U.S. Investing
US Stock Market October Performance at a Glance edit
Monday, November 04, 2013 09:57

Tags: stocks

Here are the best & worst performing market segments last month.  The total market earned 4%, bringing the year to date to more than 26%.

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Large cap staples, industrials and utilities performed best, earning 7% on average.
Small cap growth stocks were flat for the month, with healthcare & utility stocks in this style losing more than 5%.   


The U.S. Will Become A Third-World Nation Unless We Fix Our Financial Mess edit
Monday, August 26, 2013 10:22

Tags: economy

I don’t think anyone can deny that the U.S. government needs to fix its national spending and taxation policies, and do it quickly. This nation, in my opinion, is heading toward third-world status if its financial situation isn’t corrected. We’ve been the world’s greatest power, militarily as well as economically, for a long time. But remember, so were Rome, the Mongols, Great Britain and Portugal, and those once-mighty nations all fell from greatness.

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The problem today, of course, is how to fix things. Republicans and Democrats have different ideas about the scope of the overall problem as well as methods for correction.

The debate has become more heated since Erskine Bowles and Alan Simpson, co-chairs of President Obama’s Deficit Commission, released a “Chairmen’s Mark,” a broad plan to reduce the federal deficit by cutting spending and raising taxes.
I will not speak from any particular political viewpoint. I will speak as an 82-year-old to whom Social Security benefit payments are essential for survival. At my age, I am in what is considered a “protected” age category. So, too, are those SS recipients in their 70s.
This brings up the question, what about everybody else?
I’ll get to that in a moment, but first let’s take a look at what is being said in the debate.
Strengthen Social Security (SSS), an organization based in Washington, D.C., says the Bowles-Simpson plan “would cut Social Security benefits for today’s and tomorrow’s beneficiaries. Of even greater concern, it would end Social Security as we know it.
“The Bowles-Simpson proposal cuts Social Security’s retirement, survivors, and disability benefits by between 19% and 42% for young people entering the workforce today.” SSS adds that the plan would “reduce the annual Cost of Living Adjustment (COLA) for current and future Social Security beneficiaries . . . with every passing year. This would prevent benefits from keeping up with increases in the cost of living over time. Under these plans, retirees claiming benefits at 65 would see their benefits decline by 3.7% at age 75, by 6.5% at age 85, and 9.2% at age 95.”
The plan also “would raise the full retirement age to 69, and the earliest eligibility age to 64.. . . Raising the full retirement age by two full years amounts to a 13% benefit cut, on top of the 13% cut already made when the retirement age was increased from 65 to 67. The cuts are hardest for workers in physically demanding jobs, poor health, or who are otherwise unable to continue to work. . . . More than half of all workers with an annual income of about $11,000 would see their benefits cut by about 16% under the Bowles-Simpson proposal.”
Simpson and Bowles said the purpose of their latest proposal is not to replace the plan that they produced as co-chairs of the President’s National Commission on Fiscal Responsibility and Reform, but to illustrate a comprehensive, bipartisan approach that leverages areas where common ground can be found.
Simpson and Bowles say in a preamble to the new report:
“The plan we have put forward here is not our ideal plan, it is not the perfect plan, and it is certainly not the only plan. It is an effort to show both sides that a deal is possible; a deal where neither side compromises their principles but instead relies on principled compromise. Such a deal would invigorate our economy and demonstrate to the public that Washington can solve problems, and leave a better future for our grandchildren.”
They describe the plan as a “balanced, comprehensive approach that addresses all parts of the budget.” In addition to the $2.7 trillion in deficit reduction already enacted, not including sequestration, the new Simpson-Bowles plan would produce a total of $5.2 trillion in deficit reduction, enough to bring the debt down to about 69% of GDP in 2023 and “putting it on a clear downward path as a share of the economy.”
The plan, and its various options, contains too many suggestions to discuss here. Please allow me to make some generalizations:
First, I think it is absolutely necessary for Congress to agree soon on a solution, and for President Obama to sign any resulting legislation, that will put this nation back on firm financial footing. This means we should cut spending for foreign aid, defense, entitlement programs, including Medicare and Social Security, while at the same time cut taxes for middle-class Americans. Otherwise, we may become a nation of the 1 percent and 99 percent poor.
I think the tax rate for large corporations should be increased, that the 1 percent should be taxed more and that federal taxation should be eliminated for the poorest 10 percent of legal Americans. I think it also is imperative that a federally sponsored program should be initiated to promote retirement savings by all Americans.
Saving, saving, saving should be imprinted in the minds of our nation’s youth. I also think money should be found for improving our educational system nationwide and that money also should be found to improve our nation’s deteriorating transportation networks. These latter two ideas would boost America’s capability to compete with emerging super-nations, such as China, India and Brazil, in productivity, and would stimulate the economy (and boost tax revenues) by creating new jobs.
I’m aware that my suggestions may be provocative and difficult to implement, especially given the tremendously stupid gridlock that exists in Washington.
Something must be done. Even at age 82, I’m playing a small role: I pay taxes on the money I receive for writing articles and editing.
Do I think it’s unfair to tax the rich and not the poor? Yes, but something has to be done. The rich can afford it, the poor cannot. Is it unfair to start locking the young out of the full Social Security benefits that I get? Yes, but changes must be made. Maybe it’s time to phase out Social Security and Medicare and come up with new programs to replace them.
I do not, however, think that Medicaid, should be eliminated. The poor will exist always, and always will need help. Try to remember, there but for the grace of God go I.
Now I will reveal my politics: A former registered Independent, I am a long-time Democrat and consider myself to be extremely liberal on social and political issues. I’m also a realist.


Standard & Poor's Is Giving More Favorable Ratings Than Its Rivals On Mortgage-Backs; NY Times Questions Whether Agency Is Repeating Mistakes That Helped Cause The Global Financial Crisis edit
Thursday, August 01, 2013 10:20

Tags: investing | investing for income | regulation

Standard & Poor's, a government-recognized agency for rating securities, has been giving higher ratings than its big rivals on some mortgage-backed securities.


Just five years after the mortgage crisis helped trigger a global financial crisis that brought the world's financial systems to the edge of collapse, and as Wall Street is eagerly trying to revive the market for these investments, S&P is essentially being accused by The Times of returning to its old ways.

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This is great journalism. An analysis was conducted for The Times by Commercial Mortgage Alert and finds S&P is tailoring its ratings to get more business. According to The Times, S&P responded by saying the analysis has flaws and is incorrect, "though it declined to elaborate on what those flaws were."


Here's the clincher: S&P is fighting a government lawsuit accusing it of similar practices before the financial crisis.


This gives you an idea of how ineffective government regulation is and how much much influence Wall Street has over government regulation. 


In January 2011, The Financial Crisis Inquiry Commission, set up by the US Congress and President to investigate the causes of the crisis, reported, "the three credit rating agencies were key enablers of the financial meltdown." Five years after the world financial system nearly crashed, we're seeing allegations of the same practices that caused the crisis.


Despite years of hearings and debate, little was really done to reform the ratings games. The regulatory system permits the same kind of abuse now that went on before the financial crisis. The money at stake and risk of the ratings games played is astronomical, so reform is diffcult to achieve.


It has to make you cyncial about the prospects for reform of the financial advice business.

Americans Have Raised The Bar On What It Means To be Wealthy edit
Monday, July 22, 2013 16:10

Tags: behavioral finance | financial planning | high net worth

Are you wealthy if you have $1 million? How about $2 million? The majority of investors define wealth as having no financial constraints on what they do. But when asked to assign a dollar amount to being wealthy, they say the number is $5 million.

That’s one of the fascinating findings of a just-released report on affluent investors from UBS Wealth Management.

Only 10% of those surveyed said being wealthy means “never having to work again” and another 10% said being wealthy means “ensuring a comfortable lifestyle for the next generation, while 50% of those surveyed agreed that being wealthy means “having no financial constraints on activities.”

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Boy, have Americans raised the bar on what it means to be wealthy! A decade ago or two, someone with $1 million or $2 million would probably have called themselves wealthy. Now, being wealthy requires a lot more money. Being wealthy no longer means being able to retire and live comfortably at age 65. Being wealthy now also means that you’re able to help of the next generation.

“One of the most surprising findings is that four out of five investors are providing financial support for adult children or aging parents,” says UBS in its free report.  “And one in five is sharing a home with those adults. This has a real impact on the definition of a comprehensive financial plan.”

UBS is hitting on a huge financial problem facing retirees: children are moving back in with their parents after college. While raising a child used be a 20 or 25 year financial burden, it’s now widely accepted as commitment for life.

UBS Investor Watch, a quarterly publication, is based on surveys of affluent individuals. Some 4,450 U.S. investors were surveyed for this report from June 23 to July 1, 2013. Investors surveyed are ages 25 and older and said they have at least $250,000 in investable assets; half have at least $1 million in investable assets. Some 2,675 men and 1,775 women participated in the survey. This Investor Watch includes three oversamples: 422 UBS clients, 305 investors in San Diego/Orange County and 329 investors in the Baltimore/Washington metro area, and results were weighted by region and by UBS clients/non-clients to account for these oversamples.

Some other significant takeaways from the survey:
While the industry aggregates each investor’s or household’s money into one portfolio and one asset allocation model based on risk tolerance and time horizon, most investors do not view their finances this way.
  • 51% of those surveyed believe the Fed’s plan to cut quantitative easing will have a negative short-term impact, but be stabilizing force in the long-term.
  • Investors’ two top personal finance concerns are long-term care and the finances of their children and grandchildren. Yet investors do not feel adequately prepared regarding these issues.
  • While the industry aggregates each investor’s or household’s money into one portfolio and one asset allocation model based on risk tolerance and time horizon, most investors do not view their finances this way.


Standard & Poor's Upgrades Outlook For U.S. Credit Rating edit
Monday, June 10, 2013 14:44

Standard & Poor's, which downgraded the U.S. credit rating nearly two years ago, said Monday it was more optimistic about the nation's long-term fiscal situation and had removed the negative outlook from the rating.

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The automatic federal spending cuts that began March 1 and other recent developments that led to a reduction in this year's projected federal budget deficit caused S&P to change the outlook for the U.S. rating to stable, reports the Los Angeles Times.


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