Category Archives: Interest Rates

Social Security Raise in 2018 is 2% NICE!

The Social Security Administration announced late last week the COLA (Cost of living adjustment) based not he CPI, Consumer Price Index (see graph below) would be a 2% increase.

Here is a great fact sheet link

Three Important Numbers

2% – The increase in ALL Social Security benefits for 2018

$128,700 – The phase out level of Social Security withholdings – Medicare 3% does not phase out anymore

$17,040 – The maximum amount of employment related income you can earn AND draw Social Security early without facing a dollar for dollar tax above this amount

The CPI – Consumer Price Index

The Consumer Price Index (CPI) (to be exact, it is the CPI-W for clerical workers and wage earners- it looks exactly the same) is the basic index living adjustments for Social Security (and many other instruments) are used.

img_0937

As you can see the line is generally up, but there are years that no adjustment is made!

Happy 2% raise next year!

John A. Kvale CFA, CFP

Founder of J.K. Financial, Inc.
A Dallas Texas based fee only
Financial Planning Total Wealth
Management firm.
http://www.jkfinancialinc.com
http://www.street-cents.com

Q 4 2017 Newsletter Video Audio Podcast Review By John Kvale

Welcome to our Video and Audio Podcast Review of our Q 4 2017 Newsletter. For those on the road or just unable to grab the time to read, our podcast type review gives you the behind the scenes insight to our thoughts, observations and deep views of the entire Newsletter.

Click here for direct link to an electronic version (an early peek-good ole fashion paper versions are on their way to you shortly) and here for our Newsletter page

Let’s get going!

Q 4 2017 Newsletter

International Market Analysis

In a quest for value, it may be appearing overseas with our friends across the pond. Our core article of the newsletter discusses P/E Price Earnings along with the more smoothed CAPE or cyclically adjusted price earnings which is just a 10 year average ratio. With multiple looks at a long awaited possible long term positive trend, the next 3-5 years may be in the corner of  our overseas friends.

Tripit our App of the Quarter

After stumbling upon a neat app from a dear friend, “Tripit” makes our app of the quarter. Bet you have no idea just how many different reward programs you are involved … after loading them into our app of the quarter, your life will be easier.  Constant price reviews after the purchase along with multiple handy reminders may make this a fun – non financial review and item for you to try out this quarter.

Equifax Update and To Do’s

Our most popular posts on street-cents.com our blog, was the discussion of the Equifax breach. Our theme “Chillax” if our information had not been comprised before, it will eventually. The best defense in this case is an offensive preparation, BEFORE the next breach.

Break In: Yahoo announce after our discussion much more information had been compromised than originally thought …

Not IF, but WHEN our information is compromised …

1 Minute Video Reviews and Screen Shots

With tons of fun and compliments, our half dozen set of 1 minute video’s also make the Newsletter. If you like to talk like I do, full appreciation for just how hard it is to make a 1 Minute video… haha

Here is a link to our 1 Minute Video Page on our Website

Here is a link to all the Videos here on our blog

Parting Thoughts

Shhhh, we have a secret that we want to tell, but are forbidden for a couple of more weeks. We will only say it is an honor!

Watch for a reminder of our hopefully awesome Saturday Before Thanksgiving-Early November 18 Holiday Party at the Dallas Arboretum from 1-3 pm and free reign of the park until 5! Fun times !!!

Thanks for the time!

John A. Kvale CFA, CFP

Founder of J.K. Financial, Inc.
A Dallas Texas based fee only
Financial Planning Total Wealth
Management firm.
www.jkfinancialinc.com
www.street-cents.com

Yellen speaks, Fed Balance Sheet Unwind Preview – Friday

FOMC (Federal Open Market Committee) chair Janet Yellen laid out their plans for the reduction in the balance sheet. We spoke of this earlier here in this post.

Here is an updated graph from the Federal Reserve

9-28-17 Fed Balance SheetWe will discuss in great detail soon the interesting, slow tightening compared to all the historical adjustments that have been made before. This time it really is different, at least now, notably slower!

Today is the last day of the quarter, which means a monthly review and our Quarterly Newsletter coming soon … both with Podcast Videos now !!

Have a Great Day!

John A. Kvale CFA, CFP

Founder of J.K. Financial, Inc.
A Dallas Texas based fee only
Financial Planning Total Wealth
Management firm.
www.jkfinancialinc.com
www.street-cents.com

Is the United States Dollar in Trouble? Nah

After a monstrous run up against almost all other currencies as the FOMC (Federal Open Market Committee- Bernanke now Yellen) began raising rates ……. as a side note and preview of our headline article in our coming Newsletter, this creates headwinds for international investments as well … we digress … recent weakness has brought out the “Chicken Little’s

This chart from 2012-2015

9-16-17 US Dollar Run up 2012-2015

Year to date 2017, the United States Dollar has dropped against other currencies as our international friends begin to pick up their economic pace. Of course this creates chicken little dramatic comments of ….”The US Dollar sky is falling”

YTD 2017 US Dollar

9-16-17 US Dollar YTD 2017

The move up from 70 to 100 (First Chart) is much greater than from 100 back to 92 (Second Chart), but lets look longer term, from a fellow blogger and former chief economist, Scott Grannis…

20170907_150433563_iOS

Not only is the US Dollar not in trouble, over the long term it is still overvalued.

US Dollar in trouble? Nah, not a worry … still overvalued by many!

Have a Great “More Normal Dollar” Day!

John A. Kvale CFA, CFP

Founder of J.K. Financial, Inc.
A Dallas Texas based fee only
Financial Planning Total Wealth
Management firm.
www.jkfinancialinc.com
www.street-cents.com

Shrinking the Balance Sheet Explained, Bulking and Lowering too

Last Wednesday Janet Yellen, FOMC (Federal Open Market Committee) chairperson released comments on their duty as Federal Reserve members but also introduced a term that may be new to many.

“Shrinking the Balance Sheet”

What is the Balance Sheet

Much to the happiness of all those bookkeeper, accountants, CPA’s and the like, present party included, entries must balance.  Even the US Government as huge as it is, runs by the old adage

Assets = Liabilities + Equity

A basic accounting principal, that MUST always work…

If a change is made, it must be counted somewhere else, even on the USA’s balance sheet.

Bulking up the Balance Sheet

 

Post “Great Recession of 07-09” FOMC members smartly embarked on a successful but unknown effort at the time, of infusing banks and capital markets with Greenbacks aka $ Dollars!

The Federal Reserve led by FOMC members, with the click of a button created money in their checking account and created a contra account for balancing purposes then went out to capital markets and bought bought bought in HUGE quantities various capital instruments, but for the most part US Bonds of all maturities.

Their goal, again unchartered territory at the time was to infuse money into the system and also lower interest rates.

By  purchasing large quantities of instruments the FOMC were putting dollars directly into the system … there were other programs as well, but for the sake of simplicity, their buys pushed money into, at the time, a much needed financial system.

The numbers of this chart are not as important as the line and dates.

img_0874

As the FOMC clicked and bought and clicked and bought again in keeping their books “Balanced” the Federal Reserve Bank Assets Grew and Grew.

Finally the Sizzle, Shrinking the Balance Sheet

Take a peek at the far right of the line in the chart… Come on now you can do it …. this is important, and you have come this far …

What do you see? It’s flat lining….

Since most of the FOMC purchases were bonds of various types, and bonds mature, that line should begin to decrease. The FOMC holds such a huge portfolio of bonds, maturity occurs almost constantly.

Until now, the FOMC has re-invested or repurchased maturing bonds with new bonds, thereby holding that line flat. Yellen and crew are now signaling they may NOT re-invest those maturing bonds, which would lead to a VERY SLOW decline in the FOMC balance sheet or a …

“Shrinking of the Balance Sheet”

These words have been carefully chosen. Eventually the FOMC may actually sell their bonds back into the capital markets, reversing the stimulus applied in the “Great Recession of 07-09” more quickly. That would not be called “Shrinking” that would be called lowering, reducing, or something similar, look for this type of cryptic rhetoric in the future …. for now, shrinking simply means letting the maturing bonds mature and NOT re-investing … Shrinking the Balance Sheet !

There you have it, this post turned longer than expected, but the background should have made for a clearer picture … if you made it this far, pat yourself on the back… You now know the current “Shrinking” step along with likely future announcements by the FOMC and committee members!

Have a Great “Deciphering Cryptic FOMC Rhetoric” Day!

John A. Kvale CFA, CFP

Founder of J.K. Financial, Inc.
A Dallas Texas based fee only
Financial Planning Total Wealth
Management firm.
www.jkfinancialinc.com
www.street-cents.com

 

 

No Increase YET, Shrinking Balance Sheet ? Huh …. Friday still from afar…

On their regularly scheduled meeting Wednesday (7-26-17), Janet Yellen chief of Federal Open Market Committee (FOMC) and committee announced unsurprisingly, no rate increase. The committee also announced they would be shrinking the balance sheet soon.

Shrinking the balance sheet? huh…

Alan Greenspan (Former, former FOMC chair Yellen-Ben Bernanke- Alan Greenspan) made it clear if you understood what he said, he did not do his job … that language continues today!

Here is a preview graph of the FOMC “Balance Sheet”…

Next week we will explain what shrinking the balance sheet means… in English..hah

Ahhh…but that is next week … today is a Friday and we are still working remotely from afar … (Technology is treating us well!)

Enjoy your Friday and your weekend!

John A. Kvale CFA, CFP

Founder of J.K. Financial, Inc.
A Dallas Texas based fee only
Financial Planning Total Wealth
Management firm.
www.jkfinancialinc.com
www.street-cents.com

Rates Rise and No One Blinked, Report Cover Letter

The once dreaded and feared interest rate raise seems to have run its course from a fear standpoint. Just a few quarters ago when Ben Bernanke was the Federal Open Market Committee (FOMC) chairperson, the whisper of a long-awaited rate hike lead to market calamity and many to believe rates would be permanently artificially low.

Near the end of this most recent quarter, current FOMC chair Janet Yellen raised rates to the 1% level, a level not seen in almost a decade and without much capital market trepidation. Longer term the short-term interest rate controlled by the FOMC may not go all the way back to the higher levels once seen historically, however a 2-3% rate would still be stimulating from our perch. It is possible the gradual move higher will extend this current economic expansion.

Speaking of rates, in our Q3 2017 Quarterly Newsletter we do a complete deep dive on interest rates, among many other items, that may have changed Residential Housing Prices movement for the foreseeable future. While so many argue of reasons for Housing volatility, the answers are less vivid than many may think.

Continued optimism from company executives seems to have given them confidence to expand their businesses dropping the unemployment rate to levels many thought not possible via hiring’s of workers. It is possible an employed consumer is a happy consumer who is also a consumer who spends more. With consumer spending making up over two thirds of Gross Domestic Production (GDP) this bodes well for domestic and world growth, as long as it continues.

Given low but rising interest rates (finally) a happy higher price valued Home Owner (again full details in the Newsletter), a happily employed consumer, it is no wonder many assets and most capital assets, especially the US markets are priced to perfection (high compared to historical values). The fantastic news is that our overseas counterpart capital markets are not priced as high and it looks like investors are finally beginning to warm to their markets. Our good friend diversification keeps us exposed to these markets as the possibly reawakening occurs. Look for more on this on our street-cents.com blog.

Summer doldrums?

Maybe, but we always keep our guards up as risk can happen fast, even if the less tenured folks are at the wheel of the capital markets.

Have a Great Summer!

John A. Kvale CFA, CFP

Q 2 2017 Cover Letter

Founder of J.K. Financial, Inc.
A Dallas Texas based fee only
Financial Planning Total Wealth
Management firm.
www.jkfinancialinc.com
www.street-cents.com