By Edward Leone Jr. CFP RFC DMD MBA
Contact Information: edleonedds@gmail.com 303-478-6793
The Kiplinger Letter offers some interesting predictions from time to time on likely future trends. Most recently, positive comments on revival of the housing market if achieved, will help spark the economy. Single-family housing starts are predicted to increase by 19% over last year’s numbers while existing home sales are predicted to increase by 7%. Mortgage rates may bump up to 4.2%, but down payment requirements are likely to moderate and mortgage insurance premiums may decrease.
There is a significant U S Supreme Court case to be heard this month that could seriously damage the utility of Obama Care and be a tremendous burden to physicians, hospitals and health care consumers. It has to do with the legality of federal subsidies for people buying coverage on federal exchanges. Mandated coverage issues have made health insurance so expensive that many cannot afford the premiums. Should many individuals do without because of cost factors or should the flexibility over insurance plan designs be adjusted back to a form in which people could choose the coverage elements they desire in a plan structure reducing premium costs for many? What do you think?
We are seeing a great increase in the retired population for this country. By 2050, it is projected that 21.4% of the U S population will be over the age of 65. This dynamic will surely put additional pressures on those in the work force to increase productivity to drive economic growth and also stress government programs which the retired depend on such as Medicare and Social Security. The current population of retirees is finding it difficult to sustain cash flows representing their retirement income as a result of very low bond investment yields. The U S 10 year Treasury Bond which is a time-tested safe harbor standby is now yielding only 2% while other foreign government bond rates are bellow this level. The trend for global central banks to reduce benchmark interest rates to give incentive for borrowing to stimulate economic activity will further drive down yields on U S bonds since we are now at a comparatively attractive level with a safety factor which is still respected around the world. How long will this trend last and how do we grow the economy enough to get out of this trap? On the flip side of this issue, as interest rates increase in the future, U S Government debt service as a percent of the budget will grow to a level that is just not manageable. Political leaders must begin to address these trends. Those of us who are productive in the work force must continue our work ethic, manage cost of living with reason, save and invest wisely for the future and express to government the appropriate role to play in our society. The retired will no doubt need to involve the family structure in meeting their needs for support and care as they continue to mature in life.
For The Record:
DJIA 18,096.90
S & P 500 2,098.53
NASDAQ 4,967.14
Suggested Reading: “Business Law” By Clarkson, Miller, Jentz and Cross
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