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If you’ve been thinking that stock markets have been pretty quiet this year, you are right. Through the first seven months of the year, none of three major stock market indexes has fallen by more than 5 percent. And one gauge of market movement, the CBOE Volatility Index (VIX), which measures investors’ expectation of the ups and downs of the S&P 500 Index over the next month, recently dropped to its lowest level in 24 years. Low readings have tended to be equated with low anxiety and high stock prices. Amid this environment, you might be wondering what could go wrong? There are a number of risks to the US and global markets that persist. Their existence does not mean that long-term investors should change their game plans, but they are a reminder to guard against complacency and to always approach investing with caution.
Social Security, Medicare and Medicaid Q&A
Just in time for the upcoming anniversary of The 1935 Social Security (SS) Act, the 2017 Annual Report of the Board of the Social Security Trustees is out and once again, the news is sobering. “Both Social Security and Medicare face long-term financing shortfalls under currently scheduled benefits and financing.” Additionally, the debate over health care has put Medicaid in the spotlight, so it’s time for a Q&A on three of the largest components of the federal budget, which account for about $2.4 trillion of spending.How is SS funded? It’s a pay as you go system, funded by payroll taxes (the FICA line item you see on your pay stub). Every employee (and employer) pays a 6.2 percent tax on earnings up to a limit, which is currently $127,200. If you are self-employed, you have to pay as both the employer and the employee, for a total of 12.4 percent.
3 Economic Risks
During her Congressional testimony, Fed Chair Janet Yellen painted a fairly bright picture of the US economy, stressing a rebound in consumer spending, which should allow the central bank to gradually raise short-term interest rates over the next few years. Investors were heartened to hear that message and drove stocks higher, with the Dow closing at a new all-time high after Yellen’s first day of testimony. What could undo this rosy picture? There are a number of risks to the US and global markets that persist, though three rise to the top of the list. Their existence does not mean that long-term investors should change their game plans, but they are a reminder to guard against complacency and to always approach investing with caution.
KISS for Summer 2017
With Independence Day behind us, the heart of summer has begun. For some, it is the time to disengage from real life issues, like personal financial. For me, it’s time for my annual “KISS” for your money! What is KISS? “Keep It Simple, Stupid” and it’s the perfect mantra for this time of year. Here are five tasks that are easy to complete before you shut down.
Half Time for the Economy 2017
The better than expected June jobs report and Federal Reserve Chair Janet Yellen’s upcoming Congressional testimony is a good opportunity to review where the U.S. economy stands at the mid point of 2017. Economic Growth: The broadest measure of economic growth is Gross Domestic Product (GDP). Over the past fifty years or so, the economy has grown by 3 percent annually. In the past decade, that rate has dropped to about 2 percent, with 2015 being the best year (+2.6 percent) and 2009 the worst year (-2.8 percent).
Credit Scores Likely to Rise
Credit scores recently reached a record high and given changes to the industry, they could continue to rise. According to Fair Isaac Corporation (creator of the widely used FICO score), the average score hit 700 during the spring, the highest since at least 2005. As a reminder, FICO scores range from 300 to 850 and borrowers with scores above 750 are generally considered excellent, while scores below 650 are considered poor. The three most important factors that determine your FICO score are: payment history, total debt outstanding, which takes into account how many accounts you have and how close you are to your credit limit and the number of hard credit inquiries made on your behalf from mortgage, auto or student loan companies.
Summer Reading 2017
It’s a tough sell to recommend a financial book as summer reading, but the following will not feel at all like homework. I have interviewed these authors on my podcast, “Better Off”, so feel free to listen for a preview. The Good, the Bad and the Ugly Wall Street
Senate Health Care Q&A
By now you have seen the headlines, but to understand the full impact of the Senate Health Care bill (Better Care Reconciliation Act), here is a Q&A that dives into some of the numbers of the current version of the plan. What is Medicaid? Medicaid is the country’s largest government health care program, covering about 20 percent (74 million) of all Americans, including:
Amazon vs. Wal-Mart
American consumers will soon have an easier time: they will shop at either Amazon or Wal-Mart. That’s overstating the situation, but after Amazon announced that it was buying Whole Foods for $13.7 billion and Wal-Mart (which last year bought fledging Amazon competitor Jet.com for $3.3 billion), said it had purchased online men’s retailer Bonobos for $310 million, the retail landscape shifted once again. Both transactions signify that to succeed, companies will need robust digital as well as a brick and mortar beachheads. Whenever big deals are announced, it can make you feel like there are going to be three or four companies left in each sector. In the past, there have always been cycles of expansion and consolidation and just as big conglomerates were created, they could also be pared down.
The Unromantic Wedding Gift: A Prenup
It’s wedding season and as thousands of happy couples prepare to take vows, just a fraction will spend time contemplating the end of their relationships. Let’s face it: signing a pre-nuptial agreement (“prenup”) is the most unromantic engagement or wedding gift ever. A prenup is a contract that outlines how a couple would split their financial lives in the event that the relationship does not work out. While most of us may think of a pre-nup as something for the very rich, after hearing about disastrous divorces and the financial horror stories associated with them, it’s clear that many more couples might benefit from the process that forces them to outline what they bring into the marriage, how they might split up assets accumulated during the marriage (marital property), including a home, and how the couple intends to manage family gifts or an inheritance.