The economy is disproportionately affecting lower-income households and higher-income households. The rich, as they say, are getting richer. Many of the not-so-rich, sadly, still need assistance. Let’s face it — if you are reading this column, you are probably well-educated and successful. Most well-educated, successful people are also generous. Generosity is often directed by awareness. I know it’s seemingly callous to consider the economic ramifications of homelessness or lower-income households on investor portfolios. But it’s the very kind of impact that I will continually address, both in this column in “numbers” as well as in my commitment to addressing the…
Insights & Advice
Retirement
Bitcoin is…
Bitcoin is “disgusting and contrary to the interests of civilization.” —Charlie Munger, vice-chairman of Berkshire Hathaway When I was 17 years old, I bought shares of the Stop & Shop Supermarket Company (that grocery chain is now part of the Ahold Delhaize conglomerate). Being the kid I was, I held it only long enough to make the money I needed to buy the computer and the mountain bike I wanted. Stop & Shop wasn’t the only stock I considered. I remember ruling out Berkshire Hathaway because I didn’t have the $6,000-or-so to buy one single share. Maybe I should have split more wood…
Stocks hit with possible tax hike
It was a losing week for stocks. Most of the blame can be pinned on a proposal by the Biden Administration to double the capital gains tax on investments. It is not official yet, but investors are counting on an announcement next week. Before you hit the sell button on all those huge capital gains you have accumulated over the last few years, know the facts. Right now, there aren’t any. What we do know is that Joe Biden ran his winning presidential campaign on increasing taxes on the rich and on corporations. He plans to do just that, so…
Will infrastructure spending boost clean energy stocks?
Renewable energy stocks were all the rage last year. This year, however, not so much, with clean energy funds taking hits of between 25-50%. Will President Biden’s proposed $3 trillion infrastructure bill breathe new life into this sector? President Biden ran on a platform that included the build out of an infrastructure plan that would “achieve net-zero emissions, economy-wide, by no later than 2050.” By the time of his November election last year, investors had bid up the clean energy sector, which includes everything from electric cars and clean water to solar and wind power, by over 200% in some…
CAPITAL IDEAS: What a year
“It was the best of times, it was the worst of times … it was the season of light, it was the season of darkness, it was the spring of hope, it was the winter of despair.” — Charles Dickens The year 2020 was dreadful. Our neighbors, friends, and family lost jobs as the economy struggled with COVID-19. Tragically, some of us lost loved ones to the virus. I keep those losses in mind as I review the year for the stock market. My intention isn’t to spike the ball in celebration of how well the stock market performed. Instead, it…
Cross currents confuse investors
You would think that with a $1.9 trillion spending package, an increasing rate of coronavirus vaccinations, and a potential $3 trillion infrastructure package waiting in the wings, the market would be at record highs. The fact it is not should tell you something about the indecision plaguing investors. When good news fails to impress, it usually means stocks (or at least some stocks) are headed lower. That should come as little surprise to readers. I advised investors to raise cash last month in preparation for what I see as a buying opportunity this month. The challenge: when do you put…
Rising rates create headwinds for stocks
The saga of rising interest rates in the long end of the U.S. Treasury market continued this week. Investors, fearing runaway inflation, sold both bonds and stocks. Will the selling continue, or is this a buying opportunity? It depends upon which asset class we are talking about. Yields on the 10, 20, and 30-year U.S. Treasury Bonds, I believe, will continue to rise. How far? It is possible that the benchmark “Tens” could finish the year at 2%. In the short-term, however, I expect yields to fall a bit on profit-taking. Last week, I warned readers that the rise in…
Tech stocks rise from the dead
The large cap technology sector bounced back this week as bond yields fell. It is a see-saw market filled with several cross-currents. But if you want to know where stocks are going, keep your eyes focused on the U.S. Ten-Year Bond yield. In my last column, I explained how rising bond yields are like kryptonite to the continued performance of what I call “super tech stocks.” During the last two weeks, the NASDAQ 100, for example, experienced a 10%-plus down draft, as bond yields rose to 1.60% from 1.25%. Investors sold FANG stocks, and technology shares in new-era sectors, like…
CAPITAL IDEAS: Do you have excess savings?
The U.S. Gross Domestic Product (GDP) has almost recovered from its pandemic loss. According to JP Morgan, the last GDP calculation was merely 1.3 percent less than its February 2020 peak. According to the Atlanta Fed’s GDPNow forecast, the U.S. economy will surpass its pre-COVID-19 peak this quarter. With the caveat that we’re only about two-thirds of the way through and anything can happen in a month (remember March 2020?), the Atlanta Fed’s model currently forecasts a 9.6 percent growth rate of GDP for the first quarter of 2021. Unfortunately, that sounds better than it is. The official unemployment rate of 6.3…
Master Your Goals
Earlier this week, our CEO Allen Harris, pointed out we all have “woulda-coulda-shoulda” investment opportunities, but how can we minimize that? Ideas. Plans. Goals. We are almost halfway through the first quarter of 2021. Now is the time to think about your “financial fitness”. Where is it now? And where do you want it to be? These questions can seem a little overwhelming if you do not know where to begin. To help identify what your specific goals are, here’s a checklist to get the conversation going. Master-List-Of-Goals-2021
Tax Tips for Charitable Donations
Charitable giving is a great way to support the causes you care about while also getting a tax break. In 2020, Congress passed the Coronavirus Aid Relief and Economic Security (CARES) Act, which incentivized charitable giving by offering new rules for charitable deductions. As we move into the new year, now is the time to make sure you’re making your 2020 deductions properly and planning for your 2021 charitable giving. Here’s what you need to know: 2020 Tax Moves The CARES Act temporarily changed some of the rules around tax deductions for charitable giving in 2020 to encourage people…
Mind Your Business: Sell-and-stay
Do you want to get paid a bunch of money to sell your company but don’t want to stop working yet? A sell-and-stay strategy can help you monetize your lifelong work while allowing you to focus on the part of your job that you enjoy. A sell-and-stay strategy is a transaction that looks like a merger crossed with an outright transaction. It involves the seller getting paid upfront, instead of exercising a more conventional “earn-out,” which forces the seller to take on some payment risk. Instead of the owner walking away, she sticks around and gets paid as an employee…
Only the rich are saving
Last quarter, the percentage of Americans’ personal savings rate stood at 5.9% of their disposable income, according to the Bureau of Economic Analysis’s. Given that number had fallen to as low as 1.9% in 2005, that’s a large improvement. But who is saving and who is not is the real question to ask. Our savings rate is clearly higher than it used to be relative to other countries. It is nowhere near the Chinese savings rate of 38% of 2014, for example, but it has improved to the point that we are now somewhere in the middle of the pack…
Only the rich are saving
Last quarter, the percentage of Americans’ personal savings rate stood at 5.9% of their disposable income, according to the Bureau of Economic Analysis’s. Given that number had fallen to as low as 1.9% in 2005, that’s a large improvement. But who is saving and who is not is the real question to ask.
The Cost of Clutter
For well over 20 years I have been guilty of the sin of cluttering. It is only now, after I was finally forced to address the consequences of my actions, that I can write this column. This is my confession.
Should You Convert your Traditional to a Roth IRA?
Next year investors will be given a once-in-a-life-time chance to convert their traditional individual retirement accounts into Roth IRAs regardless of how much you earn. Most savers’ knee-jerk reaction is to convert, pay the taxman now and forevermore be free of giving the government a cut of their tax-deferred retirement money. When I dig beneath the surface of this transaction, however, I’ve discovered a few things you should consider.