Social Secuirty COLA – Cost of Living Adjustment – Look Out Above – 5-6% COLA ?? Maybe … WOW … Pension Recipients You May Receive a Similar Increase …

With a few of our industry rags shouting look out above for the Social Security COLA (Cost of Living Adjustment) we took a deep dive into the SSA (Social Security Administration) methodology for the adjustment.

Pension Recipients with COLA adjustments you likely will be in the same boat of increases, depending on the index the COLA adjustment is marked against….ok digressing a bit, but wanted to get that thought out !

Social Security COLA Methodology

Basically the SSSA looks at the CPI – W in the third quarter of the year and compares it to the prior year and marks the new COLA Accordingly….

The fuss or cheer, is due to the dramatic increase in the CPI – W …that most recent print is 6.1% WOW!

The CPI – W

“The Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) is based on the expenditures of households included in the CPI-U definition that meet two requirements: more than one-half of the household’s income must come from clerical or wage occupations, and at least one of the household’s earners must have been employed for at least 37 weeks during the previous 12 months. The CPI-W population represents about 29 percent of the total U.S. population and is a subset of the CPI-U population!”

From the latest BLS (Bureau of Labor Statistics) Here

SSA Methodology

Here is the SSA Methodology from their calculation pamphlet last year here https://www.ssa.gov/pubs/EN-05-10526.pdf

To determine the COLA, the average CPI-W for the third calendar quarter of the most recent year a COLA was determined is compared to the average CPI-W for the third calendar quarter of the current year. The resulting percentage increase, if any, represents the percentage that will be used to increase Social Security benefits beginning for December of the current year. SSI benefits increase by the same percentage the following month (January). If the increase in the CPI-W is at least one-tenth of one percent (0.1 percent), there will be a COLA. However, if the CPI-W increases by less than 0.05 percent, or if the CPI-W decreases, there won’t be a COLA.

Have a Great “COLA Adjustment Heads Up” Day!


John A. Kvale CFA, CFP

Founder of J.K. Financial, Inc.

A Dallas Texas based fee only

Financial Planning Total Wealth

Management firm.

jkfinancialinc

street-cents

Another Week, Another Private Space Launch…. Our Vote For Best Space Craft Style … Social Security COLA Preview … Friday

Just a week or so ago, we noted here when Richard Branson hit the skies making history with a personal space craft and safely returned to Earth….

Thankfully another launch went without a hitch earlier this week…. again, these things do not always go well and when they go bad, they really go bad big!

With two successful private flights and one more coming soon… we feel ok being a little critical or some may say tacky…

Which Craft Do You Think is Cooler

Link Below each picture is to YouTube full launch of each, Blue Origin (Bezos) and Unity 22 (Branson)

We favor the Second…. should be interesting to compare Elon Musk’s …. which we will do post launch…

Social Security COLA Preview – Coming In Hot

With the drop and rebound of the Economy, much of the Inflation numbers that the Social Security uses to do Cost of Living Adjustments or COLA are also running hot… possibly hotter than we have seen in some time…

More on this next week in greater detail, even some details we have recently discovered…

Ahhhh….but that is next week, today is a Friday… have a good Day and Weekend- Talk Next Week!

John A. Kvale CFA, CFP

Founder of J.K. Financial, Inc.

A Dallas Texas based fee only

Financial Planning Total Wealth

Management firm.

jkfinancialinc

street-cents

Lumber Prices Show How Supply Can Catch Up to Demand – Supply Clearing High Prices

There’s an old saying in many commodity complexes … “What will drive high prices down? High Prices … What will drive low prices up?   Low prices” – the basic gist of this is that when prices get too high, demand slows and when prices are low demand picks up.

We first heard this saying in the oil patch but it fits across almost any commodity or other variable pricing asset.

Spot Futures Lumber Prices – Now thats a Clearing Price

For those of you that have not heard there are supply shortages in all parts of the economy. On a funny personal note …recently I had my golf clubs re-gripped and there were only a few options to have a complete set of the same grip ….all the other were back ordered to mid to late 2022. Part of the increased prices of used automobiles is a reflection of new automobiles being unable to be complete by shortage of semis.

We thought you would find this interesting and a great example of higher prices slowing demand. At one point in the most recent quarter, several publicly traded companies were completely shutting down certain aspects of their operations due to extreme high prices.

Trailing Three Year Spot Prices

Trailing Three Year Spot with Percentage Change – Up 530% Followed By Down 70%

Certainly tons of factors going into this move. BUT, if you are wondering how higher prices can in your commodity of choice (Bread, Wheat, Lumber, Semi’s….) look like when it eventually clears…. Here is a playbook!

Have a Great “Commodity Price Clearing” Day!

John A. Kvale CFA, CFP

Founder of J.K. Financial, Inc.

A Dallas Texas based fee only

Financial Planning Total Wealth

Management firm.

jkfinancialinc

street-cents

Survey of Over 8000 Individual Investors Next 10 Year Investment Expectations – WRONG! – Natixis 2021 Survey

We recently ran across a very interesting survey. What caught our eye on this survey was the large number surveyed, 8550 individuals in over 24 countries, all with at least $100k of investments in Capital Markets.

The second item that caught our eyes, were some of the jaw dropping expectations of these investors. Thankfully, the survey is also given to professional investors and a neat comparison can easily be made!

Natixis Global Individual Investor Survey

Here in the 2021 Natixis Global Individual Investor Survey, some eye popping results caught our eye. As a side note there is a similar survey done with Institutional Survey as well.

The most recent survey found these collective individual investors expecting 13% returns over the next 10 years, ABOVE inflation….or a 14.5% total 10 year average!

We never make guarantee calls, as there are not any…. but we would find it EXTREMELY unlikely to meet these expectations. Not only that, but as you can see from the chart, the returns follow what we call “Rear View Mirror Forecasting” which is using the most recent past to forecast the future … rather than using true forecasting techniques.

Another concern arising from this information is with this expectation a possible under saving for the future and too low of risk expectations that may be inferred with these results.

Comparing the Individual versus the professional expectation of the next 10 years of returns, comes up with a very large variance.

Professional investors are expecting a much more reasonable 5.3% return. Clearly professionals are not using “Rear View Mirror Forecasting”

Individuals expect 13% over inflation for the next 10 years with Professionals expecting 5.3% – while we wish individuals are correct, it’s very unrealistic … Pro’s are likely much more accurate!

We will code this one Forecast and look back in 10 years to see who was closer! Yep a 10 year lookback….

Let the clock start ticking!

Have a Great “Individual versus Pros Expectation” Day!

John A. Kvale CFA, CFP

Founder of J.K. Financial, Inc.

A Dallas Texas based fee only

Financial Planning Total Wealth

Management firm.

jkfinancialinc

street-cents

BREAK IN- DELAYED IRS REFUNDS (35 million to be exact) … Branson Makes History … Survey Results Preview … Trials of Server Cut Over … British Open Friday …

BREAK IN – After multiple inqueries this week regarding missing or delayed refunds, then a field touch of Tax Professionals and other expected refunders we came to the comfortable conclusion there are delays.

Before we could get this to you, this yahoo finance story breaks, saying as many as 20% of all returns (35 million- yikes) may be delayed… wow- but good detective instincts by us!

So if you have a refund due, and it is late, don’t worry, the IRS is behind but will get to us eventually!

Branson Hits the Skies

Ya ya, a bunch of Billionaires racing to the skies… we get the negative, but you cannot take away the fact that Branson (Musk and Bezos in line too) took to the skies and was the first outer space self funded and self manned traveling vessel.

These things crash and explode… frequently… heck Branson did not even wear a helmet… cavalier, maybe…. ego driven…. maybe, accomplishment, for sure!

Crazy Billionaire…. Maybe!

Survey Results Preview

We have run into a terrific survey that we cannot believe. Over 8000 folks were surveyed across the globe with some startling results….

Planned on having it mid-week this week, but did not get Copyright clearing until later….

Look out next week, we cannot wait to review…. it may even be good enough for a Two Part Series… will see…

Trials and Tribulation of the Summer Tech Update

Literally the day we posted our initial announcement of our summer technology update on Friday…. Our WIFI at the office went out…

Nothing to do with the update, we assure you!”

Ok, fine … Monday of the week found several of us no access to our contact information and email….

Luckily the cell and Ipad were working great UNTIL – Thursday.. Boom, down ….but fixed with a call to said IT folks…

If you happen to send an email to us and not receive a response, please resend, we MAY have not received it!

Next week fingers crossed for a smooth “Cut Over” (Techie term for new services)

Ahhhhhh…. but today is a Friday…. you guys know how much I like the summer sun, yep its hot, but that’s ok, enjoy your day, your weekend, and be sure to spend time with those special in your life if possible – talk next week!

Ohhh, and one more thing… it is a British Open Golf Weekend, where Golf will be available first thing in the AM for those who fancy such!

John A. Kvale CFA, CFP

Founder of J.K. Financial, Inc.

A Dallas Texas based fee only

Financial Planning Total Wealth

Management firm.

jkfinancialinc

street-cents

Plate Tectonic Evolution from 1 Billion Years Ago to the Present in 40 Seconds ….From Visual Capitalist and Earthbyte

Our friends at Visual Capitalist drew attention to this awesome visual, but we had to source the information for posting on our website at YouTube from Earthbyte …

Here is the Visual Capitalist

Here is the YouTube site for Earthbyte

This is worth 40 seconds IMHO

Very cool and helps understand the Earthquake frequency better!

Enjoy and thanks again Visual Capitalist and Earthbyte!

Have a “Better Plate Tectonic Shift Understanding” Day!

John A. Kvale CFA, CFP

Founder of J.K. Financial, Inc.

A Dallas Texas based fee only

Financial Planning Total Wealth

Management firm.

jkfinancialinc

street-cents

Q 2 2021 Review – Return to Normal, Inflation Here to Stay or Transitory

Slowly Returning to Normal, or Some Similarities

With hindsight available as our measuring stick, it appears that sometime between March and April earlier this year things across the country really began to return to some type of normal.

As noted in our blog at street-cents.com and in the prior newsletter TSA throughput a measurement of airport travel looks to possibly eclipse 2019 highs later this year.

Restaurants began opening, some earlier and some much later, depending on the geographic location with patrons welcoming their reopening.

Uncertainty remains on the remote versus office environment. Most think the new normal will not be a complete office environment, but some blend of remote since it is readily acceptable and well tested.

Inflation, Here to Stay or Transitory?

As discussed in detail in our latest Q 3 2021 Newsletter, the most prevalent debate at this moment among market participants is the topic of inflation and it’s staying power, or just transitioning through. The importance of this subject is directly related to the FOMC, chaired by Jerome Powell and the timing of his reduced stimulus.  All eyes are on the inflation debate and the timing of the decrease in stimulus and will be sensitive to timing changes.

Not surprisingly economic numbers roared as they met favorable comparisons from last year, but in very recent days, have given the appearance of a return to normalcy already, decreasing concerns of longer-term inflation.

Capital Markets being forward looking are now trying to see what is around the next corner. As earnings continue to return to normal, valuations are finally beginning to be decreased from extremely stretched proportions and as long as earnings outpace returns a continuation of this should occur.

Time is really our friend, and once again the good news is, this will all play out in quarters rather than years. Things can certainly change quickly, and it is not a time to swing for the fences, which we never do!

Have a terrific summer and talk to you at the beginning of fall.

John A. Kvale CFA, CFP

Summer Office Technology Improvements … Friday

Each year, excluding last year, we tackle a technology improvement.

About a half a dozen years ago after too much coffee at a vendor related event on the West Coast yours truly came home with multiple technology improvements (New Vault, New Web site just to name a few) all at once, which turned out to be a hard lesson learned, and the team was not happy…..make darn sure the project is not too big!

New Server and Email System

Cyberspace, Data, Wire, Electronic

In a little over a week after reviewing all of our alternatives we have decided to upgrade our server and move our cloud-based email system to a new platform.

Our IT folks have already started the process of mirroring our old server to our new one and are readying the staging of the email.

We are assured this will go without a hitch; we hope to not hear the dreaded words we have heard before …

Wow I have not seen this before!”

The good news is we only have this project and not multiple projects as well as the hard-earned lesson of overcast caffeinated excitement.

Hopefully just steps forward and not back to go forward….

But that is a week or so away and this is a Friday almost dead middle of the summer.

Enjoy your day and your weekend …. Maybe even a little time off if the shoe fits!

Talk to you next week!

John A. Kvale CFA, CFP

Founder of J.K. Financial, Inc.

A Dallas Texas based fee only

Financial Planning Total Wealth

Management firm.

jkfinancialinc

street-cents

Market Valuation Update … How are we doing? Forward PE Ratio Review

As mentioned multiple times … with recent examples here and here by almost any metric Capital Market valuations have been and are stretched.

As a reminder this does not mean that markets have to come tumbling down to earth … just that heightened risks of sharper declines may be possible. Also as a reminder, just like our teenager with oversized clothes grows into them … as earnings increase faster than Capital Markets rise, valuations can come back in line! YAY

Updated Valuation Metric from our Friends at JPMorgan

And while still stretched take note of the very far right of the graph as it has smartly turned over as earnings outpaced Capital Market Growth



This is why the Graph is moving in a better direction – huge expected earnings in view….

Nice….

Still no time to swing for the fences, which we never do- but good progress…

Have a Great “Better Valuations” Day!

John A. Kvale CFA, CFP

Founder of J.K. Financial, Inc.

A Dallas Texas based fee only

Financial Planning Total Wealth

Management firm.

jkfinancialinc

street-cents

June 2021 Financial Planning and Capital Market Review – By John Kvale

Hello and Welcome to our June 2021 Financial Planning and Capital Market Update!

If you are too busy to read, feel free to listen as we describe our post and thoughts in friendly podcast audio format as well as Video!

Newbies –

We like to articulate our thoughts and review on a Monthly basis our Financial Planning Tips, Capital Markets and current events!

BREAK IN – HOLIDAY PARTY NOVEMBER 20 FROM 3-5 AT DALLAS ATHLETIC CLUB

Hope you enjoy!

June 2021 Video

YouTube

Financial Planning Tip(s)

Why Not to Overfund a Retirement Plan

In this updated post from a few years ago, we remind how easily it is to overfund a 401k plan and why, while it is not the end of the world, it is not a good tax situation….

Should you accidentally over fund your retirement plan … what occurs is a double taxation!

  1. You do not get the deduction for the contribution
  2. You will likely pay taxes on the eventual distribution

Job change is the most likely reason for overfunding!

Pesky Late Arriving Tax Form Reminder – Form 5498

In this mid month post we remind those of an extra late arriving tax form….

Murphy’s law being applied, the form just arrived last week….about two weeks after our post…..

Reason for receipt:

  • Rollover of a 401k or the like to an IRA – Most frequent
  • Contribution to an IRA
  • Contribution to a SEP

One of the most confusing parts of this form is that even though you may have made a qualified contribution for a prior year i.e. 2020, if you made that contribution in 2021, depending on the type of contribution the Form 5498 MAY show your contribution in year 2021.

Capital Market Comments

Inflation or No Inflation

In this part two post, “The Smartest Guys in the Room” post we discussed via interest rate futures graphs the movement after FOMC dot plot adjustments and the interest rate markets….

This is an updated Graph of the 2 year US Treasury, which is holding lower, (higher yield) possibly due to faster expected rate increases!

This is the ultra long 30 Year Treasury, which continues to trend higher (lower Yield) possible pricing less inflation from the above mentioned expected shorter term rate increases!

Ok…that’s a wrap for the June review…. Hello July!

Have a Great Day, Talk to You at the End of July!

John A. Kvale CFA, CFP

Founder of J.K. Financial, Inc.

A Dallas Texas based fee only

Financial Planning Total Wealth

Management firm.

jkfinancialinc

street-cents