Tag Archives: Interest Rates

Q4 2023 J.K. Financial, Inc. Newsletter … Good News on Interest Rates for Pensions and Pension Recipients, What? … Don’t Fight the FED Are we Fighting the Fed? Yes … Important True-Up Reminders for Year End Deadlines i.e. 401k … Handy Cyber Tips and Tricks … RMD Age Date Changes and Others … By John Kvale CFA, CFP …

Welcome to our Video and Audio Podcast Review of our Q4 2023 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 the Download button below, 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

Let’s get going! We hope you enjoy!

Q4 2023 Newsletter

(YouTube)

Rate Increase GOOD for Pension Plans and Pension Recipients

Special thanks to Milliman and Rebecca head of medial relations for allowing us the ability to reference this fantastic data… also sourced at the end of our post/article.

Here are the top 100 pension plans, a lot of names you likely know and maybe even have a pension with… At least one family member included in this.

With higher interest rates, something we have mentioned numerous times… Notice because of a rather complex future liability projection, pension plans for the most part are FINALLY funded….YAY

2023 Corporate Pension Funding Study

By Zorast WadiaAlan Perry, and Richard J. Bottelli Jr. 20 April 2023

https://www.milliman.com/en/insight/2023-corporate-pension-funding-study#

Don’t Fight the Fed! Wait, are we Fighting the FED? YEP

This unusual correlation especially when the blue line is going down, represents the FED (Federal Open Market Committee) pulling money from the economy or trying to slow the Economy.

Add higher rates, at the fastest pace ever….

Interesting that participants are fighting the FED, even though they regularly quote “Don’t Fight The FED!”

Stimulus still sloshing around in the Economy…

True-Up Reminders – 401k and the Like

In the year 2023 (Currently heading towards a close) the maximum amount WE (not including matching) can contribute is $22.500 and for those either age 50 or older or turning age 50 happily in 2023, you get a nice catch-up amount of $7,500 bringing your deferred amount to a whopping $30,000! 

Pro-Tip – Contribute evenly throughout the year, with a terminal amount of maximizing in late November or early December.

Pro-Trick – Similar to rushing/upping your contributions near the end of employment to maximize levels, if you are new to an employer and wish to maximize your contributions for the year, dump all you can to maximize your contributions now, with the intention of dropping that contribution level down to a normal level (see Pro-Tip above) after the turn of the calendar.  

Do Not Overfill Duplicate Plan Years

Remember, if you have contributed to a plan earlier in the year via another employer, your new employer will not be able to throttle your contributions back if you happen to go over the total annual limit. Reach out for help and clarity on this!

Be Aggressive in New Plans

Lastly, in new plans, starting from scratch with new contributions, allocation should be wide open and aggressive with the hope of choppy entry points as your contributions make up the majoring of the plan and will take advantage of the ups and downs in the early years of the plan.

Cyber Reminder- Tips and Tricks

If there’s one thing, for those of us with little time or patients for a long read that we would like you to take from this article it is that most cyber intrusions come from an e-mail that has a bad actor with a hot link click, do not click on that bad hot link!

The second thing and more encouraging, most cyber security situations are not extremely complicated and are allowed by a simple letting of our guards down- see above point!

  • Handy tip #1– Use an only known to you, phrase or password.
  • Handy tip #2– Do not ignore the recommended updates!
  • USB/Pen Drives a No No Avoid the USB/pen drive at all costs unless you absolutely, 100% know where it came from

RMD Age Changes and other Important Dates

RMD (Required Minimum Distributions)

One of the most important and likely most confusing due to the recent multiple updates is the adjustment of Required Minimum Distributions (RMD) They are now mandatory to commence for those aged 73. Those turning 75 after 2033, your new RMD age is 75.  Recall, these just a few years ago, moved from age 70 1/2 to 72, now to age 73 and eventually age 75. No wonder we are all confused!

Social Security Mandatory Commencement Date reminder age 70

The current maximum age that you may defer commencement of  Social Security still remains at age 70, well below the new younger thresholds that we hopefully are all feeling. 

The earliest one may take Social Security remains age 62, with a 25% discount to the full retirement age (FRA) benefit amount AND has a maximum earnings level of $21,240 from W-2 or 1099 (working income) not pension, investment or other non working types of income.  

Have a Great Fall! Talk after the turn of the Calendar!

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

The FED Speaks Firm AGAIN, First Travels Ahead, Friday….

Our second lead article in the coming Newsletter is Titled “Don’t Fight the Fed” …

The general context is, the FED (Federal Open Market Committee) led currently by Jerome Powell have great control through interest rates (there it is again- they really are that important) when they lower eventually it becomes stimulus, and raise, headwinds….but this time with stimulus still sloshing around in the Economy… participants are being stubborn and fighting the FED

Powell Puts His Foot Down

This week FED Chair Powell firmly stated he will slow the Economy, and if needed via higher rates…

Maybe Participants are beginning to listen?

First Travels Ahead

Next week marks the first travels of the season…while not a Road Warrior, travels are enjoyable, this years have started a bit later due to the Merger…. but the anticipation is just as great ….

Ahhhh…. Today is a Friday…. Fall is beginning to find it’s way to our neck of the woods…. Enjoy and Talk Next Week… Likely a Newsletter and Video coming!

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

Fitch threatens more downgrades including the Symbolic Biggest bank, JPMorgan …. Not surprising, Interest Rates Move Up!

During the Great Financial Crisis (GFC) of 07-09 – (some ways seems like an eternity ago…others yesterday – ok, digressing again) Credit Conditions fell apart quickly and with little warning….

The big three Credit Agencies at the time and still today ….Moody’s, Fitch and S&P Global – then called S&P were late to the softening credit cycle and caught a tremendous amount of scrutiny for a lack of warning as Credit Conditions brought a tremendous amount of pressure to the Financial System…

In True Fooled me once like fashion, they are intent on NOT being late to the party this time.

Fitch Threatens Further Downgrades

With Fitch stepping into the credit Downgrade pool first followed quickly by Moody’s, Fitch is back again raising awareness with a symbolic threat to the largest bank in the US, JPMorgan…

Would not be surprised to see the lone silent Agency speak up soon, S&P Global, if for no other reason to save face in case there is a serious weakening….

Bond investors are taking the comments serious and repricing interest rates Higher/Bonds lower values to accommodate higher risk associate with the agency call.

Short term a little headwind on bond values… long term a HUGE advantage in the form of bigger coupons from our Safe Money – NICE!

Oh… Jerome Powell and the rest of his board members on the FOMC (Federal Open Market Committee) have their popcorn out as they happily watch this slowdown occur !

Have a Great “Higher Safe Money Rates” 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

Q3 2023 J.K. Financial, Inc. Newsletter … Rate Increases re-review Forward Looking Effects- Research Affiliates Robert Arnott 10 Year Expectations … What we are doing this Summer … By John Kvale CFA, CFP …

Welcome to our Video and Audio Podcast Review of our Q3 2023 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 the Download button below, 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

Let’s get going! We hope you enjoy!

BREAK IN – The TDAmeritrade Charles Schwab merger will happen over Labor Day Weekend (September 5th, 2023) – Only Changes: Log in portal and account number – Expect (no reply) Legal Paperwork and emails!

Q3 2023 Newsletter

(YouTube)

Looking Forward Now with Regards to Rate Increases

Three Articles Centered around this main leading Article –

In our main lead article, we discuss the look forward expectations of NOT lowering rates as soon as many think. With higher rates, cost of capital will be more expensive for many projects, giving the Federal Reserve the desired slow down in the Economy ! Hopefully, and not too much!

Research Affiliates Robert Arnott 10 Year Expected Returns

Take note of Arnott’s powerful firm with predictions of the slower/safer Bonds earning more than the good ole SP 500 like stocks, earning and inferior 10 year return- Lots of disclaimers of course!

Higher for Longer

Asset Allocation – What’s old is New Again (Wish I would have thought of this title for the Newsletter) – Bonds may be our new Buddy – Especially if Powell is to be taken at his word!

Slow motion Slowdown – It is likely not over yet

Sneaky stimulus remains and with the fencing of Banks, this has the effect of additional stimulus in the system!

A Day in the Life and Summer Plans

While we may not talk Wall Street talk, our days are full of watchful research and fun client interactions!

The return of what we are doing this summer finally makes its way back into the Newsletter – we hope you enjoy!

Have a Great Summer! Talk in the Fall!

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

Robert Kaplan Speaks Candidly, Echoes Our Main Thoughts for the Newsletter – NICE – There is Still Stimulus out there and Higher for Longer!

The Forward-Guidance podcast review, recommended from one of my coveted study buddy groups, a week or so ago!

With downtime over the holiday weekend and the newsletter not being in print just yet… Robert Kaplan’s comments from a podcast came in very much in line with some of the articles in our coming Q 3 2023 newsletter, as such we had to bring you up to speed on this podcast.  NICE!

Recall Robert Kaplan was a Dallas Federal Reserve President, before getting caught up in a political issue and he along with several other members ended up resigning. 

What stands out about this podcast is the candor that Kaplan gives, which is what we are always looking for. Is it because this is a less than hugely popular podcast ? … although it will make my regular check for subject matter from now on, Or it is due to the resignation which would make Kaplan never available for public service again? …so he has nothing to lose period. Does not matter the reason his candor again is what grabbed attention. 

The just over one-hour podcast which can be found here (Forward Guidance), had three important points to bring to your attention: 

There’s still stimulus flowing in through the system- Again one of our articles in the coming Q 3 2023 newsletter speaks about the ERC or employee retention credit, Kaplan mentioned specifically talking to many mayors of many cities across the United States which have an abundance amount of stimulus capital still on their balance sheet that must be spent before 2025. hmmmmm 

Higher interest rates for longer should be the baseline assumption according to Kaplan– Again this is the subject matter of another of our newsletter articles. Kaplan speaks to the podcaster candidly and says capital markets even though we were just beginning a credit cycle (Tightening of lending standards, less loans, higher interest rates and lower margins, increased defaults all the intent of the federal reserve’s higher rates to slow the economy)- while capital markets and participants are pricing a lower interest rate at the end of 2023 and the beginning of 2024, Kaplan cautions participants to take Jerome Powell at his word. The only thing that would make him change his posture is some large event created by the further progress of the aforementioned credit cycle. 

It is a good old boys club– In an aha moment that we always thought existed, Kaplan slips and says his dissenting vote in September of 20 was a frowned upon event by Jerome Powell! However he quickly corrected himself and said I will let Powell speak for himself, but the rabbit was out of the hat, Kaplan realizing this went on to say that the general spirit of the FOMC (Federal Open Market Committee) is everybody agrees and falls in line with a distinct hierarchy of ranking. We could all remember and learn that there is a very much pecking order where the king is the chair, and the pawns are supposed to follow. 

Apologies for the length of this post, as mentioned with some time off and the dictation in hand, along with a total complement to our pending newsletter, wanted to bring this to your attention.

Have a great “Inside the Federal Reserve via Robert Kaplan” 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

Fed Watch… All Eyes (not on Vacation-haha) On FOMC (Federal Open Market Committee) Rate Increase or NOT – NOT being most likely … CME Fed Tracker Review …

With a Jerome Powell lead FOMC (Federal Open Market Committee) meeting this week (Announcement Wednesday to be exact) AND an economic projections due this announcement….

Let the Gaming Begin of a rate increase or not?

CME Fed Tracker – 70% Stay 30% Raise .25%

Left Graph is 70% and the markets pricing of a probability of NOT raising…

Right Graph is 30% and the probability of raising .25% or 25 basis points…

By the Way…. Of course the FOMC watches market expectations and know if they raise it will be a slight surprise…. 25 basis points is really nothing at this point, considering the meteoric rise in our rear view mirror….

Have a Great “Fed Fund Watch 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

Rates… Fastest Increase Review … Looking Forward for Effects … Newsletter Precursor …

This is an updated chart from our favorite buds Visual Capitalist

Last year we spoke of the speed of interest rate increases a lot… given the unique pace at which rates increased AND the super low level of (zero is about as low as you can go) starting point … it became a shock to the financial system….

So in all likelihood, rates are near their top for the foreseeable future….what lies ahead?

We will have more on this in the coming Newsletter but rates 500 times higher than they were just a few quarters ago AND looking to stay higher… there are major implications..

Debt/Financing costs higher =

Better safe investment returns aka Fixed Income/Bonds

More costs to debtors (lower returns for those using debt because of higher costs)

End of companies requiring very low costs to make profits

Have a Great “Fastest Rate Increase Effect” 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

Q2 2023 J.K. Financial, Inc. Newsletter … Tax Reminders – Still time for 2022 Savings … M2 Pilot Advanced Analysis Series Review … By John Kvale CFA, CFP …

Welcome to our Video and Audio Podcast Review of our Q2 2023 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 the Download button below, 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

BREAK IN : From Parting Thoughts in the Newsletter

If you are not receiving our street-cents.com blog posts weekly Monday, Wednesday and Fri-day, please reach out and let us know. We have entered the late cycle portion of this economic slowdown and items are moving much quicker than our quarterly newsletter so we are posting frequent and very important items amongst our sometimes-humorous articles for your review and knowledge.

Let’s get going! We hope you enjoy!

Q2 2023 Newsletter

(YouTube)

Last Minute Tax Planning and Reminders

After a small top of the mind reminder that it is ok to pay taxes, we do not want to pay zero today and then pay at a much higher rate in the future, we certainly do not want to pay ANY more than we have to, we go into several reminders….

The SEP and the Spousal IRA – two things we can do now that will help last years taxes….

Important Reminder about reporting :

Just because we did not receive a tax form personally, does not mean that the IRS did not receive some type of notification of that taxable event! If you had a transaction, usually of some out of the ordinary type, that you did not receive a tax form for, we are not out of the woods and you should report it.

Lastly, comments about the possible rolling of 529 into Roth… the answer is still up in the air with additional legal clarity on this… but it cannot start until 2024 anyway!

Happy Anniversary Rate Increases

While hard to believe, the monumental rate increases (fastest of a life time in %) just started about a year ago

M2 Broad Liquidity Measure Tightens

In another – not kidding here – never seen before, M2 one of the broadest measures of liquidity, turns negative and makes our Pilot Advanced Analysis Series…

First spoken about in January, the effects are being felt through the financial system.. but not where we had expected so far….

Have a Great Finally Here Spring! Talk in the Summer!

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

Fed Week, Tough Decisions … New “Happy Bank” Back Stop Facility – The BTFP – Bank Term Funding Loan Program … Bank Headlines Continue – Reminder Thought On Late Cycle Headlines …

A while back we mentioned the FOMC – Federal Open Market Committee, lead by Jerome Powell were in a Pickle .. as at that time one of their regional banks had a research report out that GDP- Gross Domestic Production -Economic Growth indicator – was dropping fast and they were going to raise interest rates against a hot CPI = Consumer Price Index – blunt inflation gauge which would exacerbate the situation.

Fast forward to today and that Pickle is not any better…. maybe even more dill! With the afore mentioned Part 1 Advance Analysis M2 review showing dramatically dropping or the pulling of liquidity out of the system, bank fatigue has been seen and felt and here our comments on Banks being a slave to confidence for solvency.

On Wednesday of this week, March 22. 2023 the FOMC is bound by their goal of slowing that sticky inflation we are all seeing, especially at the grocery store, and best measured by the CPI … BUT, this additional rate increase will add fuel to the fire of less liquidity, AND on top of that our neighbors across the pond just raised rates .50% last week, albeit from a much lower 3.00 to 3.50% rate….currently the US rate is 4.75% …

We did say Pickle ? Right….

Enter the BTFP – Bank Term Funding Loan Program – Happy Bank Program

On March 12, 2023 the Federal Reserve Created the BTFP as another backstop for possible Bank Fatigue ..

Press Release

March 12, 2023

Federal Reserve Board announces it will make available additional funding to eligible depository institutions to help assure banks have the ability to meet the needs of all their depositors

For release at 6:15 p.m. EDT

This new program is a sort of Fed Discount Window on Steroids, meant to improve Bank confidence.

Quick History

Long ago the FED (going back in loose form to the 1920’s – the start of the Fed) started a program for Bank help during stressful times, the Fed Discount Window –

Fed Discount Window –

  • Operation of last resort for a bank
  • Overnight deposit help
  • Anonymous for two years
  • 30 day length, but historically has been lengthened to 90 days
  • Pledge of assets for security – Treasury Securities of all Maturity among other items that are held at par (even value, no gain or loss) or better

BTFP – Bank Term Funding Loan Program

All of the above but the following additions:

  • On Year in Length maximum holding period
  • Pledge of asset securities that may be less than par aka at a loss

The last bullet is the most important and lending a helpful hand from the Fed’s fastest in history rate increase…. as mentioned repeatedly, increase of rates are a headwind to Fixed income aka Bonds, especially longer term bonds….

Some Banks may be seeing a need for immediate liquidity due to loss of confidence and liquidity drain, so this new program essentially gives them liquidity to meet those demands if needed and may have negative assets due to the fast fast rate increases!

Headlines Continue

While this is being written – Sunday late morning in between Newsletter Articles, UBS a Swiss neighbor of Credit Suisse has made a much telegraphed offer to buy their friend out… no idea what the market will make of this starting tonight as overseas markets open…. but something just crossed the mind that we have mentioned many times before…. and may be applicable….

“Headlines are always the worst near the end of the Cycle!”

Have a Great “Heads Up for a Busy Week” 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

Important One Year Anniversary? … Technology Tethered Modern Day Spring Break Concludes… Newsletter Subjects and Neat Graphs but very little content YET … Friday On the Way Back Home soon!

Happy Anniversary Yesterday – Of What?

Long time followers will find this hard to believe ….. but it is true..

What was an important 1 year anniversary as of yesterday?

You’ve got this… but it is not easy…??

The FOMC (Federal Open Market Committee) commenced their FIRST rate increase one year ago, yesterday!

The important part of this is the lag affect … the US Economy is like an aircraft carrier, not a ski boat in that it changes directions SLOWLY! More on this soon… hey it is a Friday… let’s carry on! But worth thinking about …

Modern Day Spring Break

Tomorrow we head back… it was a super fun Spring Break, and in some ways work “Stuff” was even more productive…

Always glad to be available …. heck it’s never “Work” anyway!

Thanks to technology (note battery charger for cell in pic, no plug in this courtyard), the events of the last week were digested or maybe consumed is a better word… and as mentioned in the Mid-Week Wednesday post, were not completely surprising…

More to come as needed in this area!

Newsletter in Motion

The goal was to have the Newsletter complete, but the afore mentioned events took over and while much of the diagnostic graphs have been completed … the verbiage is not … hope my editor, who likes to get a head start does not see this…. oh well…

Have a Great Friday … Super Weekend and talk next week from the regular Saddle!

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