Financial Minute Transcripts

Financial Minute Transcripts

Week 14 2015

I’m Steve Connell from Diamond Head Financial Advisors, and this is your Financial Minute.

My bank wants me to buy a CD.  A 2-year CD yields 0.2%.  Not 2%.  0.2%!  I get 1% if I don’t touch the money for five years.  Are you kidding me? 

Many investors looking for 5% are buying junk bonds today.  But junk bond managers have gone to the bottom of the barrel, buying non-investment grade securities to achieve these yields.  This will not end well. 

At DHF, we build you a safer portfolio yielding 6% using preferred equities with credit ratings of triple-B or higher.  That’s $30,000 per year on a $500,000 portfolio.  And your principle is available any time.  We call it our Early Retirement Portfolio because you might just have enough money to retire now and you never knew it. 

I’m Steve Connell, founder and CEO of Diamond Head Financial Advisors. Come to our next investment seminar Thursday May 14 at 6:30 pm in downtown Honolulu.  Call us on 664-1681 or go to Diamond Head Financial.com.

Week 13 2015

I’m Steve Connell from Diamond Head Financial Advisors, and this is your Financial Minute.

Many think a good investment in the stock market is a company that grows rapidly. But what about a company that doesn’t grow?  Can that be a good investment too?  It sure can be.

When a company matures, growth slows, but at that point, cash generation can make up for lost growth. IBM, for instance, buys back 10% of its shares per year with cash from operations. That’s a 10% yearly boost to earnings per share even though profits are flat.

Think about that: earnings per share grow even though earnings don’t.  That’s the power of cash.

It’s more difficult to find a growing company that generates cash, because growth consumes cash, but it can be done. 

Concentrating portfolios in cash-rich companies, as we do for you at DHF, reduces risk because when investors become antsy, they pay a premium for the reliable delivery of cash.

I’m Steve Connell, founder and CEO of Diamond Head Financial Advisors.  Call us at 664-1681, or go to Diamond Head Financial.com.

Week 12 2015

I’m Steve Connell from Diamond Head Financial Advisors, and this is your Financial Minute.

Did you ever wonder why we have a stock market?

Most would say so that companies can raise money.  While that is true, they could also borrow the money from a bank.  Why do they issue shares instead? 

In a word, because companies do not have to pay equity back or even pay interest on it.   Start-up companies consume cash early on so they cannot afford debt, nor would any bank lend to them anyway.

But why would an investors give money to a company that does not have to pay them back?  Because, thanks to the stock market, equity investors can get their money back selling to someone else in the market, and sometimes a lot more if the company does well.     

Without a stock market, our most promising start-ups would go starving for cash.  Indeed, countries with less developed stock markets like Germany and Japan have less innovation than the United States.

I’m Steve Connell, founder and CEO of Diamond Head Financial Advisors.  Call us at 664-1681, or go to Diamond Head Financial.com.

Week 11 2015

I’m Steve Connell from Diamond Head Financial Advisors, and this is your Financial Minute.

A steady income is a prerequisite for retirement.  Millions of Americans today are yearning to make an adequate income from their savings without taking big risks. Yet they are coming up empty handed.  Bank rates are so low not even $10m produces an adequate income, and moving to the stock market entails too much risk. 

I’ve taken to the air on Financial Minute to tell the world there’s a better way.  At DHF, we utilize a tried and true security called preferred equity to earn you a tax-advantaged 6% income without posing undo risk to your principle.  We call it our Early Retirement Portfolio.

Preferred equity holders incur less risk than the stock market because they get paid first.  The payout is higher than bonds because it is structured like an annuity.  But unlike annuities, there is an active market for preferreds, so you don’t tie up your money.

I’m Steve Connell, founder and CEO of Diamond Head Financial Advisors.  Call me at 664-1681, or go to Diamond Head Financial.com. 

Week 10 2015

I’m Steve Connell from Diamond Head Financial Advisors, and this is your Financial Minute.

In the last two weeks, we have identified excess debt as the cause of the Financial Crisis.  The question is: Why do American companies borrow so much money?  The answer lies in the tax code.

American banks and corporations today favor debt over equity because interest expense is tax deductible but dividend expense is not.  If they could deduct dividends, companies would issue more equity, and in particular more preferred equity, America’s traditional safe haven for investors seeking high income.

At DHF, we believe this bias against dividends not only threatens the solvency of the country but is a disservice to retail investors like you.  Fortunately, there are still a handful of preferred stocks available with high credit ratings yielding 6% dividends.  We are passionate about finding these to satisfy your income needs.  Come talk to us.  We’ll help you retire earlier than you thought.

I’m Steve Connell, founder and CEO of Diamond Head Financial Advisors.  Call us at 664-1681, or go to Diamond Head Financial.com. 

Week 9 2015

I’m Steve Connell from Diamond Head Financial Advisors, and this is your Financial Minute.

A lot of people are talking about when interest rates are going to rise. A more important question is by how much?

The financial crisis and years of excess spending have left the US $17 trillion dollars in debt, equal to GDP.  This debt is not free. The government must take money out of the economy to pay for the interest.

Imagine you make $100,000 per year and owe $100,000 on your credit card.  For every 1% in interest you pay, that’s $1000 less in your pocket every year. 

The US is in the same situation today.  Every 1% rise in interest rates may reduce economic growth by 1%, renewing downward pressure on rates. In a sense, rates have become self-correcting.  So don’t expect a big increase in mortgage rates any time soon. 

I’m Steve Connell, founder and CEO of Diamond Head Financial Advisors.  For more information about this and other financial topics, join our Thursday evening investment meetings, call us at 664-1681, or go to Diamond Head Financial.com. 

Week 8 2015

I’m Steve Connell from Diamond Head Financial Advisors, and this is your Financial Minute.

Do you wonder what caused the financial crisis we are still feeling today?

In a word:  Too much debt.  Banks lent too much money for housing, driving prices up, and then investors borrowed to buy these loans.  When housing prices collapsed, the house of cards tumbled down, leaving the economy with too much debt and not enough collateral.

Debt never disappears. It transfers to a bank in a bankruptcy, and then to the Federal government if the bank defaults, where it stays until your tax dollars pay it back. 

This happened in 2009.  And then the government addressed the problem by adding more debt.  National debt doubled to an unprecedented $17 trillion dollars today, equal to GDP.

This is too high.  Every 1% increase in interest rates adds $170 billion to the deficit. The challenge now is for the economy to outgrow the debt before rates rise again. 

I’m Steve Connell, founder and CEO of Diamond Head Financial Advisors.  Come talk to us. Call us at 664-1681 or go to Diamond Head Financial.com.  

Week 7 2015

I’m Steve Connell from Diamond Head Financial Advisors, and this is your Financial Minute.

Here’s a question for you:  If lower oil prices are good for the economy, then why does the stock market fall when oil prices go down?

It’s an issue of short-term trading.  Many hedge funds borrow heavily to invest in portfolios with big holdings in oil.  So when the oil price declines, margin calls and client withdrawals force these funds to sell other stocks to cover their losses from oil, causing temporary declines in the whole stock market.   

This is not something to worry about.  The US consumes twice as much oil as we produce, so we are net beneficiaries of lower oil prices.  So be patient. 

At Diamond Head Financial Advisors, we’ll keep you invested and stay focused on the conditions driving the stock market higher such as growing employment, low inflation, and attractive valuations. 

I’m Steve Connell, founder and CEO of Diamond Head Financial Advisors. Our Thursday evening client meetings downtown are open to all potential investors. Call us at 664-1681 to attend or go to Diamond Head Financial.com.  

Week 6 2015

I’m Steve Connell from Diamond Head Financial Advisors, and this is your Financial Minute.

The stock market has been rising for six years, one of the longest bull markets in American history.  Many are claiming that stocks are over-valued and ready to collapse.  Have stocks reached their peak?

At Diamond Head Financial Advisors, we don’t think so. Most of the valuation fear is coming from backward- looking price-to-earnings, or PE, analysis.  But the stock market prices in the future, not the past.  On that basis, a forward PE of 17 is reasonable, especially for such a low interest-rate environment. 

Inflation can also de-rail a market recovery.  Markets peak when inflation rises too fast and the Federal Reserve must slow things down. But inflation today is the lowest in America since the l930s.  Wages are just beginning to rise, and for now that is beneficial because it supports consumers who provide a much-needed boost to a slow economy.    

I’m Steve Connell, founder and CEO of Diamond Head Financial Advisors.  Call us at 664-1681 or go to Diamond Head Financial.com.  

Week 5 2015

I’m Steve Connell from Diamond Head Financial Advisors, and this is your Financial Minute. 

Recently, gasoline prices have fallen from $4 per gallon to $3. Many people are wondering, will these low prices last?

US oil production has risen 80% in four years and now matches Saudi Arabian output thanks to the work of an oil industry pioneer named George Mitchell. Mitchell invented horizontal drilling, unlocking oil that was previously uneconomical to pursue.

Oil on earth derives from 4 billion years of plant and animal life.  A lot more of that oil is now accessible than ever before thanks to Mitchell, which will likely keep gasoline prices low, inflation at bay, and extra dollars in consumer pockets for many years to come.  This is a good environment for retail stocks and a challenging one for energy stocks. 

At Diamond Head Financial, we discuss this and other topics at our Thursday evening investment meetings downtown to help you understand the portfolios we build for you. 

I’m Steve Connell, founder of Diamond Head Financial Advisors. Call us at 664-1681 or go to Diamond Head Financial.com.

Week 4 2015

I’m Steve Connell of Diamond Head Financial Advisors, and this is your Financial Minute.

Are you afraid of the stock market?  If so, it’s understandable, with all of the reports of doom and gloom out there.  Meanwhile, the American economy has been switching into high gear and the stock market may be poised for big gains.  There are several reasons for this:

 Employment is rebounding at the fastest rate in 30 years.  Falling gasoline prices are likely to stay low. Consumer confidence and spending have snapped back after a decade of malaise.  The lowest interest rates in 50 years are boosting housing, corporate profits, and stock market values.  And, there is no inflation on the horizon.

At Diamond Head Financial we’re optimistic about the American economy.  We offer a diversified portfolio with defense, railroad, biotechnology, and internet commerce stocks.  We avoid energy, commodities, telecom, and autos.  Come see us and let us build a portfolio for you.

I’m Steve Connell, founder and CEO of Diamond Head Financial Advisors. Join our Thursday night investment meetings downtown. Call us at 664-1681 or go to Diamond Head Financial.com.

Week 3 2015

I’m Steve Connell of Diamond Head Financial Advisors, and this is your Financial Minute.

Take the time to study the fees you pay to your mutual funds.  Most of us assume all we pay is one percent or less.  Well, not so fast. 

Did you know mutual funds charge additional fees of 2-3% for costs they are not required to report?  No wonder 80% of them underperform the market.  On top of these fees, your financial advisor charges his fee.  It all adds up to closer to 5%, not one.

At Diamond Head Financial Advisors, our fees are fully disclosed and probably less than half what you are paying now.  Also, we are market professionals and don’t outsource anything.  We charge you a fee only once for the assets we manage, and we report that fee to you monthly.  Our financial planning advice is free. 

I’m Steve Connell, founder and CEO of Diamond Head Financial Advisors.  Come join our weekly investment meeting Thursdays at 6:30 pm in downtown Honolulu.  Call us at 664-1681 or go to Diamond Head Financial.com.

Week 2 2015

I’m Steve Connell from Diamond Head Financial Advisors, and this is your Financial Minute.

How many times have you heard that it is better to put your money into an S&P index fund and avoid the management fees associated with active money management? 

Well, did you know that 25% of the S&P index consists of dysfunctional US banks and commodity energy and materials producers?  These companies offer nothing unique and do not belong in anyone’s portfolio. 

The index also includes telecommunication and automotive companies, where cutthroat competition and high capital expenses kill shareholder value.  These are areas of the economy that have never been good investments and never will be.  But you will own them if you buy a market index fund.

At Diamond Head Financial Advisors, we invest your money where product uniqueness and human innovation are continually creating shareholder value, like internet commerce, biotechnology, defense, and specialty retail. 

You don’t spread yourself too thin in life.  Why spread your investment portfolio too thin?

I’m Steve Connell, founder and CEO of Diamond Head Financial Advisors.  Call us at 664-1681 or go to DiamondHeadFinancial.com.

Week 1 2015

Topic: Preferred Equity Retirement Portfolio

I’m Steve Connell from Diamond Head Financial Advisors, and this is your Financial Minute.

Do you remember when you could earn 5% at the bank? Those days are unlikely to return any time soon.  Every day, clients ask me how they can earn safe income in this environment.

Well, decades ago, preferred stocks were a staple of high income portfolios, but today they have been forgotten.  Preferred stocks are more like bonds than stocks.  In return for security of payment, you forfeit some upside.  A carefully selected portfolio of preferred stocks can offer higher yields than bonds or bank CDs with good credit quality.  

Come to the professionals at Diamond Head Financial Advisors to build the right portfolio of preferred and blue-chip stocks for you to enjoy growth, income, and stability through these turbulent times.  We call it our retirement portfolio because it allows you to retire on a lot less money than you thought was necessary.  Current yield is 5% after fees.

I’m Steve Connell, founder and CEO of Diamond Head Financial Advisors.  Call us at 664-1681 or go to DiamondHeadFinancial.com.

 

 

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