Quote of the Week 

“President Trump may be able to temporarily hold off the sweep of automation and globalization by cajoling companies to keep jobs at home, but bolstering inefficient and uncompetitive enterprises is likely to only temporarily stave off market forces,” he continued…

“While they might be popular, the reason the U.S. long ago abandoned protectionist trade policies is because they not only don’t work, they actually leave society worse off.”  – Seth Klarman, The Baupost Group  (One of the most respected hedge fund managers that no one has ever heard of.)

Technical Corner  –  Sell Signal

We received a sell signal on the S&P 500 from our Trendrating software today (Monday). This sell signal is our indicator to exit the markets. We followed our signal and sold all of our stock market investments for all of our clients. We moved all assets to the Money Market, or if you own an annuity, to either the Money Market or the most conservative option possible. Fortunately, we sold into strength, so we captured Monday’s upside. For those of you who own Sharespost Mutual Fund, we kept the position. Our plan has been to keep the Sharespost position for the long haul as it is invested in Private Equity.

Last week was a terrible week in the markets with the Dow down 5.67%, the S&P 500 down 5.95% and the Nasdaq down 6.54. As of Friday’s close, the Year to Date returns for the Dow is down 4.80%, the S&P 500 is down 3.19%, and the Nasdaq was up 1.29%. Fortunately, our software worked very well this year and last year. I cannot quote returns for this year and last year, but if you want to know how your portfolio did, just give us a call.

I received a call this morning wondering why we didn’t get out last week. Good question. However, that is not possible with a trend following investment strategy. With a trend following strategy, the software has to recognize a change in the trend before it gives a signal to change. For example, if a trend is topping, the software has to see a trend move to the downside to give us a sell signal. This means we will never get out at the top of the market; we have to wait for the trend to go down a certain amount to recognize the trend.

The same holds true when we receive a signal to get back in the market. We have to wait for the trend to reverse from the downward trend to an upward trend before getting a buy signal.

What does this mean for your portfolio and how we manage it? It means we will never get out at the top of a market and we will never get in at the bottom of a market. At the top of a market the software assumes it is still going up and at the bottom of a market, the software assumes the market is still going down. We have to wait for a reasonable change in market direction to get a buy or sell signal.  If you would like to discuss our strategy further, please give us a call.

Our allocation for most clients as of today in 0% equities, 0% bonds, 0% alternatives, and 100% cash. We are looking for a place to put the cash to get some yield and still maintain a safe position. Stocks do not look good according to our software. Longer term bonds do not look good with rising interest rates because bond prices go down when interest rates rise.

“A penny saved is a penny earned” which is attributed to Ben Franklin. “A penny not lost is a penny earned.” You can attribute that to me.

Stephanie’s Thoughts – Evaluating an Early Retirement Offer

In today’s corporate environment, cost cutting, restructuring, and downsizing are the norm, and many employers are offering their employees early retirement packages. But how do you know if the seemingly attractive offer you’ve received is a good one? By evaluating it carefully to make sure that the offer fits your needs.

What’s the severance package?  

Most early retirement offers include a severance package that is based on your annual salary and years of service at the company. For example, your employer might offer you one or two weeks’ salary (or even a month’s salary) for each year of service. Make sure that the severance package will be enough for you to make the transition to the next phase of your life. Also, make sure that you understand the payout options available to you. You may be able to take a lump-sum severance payment and then invest the money to provide income, or use it to meet large expenses. Or, you may be able to take deferred payments over several years to spread out your income tax bill on the money.

How does all of this affect your pension?

If your employer has a traditional pension plan, the retirement benefits you receive from the plan are based on your age, years of service, and annual salary. You typically must work until your company’s normal retirement age (usually 65) to receive the maximum benefits. This means that you may receive smaller benefits if you accept an offer to retire early. The difference between this reduced pension and a full pension could be large, because pension benefits typically accrue faster as you near retirement. However, your employer may provide you with larger pension benefits until you can start collecting Social Security at age 62. Or, your employer might boost your pension benefits by adding years to your age, length of service, or both. These types of pension sweeteners are key features to look for in your employer’s offer — especially if a reduced pension won’t give you enough income.

Does the offer include health insurance?

Does your employer’s early retirement offer include medical coverage for you and your family? If not, look at your other health insurance options, such as COBRA, a private policy,  dependent coverage through your spouse’s employer-sponsored plan, or an individual health insurance policy through either a state-based or federal health insurance Exchange Marketplace. Because your health-care costs will probably increase as you age, an offer with no medical coverage may not be worth taking if these other options are unavailable or too expensive. Even if the offer does include medical coverage, make sure that you understand and evaluate the coverage. Will you be covered for life, or at least until you’re eligible for Medicare? Is the coverage adequate and affordable (some employers may cut benefits or raise premiums for early retirees)? If your employer’s coverage doesn’t meet your health insurance needs, you may be able to fill the gaps with other insurance.

What other benefits are available?

Some early retirement offers include employer-sponsored life insurance. This can help you meet your life insurance needs, and the coverage probably won’t cost you much (if anything). However, continued employer coverage is usually limited (e.g., one year’s coverage equal to your annual salary) or may not be offered at all. This may not be a problem if you already have enough life insurance elsewhere, or if you’re financially secure and don’t need life insurance. Otherwise, weigh your needs against the cost of buying an individual policy. You may also be able to convert some of your old employer coverage to an individual policy, though your premium will be higher than when you were employed.

In addition, a good early retirement offer may include other perks. Your employer may provide you and other early retirees with financial planning assistance. This can come in handy if you feel overwhelmed by all of the financial issues that early retirement brings. Your employer may also offer job placement assistance to help you find other employment. If you have company stock options, your employer may give you more time to exercise them. Other benefits, such as educational assistance, may also be available. Check with your employer to find out exactly what its offer includes.

Can you afford to retire early?

To decide if you should accept an early retirement offer, you can’t just look at the offer itself. You have to consider your total financial picture. Can you afford to retire early? Even if you can, will you still be able to reach all of your retirement goals? These are tough questions that a financial professional should help you sort out, but you can take some basic steps yourself.

Identify your sources of retirement income and the yearly amount you can expect from each source. Then, estimate your annual retirement expenses (don’t forget taxes and inflation) and make sure your income will be more than enough to meet them. You may find that you can accept your employer’s offer and probably still have the retirement lifestyle you want. But remember, these are only estimates. Build in a comfortable cushion in case your expenses increase, your income drops, or you live longer than expected.

If you don’t think you can afford early retirement, it may be better not to accept your employer’s offer. The longer you stay in the workforce, the shorter your retirement will be and the less money you’ll need to fund it. Working longer may also allow you to build larger savings in your IRAs, retirement plans, and investments. However, if you really want to retire early, making some smart choices may help you overcome the obstacles. Try to lower or eliminate some of your retirement expenses. Consider a more aggressive approach to investing. Take a part-time job for extra income. Finally, think about electing early Social Security benefits at age 62, but remember that your monthly benefit will be smaller if you do this.

What if you can’t afford to retire? Finding a new job

You may find yourself having to accept an early retirement offer, even though you can’t afford to retire. One way to make up for the difference between what you receive from your early retirement package and your old paycheck is to find a new job, but that doesn’t mean that you have to abandon your former line of work for a new career. You can start by finding out if your former employer would hire you as a consultant. Or, you may find that you would like to turn what was once just a hobby into a second career. Then there is always the possibility of finding full-time or part-time employment with a new company.

However, for the employee who has 20 years of service with the same company, the prospect of job hunting may be terrifying. If you have been out of the job market for a long time, you might not feel comfortable or have experience marketing yourself for a new job. Some companies provide career counseling to assist employees in re-entering the workforce. If your company does not provide you with this service, you may want to look into corporate outplacement firms and nonprofit organizations in your area that deal with career transition.

Note: Many early retirement offers contain noncompetition agreements or offer monetary inducements on the condition that you agree not to work for a competitor. However, you’ll generally be able to work for a new employer and still receive your pension and other retirement plan benefits.

What will happen if you say no?

If you refuse early retirement, you may continue to thrive with your employer. You could earn promotions and salary raises that boost your pension. You could receive a second early retirement offer that’s better than the first one. But, you may not be so lucky.  Consider whether your position could be eliminated down the road.

If the consequences of saying no are hard to predict, use your best judgment and seek professional advice. But don’t take too long. You may have only a short window of time, typically 60 to 90 days, to make your decision.

Copyright 2018 Broadridge Investor Communication Solutions, Inc

By the Numbers

ONE MONTH, ONE YEAR – The US government ran a $215 billion budget deficit in February 2018. As recently as 2007, the budget deficit for the entire fiscal year ($161 billion) was less $215 billion. Until fiscal year 1986, the US government had not recorded an annual deficit as high as $215 billion (source: Treasury Department). – Michael A. Higley, BTN 03-26-2018

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!

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These are the opinions of Larry Lof and Stephanie Mayoral and not necessarily those of Cambridge, are for informational purposes only, and should not be construed or acted upon as individualized investment advice. Past performance is not indicative of future results. Due to our compliance review process, delayed dissemination of this commentary occurs. The S&P 500 is an index of stocks compiled by Standard & Poor’s, a division of The McGraw-Hill Companies, Inc. The index includes a representative sample of 500 leading companies in leading industries of the U.S. economy. Indices mentioned are unmanaged and cannot be invested into directly. Technical analysis represents an observation of past performance and trend, and past performance and trend are no guarantee of future performance, price, or trend. The price movements within capital markets cannot be guaranteed and always remain uncertain. The allocation discussed herein is not designed based on the individual needs of any one specific client or investor. In other words, it is not a customized strategy designed on the specific financial circumstances of the client. Please consult an advisor to discuss your individual situation before making any investments decision. Investing in securities involves risk of loss. Further, depending on the different types of investments, there may be varying degrees of risk including loss of original principal.

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