Tag Archives: Inflation

July (YIKES GOING FAST) 2021 Financial Planning and Capital Market Review – By John Kvale

Hello and Welcome to our July 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!

Hope you enjoy!

July 2021 Video

YouTube

Financial Planning Tip(s)

IRS Refunds and Tax Return Processing Very Delayed

In this Break In Post, after having discussions with several of you, and then touching our CPA contacts we came to the conclusion that the IRS is delayed in processing returns and more importantly REFUNDS!!!

Before we could get the news to you, this Yahoo Finance Article nicely summarizes that the IRS is behind on a whopping 20% of returns or over 30 million !

With a September 1, 2021 IRS stimulus check lookback (those who did not get the last round of stimulus will be reviewed by the IRS to see if they qualify) the IRS has their hands very full….

All together…. PATIENCE! They will eventually get to us!

Fingers Crossed For a Hot (Large) COLA Increase

Catching wind through our contacts of a possible HOT (read Large!) COLA adjustment this year for Social Security and possibly those lucky ones that have a COLA adjuster on their Pension or other retirement plan we dug in here in this post and outlined the methodology used by the SSA. The line in the sand for adjustment is later in the year but as can be seen by the latest CPI-W running at 6.1%, with a little luck, we may have a very nice adjustment on our hands!

Capital Market Comments

Valuations are Getting Better but Expectations are WAY out of Line!

In this post and with the help of our Friends at JPMorgan we happily reviewed the far right hand smartly turning graph, that is headed in the correct direction for better valuations… YAY

A bit later in the month we ran across a wonderful but somewhat worrisome poll done by Natixis of over 8000 investors and their expected return over the next 10 years…. Way off base in our minds….

Likely to see this last poll make its way into the Newsletter as these numbers are likely so exaggerated, we want more air time!

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

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

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

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

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

Hello and Welcome to our May 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!

Hope you enjoy!

May 2021 Video

YouTube

Financial Planning Tips

Preparing to Hit the Sky Again

In this Break In Moment Post, an executive of the company Fligence reached out with regards to our fun TSA Posts through the closure of the country.

Their neatly designed website can be a very handy item for determining your possible time needs and delays as well as neatly follow our country to reopening at full speed.

Capital Market Comments

Inflation or No Inflation

In doing writings, I try to approach each article with a clear mind and head, especially if the post is heavy ….

Many times I try to completely forget the article or post from maybe just a week before….

Good News…. the Month of May was a success in clearing my mind as I accidentally pounded everyone over the head with Inflation stuff…..

My apologies, but it coming at us from so many directions made it top of mind….

At the Berkshire Hathaway meeting post, starring Warren Buffett and Charlie Munger, Inflation was all the chatter and a huge concern for them.

Then Here in our Jolts – job opening Post we looked at how there are tons of jobs to be had –

Here in our Favorite Dallas Federal Reserve Chair post, Robert Kaplan – Sooner rather than later, worries inflation may be coming if we stay too low on interest rates…

Lastly in this verbal tug of war post between Jim Bianco and Lacy Hunt, they could not more disagree very emphatically.

Time will tell who is correct in their thinking!

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

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

Inflation is Coming, No it Isn’t Deflation Is On the Way??? From John Mauldin‘s SIC – Strategic Investor Conference – Jim Bianco and Lacy Hunt

Break In : Interesting Google Trends

With this post already set to go, I ran across this interesting chart late in the weekend and thought it worth adding- looks like others are interested in at least the Inflation answer: 2004 to current Google Trends Searches –

  • Blue = Inflation Searches
  • Red = Deflation
  • Yellow = Recession

Ok, back to our regularly schedule Post!

n spring of 2020 during the beginning of the countrywide lockdown‘s we had the opportunity to attend a conference that we had never chosen to do before due to logistics, cost, and length of the conference (7-10 days). John Mauldin SIC Strategic Investor Conference, after 18 years of consecutive conferences Mauldin shifted last year’s and this year’s conference to virtual and we were happy attendees.

The conference this year lasted a total of two weeks and had 45 speakers of which about 35 were Capital Market related with the other 10 being macro-economic or specific industry such as doctors.

Views: Number One From the Conference – Go Away FOMC – You Have Stayed Too Long

View number one and shared by every market related expert, the federal reserve is overstaying their welcome and should immediately stop asset purchases and begin talking about increasing rates. The main reason for these shared views are because asset levels have become inflated across almost all assets according to the experts and be continued purchases are no longer necessary given that capital markets are orderly.

Number Two – Inflation Is Coming – Via Jim Bianco

View number two shared by approximately 75% to 80% of the Capital Market Professionals were there will be some type of inflation. About half of the professionals felt like inflation would indeed be transition, which is what Jerome Powell (FOMC President) and the federal reserve are saying the other half felt like by the FED continuing to purchase assets a change from the long deflationary era of the last four decades to a longer-term inflationary era over the next several decades is ahead.

None of the pro inflation experts predicted runaway inflation that we had in the 70s but the most aggressive inflationary person that we heard was Jim Bianco of Bianco research. In one of many slides, Bianco pointed to the rise of the 10 Year Treasury, below and a belief it would continue to rise.

10 Year US Treasury Yield

Number Three – No Inflation, Back to Slow Grow – Via Lacy Hunt

View number three, shared by the remaining market experts emphatically, there will be no inflation and we will return to a slow growth environment similar to what we had coming out of the financial setback of 2007 -2009.

The most emphatic believer of this deflationary trend was Lacey Hunt who oddly enough shared the stage with the aforementioned Jim Bianco, and has been an expert in the capital markets for 40 years.

Mr. Hunt‘s main beliefs on why deflation will continue are the debt occurring by the afore mentioned FED asset purchase and ageing demographics.

So what are we do with all of this information and where does that leave us?

With such dissenting opinions it’s clear that someone will be wrong and things never work out exactly like people think, so some may be correct in a portion of their view an incorrect and another.

If Bianco is correct and inflation occurs and remains this would lead to substantial pressure on long duration assets such as the value of real estate, low earning but fast growing equities, long bonds such as the 30 year treasury and higher borrowing costs across the board.  This would be a dramatic change from the last four decades and more rhyming of the late 70’s, but again not to the extreme.

If Hunt is correct, this will be a continuation of what we have seen over the prior four decades. Lower long term rates, lower borrowing costs, continued slower economic growth, lower expected earnings and continued upward pressure(tailwind) on the above mentioned longer duration assets.

The good news in monitoring each of the various forecasts we have easy to read and follow economic numbers such as the CPI and the level of interest rates, as well as federal reserve speakers talk in public venues.

In closing all of professionals believe most asset prices were elevated.  High asset prices are not a direct reason for them to come down, and elevated asset prices can be grown into, like the 13-year-old growing quickly into the 15-year-old clothes. But high asset prices demand discipline and care as increased volatility is likely.

Have a Great “Inflation Deflation Tug Of War” 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 4 2020 Newsletter Video Audio Podcast Review of Year Events, Cause and Effects By John Kvale

Welcome to our Video and Audio Podcast Review of our Q 4 2020 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 a 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

Unlike the last two Newsletters which had very little economic and market related comments, this one is all about where we have been, what has occurred and where we may be going!

J.K. Financial q 4 2020 newsletter

Let’s get going!

Thanks in advance!

Q 4 2020 Newsletter

(YouTube)

As the spread of the Covid Virus occurred, Capital Market Participants in true anticipation form, voted with their feet and sold assets across the board well ahead of the eventual lock downs.

The largely followed S&P 500 (Larger US Companies) fell over 33% along with major international markets such as the German Dax falling over 35% and US Small companies represented by the Russell 2000, falling over 40%.

The most startling item of the drop was the speed at which this drop occurred, 27 days!

Ignoring the speed of these most recent declines is a bad idea as we need only look earlier in 2018 to see ANOTHER very fast drop.

The FOMC Steps In – Lowers Rates

By Mid-March as Capital Markets continued their descent, the FOMC (Federal Open Market Committee) led by Jerome Powell, dropped the hammer on interest rates by a full 1% to zero. During normal times, .25% is the usual adjustment as can be seen by the late 2019 and early 2020, non-crisis adjustments.

FOMC Adds More Fuel

Correctly using the financial crisis of 07-09 as the play book, the FOMC took the bazooka out, and starting buying assets to flood the markets with liquidity.  The current bazooka is much bigger (about 3 X) this time as can be seen by the difference in balance sheet increase of $1 Trillion in 07-09 versus the $ 3 Trillion and counting increase currently.

It Worked (Maybe Too Well), Capital Markets Took Notice

You know us to be very positive – all through the many negatives that have occurred !

You also know we will call it like we see it!

Markets have officially gone too far and are ahead of themselves, expect bumps and no extra risk taking is warranted at this time – CAREFUL!

We hope you enjoy … talk to you Next Year – 2021 !!!

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

September 2020 Podcast Video, Financial Planning and Capital Market Update – By John Kvale …

Hello and Welcome to our September 2020 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!

Hope you enjoy!

September Video

(YouTube)

September Review By John Kvale

Financial Planning Tip  –

Markets Gone Too Far

In a luckily timed post here in our August review and again here in September we mentioned that markets had gotten far enough ahead of themselves, we had to waive the white caution flag…

Oddly, within days of our original white waiver, markets slipped … always rather be lucky than good – markets breathed caution in the air quickly with a sharp 10% correction — Safety is still advised!

Capital Market Comments

Inflation & The FOMC

In a somewhat preliminary discussion on what might change market sentiment, not knowing it had already adjusted a bit, here , here , here we discussed inflation measures, the FOMC (Federal Open Market Committee) and their views along with our personal favorite inflation measure, Dallas Federal Reserves own Trimmed Mean inflation gauge.

Have a Great September Update!

Talk to you at the end of October!

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

The Fed, Economics, Interest Rates and Interest Rates Review Part 2 What would force the FEDs hand?

Well covered in Part 1, here, the FOMC (Federal Open Market Committee) and Capital Markets also believe currently that interest rates will stay low for longer …. maybe we are hopeful they are both wrong (No maybe, we are!) but there is one word that we know the FOMC cannot allow to get out of control …

Inflation !

With inflation running persistently below this longer-run goal, the Committee will aim to achieve inflation moderately above 2 percent for some time so that inflation averages 2 percent over time and longer-term inflation expectations remain well anchored at 2 percent.

From FOMC statement September 16, 2020

Here is a great post from earlier on Dallas Fed calculated Trimmed Mean Inflation Measure, the FOMC’s favorite!

Triple the Bazooka – Who Let the Money Out!

During the 07-09 Great Financial Crisis, the FOMC then lead by Ben Bernanke, used the Feds balance sheet to purchase assets in order to lower rates, increase asset prices and calm markets….

This was unprecedented at the time….. Not today!

The current Bazooka is three times more ALREADY and will most certainly continue to grow in size and stimulus !

What if eventually the economy takes hold, and springs back to life –

Here is the traditional measure of inflation, Consumer Price Index from the BLS (Bureau of Labor Statistics) – again we like the afore mentioned Trimmed Mean and so does the FOMC!

Not to worry, we will be watching that 2ish % level closely…..

Inflation may occur, forcing the Feds hand at higher rates — time will tell!

Have a Great “FOMC and Interest Rates Part 2 Conclusion” 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

Sniff, Sniff …. Is that inflation I smell ??

On Tuesday of this week an economic report caught many by surprise. The Consumer Price Index.

CPI gets Hot !

CPI Econoday M over M CPI  6-17-14

If this continues, this is a VERY strong sign the economy is gaining traction.

The bars tell a better story than the line in the chart !

Inflation at reasonable levels is good, especially given the alternative (deflation) ….. Now “Goldilocks/Three Little Bears” ….. not too hot, not too cold….hopefully just right !!

We will review the winners and losers of inflation, but for now let’s watch and see if it continues!

Have a Great Friday!

John A. Kvale CFA, CFP

http://www.jkfinancialinc.com
http://www.street-cents.com
8222 Douglas Ave # 590
Dallas, TX 75225

“Wednesdays with Axel” …. Hard fast Austerity Choosers

In our continued series from our Private Client Roundtable event held earlier in the year, and our special guest speaker Axel Merk, we note a few countries that are making the hard choices, according to Merk.

Downward trending line = Hard Choice (Austerity)

Merk Central Banks Balance Sheet

Downward trending austerity driven line:

  • Bank of England
  • Sweedish Riksbank (Huge early adopters, 2010)
  • Europ0ean Central Bank

Note the upward, non austerity, possible “inflation way out” of the USA. Also worth noting, while Japan is all the rage, they have only begun the process of inflation and can go much farther by increasing their banks balance sheets.

Austerity Versus Inflation

Clearly, according to Axel, there are differing policy decisions on how to recover from the great world slow down. Those that are leading today, USA, Japan may not be the leaders tomorrow, as others are taking their medicine today through austerity measures, again according to Axel.

Time will tell if the easy way out or the hard way works…no matter the outcome, keeping a watchful eye is very important. Thanks for bringing this to our attention Axel!

Have a great Wednesday!

John Kvale

http://www.jkfinancialinc.com
http://www.street-cents.com
8222 Douglas Ave # 590
Dallas, TX 75225