term care. But Medicare provides only limited coverage for long-term care services such as skilled nursing care or physical therapy. And although Medicare provides some home health care benefits, it doesn’t cover custodial care, the type of care older individuals most often need.

Medicaid, which is often confused with Medicare, is the joint federal-state program that two-thirds of nursing home residents currently rely on to pay some of their long-term care expenses. But to qualify for Medicaid, you must have limited income and assets, and although Medicaid generally covers nursing home care, it provides only limited coverage for home health care in certain states.

  1. Can’t I pay for care out of pocket?

The major advantage to using income, savings, investments, and assets (such as your home) to pay for long-term care is that you have the most control over where and how you receive care. But because the cost of long-term care is high, you may have trouble affording extended care if you need it.

  1. Should I buy long-term care insurance?

Like other types of insurance, long-term care insurance protects you against a specific financial risk–in this case, the chance that long-term care will cost more than you can afford. In exchange for your premium payments, the insurance company promises to cover part of your future long-term care costs. Long-term care insurance can help you preserve your assets and guarantee that you’ll have access to a range of care options. However, it can be expensive, so before you purchase a policy, make sure you can afford the premiums both now and in the future.

The cost of a long-term care policy depends primarily on your age (in general, the younger you are when you purchase a policy, the lower your premium will be), but it also depends on the benefits you choose. If you decide to purchase long-term care insurance, here are some of the key features to consider:

  • Benefit amount: The daily benefit amount is the maximum your policy will pay for your care each day, and generally ranges from $50 to $350 or more.
  • Benefit period: The length of time your policy will pay benefits (e.g., 2 years, 4 years, lifetime).
  • Elimination period: The number of days you must pay for your own care before the policy begins paying benefits (e.g., 20 days, 90 days).
  • Types of facilities included: Many policies cover care in a variety of settings including your own home, assisted living facilities, adult day care centers, and nursing homes.
  • Inflation protection: With inflation protection, your benefit will increase by a certain percentage each year. It’s an optional feature available at additional cost, but having it will enable your coverage to keep pace with rising prices.

One of our staff members is certified in long term care insurance and can help you determine if long term care insurance is right for you and/or evaluate your existing policy.

If you have friends or family in need of financial life planning services,

It would be the honor of Laurence Lof Financial Advisors to assist them.

We value your referrals!


Share This