The Official blog of Michael Piershale, Personal Finance Expert
Monday, January 20, 2014
Mike Piershale on “Mike in a Minute:” Receiving a large tax refund
On the latest “Mike in a Minute,” Mike Piershale outlines financial strategies to consider upon receiving a large tax refund this season. Click on the video segment below to hear Mike’s insight.
Friday, January 17, 2014
Weekly market commentary
The People's Republic of China (PRC) appears to have taken the words of American industrialist Henry Ford to heart. Ford said, "There is one rule for the industrialist and that is: Make the best quality of goods possible at the lowest cost possible, paying the highest wages possible."
Last week, we learned from CNBC China's annual trade was more than $4 trillion in 2013. That pushed the PRC ahead of the United States and gave it standing as the world's biggest trader. According to The New York Times, China's annual trade surplus, in U.S. dollar terms, was the largest since 2008 and 12.8 percent ahead of 2012's surplus. In other words, China exported more than it imported.
It's interesting to note imports to China increased significantly. In fact, imports rose more than exports which reflects strong domestic demand, according to an expert quoted by CNBC. That demand may have been driven by rising wages and a growing middle class. The New York Times wrote:
"Export gains... suggest that despite years of predictions of trouble for China's export juggernaut, it has not yet been derailed by fast-rising costs for blue-collar labor, by an appreciating Chinese currency, or by foreign investment shifts toward other, lower-wage Asian countries... Blue-collar pay has soared between fivefold and ninefold in dollar terms in the last decade, wrecking China's reputation as a low-wage place for export-oriented manufacturing... A decade ago [a company] paid about $75 a month for entry-level industrial workers and provided virtually no benefits. Now, [a company] pays $570 a month plus $100 a month in government-mandated benefits."
The Economist forecast China's economy will overtake the United States' in 2019 if economic growth averages 7.75 percent a year in China and 2.5 percent in America and inflation averages 4 percent and 1.5 percent, respectively, between 2010 and 2020. In late 2013, the Organization for Economic Cooperation and Development forecast growth in China would accelerate to about 8.2 percent with 2.4 percent inflation during 2014, according to Reuters. Growth in the United States is estimated to be 2.8 to 3.2 percent with inflation of 1.4 to 1.6 percent for the year, according to the Federal Reserve.
Is the glass half full when it comes to unemployment, or is it half empty? You're probably familiar with that famous saying about the three types of lies: there are lies, damned lies, and statistics. When trying to parse the implications of economic data from government and non-government organizations, the myriad of ways in which statistics can be sliced and diced quickly becomes apparent.
December's jobs report, which was released last week, is a prime example. The unemployment rate fell from 7.0 percent to 6.7 percent; however, just 74,000 jobs were added in the United States during the month. That's less than one-half the number of jobs economists had anticipated. So, there was less unemployment, but the number of new jobs created didn't meet expectations. Does that mean the employment picture is weaker than experts thought?
Not necessarily. According to The Economist:
"Payroll gains were revised up in November to 241,000 (from 203,000) suggesting that some of December's hiring may have been pulled forward. The two-month average of 157,000 is probably a better picture of reality than either month's tally. Finally, the household survey, which while typically more volatile is still a useful check on the better-known survey of employer payrolls, shows employment rose 143,000, one reason the unemployment rate plunged to 6.7% from 7%."
Does that mean the employment picture is positive?
Not necessarily. The number of people participating in the labor force in the United States was trending south before the recession started back in December of 2007. Our workforce has been shrinking because of cyclical factors, like people giving up on finding jobs because jobs are hard to find, and structural factors, such as Baby Boomers retiring and the participation of women in the workforce has been leveling off.
All in all, 3.9 million Americans (that's about 38 percent of all unemployed workers) have been unemployed for at least 27 weeks. Are they discouraged? Have they retired? Are they raising children? There are probably some statistics out there that could provide further insight.
Weekly Focus - Think About It
Sources:
http://www.brainyquote.com/quotes/quotes/h/henryford151869.html#AQTkZcshWzObyKCq.99
http://www.cnbc.com/id/101325240
http://www.nytimes.com/2014/01/10/business/international/chinese-exports-withstand-rising-
labor-costs_html?partner=yahoofinance&_r=o
http://www.investopedia.com/terms/trade-surplus.asp
http://www.economist.com/blogs/graphicdetail/2013/11/chinese-and-american-gdp-forecasts
http://www.federalreserve.gov/monetarypolicy/files/fomcprojtab120131218.pdf
http://www.brainyquote.com/quotes/quotes/m/marktwain128372.html
http://www.bls.gov/news.release/pdf/empsit/pdf(pages1-2)
http://www.economist.com/blogs/freeexchange/2014/01/americas-jobs-report
http://www.bls.gov/spotlight/2012/recession/pdf/recession_bls_spotlight.pdf
http://www.dol.gov/opa/media/press/opa/OPA20140047.htm
http://www.brainyquote.com/quotes/c/confucius385565.html
Last week, we learned from CNBC China's annual trade was more than $4 trillion in 2013. That pushed the PRC ahead of the United States and gave it standing as the world's biggest trader. According to The New York Times, China's annual trade surplus, in U.S. dollar terms, was the largest since 2008 and 12.8 percent ahead of 2012's surplus. In other words, China exported more than it imported.
It's interesting to note imports to China increased significantly. In fact, imports rose more than exports which reflects strong domestic demand, according to an expert quoted by CNBC. That demand may have been driven by rising wages and a growing middle class. The New York Times wrote:
"Export gains... suggest that despite years of predictions of trouble for China's export juggernaut, it has not yet been derailed by fast-rising costs for blue-collar labor, by an appreciating Chinese currency, or by foreign investment shifts toward other, lower-wage Asian countries... Blue-collar pay has soared between fivefold and ninefold in dollar terms in the last decade, wrecking China's reputation as a low-wage place for export-oriented manufacturing... A decade ago [a company] paid about $75 a month for entry-level industrial workers and provided virtually no benefits. Now, [a company] pays $570 a month plus $100 a month in government-mandated benefits."
The Economist forecast China's economy will overtake the United States' in 2019 if economic growth averages 7.75 percent a year in China and 2.5 percent in America and inflation averages 4 percent and 1.5 percent, respectively, between 2010 and 2020. In late 2013, the Organization for Economic Cooperation and Development forecast growth in China would accelerate to about 8.2 percent with 2.4 percent inflation during 2014, according to Reuters. Growth in the United States is estimated to be 2.8 to 3.2 percent with inflation of 1.4 to 1.6 percent for the year, according to the Federal Reserve.
Is the glass half full when it comes to unemployment, or is it half empty? You're probably familiar with that famous saying about the three types of lies: there are lies, damned lies, and statistics. When trying to parse the implications of economic data from government and non-government organizations, the myriad of ways in which statistics can be sliced and diced quickly becomes apparent.
December's jobs report, which was released last week, is a prime example. The unemployment rate fell from 7.0 percent to 6.7 percent; however, just 74,000 jobs were added in the United States during the month. That's less than one-half the number of jobs economists had anticipated. So, there was less unemployment, but the number of new jobs created didn't meet expectations. Does that mean the employment picture is weaker than experts thought?
Not necessarily. According to The Economist:
"Payroll gains were revised up in November to 241,000 (from 203,000) suggesting that some of December's hiring may have been pulled forward. The two-month average of 157,000 is probably a better picture of reality than either month's tally. Finally, the household survey, which while typically more volatile is still a useful check on the better-known survey of employer payrolls, shows employment rose 143,000, one reason the unemployment rate plunged to 6.7% from 7%."
Does that mean the employment picture is positive?
Not necessarily. The number of people participating in the labor force in the United States was trending south before the recession started back in December of 2007. Our workforce has been shrinking because of cyclical factors, like people giving up on finding jobs because jobs are hard to find, and structural factors, such as Baby Boomers retiring and the participation of women in the workforce has been leveling off.
All in all, 3.9 million Americans (that's about 38 percent of all unemployed workers) have been unemployed for at least 27 weeks. Are they discouraged? Have they retired? Are they raising children? There are probably some statistics out there that could provide further insight.
Weekly Focus - Think About It
Sources:
http://www.brainyquote.com/quotes/quotes/h/henryford151869.html#AQTkZcshWzObyKCq.99
http://www.cnbc.com/id/101325240
http://www.nytimes.com/2014/01/10/business/international/chinese-exports-withstand-rising-
labor-costs_html?partner=yahoofinance&_r=o
http://www.investopedia.com/terms/trade-surplus.asp
http://www.economist.com/blogs/graphicdetail/2013/11/chinese-and-american-gdp-forecasts
http://www.federalreserve.gov/monetarypolicy/files/fomcprojtab120131218.pdf
http://www.brainyquote.com/quotes/quotes/m/marktwain128372.html
http://www.bls.gov/news.release/pdf/empsit/pdf(pages1-2)
http://www.economist.com/blogs/freeexchange/2014/01/americas-jobs-report
http://www.bls.gov/spotlight/2012/recession/pdf/recession_bls_spotlight.pdf
http://www.dol.gov/opa/media/press/opa/OPA20140047.htm
http://www.brainyquote.com/quotes/c/confucius385565.html
Thursday, January 16, 2014
Estate planning for all ages
When it comes to implementing financial strategies, many advisors would agree that estate planning is often the most overlooked element by their clients. Understandably so, it is tough for people to think about their own mortality and therefore, many tend to procrastinate on these plans. However, setting up an estate plan is vital to a client’s overall financial success, and can avoid major headaches for younger generations who may inherit any wealth.
Below, we outline important estate planning strategies to consider:
For younger clients in their 20's and 30's, it’s important to focus on two categories:
If you are responsible for yourself, and do not have children: At a minimum, a younger person who is living on their own should have papers for incapacity. Such papers state who will make decisions on your behalf if you become incapacitated. These documents include a medical healthcare directive, Power of Attorney, and a living will. Additionally, for a younger person who has accumulated assets, their net worth could be subject to probate without a proper estate plan if they die unexpectedly. In most cases probate creates unnecessary expenses and time for heirs. Every state has probate guidelines, with varying levels of net worth limits, so for younger clients with substantial assets above these limits, it is wise to have a trust that will avoid probate.
If you have children: For younger clients that have children, it’s vital to implement the plans mentioned above, and to have language in their estate plan that addresses guardianship. Without this language, if you pass away, the courts can decide who takes care of your children, and it may not be the best fit for either party.
At Piershale Financial Group, we typically work with clients who are nearing or in retirement, and therefore certain issues -- such as guardianship of a child -- are not as pressing as they might be to a younger generation.
For the older generation, who at this point has accumulated assets, estate plans typically address certain goals common to this age group. The first goal should be to avoid probates which for those with assets, can create substantial unnecessary expense for the heirs. Probate can be easily avoided with a properly executed trust. Additionally, plans should also be structured to avoid death tax, and (as previously discussed) focus on who will make decisions on your behalf if you are incapacitated.
It may not be pleasant to think about, or discuss with your family, but creating an estate plan that covers all the bases will allow you to easily pass inheritances and assets down to younger generations, saving them the stress or aggravation that otherwise would come when having to deal with probate.
Below, we outline important estate planning strategies to consider:
For younger clients in their 20's and 30's, it’s important to focus on two categories:
If you are responsible for yourself, and do not have children: At a minimum, a younger person who is living on their own should have papers for incapacity. Such papers state who will make decisions on your behalf if you become incapacitated. These documents include a medical healthcare directive, Power of Attorney, and a living will. Additionally, for a younger person who has accumulated assets, their net worth could be subject to probate without a proper estate plan if they die unexpectedly. In most cases probate creates unnecessary expenses and time for heirs. Every state has probate guidelines, with varying levels of net worth limits, so for younger clients with substantial assets above these limits, it is wise to have a trust that will avoid probate.
If you have children: For younger clients that have children, it’s vital to implement the plans mentioned above, and to have language in their estate plan that addresses guardianship. Without this language, if you pass away, the courts can decide who takes care of your children, and it may not be the best fit for either party.
At Piershale Financial Group, we typically work with clients who are nearing or in retirement, and therefore certain issues -- such as guardianship of a child -- are not as pressing as they might be to a younger generation.
For the older generation, who at this point has accumulated assets, estate plans typically address certain goals common to this age group. The first goal should be to avoid probates which for those with assets, can create substantial unnecessary expense for the heirs. Probate can be easily avoided with a properly executed trust. Additionally, plans should also be structured to avoid death tax, and (as previously discussed) focus on who will make decisions on your behalf if you are incapacitated.
It may not be pleasant to think about, or discuss with your family, but creating an estate plan that covers all the bases will allow you to easily pass inheritances and assets down to younger generations, saving them the stress or aggravation that otherwise would come when having to deal with probate.
Monday, January 13, 2014
Mike Piershale on “Mike in a Minute:” Owning employer stock
Mike Piershale weighs in on the consequences of employees owning too much company stock in his latest “Mike in a Minute” segment. Check out the video below to hear more about the dangers associated with such an investment.
Friday, January 10, 2014
Weekly market commentary
Like a half-full bottle of champagne that was left uncorked overnight, stock markets were anything but effervescent during the first few days of 2014.
On Tuesday, December 31, the Standard & Poor's 500 Index (S&P 500) bubbled upwards, finishing 2013 at an all-time high. On Wednesday, markets were closed as Americans celebrated the New Year. On Thursday, despite relatively positive economic news, the S&P 500 suffered its worst first-day-of-the-new-year performance since 2008. Is it a hangover? Is it lethargy? Are people still on holiday?
Some folks think a key issue is concern about the Fed's changing monetary policy. MarketWatch suggested investors are wary about the timing of and reasoning behind the Federal Reserve's decision to taper quantitative easing (QE) this month, as well as conflicting comments made by Fed officials. Last Friday, Philly Fed President Charles Plosser suggested the U.S. central bank may need to become aggressive about raising rates. His comments don't square with those of outgoing Chairman Ben Bernanke who has said rates will remain near-zero for some time to come.
Plosser's comments raise red flags because tapering QE is not the same as tightening monetary policy. Tapering is simply providing less economic stimulus. If the Fed raises rates, it will be tightening monetary policy. Generally, tighter monetary policy is used to constrict too-fast economic growth or curb rising inflation. Barron's may have provided some insight into Plosser's statement when it declared:
"...We also suspect U.S. and global economic growth will quicken more than most anticipate...Stronger economic growth combined with a further tightening in the resource markets (i.e., expect the unemployment rate to decline toward 6% by year-end and for the factory utilization rate to rise above 80% during the year) may lead to a modest rise in the U.S. inflation rate and produce the first "inflation scare/overheat/can the Fed exit fast enough" panic of the recovery."
Hold onto your hats! The minutes of the Fed's Open Market Committee meeting will be available this Wednesday and the way in which they're interpreted could buffet markets.
What makes a great invention? It probably depends on who you ask. The angel investors (a.k.a. sharks) on the television reality show Shark Tank share their opinions on air, and Time Magazine recently revealed its thoughts in print when it published, "The 25 Best Inventions of the Year 2013." The article suggested a great invention solves either a problem people thought couldn't be solved (such as helping quadriplegics walk) or a problem they didn't realize needed to be solved (who knew we needed a cronut - the offspring of a croissant and a donut - or an invisible skyscraper). Among Time's top inventions for 2013 were:
• The Smart Lens: (slide 5) Ever been frustrated by the low resolution of photos snapped with your mobile phone? Now, you can attach a smart lens and your smart phone will take pictures like a high performance camera and save them online automatically.
• The edible password pill: (slide 10) Nope. It's not on the market yet but, sometime in the future, you'll be able to swallow a pill with breakfast. The chip inside will be powered by stomach acid and make your body into its own unique personal password every single day. The FDA has already approved it.
• The 3Doodler: (slide 12) If you think 3D printing is neat, check out the 3Doodler. It's a pen that melts and cools colored plastic so you can sketch and scribble actual structures. It's the more sophisticated brethren of Popsicle sticks and pipe cleaners.
• Artificial memories: (slide 14) It's likely to be just as controversial as cloning and the human genome, but scientists at MIT have managed to implant false memories in mice. They hope human applications will help treat depression and post-traumatic stress.
From the wheel to disposable diapers to the worldwide web, inventions have powered new industries and changed lives. So, are our most inventive days behind us? There are a few pessimists out there, but the Time Invention Poll found more than one-half of respondents think there are plenty of great inventions ahead. Where will they be discovered? Those polled said the United States, China, Japan, India, South Korea, and other nations.
Weekly Focus - Think About It.
Sources:
http://online.barrons.com/article/SB50001424053111904742804579284810328140946.html?mod=BOL_article_full_popview#text.print (or go to http://peakclassic.peakadvisoralliance.com/app/webroot/custom/editor/01-06-14_Barrons-Splits_Dive-Cheap_Stocks_Thrive-Footnote_1.doc)
http://www.marketwatch.com/story/stock-market-to-find-out-if-the-fed-made-the-right-move-2014-01-05
http://www.investopedia.com/terms/t/tightmonetarypolicy.asp
http://online.barrons.com/article/SB50001424053111903675404579298633659690604.html?mod=googlenews_barrons#articleTabs_article%3D1 (or go to http://peakclassic.peakadvisoralliance.com/app/webroot/custom/editor/01-06-14_Barrons-How_to_Play_2014s_Surprise_Economy-Footnote_4.doc)
http://techland.time.com/2013/11/14/the-25-best-inventions-of-the-year-2013/
http://www.sony.co.uk/hub/lens-style-camera
http://techland.time.com/2013/11/14/the-time-invention-poll/
http://www.brainyquote.com/quotes/quotes/e/erichfromm151839.html
On Tuesday, December 31, the Standard & Poor's 500 Index (S&P 500) bubbled upwards, finishing 2013 at an all-time high. On Wednesday, markets were closed as Americans celebrated the New Year. On Thursday, despite relatively positive economic news, the S&P 500 suffered its worst first-day-of-the-new-year performance since 2008. Is it a hangover? Is it lethargy? Are people still on holiday?
Some folks think a key issue is concern about the Fed's changing monetary policy. MarketWatch suggested investors are wary about the timing of and reasoning behind the Federal Reserve's decision to taper quantitative easing (QE) this month, as well as conflicting comments made by Fed officials. Last Friday, Philly Fed President Charles Plosser suggested the U.S. central bank may need to become aggressive about raising rates. His comments don't square with those of outgoing Chairman Ben Bernanke who has said rates will remain near-zero for some time to come.
Plosser's comments raise red flags because tapering QE is not the same as tightening monetary policy. Tapering is simply providing less economic stimulus. If the Fed raises rates, it will be tightening monetary policy. Generally, tighter monetary policy is used to constrict too-fast economic growth or curb rising inflation. Barron's may have provided some insight into Plosser's statement when it declared:
"...We also suspect U.S. and global economic growth will quicken more than most anticipate...Stronger economic growth combined with a further tightening in the resource markets (i.e., expect the unemployment rate to decline toward 6% by year-end and for the factory utilization rate to rise above 80% during the year) may lead to a modest rise in the U.S. inflation rate and produce the first "inflation scare/overheat/can the Fed exit fast enough" panic of the recovery."
Hold onto your hats! The minutes of the Fed's Open Market Committee meeting will be available this Wednesday and the way in which they're interpreted could buffet markets.
What makes a great invention? It probably depends on who you ask. The angel investors (a.k.a. sharks) on the television reality show Shark Tank share their opinions on air, and Time Magazine recently revealed its thoughts in print when it published, "The 25 Best Inventions of the Year 2013." The article suggested a great invention solves either a problem people thought couldn't be solved (such as helping quadriplegics walk) or a problem they didn't realize needed to be solved (who knew we needed a cronut - the offspring of a croissant and a donut - or an invisible skyscraper). Among Time's top inventions for 2013 were:
• The Smart Lens: (slide 5) Ever been frustrated by the low resolution of photos snapped with your mobile phone? Now, you can attach a smart lens and your smart phone will take pictures like a high performance camera and save them online automatically.
• The edible password pill: (slide 10) Nope. It's not on the market yet but, sometime in the future, you'll be able to swallow a pill with breakfast. The chip inside will be powered by stomach acid and make your body into its own unique personal password every single day. The FDA has already approved it.
• The 3Doodler: (slide 12) If you think 3D printing is neat, check out the 3Doodler. It's a pen that melts and cools colored plastic so you can sketch and scribble actual structures. It's the more sophisticated brethren of Popsicle sticks and pipe cleaners.
• Artificial memories: (slide 14) It's likely to be just as controversial as cloning and the human genome, but scientists at MIT have managed to implant false memories in mice. They hope human applications will help treat depression and post-traumatic stress.
From the wheel to disposable diapers to the worldwide web, inventions have powered new industries and changed lives. So, are our most inventive days behind us? There are a few pessimists out there, but the Time Invention Poll found more than one-half of respondents think there are plenty of great inventions ahead. Where will they be discovered? Those polled said the United States, China, Japan, India, South Korea, and other nations.
Weekly Focus - Think About It.
Sources:
http://online.barrons.com/article/SB50001424053111904742804579284810328140946.html?mod=BOL_article_full_popview#text.print (or go to http://peakclassic.peakadvisoralliance.com/app/webroot/custom/editor/01-06-14_Barrons-Splits_Dive-Cheap_Stocks_Thrive-Footnote_1.doc)
http://www.marketwatch.com/story/stock-market-to-find-out-if-the-fed-made-the-right-move-2014-01-05
http://www.investopedia.com/terms/t/tightmonetarypolicy.asp
http://online.barrons.com/article/SB50001424053111903675404579298633659690604.html?mod=googlenews_barrons#articleTabs_article%3D1 (or go to http://peakclassic.peakadvisoralliance.com/app/webroot/custom/editor/01-06-14_Barrons-How_to_Play_2014s_Surprise_Economy-Footnote_4.doc)
http://techland.time.com/2013/11/14/the-25-best-inventions-of-the-year-2013/
http://www.sony.co.uk/hub/lens-style-camera
http://techland.time.com/2013/11/14/the-time-invention-poll/
http://www.brainyquote.com/quotes/quotes/e/erichfromm151839.html
Monday, January 6, 2014
Mike Piershale on “Mike in a Minute:” Government shutdown & tax filing season
Welcome back to “Mike in a Minute!” Today, Mike Piershale will outline how the 2013 government shutdown will impact tax filing season this year. Given the 16-day shutdown, the IRS will not process tax refunds until late January or early February, delaying refunds for millions. Click on the video segment below to hear more.
Monday, December 30, 2013
Mike Piershale on “Mike in a Minute:” Financial New Year’s resolutions
On today’s “Mike in a Minute,” Mike
Piershale weighs in with financial New Year’s resolutions and explains what
people should do to remain financially secure throughout 2014. Mike explains
specific strategies to consider, such as paying down credit card debt and
implementing more savings into a 401(k).
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