For years, year-end tax tips were delivered in this space every September, but this year's story is a real cliffhanger. The twist in the plot is the pending tax legislation. Ironically known as the SECURE Act, an acronym, the legislation is officially named, "Setting Every Community Up for Retirement Enhancement." The bill is likely to cause frantic last-minute tax maneuvering at the end of 2019.
After the manufacturing sector numbers for August were published on Tuesday, September 3rd, the financial press erupted with grim headlines. Largely absent from the coverage was proper context: The manufacturing purchasing managers index has predicted six of the last three recessions, and manufacturing accounts for about 12% of U.S. economic activity. Here are the facts.
The day the yield curve inverted, on Wednesday, August 14th, stocks plunged and financial headlines turned grim. Should you worry? Or is the yield curve inversion the financial fakeout of 2019?
If you own a $1 million IRA account and live in a state with a high income-tax rate, here's a financial planning tip that could save you thousands annually on state income tax. The strategy requires setting up a trust in a state with no income tax, which is probably not something you do every day. So, here's a primer.
"Financial peace of mind" is an overused term in financial services marketing. However, the help we provide in settling financial details of your estate indeed may bring you genuine-and eternal-peace of mind.
Trusts funds used to be the realm of the wealthy, providing a tool to pass money to heirs and charities. Nowadays, though, they are becoming a means for more people to engage in smart estate planning.
With summer 2019 now underway, here are three strategic mid-year tax planning tips.
Do you own a large IRA and live in a state with an income tax? Consider setting up a non-grantor trust in a state with no income tax. While this financial planning tactic may sound exotic, it's common sense and can make a material difference in your life and beyond.
In June, the economic expansion entered its eleventh year, officially setting a new record as the longest growth cycle in modern U.S. history. The previous record-setter was the 10-year expansion that bracketed the 1990s.
Bid adieu to stretch IRAs! A new tax law widely expected to become law by the end of 2019 will kill this strategy for passing on your IRAs to the next generation while minimizing the amount that goes to Uncle Sam. Adoption of the legislation is not sure, but it is highly likely, making it wise to plan now for the demise of the stretch technique.
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U.S. - China Trade War Coverage Distorts Economic Reality
The amount of coverage in the media of the U.S. - China trade war is far out of proportion with the potential impact that China - U.S. trade has on the U.S. economy.
U.S. exports to China comprise just 1% of U.S. GDP. In the $19-trillion-dollar U.S. economy, the 1% of activity with China is inconsequential. However, Chinese exports to the U.S. comprise 4.1% of China's GDP, which means China has much more at stake.
These facts seemed lost from the recent trade war coverage. Unfortunately, the alternate reality in the media misinforms, misleads and confuses investors. It's no conspiracy or bias, and it spans all political biases. Its journalists trying their best to explain the world. But it is a sign of the times, of a world in which the media's power to reach masses outstrips its understanding of our complex world. Consequently, coverage of the trade war with China was a grotesquely distorted reflection of economic and financial facts. It's no wonder so many investors have trouble adhering to a discipline.
Admittedly, there is much we do not know about the inner workings of the economy. Even Janet Yellen, former chair of the U.S. Federal Reserve Bank, the woman who led the U.S. out of The Great Recession into The Great Expansion, admitted live on CSPAN in September 2017 that the low inflation rate was a mystery to her. And, talk about mysteries, how about productivity? Surging in recent months, productivity caused a totally unexpected U.S. growth spike in the first quarter of 2019 and may be more important to U.S. growth than inflation for the rest of 2019 and 2020. And productivity growth is even more perplexing!
As a result, some people think investing is like gambling at a casino, or betting on a horse, and makes many think investing is not connected with facts. That's just untrue! We do know a few things about the economy that are important to investors:
Consumers drive 70% of economic growth in America
Economic growth drives S&P 500 profits
Profits drive stock prices
Stock prices don't always reflect fundamental economic trends, and past performance never guarantees future results. But economic fundamentals are the key determinant of corporate profits over the long-run, and economic fundamentals remained strong through the recent trade war scare. That's why stocks didn't come undone despite the media frenzy over the trade war with China.
While not everything about the economy is understood, facts matter. It's wise to stay focused on economic fundamentals. If you're investing for the long-run, lest you risk being influenced the media sometimes grotesquely distorted reflection of economic facts.
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