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12:00 TUESDAY – Stock Market Report #171 – 6/21/22

by Robert Holman | The Defensive Advisor |

EQUITY MARKET RATING…2.0 (0-4 bearish, 5 neutral, 6-10 bullish). There is a bull/bear battle that continues weekly.

TODAY’s TOPIC (a continuing series) What other important financial numbers do you need to know? We have already discussed free cash flow and debt payoff dates.

RETIREMENT INDEX NUMBER – add together all you CASH or cash equivalents – CDS, retirement accounts, investment accounts, annuity balances, etc. but not life insurance or long-term assets. Then adjust that cash number by deducting all your debts (mortgages, credit cards, etc.) to get your net cash. Next, adjust your current INCOME by multiplying it by 0.80 and subtract any payments you will get in retirement (social security, pensions, disability, property returns, etc.). Finally, divide your adjusted net cash by your adjusted income. You are in decent shape if your number is 20 or greater. If your number is less than 20, you need the help of a financial planner who can help you boost your cash through higher investment returns.

The reason we want to use current numbers, rather than future projections assuming growth, is twofold – first, we want to keep it simple and second, we want to know today’s index and monitor how it changes over time. For a more complex numbers, see a financial planner with models that incorporate growth assumptions, but beware the way that numbers can “run away” from reality. These models generally assume a higher investment return than the inflation rate, which tends to bias the results. There have been whole decades when inflation outpaced investment returns. You will probably discover that an retirement index number of 20 would equate to a 25 when computed with growth assumptions. Most planners still use the rule that “you can safely draw down your net cash by 4% per year” and make it comfortably through retirement. (4% withdrawal approximately equals a 25 retirement index number).

What you have done is to add up all the net cash you have to live on in retirement and divided it by how much you require to live on each year. Your retirement This will tell you how many years you can sustain you living expenses. We reduce current income to reflect the reality that we do not spend as much in retirement. By that time, you will have acquired most of the assets you need to live (think furniture, clothes, TVs, autos, etc.) and will only infrequently need replacements. So, a retirement index of 20 estimates that you could live another 20 years on your net cash.

EQUITY MARKETS and the ECONOMY The market is up today after a holiday weekend. If this trend continues for a while, it will bring much needed relief to investor worries and fears. Upcoming economic numbers of significance this week and next are final GDP, various energy stats, consumer sentiment and consumer confidence. But, the biggest number is “PCE core inflation” for May, released on June 30. The Federal Reserve pays more attention to PCE inflation than to CPI inflation.

Today is a day where fundamentals are dominating fears. Will that trend continue? That depends on upcoming fundamentals, i.e., the economic news to be released over the next 30 days. It's all about oil prices, interest rates, inflation, the impact on consumer cash flow, and the impact of all these numbers on corporate profits. It is unprecedented that consumer confidence is this low when employment is this high. It’s never happened before!

Keep in mind that in this type of market, fear can dominate fundamentals quite rapidly.

As a reminder, inflation is stressing out everybody as shown by consumer sentiment, which came in at an all-time low. On a year-over-year basis, CPI headline inflation came in at 8.6% versus 8.3% in April. Oil did sell off within the last 10 days, but is now rising again, presenting a buying opportunity in energy stocks.

PORTFOLIOS … After reading this report, if you are unsure what to do with your portfolio, or how to increase your cash flow, call me to discuss your circumstances and I’ll explain what ought to be done to help your situation.

If you would like a complimentary portfolio evaluation, along with a recommendation for two stocks to add to your portfolio, just click here and we will explain what’s good about your portfolio, and how it’s likely to perform in upcoming months, all at no cost to you. Alternatively, you may securely email your portfolio holdings to us (click here) and we will input the data for you.

TO MY CLIENTS … THANK YOU FOR YOUR TRUST. We’ve had great success since we started this RIA in mid-2018 and are doing better than the market return over the same time period.

Excelsior Divitiae. Proverbs 21:5, 22:3, 27:12 and 3:56, Joshua 1:9, Ecclesiastes 8:7, 1Chronicles 12:32 and 29:11-13, and James 4:13-16.

Published every Tuesday at 12:00 noon. For more information on my investment and planning services, or to sign-up for this weekly e-Newsletter, visit my website: OR

Opinions voiced in this post are for general information only and are not intended to provide specific advice to or recommendations for any individual, without complete knowledge of that individual’s total financial profile. No strategy assures success or protects against loss. Past performance does not guarantee future results.


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