Insights & Advice

Dalton – For some folks, here’s what we used to do at Berkshire Money Management. When a client passed away, and the beneficiary of their Individual Retirement Account (IRA) was a non-spouse, we’d have the recipient of that inheritance place the money into what we call a “stretch IRA” account. Using a stretch IRA (an estate planning strategy used to “stretch” required distributions over a lifetime) allowed for the assets to have the advantage of growing tax-free for a longer time, as well as keeping the recipient in a lower tax bracket. The SECURE Act, which is part of a spending…

“If a tree falls in a forest and no one is around to hear it, does it make a sound?” – George Berkeley Dalton — A lot of people (well, a lot of people who don’t read Capital Ideas) woke up December 19 thinking that they changed White House locks and kicked out President Trump. Nope. Impeachment is not the act of removing a sitting president, though it is the start of that process. We all know that there is virtually no possibility that the Senate will vote Trump out. A lot of that is easy to understand; you can just look…

Dalton — The probability of a U.S. recession, as measured by the New York Federal Reserve’s Treasury Spread ratio, has dropped from a high of 37.93% in August back down to 24.61% for November. Reaching 37.93% brought the ratio into the dangerous 10th percentile of highest, riskiest ratios. If there ends up being an economic contraction, that is the highest it has ever gotten since 1967 without going into a recession within the next 12 months. The ratio was well within the range of, if not higher than, past ratios prior to all other recessions in the last 30 years. A receding…

Just in the last couple of weeks, The Berkshire Eagle has reported on local prominent closings and quasi-closings. Still others shuttered without a whimper. And even more struggled to keep up with the gain in market share their competitors grabbed. The missteps that cause some businesses to fail are the same steps you can take (and get right) to potentially make your business more competitive. It is said that failure is the best teacher, and I agree. But it doesn’t have to be your failure. Sometimes businesses close because the owners are great at their craft but the industry, or the world,…

Dalton — The S&P 500 stock market index will hit 3,264 points in 2020. Or, at least, that’s the average vision of Wall Street analysts. That’s an increase of about 3 percent from last week’s highs. MarketWatch surveyed some of Wall Street’s “top strategists” (whatever that means) to get their view on how the stock index would perform next year. There was a range of views with a few expectations in the 3,400 range (about an 8 percent gain from last week’s levels) and a couple targets of 3,000 (about a 5 percent loss from last week’s levels). For calendar year…

What is financial agility? Well, it’s a term I made up, but it seems descriptive enough to be easily understood. Financial Agility is the ability to adapt to changes to your financial future, as well as to overcome any challenges along the way. Your “agility score” is tied to one simple metric: your fixed expenses. If we look at the costs you face every month compared to your total income, we will have our starting place. There are numerous ways to increase your agility, but not all of them are easy. First, you need to reduce your fixed costs. Things…

I publish a hyperlocal business newsletter, called the Berkshire Confidence Index, or BCI. In the Spring 2018 BCI survey, which was sent out to nearly 4,000 local business owners, I added the question, “What type of revenue streams do you have?” The answers provided were consumables, sunk-money consumables, subscriptions, sunk-money subscriptions, auto-renewals and contracts. In that order, from suckiest to best, those are the types of revenue models that will help you have sales predictability. The overwhelming response to the question was “not applicable.” Respondents didn’t think it was pertinent to their industry. Moving from selling goods or services as…

Dalton — The stock market decline of last week was mild enough to still leave investors with a lot to be thankful for. The decline prior to Thanksgiving week clipped what ended up being an impressive seven-week winning streak for the Nasdaq, and six weeks for the S&P 500. Following such streaks, is it safer or riskier to remain invested? Are streaks such as these the beginning of longer-term positive trends? Or has the stock market become overbought, and if so, is it time for a price reset? Going back to 1971, there were 34 prior seven-week winning streaks for the…

Dalton — OK, Boomer, it’s time you stopped risking your retirement by loading up on too many stocks and avoiding bonds. That’s the finding of Fidelity Investments’ quarterly retirement report. The investment company performed an analysis across more than 30 million retirement accounts and reported several reveals. Participants who have been in a 401(k) for at least 10 years have a record average balance of $306,500; the Roth IRA account is becoming more popular; and more people are using expensive “target date” funds. Also — and here is where Fidelity goes off the rails — by comparing its own target date recommendations…

Dalton — Many of us think that we’re somehow smarter than the next person. For example, typically 90% of respondents surveyed respond that they are better than the average driver, and that they are also better than average at getting along with people. It’s statistically impossible for 90% of people to be better than average. Overconfidence can be a healthy attribute. It makes us feel good about ourselves, which creates a positive framework. However, overconfidence in our investment skills can get us into trouble. For example, in one study, 74% of mutual fund investors expected their investments to consistently outperform the…