_________________________________________________________

Securities and investment advisory services offered through Cetera Advisors LLC, member FINRA/SIPC, a broker/dealer and Registered

Investment Advisor.

Cetera is under separate ownership from any other entity.

DONALD J. MOULTON RIAL R. MOULTON

CFP®, RFC CFP®, CPA/PFS, RFC

June 2019

e’ve discussed our debt concerns in these newsletters, on the radio show, at our seminars and in our individual

meetings for a couple of years. In a nutshell, debt has exploded, not just on the Federal level but on the corporate and ‘shadow’ levels.

Now others are beginning to take note – including the Federal Reserve. In their latest Financial Stability Report, the Fed cited “potential risks tied to nonfinancial corporate borrowing, particularly leveraged loans—a $1.1 trillion market that the Fed said grew by 20% last year amid declining credit standards.” They also flagged possible concerns in elevated asset prices and historically high debt owned by U.S. businesses. (A leveraged loan is a type of loan that is extended to those entities or persons that already have considerable debt and/or have a poor credit history. As such they are considered higher risk.)

Possibly even more scary, these loans are being packaged into collateralized loan obligations (CLO’s) and sold to investors – including insurance companies and banks – who face a risk that strains on the underlying loans could result in “unexpected losses”.

If this sounds familiar, it should. CLOs were at the heart of how subprime mortgages were

wrapped and sold before the last financial crisis.

It would be easy to dismiss these concerns since “this time is different”. After all;

Interest rates are low and will likely remain so;

Central Banks have everything under control;

The economy is strong with no recession in sight.

In fact, you should remember these same rationales were used to explain why subprime mortgages weren’t to be feared… just before the Great Financial Crisis.

But certainly these loans are not as pervasive as subprime mortgages – right? Wrong!

At their peak, subprime mortgages outstanding totaled about $600 billion. Leveraged loans total almost $1.2 trillion, double what they were just

five years ago.

Unfortunately, leveraged loans are not the only concern.

Even within investment grade corporate debt, almost half or some $3 trillion, is rated BBB, the

lowest rung of the quality ladder.

Of course, none of this makes for a solid financial backdrop, but an argument could be made that until it comes due, the economy sours,

W

MMOOUULLTTOONN WWEEAALLTTHH MMAANNAAGGEEMMEENNTT IINNCC..

“MOLTEN HOT” MINUTES

SPECIALIZING IN RETIREMENT AND TAX PLANNING 1220 N. MULLAN ROAD SPOKANE, WA 99206

509-922-3110

Your

Picture

Here

www.moultonwealth.com

_________________________________________________________

Securities and investment advisory services offered through Cetera Advisors LLC, member FINRA/SIPC, a broker/dealer and Registered

Investment Advisor.

Cetera is under separate ownership from any other entity.

Yours truly,

Rial R. Moulton, CFP®, CPA / PFS, RFC Donald J. Moulton, CFP®, RFC Certified Financial Planner™ professional Certified Financial Planner™ professional

P.S. Please feel free to forward this commentary to family, friends, or colleagues. If you would like us to add

them to the list, please ask them to send an email with their information and permission to be added.

The Standard & Poor's 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in

general. The Dow Jones Industrial Average is a price-weighted index of 30 actively traded blue-chip stocks. The NASDAQ Composite

Index is an unmanaged, market-weighted index of all over-the-counter common stocks traded on the National Association of Securities

Dealers Automated Quotation System. Yahoo! Finance is the source for any reference to the performance of an index between two

specific periods. Opinions expressed are subject to change without notice and are not intended as investment advice or to predict future

performance. Investments in securities do not offer a fixed rate of return. Principal, yield and/or share price will fluctuate with changes

in market conditions and, when sold or redeemed, you may receive more or less than originally invested. No system or financial planning

strategy can guarantee future results. Consult your financial professional before making any investment decision. You cannot invest

directly in an index. https://realinvestmentadvice.com/what-could-go-wrong-the-feds-warns-on-corporate-debt/

or both, it shouldn’t cause a problem.

There’s the rub.

Over the next five years, more than 50% of the leveraged loans and junk bonds – almost $5

trillion globally - comes due. And this doesn’t even include those BBB “investment grade”

bonds, rated only one step above junk!

Are problems already surfacing? According to the Institute of International Finance, “many companies are increasingly having difficulty making (even the) interest payments on their debt, which is growing faster than the U.S. economy.”

While CDO’s and subprime were primarily responsible for the 2008 carnage, shadow banking also played a role. These are non-bank lending institutions who provided loans to underqualified borrowers and who concocted some of the more exotic financial instruments that turned south with subprime mortgages. This unregulated lending has also exploded around the globe since the last recession, now accounting for $52 trillion worldwide, of which $15 trillion is in the U.S. alone.

As economist David Rosenberg notes:

“There is no way you ever emerge from years of

free money without a debt bubble. This time there

is a huge bubble on corporate balance sheets and

a price will be paid. It’s just a matter

of when, not if.”

If you are thinking this is a “Goldilocks economy,” “there is no recession in sight,” “Central Banks have this under control,” and that “I am just being bearish,” you would be right.

But this is also what everyone thought in 2007.

Do you have a defensive plan?

Come to a seminar to learn about ours.

Hampton Inn North June 12, 2019

9:30 AM

16418 E. Indiana

Spokane, WA *Breakfast served!

---------------

Hampton Inn Richland June 13, 2019

11:00 AM

486 Bradley Blvd

Richland, WA *Refreshments served!

Seating is Limited, So Call (509) 922-3110 Now!

(Or leave a message – 24 hours a day – and you will get a return call)

Securities and investment advisory services offered through Cetera Advisors LLC, member FINRA/SIPC, a broker/dealer and Registered Investment Adviser. Cetera is under separate ownership from any other entity.

Back By Popular Demand!

Tax & Income Planning

Strategies for 2019 and Beyond

Your Workshop Sponsor:

MOULTON WEALTH MANAGEMENT, INC.

Rial R. Moulton, Attorney, CPA, CFP®, PFS

Rial has been practicing as an Attorney and Certified Public

Accountant for over 30 years in addition to being a Certified

Financial Planner professional™ and a Personal Financial

Specialist for the last 15 years. He specializes in working with

retired individuals. He has been seen on CNBC and quoted in

the Wall Street Journal among other publications. He has also

been teaching the public since 1983 on topics related to Tax,

Estate Planning, and Retirement Income, especially in relation

to how all the disciplines – Estate Planning, Retirement

Planning, Tax Planning and Investment Planning – fit together

into a cohesive plan.

ATTEND ONE OF THESE

FREE WORKSHOPS!

Each workshop attendee will be entitled to a free tax and estate planning consultation.

Learn How Some Little Known, Yet Simple Techniques May Be Able to

Save You Unnecessary Income Taxes. You Will Discover…

The New Tax Laws and how they impact you!

Income Tax Strategies – The Good, the Bad, and the Ugly.

How to Possibly Sell Appreciated Property Tax Free!

How to Qualify as a Washington Resident to Avoid Paying Income Taxes to another State.

Rules to Stretch Out your IRA for your heirs over 30, 40, or even 50 years!

How you Might Reduce your Required Minimum Distribution and Reduce your Income Taxes!

How to possibly receive a Tax Advantage for Charitable Contributions even if you Don’t Itemize!

The Estate, Tax, and Health Risks associated with being a Surviving Spouse.

Anyone that has $350,000 or more in retirement accounts should attend this workshop!

Cetera Advisors LLC does not provide tax or legal advice. Please consult a legal or tax professional for specific information regarding your individual situation.

Tax Seminar

Call to reserve a spot: 509-922-3110

Review of the new tax laws...

Learn How Some Little Known, Yet Simple Techniques May Be Able to

Save You Unnecessary Income Taxes

SPOKANE

June 12th @

9:30 AM Details Inside

No Cost Seminars for Retirees and those close to

Retirement

Richland

June 13th @

11:00 AM Details Inside

Securities and investment advisory services

offered through Cetera Advisors LLC, member

FINRA/SIPC, a broker/dealer and a Registered

Investment Adviser. Cetera is under separate

ownership from any other entity.

1220 N. Mullan Road, Spokane, WA 99206

Sponsored By Moulton

Wealth Management, Inc.