News

What To Do If You Win $400 Million Powerball

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powerball jackpot cash or annuity

There are Powerball jackpots, and then there are POWERBALL JACKPOTS. Tonight’s Powerball jackpot is  at $403 million (annuity), and $243.9 million (cash), which according to news reports is the 10th largest jackpot of all time. Every wonder what you should do if you win Powerball? The truth is that with a jackpot this large, you’d have to mess up pretty bad for it to be much of an issue. Smaller jackpots can be trickier, if you are trying to live the rest of your life without ever having to work again, AND live a larger than life lifestyle. Choose Annuity or Cash There are two options to choose from if you win the Powerball jackpot. Contrary to popular belief, the value of both choices is the same. The actual jackpot is $243.9 million in both cases. However, if you choose the annuity, the lottery invests that $243.9 million on your behalf, and then sends you 30 checks over the next 29 years. The difference between the announced annuity amount is nothing more than the interest that builds up over those 29 years of payouts. Hypothetically speaking, if you were able to invest the money in the same way that the lottery …

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Market Review

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Another up week for stocks in the week that ended February 10th. The Dow is still up over 20,000, and the S&P 500 and Nasdaq all finished up nicely as well. One big stock in the news was Sears, which has yet another restructuring plan, but having sold off most of its best assets, is it just delaying the inevitable? With little news scheduled on tap for the coming week, stocks will likely drift along with whatever the headline of the day is. Time to start thinking about taxes.

Dow 20,000

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This post will not be long, and there won’t be much analysis. Why? Because, the Dow hitting 20,000, or Dow 20K, as some like to say, is not that important. The reality is that Dow 19,823 is not really any different than Dow 20,107. Round numbers are not magic. So, what’s the big deal? Why Does Dow 20K Matter? I’ve noticed an increasing number of financial publications describing the Dow Jones Industrial Average hitting 20,000 as a “psychologically important” milestone. In other words, it matters for really cool newspaper headlines and not much else. Remember, the Dow is just 30 stocks. Those 30 stocks are all large, U.S. companies, and they change them from time to time for numerous reasons, including when that stock just isn’t very good anymore. In other words, it isn’t really representative of much of anything. But, like a fake credit score from Credit Karma or the like, it is a useful way of getting a general idea of whether stocks are going up or down, and to a lesser extent, by how much. This is why the news often states, “The Dow was up 50 points today…” It’s a quick, no effort, way to say …

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Retail Stocks and 2017

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retail stocks 2017

Wheee! Well, looks like 2017 is going to be a lot of fun, and by fun, I mean volatile and sketchy all the way through. First up, are announcements by retail stocks such as Macy’s and Sears, both of whom announced that they would be cutting staff and closing stores. Kohls also announced sluggish holiday sales. That means that the 2016 holiday shopping season was not strong enough for a lot of traditional retailers. Look for earnings on the low side, that disappoint Wall Street for most retail stocks. This is a big deal, because this was supposed to be the “up” year for the economy. The stock market is up, closing in on 20,000. Job reports show that unemployment is as low as it’s been since before the Great Recession. The Fed even finally got to raise interest rates in December. If this holiday season wasn’t good, then things maybe aren’t going as well as everyone might have hoped. Of course, it is possible that there was still plenty of consumer spending and it just went different places like online retailers, or specialty stores, but so far, no one is pushing that theory. Trump, The Fed, Inflation and a …

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Fed Raises Interest Rates

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fed raises interest rates

As I’ve long pointed out on this blog, the Fed has been dying to raise interest rates in 2016, but each time a meeting came up that they were planning to announce an increase, something happened in the world that made the markets shaky, and rate hike even dicier. As a result, this December 2016 interest rate hike is the one and only rate hike for the year. The current interest rate increase takes the Fed’s main short-term interest rate to 0.50% (officially 0.5% to 0.75%) from 0.25 percent. The Fed and 2017 Ironically, inflation has been very contained for all of 2016 without any interest rate hikes. In face, inflation during 2016, even without a single interest rate increase, has been so low that the formula for Social Security benefits means that there well be no cost of living increase. That makes you wonder why the Fed has been so eager to raise rates, if the whole point of an interest rate increase is to hold back inflation, when there was no inflation at all. There still isn’t any inflation, but the Fed wants to raise rates for other reasons. One that keeps getting floated around is the idea that …

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OPEC Deal and the U.S. Stock Market

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opec deal stocks

For the past few years, the strategy of OPEC has been to do nothing while Saudi Arabia pumps oil as fast as it can into the market. The idea was to cripple, or drive out of business, various U.S. oil businesses that depend on more expensive extraction methods such as fracking. With prices low, many of those businesses did indeed go into hibernation and most new drilling was curtailed. However, that still leaves tons of capacity sitting idle, waiting for higher prices before flipping the switch back on. OPEC Deal It has become apparent that overproduction will not drive out U.S. oil businesses. It seems a strong U.S. economy, plus a more disciplined approach to lending and spending has left most American producers able to hold out for higher prices for longer than the cartel may have hoped. As a result, the cheap oil is actually causing more trouble for oil producing countries like Saudi Arabia that depend on oil production to fund their government. So, for the first time in over 7 years, the 14 OPEC countries have reached a deal to reduce production. The new deal calls for a reduction of 1.2 million barrels of oil per day, with …

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What Is a Trade War?

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china trade war

As part of his campaign for President, Donald Trump offered up some “tough talk” on China. Specifically, Mr. Trump has advocated for labeling China as a currency manipulator. There is a specific provision U.S. law for what happens to countries labeled as such. Labeling China would trigger those actions. Is Trump right about China currency manipulator status? As with many things in the law, there is a difference between the legal definition, and what is the common reality, if you will. China IS a currency manipulator under pretty much any definition you like, except the one that matters.  Typically, a country lets the value of its currency fluctuate based upon market demand. China can, and does, ensure that the value of its currency does not vary outside of of parameters it sets. This is what currency manipulation is. The reason currency manipulation is a problem for America is that usually with a large number of imports, the exporter’s currency will start to increase in value relative to the importer. That makes the exporter’s goods more expensive and the importing country buys less of them. This keeps trade deficits smaller, and on a larger scale, makes the importing country’s own goods …

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Trump Election and the Economy

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Looks like Donald Trump will be the new President of the United States. Don’t think anyone saw that coming. The polls were way off. The world markets panicked, and it looked like U.S. markets might do the same, but then investors realized what everyone else is slowly figuring out. We don’t actually know what Donald Trump is going to do as President, and whatever it is that he does do, it won’t happen until January 2017, when he gets sworn into office. Even then, this isn’t an instant sort of thing. So, what should investors do regarding a Trump Presidency? As always, long-term investors should do nothing more than confirm that they have the right diversified portfolio setup for their risk tolerance. For shorter-term investors, there might be some increased volatility. The markets hate an unknown, and right now Trump is an unknown. However, there are plenty of things to deal with before that. The holiday shopping season is coming, and how it goes (or seems to be going) is going to be a big indicator for how the economy is doing. Retailers can expect a big boost, or a pretty decent beating depending upon whether holiday spending is up …

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Fed Wants To Hike Rates

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rush to raise interest rates

The Federal Reserve Open Market committee wants to hike interest rates so bad they can taste it. Realistically, the Fed has been dying all year to raise interest rates, it’s just that every time it was ready, something drastic happened to spook the Fed, the economy, and the markets enough to make it impossible. But, there has been a period of relatively basic news, and no big shocks, so now it’s basically, “Quick! Raise rates before something else happens.” I’m no economist, but the Fed’s supposed goals are full employment and 2% inflation. This makes the rush to raise interest rates kind of strange, since, the economy is nowhere near full employment, and inflation is nowhere near 2 percent either. I guess the Fed believes that the crawling, sputtering, stuck in neutral expansion that numerous analysts are actually worried is coming to an end, will fire up and take off before the Fed can act. Yeah, that doesn’t make any sense to me either. Which brings us to a Fed rate hike in December because they feel like it makes them look tough, or diligent, or something. What Happens When the Fed Raises Rates I should probably crank out a full article about …

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Fed Predictions

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interest rates federal reserve

Predicting the Federal Reserve and the actions it takes for monetary policy is tricky. In no small part, the difficulty lies with the fact that you are actually making a dual prediction. First, you are predicting what economic news, data, and figures the Fed will receive, and THEN you are predicting how the Fed will respond to them. Getting the second part right, is probably easier than the first part because you are dealing with established pasterns of rational beings, rather than the unknowable events of a future world economy. It seems in a speech Wednesday, Fed member Charles Evans said that he thinks there will be three one-quarter percentage rate hikes. That would essentially end up with the Federal Reserve’s Open Market Target Interest Rate by the end of 2017. Curious about Mr. Evans’ track record, I did a search for his remarks in the last quarter of 2015 to see how well he did at predicting what 2016 would look like. As it turns out, Mr. Evans is pretty good at his job (based on one year anyway) having predicted the U.S. economy would grow at about 2.5 percent during 2016, and with the Federal Funds Rate ending below …

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