Financial Planning 2019

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Financial Planning 2019 1

Stock Market 2019 Look Ahead 2019 is here, and it’s time for Finance Gourmet to take a look forward at what is going to happen with the market in 2019, the economy in 2019, and how you and your personal finances should be setup to weather the storm, and take advantage of the opportunities. 2019 Economy Let’s start with an easy one (Hah!). The 2019 economy looks to be a transition year. This is either the year, that the the economy and the markets consolidate their success and move forward into another expansionary period, or the year that the recession starts. Under normal circumstances we might have a pretty good idea of where things were heading, but these are not normal circumstances. The Trump Presidency alone adds a measure of volatility and uncertainty that just can’t be predicted. That being said, we do have several things to look at to help get an idea of where the economy is heading in 2019. First up is the Federal Reserve, which, at long last, appears to have finally noticed that the economy is slowing and shaking, and that inflation is nowhere to be found other than the always volatile fuel prices. That …

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Happy New Year

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The kids start going back to school today, so Finance Gourmet will be in full effect. We’ll be covering a lot of stuff quickly here in the new year. Of course, we’ll be focusing on taxes. Information is coming slower than usual thanks to the Trump shutdown, but your taxes will still be due on April 15. We’ll be taking a look at the year ahead. It seems major economists are finally starting to see that this expansion is really, really weak, and that might just stop the Fed from raising rates. They’ve already cut back to just forecasting two this year. We’ll take a look at housing, and other big topics as well, so stay tuned.

Colorado State Taxes and Finances

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Hey, guess what I found? It’s an economic document focused on Colorado! Whoop! Whoop! Finance Nerd Alert! The Colorado Legislature’s December 2018 Economic Forecast is out. There’s always plenty of good stuff in there for a finance geek to look at and see both how the Colorado economy is doing, and how the Colorado Legislature is managing it. I’ll dig in here in the next day or two, but here are some interesting tidbits so far. Marijuana Taxes Aren’t Everything Despite what the uninformed and misinformed might think, tax collections on marijuana just aren’t that big of a thing compared to the overall budget. If you thought pot taxes would solve all of the governments budgetary needs you were duped, or sorely mistaken. While December isn’t finished yet, it looks like Colorado’s pot tax revenue will come in at about $250 million. That is real money, but it isn’t difference making making. Colorado’s state budget is $29.9 BILLION. That means the $250 million from marijuana taxes doesn’t even make the budget figure unless you carry out more decimals. $250 million is just 0.08% of the State of Colorado’s overall budget. In other words, it’s a blip on the radar. It …

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Home Builder Stocks Head Down

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It shouldn’t be any surprise that home builder stocks are heading toward the basement. After several months of economic data showing that home sales are slowing, and that home inventories are building, the proof is indisputable, that the Fed’s obsession with raising rates because they want to have higher rates, has begun to hit the economy. The first victims are home builders who are directly impacted by potential home buyers finding out they can afford less, and less home, with each interest rate increase. While most mortgages actually follow the 10-year Treasury yield, the Fed’s steady push on the short end of the curve has provided some rise in that benchmark. The Federal Housing Finance Agency showed a national average adjustable rate mortgage of just 4.08% at the beginning of the year. The latest data, for October shows 4.75%. That might not sound like a lot, but for a mortgage that makes a big payment difference. A $400,000 mortgage for 30-years at 4.08% has a $1,921 payment. The same mortgage at 4.75% rocks a $2,087 payment. For a home buyer reaching for a dream home, $160 a month might be the difference between buying a cheaper home, or even worse …

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Wild Wall Streets Computer Trading

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computer trading market moves

In the past few days, the stock markets have whipsawed up and down by as much as 800 points, sometimes during the same day! It can be hard to put a finger on what is driving the stock market when the behavior seems so irrational, but the reality is actually pretty easy to understand. The computer programs have been tightened, and they keep firing off, sometimes together, sometimes opposed, and each movement they create triggers another program, which triggers another program, and so on. Program Trading Once upon a time, computer trading was nothing more that the pre-placed buy and sell orders entered by traders. A stop order to sell if the price dropped below a certain amount. A buy order if the price trended up. Those trades have been replaced by more sophisticated programs run by everyone from big Wall Street banks and brokers, to hedge funds, to so-called quant mutual funds. These programs fire off hundreds, or even thousands of orders in response to pre-defined market triggers. Is there a Credit Karma scam? Get the markets leaning too far, and they start kicking in, often triggering other programs in the process. The result is seemingly bizarre trading patterns, …

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New Section 199A Business Tax Deduction

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It’s time to dig into how the new Republican tax law is actually going to affect you and yours this coming tax season. While it has been a while since the law was passed, it takes some time for the IRS to iron out the actual rules. Plus, you have to wait for the year to go by before you file your taxes. So, here we are, heading into 2019, and we’ll be doing our 2018 taxes. There are a lot of changes, but one of the biggies is Section 199A. I’m going to take a quick look at the Section 199A Deduction as it applies to a freelancer, or someone who owns their own side business. Section 199A Tax Deduction As noted at the time, the Republican tax bill of 2017 was passed quickly in order to keep any opposition from building up and stopping its passage. As a result, it wasn’t very well thought through, and chances are that there are more than one or two bugs in the system. The IRS itself tried to iron some of those out as it created definitions, and rules and regulations, but there is still a lot of uncertainty about exactly …

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Neutral Interest Rates

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on the edge

Fed Chairman Jerome Powell made some very interesting remarks where he said he thought that interest rates were “just below” neutral. This is bizarre on many levels. First and foremost, neutral interest rates are perfect interest rates unless your economy is in a recession in which case you want stimulating interest rates, or if you are trying to control inflation in which case you want interest rates that have a constricting effect on the economy to stop price increases. So, if interest rates were close to neutral, and inflation was not increasing, then wouldn’t you want to keep interest rates at neutral? Check out my notes about Ebates and holiday shopping. But, Powell and the rest of the Fed have been telegraphing a December rate increase as loudly as possible. In other words, event though interest rates are “just below” neutral, Powell and company want to raise them. Why? Economy is Teetering The other weird bit is that everyone can see the economy is slowing down, and quickly. Housing starts are way down. Housing sales are decreasing. Both are very much affected by higher rates. The stock market is falling, having erased the whole year’s gains. Also, in very large …

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Oil Price Fun (11/2018)

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oil prices

I’ve been swamped so I haven’t been able to update on here as often as I would have liked these past couple weeks, which is a shame because there is tons of interesting stuff going on out there, plus end of year stuff coming, and so on. I’m on it. Don’t worry. In the meantime, my favorite story of the past few weeks is oil prices. Since this time late year, oil prices have been trending higher (with the usual ups and downs). Since June of this year, oil was basically stuck between $65 per barrel and $70 per barrel. That price range might be considered the “real” oil price, or the non-panicked oil price based upon an established equilibrium of supply and demand. Then, Trump started talking about sanctions on Iran, and prices started climbing, topping out at over $76 per barrel. This is because taking Iran’s oil supply off of the world market would decrease supply with no corresponding decrease in demand. But, what Trump shouts and what he actually does don’t always match up, and the administration basically granted sanction waivers for all of Iran’s biggest customers including China. That means that the supply is not decreasing, …

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Market Falls, But… No Panic… yet?

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stock market price down facebook

So, interesting phenomenon happening in the stock market these last few days with the S&P 500 dropping over 5% (around 1,400 points) and even dipping below its 200-day moving average. In the right circumstances, this might be the trigger of a full-on rout in the stock markets. Here is what is missing though: panic. Markets Down – Does Anyone Care? I’ve been subtly (and not so subtly) hinting for about a year now that I think the Federal Reserve is too set in stone on its course to raise interest rates in the face of little to no inflationary pressure. To me, this recovery, as long as it is, doesn’t seem that strong. As such, one rate hike too many, could spell disaster. With this week’s market reacting poorly to rising interest rates in the bond markets, I was dusting off my “I Told You So,” posts. But, it looks like I’ll have to wait a bit longer. My Digit reviews. Despite the fairly big numbers in the Wall Street sell off as late, there isn’t much fear associated with it. When it comes to the economy, nothing matters more than how people FEEL about it. That’s why they try …

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Stocks Have Hard Day – Just Volatility, or the Recession Knocking?

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crystal ball stock market economy

Stocks had a pretty big selloff today in response to a big drop in the bond markets. For those of you keeping score (the baseball kind, not just the points scored), here is the way the game looks so far. Check out my review of Credit Karma. US economy is still expanding, making it one of the longest economic expansions The economy itself is cyclical. It ALWAYS goes up AND down. So, if it has been going up for a very long time, sooner or later, there will need to be a correction, or recession. How hard the recession ends up being is a function of how it hits. A “pop” leads to a hard (potentially shorter) recession. A “soft landing” means markets can regroup and reprice (usually with a lot of sideways movement) without shocking the system. The Fed keeps raising interest rates because… well, because they want to be “hawks” and not “doves” and just for the barest of moments, the supposed “target” of 2% inflation was touched, so here comes the Fed. The Fed not only keeps raising interest rates, it keeps saying it is going to raise interest rates more. One more hike this year, in …

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