Prepare Your Retirement for Crisis, Dennis Miller Interview (Casey Research)

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Dennis Miller: Writer Profile

Transcript

Future Money Trends: Greetings, and thank you for joining us at FutureMoneyTrends.com. I’m here with Dennis Miller at the Casey Summit in San Antonio, Texas. He writes the letter for retirees, or people who are near retirement, and it’s called “Miller’s Money Forever.” Dennis, thank you for joining us.

Dennis Miller: Well, thank you for asking me, I appreciate it.

Future Money Trends: Dennis, your letter is probably the most important because, honestly, even if you’re not nearing retirement, these unprecedented times, I don’t think it’s a time to take a lot of risks. Casey Research, of course, a lot of people learned about it from libertarian values, gold and silver, all things that are important to all of us, sound money.

But then you can’t live on 100 percent gold, and you also don’t want to live on 100 percent mining stocks. What is your letter advising people to do who are near retirement, or at retirement, to preserve their wealth during, basically, an economy that lives in a constant crisis?

Dennis: That’s a really good question. Ask any retiree and they will tell you of this experience. Envision somebody, a national sales manager who’s been very successful in his career. All of a sudden he cashes out with a lump sum payout on his 401k, a million dollars, whatever. All of a sudden, he looks at this and has this feeling in the pit of his stomach, “My gosh, that money’s got to last me the rest of my life. I’m not trained for this. I don’t know what to do.”

When you’re investing retirement money, the whole theme behind our conference is investing in a crisis time. When you’re investing retirement money, you’re always investing as though a crisis might be coming, because you don’t have that option of a do‑over. Your position limits, your allocations, your whole mindset of how you approach investing your money is totally different.

Future Money Trends: Do you specifically focus on stocks for income, or do you look at real estate bonds, other assets that people aren’t aware of?

Dennis: Yes, we…Let me back up first and go back to part of the problem, and then I can show you what we do, because the answer is all of the above, but with a lot of caveats. One of the things that we saw this week at the conference was, I believe it was Grant Williams, talked about the war on savers. I’ve used that term a couple of times and people said, “Isn’t that kind of extreme?”

Bernanke was quoted as saying, “The policies of the Federal Reserve are requiring seniors and savers to put a whole lot more of their capital at risk than they’re accustomed to.” He referred to the seniors and savers as collateral damage. If that’s not a war term, I don’t know what is. I mean, wow. When you couple that…

There was a quote in the Mauldin book, “Code Red,” that everybody knows the market’s on thin ice, and everybody thinks they can get out of the market ahead of the other guy, they can get through the door, if you will. Well, I don’t think we’re going to necessarily get through the door first.

Our goal in investing that retirement money, and I’ll talk to you about the allocations in a second, is to get through that door whole so that we can live to fight another day. Too many of my friends took 40 and 50 percent hits in ’07. That’s the real collateral damage. It’s not the loss of interest income that you would have gotten from the CDs.

It’s the collateral damage you could experience if you had a sudden downturn in the stock or the bond market where you had to exit your position quickly. Now, with that, do we go into the market? Yes. We only put 50 percent of our retirement portfolio in the market, with a whole bunch of caveats, stop losses, position limits, low correlation, internationalization, so that it’s giving us all those kinds of safety measures.

Future Money Trends: Do your stocks that you guys are buying, do they cater to the Casey crowd in the sense that, are you buying Coca‑Cola, or are you buying a natural energy company, or something like that?

Dennis: The Coca‑Cola. As a matter of fact, we held Coca‑Cola for a while and it didn’t meet our standards. But what we’re looking for in the stock are appreciations, dividend, inflation protection. The more international it is, the better. Plus one other thing, the ability to exit quickly. Many of the Casey stocks are very thinly traded. If you had to exit a big position quickly it would be difficult.

Future Money Trends: Yeah. No, you’d probably move the market cap. Somebody…

Dennis: Yeah, you’d move the market.

Future Money Trends: Oftentimes in the junior mining stocks, people ask me why they move a significant amount. It’s like, who knows? Maybe somebody got a divorce and they had to sell 10 grand. You don’t know. What about the other 50 percent?

Dennis: 30 percent of it is in investments, which we were looking for for yield and then appreciation. We’re investing in a lot of places where you have your business development corporations and your master limited partnership. For example, one of our investments is Sunoco. We’re up over 50 percent in Sunoco, but we bought it for yield. But we’ll take the appreciation.

We’re involved now, we have a business development corporation. Excuse me, convertible bond fund. Thank you for your patience. That gives you two‑thirds of the upside protection of stock, but one‑third of the downside risk. We’re up 22 percent in that, plus we’re getting a nice yield. That’s the income, first.

Then, the other 20 percent goes into what you and I would have called the cash accounts. Right now my brokerage firm pays me one one‑hundredth of one percent, so $10,000 invested gives you a dollar a year in interest. Whoopee. We’re saying there are investments that you can put in there that can be quickly converted into cash.

Interestingly enough, we are in short‑term bond funds, two to three years out, very low duration, paying three, four percent, but it’s making a contribution. If the bond market collapsed, what’s the worst thing we would do? We would hold onto them to maturity.

Future Money Trends: Yeah. This is probably, I would assume, for younger people, but I’m not a retirement expert. A lot of Austrian economists and people who are worried about the economy are starting to use whole life policies because you have that cash value and guaranteed return. Is that something that you would consider for safety?

Dennis: We have written a series of reports with annuities, and I have worked…I don’t sell these for a living. Investing in insurance is to me a misnomer. The only way to make a life insurance policy a good investment is to die ahead of your mortality. The only way to make an annuity a good investment is to outlive your mortality.

Basically, when you’re looking at investing in life insurance policies, you are paying them just as though you would a fund manager to invest your money. Those fees can become very, very significant. You have to look at that as compared to other products, because insurance policies are a transfer of risk. There are a lot of better opportunities.

Now, actually, there are some circumstances where I would suggest that retirees buy an annuity, but very limited as a portion of your portfolio. Don’t think you can sit there and buy annuities and buy a retirement plan and you’ll never have to worry again. Have any kind of inflation, you’ll realize you made a mistake.

Future Money Trends: In closing, I want to ask you a question. If a Lehman Brothers event happened tomorrow morning, where are your portfolios Friday? Are triggers being set to exit these?

Dennis: Absolutely. Let me just give you a quick example. On the stock side, no more than five percent goes into any individual position. 20 percent trailing stop loss, max. Might be 10, might be 15. Of course, if you invested on day one, and on day two a Lehman Brothers event happened, if you’re going to lose 20 percent but only half is in the market, you’d have a 10 percent overall loss.

There are safeguards and protection built in. But that’s well beyond the worst case, because many of the things that we are invested in are not correlated directly to the market, which would buy us time to make decisions. Many of the stocks that we’re invested in are the kind that would come back quickly. OK, just don’t sell, just keep getting the nice dividends and you’ll be fine.

Worst case, we would probably lose 12 to 15 percent. I had friends in 2007 that retired with that 401k like we talked about that lost 40 and 50 percent. They’d have been ecstatic with 10 percent. You live to fight another day.

Future Money Trends: I’m sure a lot of people who bought silver and gold are wishing they had a stop loss.

Dennis: Oh yes, yeah. On the silver and gold side, I believe there’s also what we call the core portfolio, which is the basis of that, and that everybody should have that core portfolio as their base, even before they go into the kind of stuff we’re in. Because if we have that Armageddon event, it’s that core portfolio, when gold hits $10,000 an ounce, that is going to really help us live to fight another day.

But that’s the kind of thing, and you see it at the Casey Summit. “I don’t care what happens, I’m not selling my gold.” They bought it for a different reason.

Future Money Trends: Yeah, exactly. Dennis, thank you so much for you time.

Dennis: Appreciate it. Thank you.

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