Please join us for this very important show. Investors, especially baby boomers, need to protect themselves. “Trust the Fed” is not good advice, nor is “stay the course.” Replays anytime after 2/22 Watch on Facebook: https://www.facebook.com/100144354887536/posts/495743881994246/ Watch on YouTube: https://www.youtube.com/watch?v=RMhZInL5ttU Watch on LinkedIn: https://www.linkedin.com/video/event/urn:li:ugcPost:6899746952225861632/

1. Dealing With Dangers in the Economy & Stock Market

2. Ron Surz & Kathy Tarochione
Ron@TargetDateSolutions.com & KathyTarochione@gmail.com
10:00 PST on Tuesday February 22, 2022 (2/22/22)

3. Agenda
• Threats
• Money printing reaction to threats
• Stock & bond market bubbles inflated by
money printing
• Inflation bursts bubbles
• Federal Reserve can’t control inflation
without bursting bubbles
• Have we been hustled?
• Investor safety, especially target date funds
• Be prepared

4. 5 Reasons That it Really is
Different This Time
1. Interest rates have never been lower
2. The US government has never printed more money
3. Stock prices have never been higher
4. The wealth divide in the US has never been wider
5. There has never been 78 million people in the
Investment Risk Zone at the same time

5. What Could Go Wrong?
Episode 2: Threats
https://www.youtube.com/watch?v=vb44OnTumyw&t=
51s
Popping the Bubble

6. Social Security & Medicare
Going Broke
• Social Security Bankrupt in 2026
• Medicare in 2034
BUT we could just “print” money
Source: Target Date Solutions
• Treasury issues bonds
• Federal Reserve buys them

7. Quantitative
Easing & ZIRP
And now COVID
2008 Recession

8. Modern Monetary Theory
Poke the Inflation bear with money printing, but take it back with taxation if inflation happens

9. The Inflation
Bear is
Infuriated

10. Printing Money: Modern Monetary Theory
Treasury
Federal
Reserve
Federal Reserve buys most of Treasury borrowing Inflation follows the money

11. Perspectives
0
2
4
6
8
10
12
14
$Trillions of New Money Compared to Spending on Wars
New Money Costs of Wars
5.2 9.7 13 4.7 9.9 12
COVID
COVID
+
QE
COVID + QE + Infrastructure
WWII
WWII
+Since
2001
13 Biggest
Source: Glidepath Wealth Management and Congressional Research Service
Why Cash Might Not be Safe

12. Wealth Divide Causes Social Unrest
Source: Statista

13. Helicopter Money “Rescues”
the economy and stock market
but…
• Wealth concentration
• Limited bank lending
• Aging population
• Technology advances
• Abundance (e.g. Energy)
• Outsourcing $4
$9
$13
Where & when will the scales tip?
$Trillions
Source: Target Date Solutions
Money Printing and Inflation

14. A Stock Market Gone Berserk

15. S&P500 Returns 600% in past 13 Years
Sources: Yahoo Finance, Standard & Poors, & Target Date Solutions
13 Years of Consistently High Stock Market Returns

16. China Learned a Lesson in 2015
US Stocks
China Stocks
Source: Trading Economics
Government
Stimulation

17. Value versus
Price
Bubble:
Price much
higher than
Value

18. 10 Indications That Investors are “Normal”, not Rational
Reasons the Stock Market is Inflating Behavioral Bias
Federal Reserve to the rescue Representative
Interest rates will remain low Recency
Fear of missing out (FOMO) Hindsight
Economic recovery Framing
92 million millennials are buying Herding
Vaccine cures the economy Loss aversion
FAANG mega companies rule Narrative
Foreigners are big buyers Confirmation
“Hopium” the drug that gives hope Self attribution
Amateurs can beat Wall Street Overconfidence

19. The Most Expensive Stock Market Ever
By A Very Wide Margin!!
https://markets.businessinsider.com/news/stocks/warren-buffett-indicator-record-global-stock-market-boom-
bubble-crash-2021-9
Who says it’s a bubble?

20. Recession (Contraction) is Overdue by 92
Months (130-38), which is 7.5 Years
Average Cycle
Expansion Contraction Total Cycle
# Months 38 18 56
-10
10
30
50
70
90
110
130
Current Cycle, so far
Expansion Contraction Total Cycle
# Months 130 0 130
-10
10
30
50
70
90
110
130

21. Price / Earnings is
the Wild Card:
How much will investors
pay for future earnings?

22. High P/Es only
when Inflation
is near zero.
Low P/Es when
there is high
inflation OR
high deflation
Source: Crestmont Research
Today
Inflation
Deflation
Both Inflation & Deflation
Lead to Low Price / Earnings
P/Es are driven by investor psychology: Greed and Fear
Fear Greed
P/E

23. Coming Soon
A Minsky Moment refers is the onset of
a market collapse brought on by the
reckless speculative activity that
defines an unsustainable bullish period.
Minsky Moment crises generally occur
because investors, engaging in
excessively aggressive speculation, take
on additional credit risk during bull
markets.
Minsky Moment defines the tipping
point when speculative activity
reaches an extreme that is
unsustainable, leading to rapid price
deflation and unpreventable market
collapse.
Economist Hyman Minsky

24. Return Forecasts
Next 12 months: 50% loss
Next Decade (Annualized): 1% loss per year
Components of
Return
Earnings Growth
+ Dividends
+ Price/Earnings Expansion or
Contraction: Investor Sentiment

26. Fueling the Inflation Fire
$4.5 Trillion Quantitative Easing
$5.5 Trillion COVID
$3.0 Trillion Biden Packages
$13 Trillion in New Money

27. Recession
Inflation
COVID Relief
+ New $4 trillion
Quantitative
Easing

28. $1 Trillion
Unemployment
, 885
Vaccine, 440
Schools, 440
Business,
226
Obamacare, 135 Landlords & Renters, 95
$4.2 Trillion
Where the $5.2 Trillion
Has Gone
$1.7 Trillion
Indirect
Source: USA Today
Source: The Baby Boomer Investing Show
Collected from various sources

29. Do Not Swallow
This BS
Inflation is NOT
Transitory.
The Fed CANNOT
stop it.

30. The Fed Cannot Control
Inflation Without Crashing
the Stock & Bond Markets
If you’re in a hole, you need
to stop digging. Money
printing needs to stop.

31. The Fed is at a
Crossroad
The Quantitative
Easing (QE)
experiment is
coming to an end.
The Fed cannot
control inflation
without crashing
the stock market

32. The Process the Fed Put in
Motion Cannot be Stopped
Double
Whammy
Inflation
Demand
Pull
Cost Push
Market
Crash
Overpriced
Stocks
• Supply shortages generate
current demand-pull
inflation
• $13 trillion in newly printed
money creates cost-push
inflation. GDP is $21 trillion
• Insanely overpriced stocks
will crash. They are NOT an
inflation hedge. Deflationary forces are overwhelmed

33. ZIRP
Causes
Inflation
End
ZIRP
Interest
Rates Rise,
so Bond
Prices Fall
Debt
Service
Increases
Stock
Prices
Fall The Fed’s
Dilemma
Massive money printing is required to manipulate
bond prices to Zero Interest Rate Policy (ZIRP). This
causes Cost-push inflation that is added to supply
shortage Demand-pull inflation.
Tapering bond buying reduces
money printing, & inflation.
And allows interest rates to
return toward normal –
without official rate hikes.
The Fed must keep some manipulation
When all manipulation ends, yields
revert to inflation + 3%, or 10% when
inflation is at 7%.
A 9% increase in yields generates a 54%
decrease in bond prices
Interest on $30 trillion of federal debt
increases from 1% ($300 billion) per
year to 10% ($3 trillion). Total tax
revenues in 2021 were $3.9 trillion.
Rising interest rates cause stock
prices to fall because earnings
are discounted at a higher rate
and borrowing costs increase.
Stock market losses put pressure on Fed to lower
interest rates, so they do, as they did in the 2013
Taper Tantrum.
A Vicious Cycle: We are HERE now. Will we come full circle again?

34. Risk Premia Building Blocks:
96 Year Return History
Stocks =10.5%
Bonds + 4.5%
Bonds: = 6%
T-bills + 2.5%
T-Bills =3.5%
Inflation
+0.5%
Inflation
=3%
Bond Yield:
Inflation + 3%
Sources: Pyramid is Target Date Solutions
Remember
when bond
prices weren’t
manipulated?

35. Rising Interest
Rates Cause
Disaster
When ZIRP (Zero Interest Rate Policy) ends
Article: Click on Image or following text
https://401kspecialistmag.com/what-the-federal-reserves-
misguided-policies-really-mean/
Inflation
Increased
Bond Yields
Decreased
Stock Values
7% Inflation + 3% Real Interest = 10%
Taper

36. Regardless of Who is Right
The primary investment objective of baby boomers should be to protect
their lifetime savings. This doesn’t make Wall Street happy.
Wizards of Wall Street say “Don’t Worry”

37. A Hustle Follows a Script
for the “Long Con”
•The “Roper” finds a “Mark”
•“Grifters” research the “Mark” to find a
vulnerability
•“Fixer” sets up the con (story) & enlists “Shills”
•They give the Mark a “Convincer”.
•“Closer” executes the “Sting” using urgency
•Grifters escape
Great TV Series
Very clever!!

38. A mind game:
Has China conned the USA with MMT & COVID?
•The “Roper” finds a “Mark”. China wants to be king, above USA. The USA is the Mark.
•“Grifters” research the “Mark” to find a vulnerability. Politicians want to be re-elected. Citizens want
free stuff.
•“Fixer” sets up the con (story) & enlists “Shills”. China is behind MMT. Japan is an (unwitting) shill.
•They give the Mark a “Convincer”. USA uses MMT to “solve” the 2008 crisis, & it “works.” USA spends
$5 trillion
•“Closer” executes the “Sting” using urgency. COVID gets USA to spend another $5 trillion. And it adds
at least another $3 trillion for Biden plans. $13 trillion is more than our most expensive wars.
•Grifters escape . Chinese economy grows without inflation.

39. Protecting Assets
60/40 & Target Date Funds are Way Too Risky

40. Investors Are Not Safe. The Ubiquitous 60/40.

41. Congressional
Request for Review
of Target Date Fund
Risk and Practices
Why is Sequence of
Return Risk so high?

42. It is unconscionable that
regulators and TDF providers
do not even attempt to warn
and quantify sequence of
return risk and the Risk Zone
for the many unsophisticated
defaulted investors who want
a “dignified retirement”
High Risk near the
target retirement
date is just plain
wrong.
An Annuity Purchased at Age 65:
Investor A: Lifetime Annuity generates only $670/month due to Sequence of Returns Risk and a lower Annuity
crediting rate as the Federal Reserve cuts rates to stimulate the economy after the three-year stock market selloff. The
Investor feels the planned dignified retirement slipping away accompanied with higher levels of stress and health
concerns.
Investor B: the Annuity pays $2000/month placing the investor on the path for a dignified retirement with social
security and other savings/income.
Sequence of Return Risk

43. Two Types of TDFs: Safe & Risky
(“To” versus “Through” is a distinction without a difference)
“Safe” for TSP is Government Guaranteed Fund G.
For SMART & OPEIU it’s T-bills & Intermediate TIPS.
85% Risky at the Target Date is
Shocking
TSP is the largest savings plan in the world

44. Do Not Swallow This
BS Either
High risk is justified by:
(1) Inadequate savings
(2) Longer lives
The Retirement Crisis

45. Fiduciary
Hypocrisy
and/or
Ignorance
Protect
beneficiaries
near
retirement
Select
Risky
TDFs

46. Be Prepared: Something is
Going to Break
Move NOW to Inflation-Protected Safety

47. Protection Portfolios Guard
Against Inflationary Recession
Blending a Stabilization Portfolio
with a Real Return Portfolio
TIPS, 60
Short
term
TIPS, 40
Commodity
, 17.5 Agriculture,
5
Physical
gold, 17.5
Precious
metals, 5
Blockchain,
5
US Real
Estate, 25
Global Real
Estate, 25
Stabilization: 1/3rd
Real Return: 2/3rds
The Talmud is the source from
which the code of Jewish
Halakhah (law) is derived.

48. Options-based
Protection:
Betting Against
the Markets
• Puts are Insurance
• Leveraged inverse ETFs, like
Direxion funds
• Guardrails, like Innovator
ETFs
• Straddles, etc.

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