Wednesday, November 20, 2013

The Only Way to Rescue Your Retirement


Is Death the New Retirement?

A new survey says 40% of Americans plan to work till they drop. Most say they can't pay bills and save for retirement. So here's the one simple thing you can do to triple your nest egg in the next decade or so.

Details here.

The Only Way to Rescue Your Retirement

David Dittman

The U.S. is hurtling toward a retirement crisis.

Here are just a few of the warning signs, which precious few Americans are bothering to heed:

  • About 7.2 million Americans over the age of 65 were employed in 2012, up 67% from a decade ago;
  • 59% of households headed by people 65 and older have no retirement account assets;
  • Bankruptcy is up 178% among Americans aged 65 to 74 since 1991. Medical bills are often to blame (over 60% of retirees cite hospital bills on their Chapter 7), but retirees are also carrying more debt—an average of $8,278 on credit cards alone;
  • AARP, which usually tries to make older Americans feel better about their future, says that 40% of them plan to "work until they drop."

That's just the tip of the iceberg.

By the year 2050, there will be 90 million seniors in the U.S. According to Bloomberg, 78 million Baby Boomers will require what amounts to 85% of current U.S. GDP to fund their retirement.

Will the U.S. economy grow fast enough to support such massive obligations? Maybe. But I wouldn't bet my last years on it. Truth is, the old retirement strategies are outdated. Back in 1945, there were 42 workers for every retiree. Today there are only 2.5.

That's why a record number of new seniors are staying in the workforce, with their numbers up 26% from just 30 years ago. These workers aren't hanging around by choice: they know they can't maintain their lifestyle without a salary.

"Terrifying Uncertainties" Make Retiring Harder Than Ever

In the old days, saving for retirement was simply a matter of squirreling away cash. But today's retirees need to be ready for terrifying uncertainties their parents never dreamed of, such as:

  • What are you going to do if your home suddenly drops 50% in value—just like in the thousands of "zombie" neighborhoods in Michigan, Illinois and Florida?
  • Or when pensions fizzle on their promises and never send the checks you're owed?

At the same time, governments at all levels are facing crises of their own, with Detroit's $18-billion bankruptcy filing—the largest of any city in U.S. history—the most glaring example. Like Detroit, many cities are groaning under the weight of massive pension obligations. Los Angeles, for example, faces a $9.4-billion unfunded pension shortfall. That's $8,437 per resident.

Many states are in worse shape: Illinois' pension liabilities are 56.6% unfunded (or $6,505 per resident), while Alaska's $7-billion shortfall amounts to $10,235 for every person in the state. Only a handful of states are healthy enough to guarantee the future, the standout being Wisconsin, with 99.8% funding.

Taken together, state and local governments are $4.4 trillion short of their obligations. To put that in context, the entire U.S. federal budget is $3.8 trillion—and that's the largest budget the country has ever had. Uncle Sam, too, is wrestling with a $17.1-trillion debt.

The bottom line: when it comes to securing your retirement, you're on your own.

Power Up Your Retirement Plan

I'm not trotting out these numbers to worry you, but they should be a wake-up call for anyone who hopes to retire (which is hopefully all of us).

I also want to show you a proven way to not only survive but thrive in the troubled years ahead—no matter what your retirement goals are.

You see, for many years, I've had the privilege of writing Utility Forecaster, one of the nation's longest-running investment advisories. While Wall Street chases trendy buzz stocks, we focus on the quiet giants that steadily plow ahead, year after year.

At Utility Forecaster, we specialize in the water and energy utilities that use long-term contracts—think 10, 20 and 30 years—to pull in fat income checks year after year.

Here are just a few of the things that make utility stocks so special:

  • They have the fattest gains. Right now, 18 of the 30 stocks in our Utility Forecaster Growth Portfolio are up by triple digits—and two are in quadruple digits. Some of our big winners include gains of 552%, 864%, 957%, 1,021% and 1,081%!
  • They have the largest dividend yields—up to 12.4%. Yields like these will secure independence for your golden years and keep your nest egg well ahead of inflation;
  • They have the safest performance: The utility sector was one of the least affected during the 2008 crisis.

Think about it every time you turn on the lights, take a shower or run the furnace. If there's a surer bet than buying into these old-school standbys, I don't know what it is.

Can you picture a day when you call up your power company and say, "No, thanks, I'm all good here"?

I've been through several market panics in my years of following this industry. Each time I've used the opportunity to stock up on quality utilities with regulated operations, guaranteed rates of return and generous dividends.

It all adds up to a sweet deal for investors, especially these days with everyone biting their nails about the possible fallout of rising interest rates and inflation.

Your 3-Part Retirement Rescue Package

To help you zero in on precisely which utilities will give you the highest, safest gains—while throwing off a rising tide of dividend income—I'd like to give you my very latest special report. It's called the "Bounceback Dream List," and it gives you a unique collection of undervalued utilities. These under-the-radar stocks are pure buying heaven for safety-first investors.

This one-of-a-kind report gives you a basket of stocks with 10-to-1 upside, along with their "dream prices"—downward breaks that signal precisely when to buy and unleash years of soaring bounce-back gains.

Most investors think of utilities as merely suppliers of power and water—but that's a misconception. There's so much more to the sector for investors like you and me.

Indeed, what you'll rarely hear is that utilities offer a safe way to tap into some of the most powerful megatrends sweeping the globe today—such as mobile devices and the ongoing shift toward renewable power.

That's why I've prepared two more special reports for you: "Broadband Billions," which shows you precisely which wireless carriers are set to reap the biggest gains from the smartphone revolution, and "The Real World Renewable." This exclusive report gives you the inside track on a clean, cheap energy source that's generating fat profits and dividends from stocks virtually unknown to all but a few clued-in investors. Unlike wind and solar, this energy never shuts down. Neither will the profits.

Click here for full details on this one-of-a-kind offer. In just a few minutes, you could be all set up—and on the way to securing your retirement dreams once and for all.

Editor's Note: We've all worked too hard to be among the 40% of Americans that AARP says plan to "work until they drop"—and you can bet that no one's going to take care of your retirement for you. That's why you must get your hands on David's new special reports right away. They give you everything you need to use the raw profit-making power of utility stocks to build the retirement you've always dreamed of. Don't miss out. Get your copies now.


The One Solution for a Bare Nest Egg

78 million Baby Boomers will require 85% of the current GDP to fund their retirement. Social Security and Medicare are $54 trillion in the hole. The economy simply can't grow enough to meet this massive obligation. In today's economy, folks are finding it harder to pay bills and save for retirement. 1 out of every 5 bankruptcies is a retiree going under.

But here's the one easy solution to safely grow your nest egg. It's tripled nest eggs over the past 13 years with bigger, safer gains. In 24 years, it's taken retirees with $60,000 nest eggs and made them millionaires.

Go here for your best solution so you don't outlive your money.

Home Depot: The Right Tool for the Job

Chad Fraser

Shares of Home Depot (NYSE: HD), the country's largest home-improvement chain, have been riding high in recent years, largely thanks to the rebounding housing market.

If you had bought the stock a year ago, when we highlighted its potential to gain from both continued housing strength and the recovery from Hurricane Sandy, you'd now be sitting on a 30% gain, not including dividends.

Today, the rebound in the housing sector continues, although in its October 30 policy statement, the Federal Reserve noted that it has "slowed somewhat in recent months." Even so, in the latest Standard & Poor's/Case-Shiller report, released October 29, the 20-city home price index rose 12.8% in August from a year earlier, compared with a 12.4% year-over-year gain in July.

Moreover, another vital indicator for Home Depot—renovation spending—suggests the home-improvement giant still has room to run.

Homeowners Open Their Wallets

Home Depot is the world's largest home-improvement re­tailer, with 2,258 locations, including 1,977 in the U.S., 180 in Canada and 101 in Mexico. Most of its sales come from items like kitchen equipment, flooring, paint and hardware bought by those remod­eling their homes.

The company also provides installation services for products like roofing and siding, windows, furnaces and central air systems. 

According to the Leading Indicator of Remodeling Activity (LIRA), a quarterly estimate released by Harvard University's Remodeling Futures Program at the Joint Center for Housing Studies, Americans spent $140.0 billion on home renovations in the third quarter. That's up 10% from $128.4 billion in the second quarter and 17% from $119.4 billion a year earlier.

Home Depot's sales have largely gained in lockstep with that spending. In its fiscal 2013 third quarter, results for which it reported yesterday, the company's sales rose 7.4%, to $19.47 billion from $18.13 billion a year earlier, beating the consensus forecast of $19.18 billion. Comparable-store sales were also up 7.4%.

Earnings surged 42.7%, to $1.35 billion from $947 million. As a result of a lowered share count due to the company's ongoing buybacks (more on those below), per-share earnings accelerated at a faster clip of 50.8%, to $0.95 from $0.63, easily eclipsing the Street's expectation of $0.89.

Without an $0.11-a-share charge related to the closure of its last seven large-format stores in China in the year-earlier quarter, the company's earnings would have risen 28.4%.

The strong performance prompted the company to revise its full-year forecast: it now expects sales to be up 5.6% in fiscal 2013, along with a 7% comparable-store sales gain. It now sees earnings coming in at $3.72 a share, up 24.0%.

That rosy outlook is backstopped by a continued strong forecast for renovations: according to the Joint Center for Housing Studies, spending on remodeling will continue to climb as rising home prices encourage more homeowners to upgrade their abodes. By the first quarter of 2014, the center sees renovation outlays hitting $148.9 billion before settling back slightly, to $147.9 billion, in Q2.

"The soft patch that homebuilding has seen in recent months, coupled with rising financing costs, is expected to be reflected as slower growth in home improvement spending beginning around the middle of next year," says Eric S. Belsky, the center's managing director. "However, even with this projected tapering, remodeling activity should remain at healthy levels."

Going After Contractors

Even with these tailwinds, the company isn't resting on its laurels. It continues to improve its customer service, including stepping up training of its floor supervisors. It has also developed a smartphone app that lets customers easily order items and receive regular promotional offers. In addition, the app contains a "toolbox," with a number of features aimed at saving time, like a nut and bolt finder and a measurement converter.

Contractors continue to be a vital market for Home Depot, and it has rolled out a number of initiatives to gain and keep their loyalty, including a website specifically for pros, dedicated check-outs, commercial financing and an expanded help desk. In the latest quarter, it also unveiled the first version of its mobile app for contractors, which lets them view multiple store inventories at the same time.

These efforts appear to be paying off: over the past three years, the com­pany's comparable-store sales have been consistently higher than those of its main competitor, Lowe's (NYSE: LOW), suggesting that Home Depot is gaining market share.

Stepping Softly Outside the U.S.

Home Depot still has lots of room to expand internationally—though it is taking a cautious approach. As mentioned above, the company closed its last seven big-box stores in China over a year ago; Home Depot entered the country with 12 outlets in 2006 but found its "do-it-yourself" approach to be incompatible with local tastes.

There were other problems, as well: "I never got the leadership right, so we had multiple changes in leadership [in China]," CEO Frank Blake recently told CNNMoney. "What made Home Depot successful in the U.S. was the ability to leap over the distribution channel and give customers kind of wholesale pricing. We never broke through the distribution channel in China and saw no prospects of being able to do it."

Despite the setback in China—which Blake says taught the company "many, many lessons"—it continues to grow beyond its home market, but it's focusing on doing so closer to home. For example, it currently plans to add 25 more stores in Mexico, along with 20 in Central America.

A Buyback Leader

In addition, as we reported in an October 30 article, Home Depot is a major buyer of its own shares—including $6.4 billion worth in the first three quarters of fiscal 2013. It plans to repurchase another $2.1 billion of stock in the current quarter. In addition, the company is a long-time dividend payer. Its current quarterly payout ($0.39 a share) yields 1.9%.

For investors looking to give their portfolio some curb appeal, Home Depot offers an attractive option.


How to Outperform All the Best Retirement Funds

This one "retirement" plan averages 9.3% annual gains. Since 2000, it's earned 218% total – more than tripling your money. $50,000 is now $159,000. This little-known retirement plan has been around for 24 years. And retirees and soon-to-be retirees are 1,667% richer! $50,000 is now almost $900,000.

Best yet… there are NO fund fees. NO maintenance fees. NO service fees. It simply earns bigger, safer gains that are ignored by most investors.

Details here.

There's No Stopping the Oil Sands Train

Robert Rapier On my recent trip to the Athabasca oil sands near Fort McMurray, Alberta, the logistical issues of getting the crude extracted here to market were a major topic of discussion. The issue has received widespread attention in recent years as a result of the high-profile battle over the Keystone XL pipeline extension.

To review, the Keystone Pipeline is owned by TransCanada (TSX, NYSE: TRP). The pipeline already has the capacity to move 590,000 barrels per day (bpd) of crude oil from the Athabasca oil sands to hubs and refineries in the US. The first phase of the pipeline began operating in 2010 and connects Alberta to refineries in Illinois. In 2011, the second phase of Keystone connected Steele City, Nebraska to the major oil hub in Cushing, Oklahoma.

There are two proposed expansions of the Keystone Pipeline that are collectively called Keystone XL ("XL" stands for export limited.) The southern leg of the pipeline has been built and is due to start transporting oil by year end. This Keystone-Cushing extension will have an initial capacity to transport 700,000 barrels of oil per day from the Cushing hub to Gulf Coast refineries -- and did not require federal approval.

The northern leg, however, would cross the US-Canadian border. Therefore the State Department is required to determine that the project is in the national interest in order to grant a permit. This proposed 1,180-mile addition would extend from Hardisty, Alberta to Steele City, Nebraska, carrying up to 830,000 bpd of crude from the oil sands in Alberta and the Bakken oil fields in North Dakota to refineries on the US Gulf Coast.

The Keystone XL pipeline project has probably been the most discussed pipeline project in US history since the Trans-Alaska pipeline of the mid-1970s. Opponents of the Keystone pipeline generally hold the view that the Keystone XL is the key to the expansion of Alberta's oil sands, and that stopping the pipeline will slow the rate of oil sands development. Such views are exceedingly naive, and demonstrate a general lack of knowledge about logistics projects.

Most people are entirely unaware of the extent to which pipelines already crisscross North America, but it's akin to an invisible interstate highway system. Below is a partial map of the North American oil pipeline system. There are pipelines crossing through national parks and above critical aquifers, and pipelines crossing our border to the north and south. Yet I constantly encounter people who insist that preventing the Keystone XL pipeline will prevent heavy oil from Canada from making its way into the US. It's as if this would be an unprecedented development.

North American pipelines map

Source: Theodora

Many are then surprised to learn that the Keystone XL would not be the first, or the 10th, or even the 50th oil or gas pipeline crossing the US-Canadian border. According to the Canadian Embassy in Washington, D.C.,  there are 74 operating oil and gas pipelines that cross the border between the US and Canada. Keystone XL would be the 75th.

Even if Keystone XL opponents are aware that many pipelines already cross the border, they often insist that this one is special, and that this one holds the key to the expansion of oil sands production. Stop Keystone XL, they insist, and oil sands development will stall.

They might even offer up that there is another pipeline proposal called the Enbridge Gateway (also called the Northern Gateway) that would provide an outlet for oil sands bitumen to the Pacific Ocean, but they will insist that there is so much opposition in British Columbia and from First Nations groups that this pipeline is unlikely to be built. They are probably right about that. And that just about sums of the knowledge of 95 percent of the people opposing the Keystone XL pipeline.

But there is so much they don't know. For example, there were many pipeline proposals being floated before Keystone XL that would have moved Alberta bitumen, but the Keystone XL got a lot of commitments from industry because it made the most sense to ship the heavy oil to US Gulf Coast refineries that were configured to refine heavy oil. This would have backed out heavy Venezuelan crude, essentially trading it for a more reliable Canadian supply. So shippers lined up behind the project that made the most sense -- Keystone XL -- and the other pipeline proposals were shelved. Now that Keystone XL is facing formidable opposition, TransCanada's competitors are dusting off old proposals, and coming up with new ones.

The following graphic summarizes a number of the pipeline projects that are currently being planned or built in the US and Canada.

crude pipelines under consideration map

Source: Alberta Department of Energy

I want to talk about two proposals, which became much more important to the Canadian government once Keystone XL project delays began, and it became uncertain as to whether the project would get US approval. One of the pipeline projects would carry bitumen east from Alberta, and the other would carry it west. TransCanada's Energy East pipeline would be a 4,500-kilometer pipeline that would carry 1.1-million barrels of crude oil per day from Alberta and Saskatchewan to refineries in Eastern Canada.

The Energy East pipeline project involves converting an existing natural gas pipeline to an oil transportation pipeline, constructing new pipelines in Alberta, Saskatchewan, Manitoba, Eastern Ontario, Quebec and New Brunswick to link up with the converted pipeline, and then constructing the associated facilities, pump stations and tank terminals required to move crude oil from Alberta to Quebec and New Brunswick, including marine facilities that enable access to other markets by ship.

This project alone would be nearly 50 percent larger than Keystone XL, and would still give Alberta's bitumen access to Gulf Coast refineries by allowing the oil to be loaded on ships on Canada's East Coast and transported down. The pipeline is expected to be in service to Quebec by 2017 and to New Brunswick by 2018. A recent open season for the project received over 900,000 bpd in shipping commitments for 20 years.

Kinder Morgan Energy Partners' (NYSE: KMP) Trans Mountain pipeline expansion project would increase the current capacity of the 300,000 bpd Trans Mountain pipeline that connects Alberta to Canada's west coast. The expansion of the current pipeline would be along the existing right-of-way, greatly simplifying the environmental permitting for the project. The project would nearly triple the existing pipeline capacity to 890,000 bpd, and would terminate in Burnaby, British Columbia. To date 710,000 bpd in shipping commitments have already been obtained. The pipeline is scheduled to begin construction in 2016 with incremental product online in 2017. This project would greatly increase the access of Alberta's oil sands producers to the lucrative and growing markets of Asia.

Neither pipeline requires US approval, both pipelines face far fewer obstacles than the Northern Gateway pipeline, and they give Alberta's oil access to both coasts. Mark my words, while there will be opposition, these pipelines will get built. After all, if you put yourself in the shoes of the Canadian government, they certainly don't want fickle US politics to threaten one of Canada's highest priorities: development of the country's 183 billion barrels of bitumen reserves.

Then of course there is the rail option. As I have pointed out many times, railroads essentially built a Keystone XL on rails in about 3 years to transport oil from the Bakken oil fields in North Dakota. Why? Because there was insufficient pipeline capacity to get growing oil supplies from the Bakken to world markets where the crude commanded premium prices. It wasn't that there was anything special about Bakken crude that allowed it be transported by rail. It's just that the price differentials were high, the railroads saw an opportunity, and oil producers were more than willing to pay the price to get their crude to distant markets.

crude oil rail shipments chart

Source: Alberta provincial government

The same thing is beginning to happen with Alberta bitumen. This crude is significantly discounted from global markets, and as a result there is a lot of incentive for shippers to get the oil to market. Whether oil-by-rail continues to ramp up at the same pace as in the Bakken -- which has been the case thus far -- will be a simple function of whether the price differentials remain high and the pipeline options insufficient.

Recently, 175,000 bpd of Western Canada's crude was being exported by rail, out of the current maximum operational capacity of 224,000 bpd.

Rail expansion projects chart

Source: Alberta provincial government

But the rail projects on the drawing board would push the rail capacity up to over 900,000 bpd. Along with the announced pipeline projects, the total capacity would cover expected oil sands production increases for several more years -- even without Keystone XL. In fact, it is safe to say that not all of the projects will be built because that would create too much capacity to the ultimate cost of pipeline companies and rail operators.

One thing is certain, though. The future of the oil sands doesn't hinge on whether Keystone XL is approved. Environmental organizations that argue otherwise are fooling themselves and their supporters.

(Follow Robert Rapier on Twitter, LinkedIn, or Facebook.)

This article originally appeared in the The Energy Letter column. Never miss an issue. Sign up to receive The Energy Letter by email.


How Pensions are Ruining Your Retirement

Detroit. LA. Chicago. Baltimore. Colorado. Alaska. Hawaii. Bankrupt city and state pensions could ruin your retirement as taxpayers are forced to bail them out. Social Security and Medicare owe future retirees $54.1 trillion. They don't have it. What happens when Uncle Sam has no more money for the rest of us? No wonder 40% of Americans say they'll work till they drop.

But one retirement "plan" has tripled nest eggs in the past 13 years. It outruns inflation. It's easy to start. You don't need a lot of money to begin. You can start today.

Details are here.

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