April, 2018

Last year, it was hard to turn on your computer without reading about the dramatic rise in cryptocurrency values, or see advertisements for ways that you, too, could participate in this get-rich-quick opportunity to buy virtual money that is backed by no government on Earth. 

It’s almost always the case that when an investment becomes wildly popular and experiences a dramatic runup in price, that is exactly the wrong time to invest.  And it turns out that cryptocurrencies were no exception.

While the stock markets were dropping moderately in value, cryptocurrencies lost their owners an estimated $60 billion in the last week of March, including a $20 billion drop over one dramatic six-hour period.  Bitcoins are trading below $7,000, and the trend is taking them toward their February 6 low—and, perhaps, further.  In case you’re not up on other cryptocurrencies, there’s something called Ether (now $381 per coin); Bitcoin cash ($691.48); Litecoin ($116.27) and Ripple (49 cents). 

The problem, as always, is figuring out whether these alternative currencies are actual investments.  For now, there are very few stores which accept them as actual money.   Bitcoin’s primary purpose in the marketplace has famously been to enable drug and weapons traffickers to buy and sell without leaving a paper trail for international police agencies to follow. 

Sincerely,

Edward J. Kohlhepp, Jr., CFP®, MBA President 

Edward J. Kohlhepp, CFP®, ChFC, CLU, CPC, MSPA

Founder & CEO 

This material was prepared by BobVeres.com., and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. Please note - investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.

Source: 

https://www.marketwatch.com/story/cryptocurrency-market-sheds-a-further-20-billion-in-total-value-overnight-2018-03-30

March 13, 2018

You may have heard about the “Trump Tariffs;” that is, the proposed 25% surtax on all steel imports coming into the U.S. from foreign manufacturers, and a similar 10% surtax on aluminum.  The markets certainly noticed; they fell dramatically after the announcement, as investors feared that the move would spark a global trade war.

The proposed tariffs would be enacted under a loophole in the World Trade Organization rules, which generally prohibit countries from straying from their agreed-upon trade arrangements, but permit “safeguard” responses to a sudden, unforeseen and damaging import surge that could seriously damage a particular industry.  Internally, the Trump Administration plans to circumvent Congress by imposing the tariffs under Section 232 of a 1962 U.S. law that allows the President to take unilateral action based on national security concerns.  The last time Section 232 was invoked was back in 1975, when President Ford imposed taxes on foreign oil.

The initial panicked market reaction cooled after it became clear that the tariffs may actually never be imposed—for several reasons.  One is that there has actually been no unforeseen or damaging import surge in aluminum or steel, or really any surge at all.  The U.S. already imposes 169 trade taxes on various types imported steel, including 29 on Chinese products that were imposed during the Obama Administration.

Another is that the national security concern is not easy to justify, particularly after the President signaled that he would remove these tariff measures on Mexico and Canada—two of the largest exporters of steel to the U.S.—if those countries come back to the table to renegotiate the North American Free Trade Agreement.  Wouldn’t that put the country back at risk all over again?

A third is that the tariff is a bit like shooting at the enemy and hitting one of your fellow hunters instead.  President Trump specifically called out China for destroying the U.S. steel industry and dumping artificially-priced steel on U.S. markets.  But China is only the 11th largest source country to the U.S., accounting for just two percent of total U.S. steel imports last year.  The Chinese steel industry doesn’t depend on the U.S. market; America is China’s 26th biggest import customer, well behind South Korea, Vietnam, the Philippines, Thailand and Indonesia. 

Who would be hurt most by the tariff?  Canada is by far the biggest source of manufactured steel, accounting for 17% of U.S. imports.  Other U.S. allies like South Korea, Mexico and Brazil are all significant sources for U.S. manufacturers.

Finally, if the effort is to boost the number of manufacturing jobs in the U.S., the proposal looks like it could seriously backfire.  There are approximately 170,000 steel- and aluminum-related jobs in the U.S. currently.  But if the measure makes steel and aluminum more costly, it would lower profits for companies that employ more than 6.5 million workers—who are paid to make everything from pickup trucks to canned soup.  Worse, the measure opens the doors for the European Union and China to create targeted retaliatory measures like slapping significant tariffs on Harley Davidson motorcycles, bourbon and a variety of agricultural products that depend on exports—further endangering American jobs.

So while the sweeping tariff proposals make headlines, the reality is likely to be a quiet walking back from the proposal altogether or, to save face, a tariff that makes a lot of exceptions and grandfathers existing long-term contracts.

This material was prepared by BobVeres.com., and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. Please note - investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.

Sources:

https://www.reuters.com/article/us-usa-trade-explainer/trumps-extraordinary-tariffs-idUSKBN1GH2IR

https://www.dallasnews.com/news/donald-trump-1/2018/03/01/trump-says-will-steel-aluminum-tariffs-despite-objections-industry-congressional-leaders

http://money.cnn.com/2018/03/02/news/economy/steel-industry-statistics-us-china-canada/index.html

https://www.cnbc.com/2018/03/02/if-trump-thinks-hes-taking-steel-tariff-war-to-china-hes-wrong.html

https://www.nytimes.com/2018/03/05/opinion/trump-tariff-americans-jobs.html

February 9, 2018

It looks like the U.S. stock market will finally get something that happens, on average, about once a year: a 10+ percent drop—the definition of a market correction.  However, the last time a verydeep drop happened, it was a whopper—the Great Recession drop that caused U.S. stocks to drop more than 50%--so most people today probably think corrections are catastrophic.  They aren’t.  More typically, they last anywhere from 20 trading days (the 1997 correction, down 10.8%) to 104 days (the 2002-2003 correction, down 14.7%).  Corrections are unnerving, but they’re a healthy part of the economy—for a couple of reasons.

Reason #1: Because corrections happen so frequently and are so unnerving to the average investor, they “force” the stock market to be more generous than alternative investments.  People buy stocks at earnings multiples which are designed to generate average future returns considerably higher than, say, cash or municipal bonds—and investors require that “risk premium” (which is what economists call it) to get on that ride.  If you’re going to take more risk, you should expect at least the opportunity to get considerably more reward.

Reason #2: The stock market roller coaster is too unsettling for some investors, who sell when they experience a market lurch.  This gives long-term investors a valuable—and frequent—opportunity to buy stocks on sale.  That, in turn, lowers the average cost of the stocks in your portfolio, which can be a boost to your long-term returns.

The current market downturn relates directly to the first reason, where you can see that bonds and stocks are always competing with each other.  This week’s 4.1% decline in the S&P 500 coincided with an equally-remarkable rise in the yields on U.S. Treasury bonds.  Treasuries with a 10-year maturity are now providing yields of 2.85%--hardly generous, but well above the record lows that investors were getting just 18 months ago.  People who believe they can get a decent, relatively risk-free return from bond investments are tempted to abandon the bumpy ride provided by stocks for a smoother course that involves clipping coupons.  Bond rates go up and the very delicate supply/demand balance shifts, at least temporarily, in their direction, and you have the recipe for a stock market correction.

This provides us all with the opportunity to do an interesting exercise.  It’s possible that the markets will drop further—perhaps even, as we saw during the Great Recession, much further.  Or, as is more often the case, they may rebound after giving us a correction that stops short of a 20% downturn.  The rebound could happen as early as Monday, or some weeks or months from now as the correction plays out.

Once it’s over, no matter how long or hard the fall, you will hear people say that they predicted the extent of the drop.  So now is a good time to ask yourself: do I know what’s going to happen tomorrow?  Or next week?  Or next month?  Is this a good time to buy or sell?  Does anybody seem to have a handle on what’s going to happen in the future?

Record your prediction, and any predictions you happen to run across, and pull them out a month or two from now.

Chances are, you’re like the rest of us.  Whatever happens will come as a surprise, and then look blindingly obvious in hindsight.  All we know is what has happened in the past.  This week’s market drop is nothing more than a data point on a chart that doesn’t, alas, extend into the future.

Sincerely,

Edward J. Kohlhepp, Jr., CFP®, MBA President 

Edward J. Kohlhepp, CFP®, ChFC, CLU, CPC, MSPA

Founder & CEO

This material was prepared by BobVeres.com., and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. Please note - investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.

Sources:

https://www.fool.com/knowledge-center/6-things-you-should-know-about-a-stock-market-corr.aspx

https://www.yardeni.com/pub/sp500corrbear.pdf

https://finance.yahoo.com/news/stocks-getting-smashed-143950261.html

February 5, 2018

Suppose somebody came up to you and shouted: “I have terrible news about the economy.  I think you should sell your stocks!”

Alarmed, you say: “Oh, my God.  Tell me more!”

And this mysterious stranger shouts: “Run for the hills!  The American economy just added 200,000 more jobs—more than expectations—and the U.S. jobless rate now stands at 4.1%, the lowest since 2000!”

You blink your eyes.  So?

“There’s more,” you’re told.  “The average hourly earnings of American workers have risen a more-than-expected 2.9% over a year earlier, the most since June of 2009!  You should sell your stocks while you can!”

Chances are, you don’t find this alarmist stranger’s argument very persuasive, but then again, you don’t work on Wall Street.  After hearing these benign government statistics, traders rushed for the exits from the opening bell to the closing, and today the S&P 500 stocks are, in aggregate, worth 2.13% less than they were yesterday.  The Nasdaq Composite index fell 1.96% and the Dow Jones Industrial Average, a somewhat meaningless but well-known index, was down 2.54%.

To understand why, you need to follow some tortuous logic.  According to the alarmist view, those extra 200,000 jobs might have pushed America one step closer to “maximum employment”—the very hard-to-define point where companies have trouble filling job openings, and therefore have to start offering higher wages.  No, that’s not a terrible thing for most of us, but the idea is that if companies have to start paying more, then they’ll be able to put less in their pockets—and the rise in the hourly earnings of American workers totally confirmed the theory.

If you’re an alarmist, it gets worse.  If American workers are getting paid more, then

companies will start charging more for whatever they produce or do, which might raise the inflation rate.  “Might” is the operative word here.  There hasn’t been any sign of higher inflation, which is still not as high as the Federal Reserve Board wants it to be.  But if you’re a Wall Street trader who thinks the market is in a bubble phase, you aren’t necessarily looking at facts to confirm your beliefs.

Suppose you’re not an alarmist.  Then you might notice that 18 states began the new year with higher minimum wages, which might have nudged up that hourly earnings figure that looked so alarming a second ago.  And some companies have recently announced bonuses following the huge reduction in U.S. corporate tax rates, whose amortized amounts are also finding their way into wage statistics.

Meanwhile, those same government statistics are showing a resurgence in factory activity and a rebound in housing, which account together for more than 50,000 of those new jobs.

So the question we all have to ask ourselves is: are we alarmists?  Selling in anticipation of a bear market has never been a great strategy, even though stocks are admittedly still priced higher than they have been historically.

If you are not an alarmist, then you have something to celebrate.  The S&P 500 has now officially ended its longest streak without a 3% drop in its history.  It’s an historic run not likely to be seen by any of us again.  The truth about the markets is that short, sharp pullbacks are inevitable and routine—unless you were living in the past year and a half, when we seemed to be immune from normal market behavior.

Sincerely,

Edward J. Kohlhepp, Jr., CFP®, MBA
President 

Edward J. Kohlhepp, CFP®, ChFC, CLU, CPC, MSPA

Founder & CEO

This material was prepared by BobVeres.com., and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. Please note - investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.

Sources:

https://www.bloomberg.com/news/articles/2018-02-02/u-s-added-200-000-jobs-in-january-wages-rise-most-since-2009

https://www.bloomberg.com/news/articles/2018-02-01/asia-stocks-to-slide-as-tech-stumbles-bonds-drop-markets-wrap?https://www.theatlantic.com/business/archive/2018/02/market-dow-drop/552254/?utm_source=atltw

January 5, 2018

Investors are excited about bitcoin – perhaps too excited. Their fervor is easy to understand.On December 18, bitcoin closed at $17,566. Back on September 22, bitcoin was valued at only $3,603.¹    

Yes, you read that correctly – the price of bitcoin jumped nearly 500% in three months. Thanks to this phenomenon, investors everywhere are asking if they should buy bitcoin or invest portions of their retirement funds in the cybercurrency. The air is filled with hype: bitcoin is “unstoppable,” it is “the answer,” it is “the future.”  

It may also be heading for a crash.   

Bitcoin has crashed before.It is highly volatile. On Thanksgiving 2013, a single bitcoin was worth $979; by April 2014, the price was at $422. In late August 2017, it settled at $4,673; by mid-September, it was back at $3,783 immediately before its amazing fourth-quarter climb.¹   

With the recent launch of bitcoin futures markets on the Chicago Board Options Exchange (CBOE) and CME Group, bitcoin has gained more respect. Still, there are many investors who will not touch it because of its considerable downside risk and its association with the seedy side of global finance.²   

The free market determines the value of bitcoin. Therefore, it can suffer sudden, dramatic devaluations due to the day’s headlines. When China ordered bitcoin exchanges to shutter, the price of bitcoin slid. When JPMorgan Chase CEO Jamie Dimon called bitcoin “a fraud” in September 2017, the price quickly fell 10%. When the Silk Road website disappeared, bitcoin’s value took a hit (and its disappearance brings us to the cryptocurrency’s other worrisome aspect).^3,4 

Bitcoin has long been linked to the “dark web.” Even its origins are mysterious: the digital currency was created by someone named “Satoshi Nakamoto,” whose identity is still a question mark. Bitcoins are made in cyberspace by computers, beyond the control of any government.To its advocates, the fact that bitcoin has emerged from the Internet rather than a central bank is attractive. Who bitcoin and other cybercurrencies have attracted is another matter.^4,5    

Bitcoin transactions are conducted on multiple exchanges and verified through the blockchain, a digital ledger that leaves transaction records open to the broad community of bitcoin users rather than a financial regulatory authority.^3,4  

Is this transparency a plus or a minus? You will hear both arguments. Even with this openness, users on bitcoin exchanges are not always required to reveal their identities, which is a plus for criminals. Bitcoin has been linked to money laundering, and earlier in this decade, some economists saw it as little more than a currency for drug lords. Silk Road, a black-market website, saw plenty of bitcoin transactions. How about funding for terrorist cells? Recently, a New York woman was charged with trying to send more than $80,000 to ISIS – cash mostly laundered through bitcoin, federal prosecutors assert.^5,6   

The hype says that bitcoin is the “new gold,” but gold has intrinsic value. Governments, banks, and institutional investors share a foundational belief that gold is a valuable commodity. Does bitcoin have such a foundational belief beneath it?  

If speculators stopped believing bitcoin was valuable, then how valuable would it be? Nearly worthless, in the eyes of some observers. As NerdWallet investment writer Andrea Coombes remarks, “The value is in the demand itself.”⁷ 

In the financial markets, higher prices are not always succeeded by higher prices.This is essentially the belief holding up bitcoin. Its biggest fans believe its direction will be up and up for years to come, and that it will never really crater again. This is called irrational exuberance, and it has harmed many investors through the years. 

Whether you think bitcoin is the “new gold” or amounts to a bubble ready to burst, its extreme, dangerous volatility means one thing – if you do choose to invest in it, you would be wise to only invest money that you can afford to lose.

Sincerely, 

Edward J. Kohlhepp, Jr., CFP®, MBA
President  

Edward J. Kohlhepp, CFP®, ChFC, CLU, CPC, MSPA

Founder & CEO 

This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. Please note - investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.

Citations.

1 - coindesk.com/price/ [12/20/17]

2 - cnbc.com/2017/12/17/worlds-largest-futures-exchange-set-to-launch-bitcoin-futures-sunday-night.html [12/17/17]

3 - thebalance.com/who-sets-bitcoin-s-price-391278 [2/14/17]

4 - theguardian.com/technology/2017/sep/13/from-silk-road-to-atms-the-history-of-bitcoin [9/14/17]

5 - theguardian.com/business/2013/mar/04/bitcoin-currency-of-vice [3/4/13]

6 - arstechnica.com/tech-policy/2017/12/feds-charge-new-york-woman-with-sending-bitcoins-to-support-isis/ [12/15/17]

7 - nerdwallet.com/blog/investing/is-bitcoin-safe/ [12/7/17]

Senate Tax Bill

December 5, 2017

The U.S. House of Representatives passed its proposed tax “reform” bill last month, and now the Senate has followed suit.  Interestingly, the two bills are different enough that the two sides are going to have to meet and hammer out a compromise.

Here’s a quick glance at the provisions in the Senate bill and some of the differences.

First, the Congressional Budget Office created a quick report that assesses a variety of income levels, and whether they’ll come out ahead, tax-wise (blue and white cells) or will lose ground financially (pink cells) under the proposed bill.  (See graphic). 

Under the Senate bill, there would be seven tax brackets (compared with four in the House version): 10%, 12%, 22%, 24%, 32%, 35% and 38.5%.  The threshold to reach the top rate would be raised from $418,000 (single) or $480,000 (joint) to $500,000/$1 million.

The Senate bill raises the standard deduction to $12,000 for singles and $24,000 for joint filers, compared with $12,200 and $24,400 in the House version.  The Senators decided to keep the mortgage interest deduction as it is today, rather than (House version) limit the amount of mortgage debt upon which interest can be deducted to $500,000.

Meanwhile, the House repealed the alternative minimum tax, but the Senate decided to keep it, although it did propose to raise the income exemption levels from $50,600 (single) or $78,750 (joint) to $70,600 and $109,400 respectively.  Both versions would raise the estate tax exemption to $11 million for individuals and $22 million for joint filers, but the House version would repeal the estate tax altogether in 2024, while the Senate version would not.

Like the House, the Senate bill would eliminate many popular deductions, including state and local income taxes, casualty losses and unreimbursed employee expenses. 

It is possible that the final version will greatly reward taxpayers who own and receive income through so-called “pass-through entities;” that is, corporate arrangements where the taxes are calculated and paid by the owners rather than at the corporate level.  This includes partnerships, Subchapter S corporations and limited liability companies, which would, under the Senate bill, be taxed at a rate of about 29.6% rather than the top rate, whatever that turns out to be.

Interestingly, this lower rate is also extended to publicly-traded pass-through vehicles—which suggests that you might see a lot of new tax-advantaged investment products come on the market if the bill is passed.

Speaking of publicly-traded entities, companies with significant earnings outside the U.S. will also receive a generous tax break; they would, under the Senate bill, be able to bring their earnings home at tax rates ranging from 7.5% to 14.5%—lower than the proposed new 20% corporate tax rate. 

The consolidated bill is expected to be signed before the end of the year—and of course the professional community is watching closely to calculate the impact on all of us.

Sincerely,

Edward J. Kohlhepp, Jr., CFP®, MBA
President 

Edward J. Kohlhepp, CFP®, ChFC, CLU, CPC, MSPA

Founder & CEO

This material was prepared by BobVeres.com., and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. Please note - investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.

Sources:

http://money.cnn.com/2017/12/03/pf/taxes/senate-house-tax-bills-individuals/index.html

https://www.nytimes.com/2017/12/02/business/tax-bill-offers-last-minute-breaks-for-developers-banks-and-oil-industry.html

https://www.forbes.com/sites/anthonynitti/2017/12/02/winners-and-losers-of-the-senate-tax-bill/#79382054254d

November 10, 2017

Major changes may be ahead for federal tax law. At the start of November, House Republicans rolled out their plan for sweeping tax reforms. Negotiations may greatly alter the content of the bill, but here are the proposed adjustments, and who may and may not benefit from them if they become law.

The corporate tax rate would fall from 35% to 20%.Wall Street would cheer this development, perhaps with a significant rally. Sole proprietorships, partnerships, and S corporations would also see their top tax rate drop to 25% (although W-2 wages for business owners who invest in these pass-through entities would still be taxed at the owner’s marginal tax rate).^1,2

The estate tax and Alternative Minimum Tax would be eliminated.The AMT would die immediately, saving more than 5 million high-earning taxpayers from an annual bother. Death taxes would sunset within six years, and in the interim, the estate tax exemption would be doubled, leaving the individual exemption at about $11 million. This would be a boon for many highly successful people and their heirs.²

Personal exemptions would go away, but the standard deduction would nearly double.The loss of the personal income tax exemption (currently $4,050 per individual claimed) would be countered by standard deductions of $12,000 for individuals and $24,000 for married couples. This could lessen the tax burden for many middle-class households. On the downside, the larger standard deduction might reduce the incentive to donate to charity.^1,2

Only four income tax brackets would exist.While the top marginal tax rate would remain at 39.6%, the other brackets would be set at 12%, 25%, and 35%. Individuals earning $45,000 or less and spouses with combined earnings of $90,000 or less would fall into the 12% bracket. Households earning less than $260,000 would be in the 25% bracket. The individual threshold for the 39.6% bracket would be moved up to $501,000 from the current $418,401; it would apply to couples who earn more than $1 million.³

Some state and local tax deductions might vanish.Taxpayers who face higher state income tax rates – such as those living in New York, California, and New Jersey – could lose a big tax break here. The reform bill’s author, House Ways & Means Committee Chair Kevin Brady (R-TX), says that a new revision to the bill would at least let homeowners deduct state and local property taxes up to a $10,000 cap.³

Speaking of caps, the mortgage interest deduction would be halved to $500,000. Real estate investors, developers, and agents are unhappy with this idea, as the current $1 million mortgage interest deduction has helped to spur home buying.¹

Some key itemized credits and deductions would disappear.Among those the bill would do away with: the medical expense deduction, the moving deduction, the student loan interest deduction, the deduction on alimony payments, the electric vehicle deduction, and the tax credit drug manufacturers rely on as they undertake clinical trials. Retirees, divorcees, college grads, and pharmaceutical companies could see some financial negatives.^1,2

Private college endowments would be taxed.With the aim of generating $3 billion in revenue over the next ten years, the bill would impose a 1.4% federal excise tax on private colleges and universities with 500 or more students and assets equivalent to or greater than $100,000 per full-time student.¹

The Child Tax Credit would grow.Families eligible to claim the credit would see it rise to $1,600 from the current $1,000.³

Hardship withdrawals from workplace retirement plans could become larger.Currently, plan participants who take hardship withdrawals are only allowed to withdraw their contributions, not both their contributions and earnings. The new reform bill would lift that restriction. In addition, a worker with an outstanding loan from a workplace retirement plan who loses his or her job would have until April 15 of the following year to repay the loan balance, as opposed to the current 60 days.⁴

 Sincerely,

Edward J. Kohlhepp, Jr., CFP®, MBA
President 

Edward J. Kohlhepp, CFP®, ChFC, CLU, CPC, MSPA

Founder & CEO

This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. Please note - investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.   

Citations.

1 - nytimes.com/2017/11/02/us/politics/republican-tax-plan-winners-losers.html [11/2/17]

2 - kiplinger.com/article/taxes/T055-C032-S014-3-game-changers-for-investors-in-house-tax-plan.html [11/3/17]

3 - businessinsider.com/trump-gop-tax-reform-plan-bill-text-details-rate-2017-10 [11/2/17]

4 - chicagotribune.com/business/ct-biz-gop-tax-bill-401k-changes-20171103-story.html [11/3/17]

November, 2017

On November 2, Jerome “Jay” Powell was nominated to lead the Federal Reserve. The announcement in the White House’s Rose Garden was not a surprise; in recent days, he had emerged as the front-runner for the chairmanship.¹

Three things stand out about Jay Powell’s nomination, and the change of leadership presumably ahead at the Fed in 2018.¹

The choice of Powell does much to affirm the status quo. In fact, Powell has sided with the majority in every Fed policy vote since he became a Fed governor in 2012. Former White House budget director David Stockman calls him “Janet Yellen with a tie.”^1,2

Analysts widely expect Powell to try to maintain the accommodative stance of his predecessor, along with the Fed’s current strategy for normalizing monetary policy. He has shown an interest in scaling back some of the banking regulation put in place by the Dodd-Frank Act, such as the prohibition on proprietary trading by commercial banks.^1,3

Interestingly, Powell does not have a Ph.D. in economics. He is not an economist by profession, but rather a lawyer who became an investment banker and Fed governor. This may turn out to be more of a curiosity than a detriment; after all, the last Fed chair without a doctorate in economics was a fellow named Paul Volcker.^3,4

For the first time in almost 40 years, a sitting Fed chair will not be reappointed.Presidents have commonly retained Federal Reserve chairs appointed by the previous commander-in-chief; if Powell takes the helm of the Fed, that pattern will end. Janet Yellen does have the option to stay on as a Fed governor and voting member of the Federal Reserve Board through 2024, though exercising that option would be atypical. Assuming his nomination is approved, Powell will succeed Yellen as Fed chair in February.^3,4

Sincerely,

Edward J. Kohlhepp, Jr., CFP®, MBA
President 

Edward J. Kohlhepp, CFP®, ChFC, CLU, CPC, MSPA

Founder & CEO

This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. Please note - investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.   

Citations.

1 - nytimes.com/2017/11/02/opinion/jerome-powell-trump-federal-reserve.html [11/2/17]

2 - foxbusiness.com/politics/2017/11/01/fed-pick-jerome-powell-is-janet-yellen-with-tie-fmr-reagan-budget-director.html [11/1/17]

3 - thestreet.com/story/14364543/1/powell-seen-as-safe-uncontroversial-choice-to-replace-yellen.html [11/1/17]

4 - tinyurl.com/y8kammc9 [11/2/17]

August 16, 2017

So far, the world markets seem to be shrugging off the sabre-rattling coming from North Korea (normal behavior) and the U.S. White House (complete departure from policy). The smart money is betting that the distant but suddenly headline-grabbing possibility of the first conflict between two countries armed with nuclear weapons will amount to a tempest in a teapot.   
 

Meanwhile, the U.S. stock market has been testing new highs for months, and experts cannot quite explain why valuations have been rising amid such low volatility.  
 

So the question is quite logical: isn’t this a good time to pare back or get out of the market until valuations return to their historical norms, or at least until the North Korean “crisis” blows over?   
 

The quick answer is that there’s never a good time to try to time the market.  The longer answer is that this may actually be a particularly bad time to try it.   
 

What’s happening between the U.S. and Korea is admittedly unprecedented.  In the past, the U.S. largely ignored the bluster and empty threats coming out of the tiny, dirt-poor Communist regime, and believe it or not, that also seems to be what the military doing now.  Yes, our President did blurt out the term “fire and fury” in impromptu remarks to the press, and later doubled down on the term by suggesting that his warning wasn’t worded strongly enough.  But the U.S. military seems to be responding with a yawn.  There are no Naval carrier groups anywhere near Korea at the moment; the U.S.S. Carl Vinson and the U.S.S. Theodore Roosevelt are both still engaged in training exercises off the U.S. West Coast, and the U.S.S. Nimitz is currently patrolling the Persian Gulf.  Nor has the State Department called for the evacuation of non-essential personnel from South Korea, as it would if it believed that tensions were leading toward a military confrontation.   
 

Meanwhile, on the home front, the U.S. economy continues to grow slowly but steadily, and in the second quarter 72.2% of companies in the S&P 500 index have reported earnings above forecast.   
 

What does that mean?  It means that you will probably see a certain amount of selling due to panic over the North Korean standoff, which will make stocks less expensive—a classic buying opportunity.  History has given all of us many opportunities to panic, going back to World War I and World War II, and more recently 9/11—but those who stayed the course reaped enormous benefits from those who abandoned their stock positions.
   

If you’re feeling panic over the North Korean situation, by all means, go in the nearest bedroom and scream—and then share some sympathy for the Americans living in the island territory of Guam, which is in the direct path of the North Korean bluster.  Just don’t sabotage your financial well-being in the process.   
 

Sincerely, 

Edward J. Kohlhepp, Jr., CFP®, MBA 
President  

Edward J. Kohlhepp, CFP®, ChFC, CLU, CPC, MSPA
Founder & CEO

This material was prepared by BobVeres.com., and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. Please note - investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.