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What Is Still Deductible

December 6, 2019November 13, 2019 by Finance Gourmet

Trump’s new tax law has caused a lot of confusion. One of the big areas of confusion is that many of the so-called “itemized-tax deductions,” won’t really count for most American taxpayers anymore. It’s not that those deductions are gone, it’s just that triggering the threshold where itemizing tax deductions saves you more money than taking the standard tax deduction has moved. New “Smaller” Tax Forms Politicians are always lying and claiming victory when they have achieved no such thing. One thing many politicians tried to take credit for with the new Trump tax law was making taxes simpler. They did… kind of… sort of… My favorite part of the new tax law is that you can “file your taxes on a postcard.” <insert super eyeroll> You know, if you use both sides of the postcard… with no space for any sort of address for mailing it… and if anyone still used postcards, which the IRS does not recommend for filing your taxes. The official IRS 1040 form would indeed fit on an non-mailable postcard. If you printed it front and back. Sound dumb? It is. Still, here we go, the official IRS Form 1040. Wait a minute. That IS …

Stock Trends Reversing to the Mean

November 6, 2019 by Finance Gourmet

Nothing makes a financial journalist salivate more than the sweet sound of statistics to make their stock market warning article sound more legitimate. Of course, numerous statistics are meaningless, others are easily cherry-picked based on data, and still others are far less useful or predictive than other statistics that might not say the same thing. Today’s fun example comes courtesy of MarketWatch and the gloomy warning that U.S. Stocks could be in for a world of hurt if this trend reverses to the mean. Check out my Rakuten rebates review. “World of hurt?” – Whew! Pulling hard on our masculine headline click bait phrase dictionary this morning are we? What Is Reversing to the Mean? Reverting to the mean is the statistical probability that for any observation away from the mean, the more likely the next observation will be closer to the mean. An easy way to think of this is if the mean speed of cars passing by on a road is 55 mph, and one goes by at 95 mph, statistically the next card that goes by will do so at a speed closer to the mean than 95 mph, that is 94 mph or less. Obviously, this …

Fidelity Joins Free Commissions Movement

January 12, 2023October 10, 2019 by Finance Gourmet

Fidelity announced that it too would be offering free trade commissions to its customers following earlier announcements from Schwab and TD Ameritrade. Fidelity free commission trades have some limits, but they are not onerous. While this is a newer movement among discount Wall Street brokers, it comes after many different investing apps, and services have pushed a commission free investing business model for a year or two now. Obviously, the free trade model is mostly aimed at smaller, do it yourself investors. It also works well for those doing the roboadvisor, or computer-based model investing. Fidelity Free Commission Larger investors already enjoyed “free” trades as part of an annual fee usually applied to their accounts that provided not only free trades, but investment and financial advice as well. Keep in mind that the free trades does not apply to mutual funds with loads, or other investments that charge their own fees. This new wave of freebies only applies to stock trades, ETF trades, options, and other market trades. And, of course, be sure to check the fine print where you’ll find tidbits, like $0.65 per option contract and a charge for sell orders: Sell orders are subject to an activity …

Everyone Who Called a Downturn in the First Half of 2019 Is Officially WRONG

October 8, 2019 by Finance Gourmet

It is now October. That is the third quarter of 2019. By any, and all, definitions the first half of 2019 is officially over. That means all of those analysts, pundits, economists, and big Wall Street talking heads who predicted a recession or stock market downturn in the first half of 2019 are officially wrong. They were also wrong about the first three-quarters of 2019, but that headline isn’t as catchy. 🙂 There is nothing wrong with that on the surface. Predictions of any kind are risky business. However, a great many of these same people trade on a weird blindness in the financial industry. No one keeps any real track of these predictions. As a result, if these same people go out and make the exact same prediction for next year, they get full credit in the media for “calling” the next downturn without any acknowledgement that they were wrong this year (and maybe several of the previous years.) Investing By Predictions is Dumb Past performance is not an indicator of future results. This statement is mandated to show up on all kinds of investing materials by regulators. It is a hopeless cry to the masses to not invest …

Free Trades

October 3, 2019 by Finance Gourmet

Charles Schwab and TD Ameritrade have both announced that they are eliminating their usual commission for stock, option and ETF trades, to provide free trades to their customers. In the coming days, we may see other discount brokerages follow their lead, in part, or in whole. Until now, most brokerages only offered free trades on select securities, often on company owned mutual funds. For example, Fidelity has a list of mutual funds customers can buy for “free.” Schwab has a similar list. This new move opens up free trades to the world of stocks and options. Trading vs Investing New investors often confuse the concepts of trading and investing. Trading seems exciting and romantic. While it very much can be for the right people, the average person actually needs to be investing for long-term goals, rather than slinging stock trades. For investors building a well-diversified, long-term portfolio high commissions can impose an overhead that diminishes returns. That’s why low-cost brokerages like Schwab and Fidelity are preferred for many do it yourself investors. Zero-cost takes it one step further, providing the opportunity to build, maintain, and re-balance a portfolio without the added overhead of even a low commission. Traders, obviously, will …

Customer Spending Plus No Inflation is Best

August 30, 2019 by Finance Gourmet

Interesting story today over on Market Watch. In the decade since the U.S. basically gave up on manufacturing to do it cheaper overseas while building a service economy at home, the only real driver of economic growth is customer spending. As long as customers are buying, American companies can keep importing goods from China and making a profit. Meanwhile, the service economy runs along in the background to give Americans the money to spend. Ironically, the only thing that moves slower than trying to adjust the economy with interest rates is trying to adjust the thinking of economists who insist on pretending that America has basically the same economic structure it did two or three decades ago. This disconnect is the root cause of much of America’s economic stress. Today’s super Goldilocks article notes that American consumer spending increased in July, with (still) no increase in inflation. In the reality of today’s U.S. economy this is literal perfection. Business can continue to grow, consumers can continue to spend, and companies can hire, all with no currency blow back issues. But, old school economists and the money shufflers on Wall Street can’t see this. All they remember are no longer accurate …

Stock Market Is a Leading Indicator

September 11, 2020August 23, 2019 by Finance Gourmet

Remember, the stock market is a leading indicator. What Is a Leading Indicator? This should probably get its own post, along with what is a lagging indicator, but that isn’t the point of this article, so let’s hit the highlights. At the most basic level there are leading indicators and lagging indicators. A leading indicator is a measurement of what is to come. A lagging indicator is a measurement of what has already happened. At a metaphorical level, the display on your car that says you have 80% of the life of your oil left is a leading indicator. It is measuring the future. Note that it does NOT predict the future. It’s a best guess effort based on available data. Contrast that with a lagging indicator, which measures something in the past. Metaphorically, this might be the sticker on the windshield that says the mileage of the last oil change, or your maintenance log. In the world of economics, most lagging indicators are big data compiled by the government. You may have noticed that the June Labor Report comes out in July. That’s because you have to wait until the end of June for all the data to even …

Stocks! China! Trade Deal!

August 13, 2019 by Finance Gourmet

The Trump presidency has been nothing if unpredictable. The President seems to wake up with new tweets on his mind every day, and the markets love overreacting to every one. The result is a stunning whip shaw effect of large market moves up and down, often during the same day. This morning, U.S. Trade representatives said that the new tariffs Trump announced in a tweet on August 1 would be delayed. Some tariffs will be delayed until September 1 and others until December. Does that mean that progress is being made on a trade deal? Only the President knows, although he doesn’t really know either. Depending on how talk show hosts talk over the next few weeks, and what he advisors say, he may or may not think he is getting a good deal. Or getting credit for a good deal. Or maybe just get bored. Long-Term Diversified Portfolio Every financial planner eventually gets tired of beating this drum, but the answer is always the same. A long-term, well-balanced, risk adjusted, annually rebalanced portfolio is the solution to the dramatic, unpredictable moves of the market. Sooner or later, this market will roll over. Although, the tons of analysts “predicting” it …

China Is Officially a Currency Manipulator

August 7, 2019 by Finance Gourmet

China has been a currency manipulator for years. Everyone knows it. China knows it. The U.S. knows it. Every economist in the world knows it. China has an enormous trade surplus with the world. Typically, when this happens, the value of that currency rises making its exports more expensive to other countries. This, in turn eventually reduces the amount of imports a country makes, thereby reducing the overall trade deficit. China, which requires its citizens to hold their savings in state run banks, uses the large amounts of currency it generates sending exports around the world to ensure that the value of the Yaun never gets above a certain amount. In turn, this both keeps its exports cheap, and prevents any closing of the trade gap between its trading partners. None of this is secret, or remotely new information Trump Calls Out China Currency Actions What is new, is that usually no one says it out loud, and no one ever actually makes it official by labeling China a currency manipulator. So, what does it mean now that China has been officially labeled? Nothing. You see, since China has been doing this forever, and the other countries have known about …

Summer Time!

June 6, 2019 by Finance Gourmet

We at Finance Gourmet (it’s just me, but I like saying that) are getting ready to gear up for summer. That means a few things. First, some of the articles around here are going to be about VACATIONS and things like credit card rewards programs, airline miles, and how to save money on travel. Second, some of the articles are going to be focuses on outdoor activities and how you can take advantage of them while saving money, and living the good life. Third, there is a WHOLE LOT of weird stuff going on in the world economically speaking. Regardless of what you think of President Trump, the stuff he is doing is bombastic, and not at all carefully implemented, so expect plenty of whipshaw from investors, the markets, and economic numbers. As always, a well balanced portfolio is the answer to all your long-term investing issues, but changes are probably necessary for your short-term stuff because the volatility isn’t going away. And, finally, I’m “off” during the summer (I don’t have to go into an office anyway) so expect a bit of off-topic drift as me and the family have a whole lot of fun without breaking the bank, …