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Obsession Over “Considerable Time”

The Fed concluded their two day meeting yesterday, and it held no real surprises.  The expansion of the balance sheet (almost $4Trillion in money printed since 2007) will finally come to an end next month. They did raise their median estimate for the federal funds rate (currently 0.25%) at the end of 2015 from 1.125% (as of June) to 1.375% (as of September). The median estimate for the end of 2016 is now 2.9%, up from 2.5%; and they believe the rate will be 3.75% by the end of 2017; this is the first time they have published a 2017 estimate. (Source: Charles Schwab) As a reminder, the Fed members…

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The Seasons

We have compared investing to farming multiple times over the years.  We believe there is a time for planting and a time to harvest.  We actually saw a negative return in equities last month, which may be a surprise to many as the two year rapid ascent has caused many investors to get complacent in regards to their expectations of returns. The economic cycle has followed this pattern in the past and will continue the same dance into the future.  Stay focused on balancing risk and don’t forget to harvest profits occasionally.

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Rising Interest Rates in Your Future?

This week will be a busy one with Wednesday a key day as the release of the initial estimate of second-quarter gross domestic product and a statement from the Federal Open Market Committee at the close of its monetary policy meeting on July 29–30. On Thursday, the Employment Cost Index for the first quarter comes out. A number of reports will be released on Friday, including personal income, construction spending, the ISM Manufacturing Index, and the closely watched monthly employment situation. This begs the question of when the Fed will raise interest rates, which we break down into three decision points: Economic Strength – Estimates for advance Q2 GDP is only…

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Do You Need a Mulligan?

I was raised to respect my elders and listen closely to their advice… there is much to be learned from their life experiences. I could not resist posting the #1 answer to this question in a survey of adults over 60 years of age: What, if any, of the following steps do you wish you had taken to plan and prepare for your senior years? #1 Answer…. SAVE MORE MONEY by 45% of the survey respondents. #3 Answer…. MAKE BETTER INVESTMENTS by 31% of the respondents. The medical community won’t be surprised that the #2 answer was Taking Better Care of My Health. It may not be too late for regret, so listen to your elders!…

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Taxing Issues.. Key Triggers for an Audit

IRS funding cuts have shrunk examinations to their lowest level since 2005. Only 1 return out of every 104 filed are examined, and we expect this number to get wider as funding continues to be an issue for the agency.  In addition, the agency continues to suffer brain drain as experienced examiners retire or leave for a better work environment. It makes me wonder when Congress will address tax reform.  Our system is too complex, and cheaters are less likely to get caught as the agency suffers.  It’s a no brainer in my opinion to drastically simplify the tax code. Of course, the only reason filers should worry about an…

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Looking Into The Future

We tweeted out an interesting statistic today from the Journal of Financial Planning that reinforces the sea change that is building from the use of technology. Cash… 57% of Americans never carry cash, relying on credit and debit cards for daily expenses. — LANDMARK FINANCIAL (@LandmarkFin) July 11, 2014 We all recognize how robotics and technology has radically changed the manufacturing industry allowing productivity to rise, which is a main driver for companies coming back to US soil, but the banking industry has been slowly changing as well. I grew up in a world of cash & writing checks, but that has now evolved into the use of plastic and…

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Generation Debt… Staggering College Statistics

It’s not just the total number of student loan borrowers that is going up.  The average balance per borrower is going up as well.  The St. Louis Fed last month had a blog post that showed that as of March 2012, student loan debt stood at $870 billion and had surpassed total credit card debt ($693 billion) and total auto loan debt ($730 billion). What’s staggering is the rapid growth in the last seven years in the amount of debt that is being accumulated by the average student.  How will this impact this generations’ ability to buy a home or car as they are now behind the eight ball right out of the…

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Economics 101 – It’s Supply and Demand

Why have U.S. Treasury yields dropped since the beginning of 2014? The most convincing explanation may be the reduction in supply of Treasury debt on the market.  Last year, at a total quantitative easing pace of $85 billion per month, the Fed bought $225 billion in Treasury securities in the first five months. This amounted to about 67% of the $338 billion offered by the Treasury.  This year, the Fed only purchased about $165 billion—but it was nearly all of the $168 billion offered by the Treasury. (All data on Treasury offerings from TreasuryDirect.) The Fed’s Treasury purchases are expected to decline to zero by October 2014. Someone else will have…

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Markets Must Always Crash

No, we don’t forecast any imminent drop in the markets.  We just saw a good article on The Motley Fool that discuss why corrections happen and provide some good insights on what we preach on a regular basis. “Decades ago, economist Hyman Minsky wrote about a paradox.  Stability is destabilizing, he said.  If stocks never crashed, we’d all think they were safe.  If we all thought they were safe, we’d rationally bid up prices and make them expensive.  When stocks are expensive, the inevitable whiff of danger, uncertainty, or randomness sends them crashing. So, a lack of crashes plants the seeds for a new crash.” “The reason stocks offer great long-term…

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Uncle Sam Desires to Increase Taxes Again

Surprise.. Surprise… The US Govt may be changing the rules in very short order to fill their coffers. President Barack Obama’s recently released FY 2014 proposed budget contains a number of estate, gift, and generation-skipping transfer (GST) tax proposals. The most far-reaching would permanently return the estate, gift, and GST tax regimes to the 2009 rules, starting in 2018. This would mean a 45% top tax rate (currently 40% rate) and a $3.5 million exemption (currently $5,340,000) for estate and GST tax and a $1 million exemption for gift taxes (currently $5,340,000), and neither exemption would be indexed for inflation. While a proposed budget isn’t law we would expect taxes on the “wealthy”…

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