We don’t want to get too heavy and pound you with market thoughts, we know you’re getting enough of that from the “Market in Turmoil” like headlines, but we did want to give some explanations and let you know we are watching carefully as we have been on notice since December for a possible slowdown.
Look forward, not back
Economic reports such as today’s CPI (consumer price index) report is very much rearview looking, as such it’s sometime easy to forget that what’s most important is looking forward to what is going to happen next rather than backwards to what has happened. Yes it is much harder, and you do not know exactly what is going to happen … but you sure do not drive a vehicle looking continually in the rear view mirror – some humor on a dry subject… stay with me!
This is even more evident at the recent quick rise in interest rates, creating the headwinds to bonds. As noted here and again here in our posts (the second with even a special video) it’s highly likely and the probability is most that the headwinds for our fixed income investments are behind us. Once again looking forward, a slow down usually garners lower interest rates, exactly opposite to our slightly current and mostly rearview looking higher rates.
FOMC chaired by Powell gave and now takes
Over the past 18 months to two years the FOMC (Federal Open Market Committee) headed by Jerome Powell have taken very aggressive measures to stimulate the economy. Much of a stimulation, once the book is written may have over stimulated not only the economy but various asset prices. Their goal at this time is to slow inflation thereby doing a complete turnaround from their prior stance and taking away stimulus. This most likely will continue until they see evidence of slower inflation or lower employment.
Higher rates are their main instrument of choice:
The FOMC waits for the reports such as the CPI to confirm their decisions, making for a lag in decision making and possibly longer decision-making, but they will eventually get there….
Finally, capital markets are certainly looking forward hence the sluggishness as they begin to price in a slowdown in full force. Eventually it’s very likely the FOMC will begin to see these clues as well!
Welcome to our Video and Audio Podcast Review of our Q2 2022 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.
BREAK IN – We are trying a new format of articles that are shorter, and hit a very wide variety of topics that should interest all ages and chapters…. Let us know what you think?
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
All about the Stimulus Base Effects and the Coming Comparable (Hurdles)
In our main article, a somewhat follow up article to our Q 1 2022 Newsletter Main Article “Anatomy of a Slowdown” we review the base effects we as an economy are about to have to hurdle.
Sale of many companies exploded higher, similar to the one below, but now must be digested..
Look Back Tax Savings – Spousal IRA – SEP – HSA , These can be done before your filing due date of April 18 to Possible Lower Your 2021 Taxes
With tax season officially underway, actually nearing an end, the official filing date for non-extension regular Form 1040 Filers is April 18th, 2022 (this year) for year 2021 tax filings, just a few weeks out. There are a few tax saving ideas that even with the turn of the calendar can be implemented to possibly help last year’s income taxes.
Self Employed Pension plan-the SEP as it’s commonly called is a great vehicle to offset income that is not of the W2 type, think consulting income.
The Spousal “Qualified IRA” is another handy tool to use if one of the spouses does not have any form of a retirement plan.
The HSA. One of the great parts of the HSA is you only need a high-deductible health insurance plan
Estate and Gift Planning Update – Annual Gifting Amount – Estate Tax Update
Annual Gift amount upped to $16k per person
Estate Tax Stands at $12.06 million per person or $22.12 million per couple
“Last year certainly garnered many headlines of possible changes in much of the estate tax laws. In all fairness we fielded many questions and thankfully once again stuck to our mantra of until it is law, one should be very careful at making preemptive adjustments. There certainly can be changes in the future, but again short of knee jerk reactions, we tend to like for law mandates to be made for reaction, rather than rumors. “
Financial Planning/Retirement Planning Trick for those Early in the Workforce – Roth contribution for young working
Helping a new worker contribute to a Roth and an early age to jumpstart a retirement program…
From the Article…
“Most likely if a young worker is making a very nominal amount, and possibly still living at home, they will not have the cash flow to contribute to any type of retirement plan. But if someway somehow they can make a Roth contribution at least up to their earnings at a very young age the long term positive consequences of this can obviously be fantastic.”
“If a 17 year old was somehow able to get $6000 in a Roth (one time!) and earn 8% a year at age 66 he/she would have about $191,000. If that same 17 year old were somehow able to get $6000 a year until he or she was 23, (five years), and had the same 8% compounding until he or she was 66 there would be a nest egg of just under $1,000,000. That $1,000,000 would not be subject under current tax laws, to mandatory required minimum distributions (RMS;s) nor again under current tax laws would it be taxable income upon distribution.”
The third post of a neat (well we think so) new idea, series we discuss “Protection Planning” !
This series is a review of the basics, and will serve as somewhat of a semester study of the Financial Planning foundations all the way to more advanced topics later in the series…. We plan on a mid month release of each part and somewhere south of double digit parts…. possibly with a video added to each for additional insights…. thanks in advance for sharing with those who may find this series helpful….
In this Debt Planning section we cover from a high level …
The Good, the Bad and the Ugly Forms of Debt
Yes there are some debts that or ok, but there are also some that are very much sinners….
Review that Social Security Statement
In this annual reminder post, receiving a weekend email alert directly form the Social Security Administration our review was set in motion and a new post was born….
Happily as mentioned in the post, the SSA had updated the site and there are really neat new features such as a graph for delayed benefits and a neat spousal calculator.. Well done guys!
Please be sure to take 5 minutes and review that your hard earned earnings are being credited to your Social Security Benefit/Number!
Capital Market Comments
Interest Rates Jump Ahead of Fed – Short Term Pressure on Bonds Long Term Gain
While this post concerning how the bond markets, more specifically the two year and ten year treasuries front run the FOMC (Federal Open Market Committee) we also want to remind that such movement, especially seen in the two year treasury puts pressure (lowers) on the value of the bond but also ups the income from the bond……
So initial headwind, and eventual tail wind…yay
Re-Review “The Anatomy of a Slowdown/Recession” the Snap Back
With market jitters creating headlines and lower values, in this post we reviewed our luckily timed lead article in our Q 1 2022 Newsletter article, called the “Anatomy of a Slowdown”
The main purpose of the article and the re-run is to remind everyone INCLUDING OURSELVES, slowdowns (markets dropping in value) do occur, and while we don’t want them to, they do anyway!
In this post, we review three very large what we coined snap backs…. large rallies of 5%-to over 10% which are for some reason very confusing during slow down times and also tend to totally ignore headlines…
No idea for sure WHY they happen, just know they do … thought worth reminding as some great questions came in on the subject.
Have a Great Day, Talk to You at the End of March! Going fast this year!!!
Second In Back to Basics Series – “Protection Planning”
The second post of a neat (well we think so) new idea, series we discuss “Protection Planning” !
This series is a review of the basics, and will serve as somewhat of a semester study of the Financial Planning foundations all the way to more advanced topics later in the series…. We plan on a mid month release of each part and somewhere south of double digit parts…. possibly with a video added to each for additional insights…. thanks in advance for sharing with those who may find this series helpful….
In this Protection Planning section we cover from a high level … Health, Auto/Home/Umbrella and Life Insurance basics and best ways to implement !
New Uniform Table Gives RMD Break – We are all Younger!
In this post we highlight as the calendar turned, we are all viewed as younger (actually the tables have us living longer- semantics)…
A very important result of this change is to give those mandated by RMD’s (Required Minimum Distributions) relief…. since the tables in effect make us younger/living longer, less money is demanded out (Uncle Sam wants his taxes) thereby lowering taxable income!
Capital Market Comments
Re-Review “The Anatomy of a Slowdown/Recession”
With market jitters creating headlines and lower values, in this post we reviewed our luckily timed lead article in our Q 1 2022 Newsletter article, called the “Anatomy of a Slowdown”
The main purpose of the article and the re-run is to remind everyone INCLUDING OURSELVES, slowdowns (markets dropping in value) do occur, and while we don’t want them to, they do anyway!
In this post, we review the following chart and outline the normal 9-12 month slowdown time line… very much unlike the last three we have experienced…
Have a Great Day, Talk to You at the End of February!
With the gyrations of the Capital Markets as of late making headlines, we wanted to re-review our review (purposely a lot of reviewing…haha… ok digressing) of our lead article in our most recent Newsletter (Q1 2022) The Anatomy of a slowdown!
After large infusions of stimulus during the virus and associated lock downs, it should not come as a surprise that there would be a slowdown both economically and on an individual spending level as the stimulus subsided….
Capital Markets have sniffed this out and are trying to figure out the next speed of economic growth…
While Capital Markets and participants do their thing …. we wanted to remind ourselves and readers of a few facts from the Newsletter:
Those 10 years or more from retirement, should embrace the eventual slowdown and market reactions. This is the time you really get to make great purchases and shine in the future, but it may not feel like it at the time, Enjoy and Embrace!
Those in the 10-5 year range from retirement, recall we adjust our risk level down as we get closer to retirement. Yes, that means taxes and a slower ride, but a lot less bumpy and less stress.
Those 5 years out or already retired, as a slowdown occurs, and values drop, our most important item is to rebalance from the safe things that have held up in value, to the more risky items that have dropped in value (agnostic sell high and buy low), and of course remind ourselves we came into this with a good allocation for each and every one of us and can easily navigate this.
The most important items we want to convey are that near the very end of a recession/slowdown, the headlines are the worst, but the rewards are the greatest.
The average length of a recession is about 9-12 months, much longer than the most recent 2020 recession (-36%), and the Interest Rate Temper Tantrum slowdown of late 2018 (-19.9%) or the low Volatility (VIX) shake out of early 2018 (-12%) all shown here in the chart below!
Final Thoughts to Remember:
Investing is risky, and one will almost certainly have a drop in value during a slowdown/recession
Invest rationally when the sun is shining AKA Don’t get over your ski’s by keeping your allocations (safe/risky, Fixed income/Equity) correct during good times, thereby making it through the inevitable bad times
Reallocation from winning to losing areas is the most important item to capture the best part of a slowdown/recession, the eventual recovery
Ignore the headlines and remember they will likely be the worst near the end *Purposely Bolded for extra reminder!
Avoid false prophets, there will always be someone who has made a negative correct call, but most of the time that is not that someone’s first call, and they likely will overstay their welcome, once again missing the best part of the slowdown/recession, the recovery
Stay positive, and know our job is to help talk and guide you through these situations, just like we are now, by reminding and reviewing during sun shining times
Have a Great “Re-review of Anatomy of a Recession” Day!
Welcome to our Video and Audio Podcast Review of our Q1 2022 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
In our main article, we review the last three drawdowns/slowdowns/recession for examples of how fast they occurred and the extremely fast recovery as can be seen by the main graph below.
We are not calling for a major slowdown/recession or the like, but we wanted to remind ourselves as well as everyone else, the last three drawdowns were not normal.
Longer drawdowns are the norm, and in the Newsletter Article we also go deeper into the Great Financial Crisis of 07-09, which was also not normal… it was much larger and much longer than the normal.
The past decade and a half have had it’s scary moments, but they did not last very long and were quickly attacked by the FOMC (Federal Open Market Committee) to give support in the system, fortunately very successfully. This may not always be the case, hence a reminder of the Umbrella use during sun shining times!
New Retirement Contribution Maximums, Best Practice, Tips and Tricks
The new retirement maximums are out at the IRS Website .
Again in our Newsletter article we remind those of smooth contributions throughout the year, UNLESS you have knowledge that may have you severed from your 401k some time during the year, in which a neat trick is to accelerate you contribution level in order to max that 401k out before you leave!
IRAs
2022
2021
2020
2019
401(k), 403(b), Profit-Sharing Plans, etc.
2022
2021
2020
2019
Annual Compensation
305,000
290,000
285,000
280,000
Elective Deferrals
20,500
19,500
19,500
19,000
Catch-up Contributions
6,500
6,500
6,500
6,000
Defined Contribution Limits
61,000
58,000
57,000
56,000
IRA Contribution Limit
$6,000
$6,000
$6,000
$6,000
IRA Catch-Up Contributions
1,000
1,000
1,000
1,000
Traditional IRA AGI Deduction Phase-out Starting at
Welcome to our Video and Audio Podcast Review of our Q 3 2019 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
We had planned on leaving this out due to repeated appearances here in our blog and in the Newsletter – but in true “Break In” like format, as this post is completed and the video – hopefully the local wifi is strong enough for uploading … the time is spent in Austin Texas at this moment in another rain delay- the same exact place the original article was written!
Tax Talk/Review
Change Likely the New Normal
After two decades of only minor changes in the Tax Law… it was overhauled and many changes were made that were reflected in our 2018 tax returns.
This neat chart is a nice reminder of the current brackets and can be helpful in income distribution tax bracket management.
Inverted Yield Curve Update
This chart featured in our Newsletter is a slightly different term comparison of the 2 year (we like the 90 day) versus the 10 year, but a wonderful historical view of inversions and recessions. We have fully inverted for over a month now and if we use this historic guide as our yardstick a recession would be in the cards mid year 2020!
Social Security Update
We have begun a detailed review of the late spring event and it is going great. Weekly we dissect a section of Social Security Expert, Tom Clark’s presentation and give handy links to greater details and explain in bullet fashion the main points. Here is a link to the Audio on a special page here at our blog and you can also click here for a link that will pull up each complete post!
There are tons of nuances regarding Social Security, Disability, Death Benefit and Medicare decisions…we look forward to discussing many more with you as the summer weeks occur!
We hope you enjoy … talk to you near the end of Summer!
Welcome to our monthly Economic, Capital Market, and Financial Planning tip of the month.
This months Financial Planning Tip of the month is a reminder of an important Estate Planning Document
Once again a special thanks to all of YOU … the best clients and friends as your experiences have again given us the subject matter for our Financial Planning Tip of the Month.
For those new to our writings, we touch on the most pertinent Financial “stuff” along with a video of my mug that has even more specialized details of the latest month as well as this post.
The Power of Attorney – Another great Financial Planning Tip:
With the vacation season coming, dust off that Power of Attorney document and take a look!
This document frequent comes in two forms, both very powerful.
Financial Power of Attorney
Health care Power of Attorney
These documents can be an invaluable part of your Estate plan. Be sure we have a copy too, for easy access. These powerful documents are relatively simple, and usually only a couple of pages in length.
Just how tough this last recession was
This neat adjustable graph comes from the Minneapolis Federal Reserve Bank research. What stands out is just how deep the recession was. Because it was so deep, it is not surprising that the recovery is taking so long. The sicker we are the longer it takes to get well.
This is one of the longest recoveries on record, in part due to the severity, while not predicting another recession … the longer we go in this business cycle the faster we approach our next slowdown … our radars are up!
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which investments may be appropriate for you, please consult your financial advisor prior to investing!
Background
The is the vocal portion of J.K. Financial, Inc. a Dallas Texas Based Fee Only Total Wealth Financial Planning Firm. Founded by John Kvale, a Dallas Texas Fee only Financial Planner and Total Wealth Manager.
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Capital Market thoughts, looking forward not back … FOMC chaired by Jerome Powell gave, now taking away, for the moment
We don’t want to get too heavy and pound you with market thoughts, we know you’re getting enough of that from the “Market in Turmoil” like headlines, but we did want to give some explanations and let you know we are watching carefully as we have been on notice since December for a possible slowdown.
Look forward, not back
Economic reports such as today’s CPI (consumer price index) report is very much rearview looking, as such it’s sometime easy to forget that what’s most important is looking forward to what is going to happen next rather than backwards to what has happened. Yes it is much harder, and you do not know exactly what is going to happen … but you sure do not drive a vehicle looking continually in the rear view mirror – some humor on a dry subject… stay with me!
This is even more evident at the recent quick rise in interest rates, creating the headwinds to bonds. As noted here and again here in our posts (the second with even a special video) it’s highly likely and the probability is most that the headwinds for our fixed income investments are behind us. Once again looking forward, a slow down usually garners lower interest rates, exactly opposite to our slightly current and mostly rearview looking higher rates.
FOMC chaired by Powell gave and now takes
Over the past 18 months to two years the FOMC (Federal Open Market Committee) headed by Jerome Powell have taken very aggressive measures to stimulate the economy. Much of a stimulation, once the book is written may have over stimulated not only the economy but various asset prices. Their goal at this time is to slow inflation thereby doing a complete turnaround from their prior stance and taking away stimulus. This most likely will continue until they see evidence of slower inflation or lower employment.
Higher rates are their main instrument of choice:
The FOMC waits for the reports such as the CPI to confirm their decisions, making for a lag in decision making and possibly longer decision-making, but they will eventually get there….
Finally, capital markets are certainly looking forward hence the sluggishness as they begin to price in a slowdown in full force. Eventually it’s very likely the FOMC will begin to see these clues as well!
Have a Great “Forward Looking” Day!
John A. Kvale CFA, CFP
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Posted in Debt - Debt Management, Economy, FOMC, Interest Rates, Investing/Financial Planning, Market Comments
Tagged BLS, CPI, FOMC, Interest Rates, Jerome Powell, Recession