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Fed Raises Interest Rates

December 14, 2016 by Finance Gourmet

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 …

Should I Invest Money in My HSA Account?

December 13, 2016 by Finance Gourmet

A Health Savings Account, or HSA, is a tax-advantaged way to save money for health care costs. An HSA account is different from a Flexible Savings Account, or FSA, that many people are more familiar with. For most people with qualifying health insurance plans, an HSA is better than an FSA. HSA Investing One of the advantages of a Health Savings Account is that the money does not have to be spent in a single year. Instead, those funds can be left in an HSA for years. In fact, that money can be invested, just like with a 401k plan, or a 529 plan, in order to grow for future medical costs. But, does it make sense for YOU to invest money in your Health Savings Account? Money that is invested in an HSA grows tax-differed, just like in an IRA or 401k. That many can also be withdrawn tax-free, if and only if, it is used to pay for medical expenses. There are several factors that determine whether it is a good idea to invest your HSA funds, or whether you are better off leaving them in the cash, or money market account. How You Use Your HSA Determines …

OPEC Deal and the U.S. Stock Market

December 1, 2016 by Finance Gourmet

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 …

All The Basics

November 20, 2016 by Finance Gourmet

Coming this week on the Finance Gourmet, all of the basics in one week of posts. That’s right, all the things you need for a successful basic financial plan, retirement plan, and college savings plan all in one place in a series of easy to read posts. Consider this the intro to personal finance that you always wanted to read, but never really found. We’ll continue next week with some interesting reviews of financial apps, like our Acorns review, and Digit review, as well as reviews of various online financial services such as Credit Karma and Credit Sesame. I’ll probably bail on Thanksgiving, but I’m willing to bet that most of you won’t be looking to brush up on your personal finance knowledge on that day either. So, no harm, no foul. Going into the new year, we’ll get back to what started it all here on Finance Gourmet, a series of financial recipes. These are recipe style financial solutions and personal finance plans that you can implement without an in-depth understanding. Instead, just gather the necessary “ingredients” and then follow the recipe. We’ll cover everything from a 401k plan to more complicated topics. We are also going to start …

What Is a Trade War?

November 14, 2016 by Finance Gourmet

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 …

Trump Election and the Economy

November 9, 2016 by Finance Gourmet

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 …

Fed Wants To Hike Rates

October 31, 2016 by Finance Gourmet

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 …

Fed Predictions

October 24, 2016 by Finance Gourmet

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 …

FCC Fake Fines T-Moble $48 Million

October 19, 2016 by Finance Gourmet

When is $48 million not $48 million? When it is a FCC fine. T-Mobile was fined $48 million today by the FCC for misleading customers about its unlimited data plans. As it turns out, T-Mobile’s unlimited data plan was actually a 17 GB per month plan. After that the company “de-prioritized” the customer’s traffic making it so slow as to be pretty much unusable. Most unlimited plans work this way, of course, because unlimited isn’t really feasible. The reality is that there is only so much data a “normal” user would use in the course of a month, and racking up 17 GB would require some pretty heavy effort. This is a problem of the cell phone carriers own making. They market against each other in such a way that customers now believe that they must have unlimited data even though many of them don’t use anywhere near that much. So now, carriers work overtime to shout UNLIMITED whenever possible, and then hide actual limits in the fine print. In this case, T-Mobile even tried to not be honest in the fine print, and that’s when the FCC struck with its huge fine, except… It’s Not Really $48 Million The …

When Do I Need Umbrella Insurance?

October 17, 2016 by Finance Gourmet

What is umbrella insurance exactly? I overheard someone saying that umbrella insurance covers everything. That isn’t entirely true. What umbrella insurance covers is personal liability. It does cover most all personal liability, so I suppose in a way it covers, “everything.” Liability Insurance Most people already have some liability insurance. Your car insurance, for example, has liability insurance for anything you become liable for while driving a car. Most auto insurance coverage is specified by three numbers like 100/300/100. The first number is your liability coverage limit per person per accident. The second number is the total liability coverage per accident for all persons. The third number is the liability limit for property damage for each accident. Of course, this liability coverage only involves things that happen while you are operating a covered vehicle. Homeowners typically have some liability coverage through their homeowners insurance policy. This liability covers a lot more ground (but NOT when you are driving a car). Anything that happens on your property is covered. So, if someone trips and hurts themselves on your driveway, that liability would be covered. This coverage is also limited to a specific dollar amount depending upon your policy. An amount like …