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The Money Compass: Where Your Money Went and How to Get It Back

ISBN: 978-1-118-61445-7
256 pages
January 2014
The Money Compass: Where Your Money Went and How to Get It Back (1118614453) cover image

Between the ongoing recession, the collapse of the housing market, and the crumbling of the middle class, many Americans are left wondering what happened to the American Dream. They’re also wondering what happened to their money. For millions of people, just making ends meet is challenging enough. So when it comes to saving and investing, it seems like the deck is stacked against you.

The bad news is that you’re right. If the economy were a card game, the dealer would hold all the aces. But the good news is that you don’t have to play by the house rules. Renowned for his unvarnished insight on finance and investing, money manager Mark Grimaldi has a reputation for telling it like it is. He doesn’t sugarcoat the negative and he doesn’t have time for the financial industry hype that leads to bad investing decisions. Here’s the truth: the economy is in bad shape, but that doesn’t mean you can’t save responsibly, invest profitably, and retire comfortably.

In The Money Compass, Grimaldi teams up with accounting professor G. Stevenson Smith to offer a wealth of smart investing advice for today’s investor. This plain-English guide to good investing presents practical strategies and actionable advice for safely navigating today’s financial markets. It shows you how to manage credit and debt responsibly, how to use the tax code to your advantage, which kinds of trendy investing advice you should ignore, and where to put your money for solid returns.

In addition, the authors explore the hard macroeconomic realities that explain how we got here and where we’re going next. They look at the primary causes and consequences of the recession, the housing crash, the slow collapse of government programs, long-term unemployment, and how it all impacts you and your money. Plus, Grimaldi and Stevenson forecast the next big economic shock and show you how to profit from it. 

The economic game is rigged to keep you poor and keep Wall Street rich. So it’s time to write your own rules. Whether you’re white collar, blue collar, or somewhere in between, The Money Compass gives you the commonsense guidance you need to chart a course to a comfortable financial future—even in the roughest economic waters.

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Preface xi

Acknowledgments xiii

Chapter 1 Introduction: The Invisible Hand of Confiscation 1

The Fourth Branch: K Street Government 2

More Income Tax and More Debt, Too 4

Monetization of the Debt: Say What? 8

The Last Biggie: Repeal of Glass-Steagall and Gamblers Gone Wild 11

Summary 13

References 14

Chapter 2 Greenspan and the Growing Bubble 15

Simple Plans Often Become Complicated 17

Moving On . . . 19

The 36-Day Election 24

My Takeaway Is More than Fries 28

Summary 30

Reference 30

Notes 30

Chapter 3 Drop the “U” Out of “Housing” and You Get What America Got 33

2000 to 2006: The Perfect Storm 35

Oops, Almost Made It 38

2007: All Fall Down 40

2008: The Year of Reckoning 44

The Fat Lady Sings: “It’s Not Over” 46

2009 to 2012: The Road to Recovery? 48

Looking Ahead 49

50-Year Mortgages 50

What to Do Next? Let’s Buy a House 51

Summary 54

Reference 55

Notes 55

Chapter 4: Credit Cards: Let Me Have It NOW! And They Did 57

The New Law 58

Let’s Skip a Payment 59

The Contract 60

How Is That Interest Rate Figured? 62

The Credit Card Tax 67

Tipping a Hat to Debit Cards 68

Getting Back 70

Summary 74

Notes 74

Chapter 5: Who Are Target-Date Retirement Funds Targeting? 77

A Ticking Time Bomb 84

The Dawdling SEC 86

What Can You Do? 87

Chapter 6: Four-Oh-One-Kay Tales 89

The Truth about Your 401(hey)! 90

Meet Mr. Uninformed and Mrs. Navigator 91

Mr. Uninformed and Mrs. Navigator, 10 Years Later 93

A Little More Sizzle 95

One Exception 97

Four Reasons to Invest in After-Tax Accounts 97

Summary 99

Chapter 7: Exchange-Traded Funds 101

Is Mr. Bogle “Indexing” the Problem? 101

What Is an Index Fund? 102

Why Invest in an Index Fund? 103

Giving Up Downside Protection 104

Giving Up the Ability to Lock In Profits 105

Why Not Buy and Hold? 107

So What’s Wrong with ETFs? 107

How Much Should You Pay for an ETF Trade? 110

The Benefits of Professionally Managed ETFs 110

Ranking ETFs the Grimaldi Way 111

Summary 112

Note 114

Chapter 8: Who Took My Money Now?

The Collapsing Education System 115

The Feds and State Government 116

The Vendors 117

School Administrators, Relatives, and Cronies 119

The Boosters 121

Teachers, Sex, Unions, Drugs, and More Fraud 123

Parents 128

Students 129

So What Are You and Yours Losing? 130

Are There Choices? 131

Summary 134

Notes 135

Chapter 9: Staying Poor in America 137

Rich or Poor? 138

What Else? Business Models Have Changed Our Way of Earning a Living 141

Other Factors Making Americans Poor 143

Spend It if You Got It or Pretend to Be Rich Until You Are Poor 144

Governmental Solutions 146

Private Solutions 147

Summary 150

Notes 151

Chapter 10: The Federal Debt Bomb: Hold Your Breath (at least try) 153

Government Choices and Me 156

What Am I Going to Lose in These Policy Choices? 164

So How Do I Keep from Losing My Shirt—or at

Least Survive an Inflationary Environment? 169

Summary 171

Notes 171

Chapter 11: Navigating the 2014 Recession 173

Beginnings 174

Behind the Accolades—Accurate Forecasting 177

The 2014 Recession 180

Recession Rules to Live By 181

Navigate Carefully 184

Appendix The Grimaldi Forecasts 186

January 2008 Navigator Newsletters 186

February 2008 Navigator Newsletters 189

March 2008 Navigator Newsletters 189

June 2008 Navigator Newsletters 191

November 2008 Navigator Newsletters 192

May 2009 Navigator Newsletters 194

Chapter 12: Changing Job Patterns and You 197

How Could This Happen? 200

Did You Leave the Middle Class on Purpose? 202

The Job Recovery from the Great Recession 203

Societal and Economic Effects 204

A Possible Solution? 207

Summary 210

Notes 210

Chapter 13: Gratuity Government: Should I Take the Free Butter? 213

Taker Trends: Get Wise and Do Less for Yourself 215

Entrance to the Land of the Takers 216

Transfer Payments and a Hypothetical Monthly Budget 223

Summary 225

Notes 226

About the Authors 227

Index 229

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Mark A. Grimaldi is a Certified Fund Specialist, co-founder of Navigator Money Management, Inc., and Chief Economist for the Navigator family of newsletters. In 2009, he launched The Sector Rotation Fund (NAVFX), a pure no-load mutual fund. Mark serves as Vice President of The Prestige Organization, Inc. Mark correctly forecasted the housing depression, the gold rush, 10% national unemployment and in January 2010 said "In 2010 the DJIA will have it's first 1000 point down day ever"!

G. Stevenson Smith, PhD, CPA, CMA, is the John Massey Endowed Professor of Accounting at the John Massey School of Business at Southeastern Oklahoma State University. He formerly worked for the Securities and Exchange Commission in Washington, D.C., as a financial analyst. Dr. Smith is the author of three books on nonprofit financial management, including Cost Control for Nonprofits in Crisis.

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January 21, 2014
The Money Compass: Where Your Money Went and How to Get It Back

If you are like many investors, you were hit hard by the Great Recession. We Americans spent years watching our investments grow as we followed the advice of finance gurus and investment managers. Then, in 2008, we watched all that hard work go down the proverbial drain overnight. In the aftermath, we have discovered that the situation on Wall Street is infinitely more complex and uncontrollable than we ever suspected. The Money Compass explains what is really going on in the markets today, where your money went, and how to hold onto it once you've gotten it back.

The first step to understanding the biggest financial collapse in a generation is coming to terms with the fact that you weren't prepared for it. Almost none of us were. We didn't see it coming because we were still operating under the old rules. Mark Grimaldi and G. Stevenson Smith wrote this book so you can understand the newrules. Financial markets no longer work the same way they did when most investors got their start. The key to holding on to your investments today is in learning to look at markets through a totally new lens.

A less-than-perfect U.S. credit rating, ongoing depression in the housing market, high-volume trading, flash crashes, and the collapse of American manufacturing—these are all things that would have been unthinkable just a few years ago. Today, they are a reality, and The Money Compassis a guide to navigating this reality. If investors don't adapt, and adapt quickly, they risk joining the ranks of market dropouts who may never recover from recent losses. Retirement plans, mutual funds, the labor market, you name it. It's all changing, and a failure to adapt is what got us into this mess in the first place. It is absolutely imperative that we get with the times.

You can't adapt if you don't understand what's going on. That's why this book exists. The authors tell it like it is, explaining how, while Americans weren't looking, the U.S. government, with the help of special interests, created a volatile financial situation that continues to lead straight to the confiscation of your hard-earned wealth. Keeping your investments safe and stable is still possible, but you will need to get informed about what's really happening on Wall Street. The Money Compass points the way to financial recovery and stability, no matter where you're starting from.

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