Money Matters with Wes Moss — May 17, Hour 2

This is the second hour of the Money Matters Radio Show with Wes Moss for May 17, 2009. Wes talks about the volatility levels since the Lehman Brothers collapse and discusses questions regarding Social Security and Medicare, as well as where to invest your money if your money market account is not generating the returns you desire.

Panic continues to subside, and despite a down market this week, orderliness has come back for a visit. The major volatility index that has spiked ever since the collapse of Lehman Brothers (last September)returned to it’s “pre-Lehman” levels. This means fear has subsided, and a greater sense of normalcy has returned…not we are faced with “normal” bad economic news.

I’ll take normal “bad” over “rare panic” any day…

That’s what you want to hear as an investor…

WEEKLY TSG (Tell Me Something Good):
1. Volatility index has reached pre-Lehman Brothers levels
2. US retail sales -0.4% April, but consumer confidence is going up, the highest levels since Sept.
3. 65% of companies that have reported have beat expectations…cost cutting not revenue based

Key questions we will address today:
Q: Social Security and Medicare announced that they will be running out sooner than expected…what can we do?

A: These programs have been a sinking ship for years. Now that the rate has accelerated the government is going to have to either cut entitlements, raise taxes, or both. This will inevitably happen, so all you can do as an investor is prepare for it. Start looking at your retirement nest egg as an income generating machine, and look to make up any potential decline in social security. Also, consider how tax increase may effect certain income producing investments like municipal bonds and see if they may be appropriate for your needs and tax bracket.

Q: I’ve sold everything…and now all of my funds are in money market and CDs…I was too scared to leave it in stocks. “Now I’m really scared” because the yield on my money market is less than 1%, I’m barely generating any returns, and little income, and I don’t want to eat into the principal…I’m scared to “get back in”. What should I do?

A: Focus on your “Income” need, and don’t feel as though you have to go “all in”, back into the stock market. There are enormous opportunities in fixed income right now. We have been talking about this since the very first day on Money Matters, and Barron’s just had an enormously powerful article this week that talks about many of the same things you and I have talked about over the last several months.
Be VERY careful with intermediate and long term treasuries, and look at the abundant opportunities in corporate bonds, high yield bonds, high yield mortgage backed bonds, closed end funds, TIPS, and even a small light still flickers within the GNMA space (government backed mortgages).

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