Leonesmoneymonitormonthly's Blog

By:  Edward Leone Jr. CFP RFC MBA DMD

Contact Information: 303-478-6793   edleonedds@gmail.com

Equity markets are down slightly from record highs of January and February and are experiencing minor volatility from day-to-day. The S&P 500 Index was up 6.03% for the first quarter of the year. The All Country World Index was up 6.84% and Emerging Markets rose 11.31%. It appears that the global economy is improving.  As I have stated before, it is likely to take some time before so many of the initiatives promised in the November election period may appear. It is also critical that political, civic and business leader come together in forming a consensus over the directions that this country and the economy will take. Conditions which promote consumer spending will be key to promoting economic activity. Adjustment on regulations which burden business activity needlessly will also be a key ingredient in growing the economy.

With the obvious trend, although very modest, of interest rate increases many may be considering a refinance of mortgage debt. Please be aware of the interest deduction on debt used to refinance a home. The new mortgage is treated as home acquisition debt up to the amount of the old mortgage principal at the event of the refinance. You can also deduct interest paid on up to $100,000 in additional mortgage refinancing as home equity indebtedness.  These additional funds can be used for any purpose and not only home improvements. Interest paid on loan increases above that $100,000 may not be deducted unless the funds are applied to business or investment efforts. It will be interesting to see if home mortgage interest deductions are continued in any effort at tax reform. I suspect that this will occur, but perhaps the rules of the game will be changed.

Home values are increasing in many markets. This means that property taxes are also increasing.  You may try to control this issue by checking for considerations if you are a senior citizen, disabled or a veteran. You may challenge the assessed value of the property by comparing your assessment to those of other properties in the neighborhood. The official process of a formal review will likely need to be engaged.

Those who are eligible, need to sign up for Medicare up to three months prior to turning 65 years old. Learn the rules to avoid late enrollment penalties particularly if you are delaying the taking of Social Security Benefits. As we enter the retirement years, it is wise to organize finances in a simple pattern making access to financial information easier for the retired and those who may be charged with care and maintenance of elderly family members and friends.  47% of those in the age group of 40 to 60 are taking care of parents and perhaps children also.

Be dedicated to those who need you help within family and the community!!

For The Record:

DJIA                   20,587.54

S&P 500              2,343.45

NASDAQ            5,841.53

Suggested Reading:  “Lords of Finance” By Hamed

By Edward Leone Jr. CFP RFC MBA DMD

Contact Information:  edleonedds@gmail.com      303-478-6793

The new administration in Washington has many challenges regarding the health of the US economy. According to Richard Young, a long time investor, writer and researcher, the Trump administration and the US Congress have inherited some very troubling issues:

Cheap debt has created an addiction to borrowing to advance economic growth. Public debt, corporate debt and private debt have grown dramatically in recent years. Low interest rates have hurt savers and those retired who depend on fixed income assets for spending income.

Unemployment reports are misleading. The labor force participation rate is at 63% as compared to 67% in 1999.

Median household income is currently at $56,500. It was at $58,000 in 2000. These are real income numbers adjusted for inflation.

Many corporate entities are using cheap debt to increase earnings reported by the repurchase of existing stock shares to increase the reported P/E ratio.

It will likely take an extended period of time along with significant cooperation among government officials, corporate leaders and our citizens to turn this trend around. Do we have the will? Economic reports are becoming more positive. Will this trend be sustainable?

Another issue which many of use who are in retirement or getting close to retirement fail to address is an estate plan. Please consider the following under the guidance of a trained professional:

Create a will or trust instead of having state law dictate the distribution of your assets.

Keep adequate records of assets and family information. Retirement savings should engage a long-term consistent plan for investing.

Make and confirm beneficiary designations.

Name appropriate fiduciaries such as executors and trustees.

Correctly title assets.

Consider directives in the event of incapacity and health issues.

Periodically review and up date the plan.

Regarding economic saving and planing think about the following:

Save from early in life and save often. Shelter retirement investments from taxes when possible.

Have cash available for emergencies.

Take maximum advantage of employer incentives.

Maintain a good credit rating status.

Set economic goals.

Cultivate your career path to move ahead in you area of interest and expertise.

Engage risk management through insurance vehicles and legal awareness of risk issues.

Maintain a stellar personal reputation.

A very interesting study performed at Notre Dame University focused on how married couples spent money in retirement. It was noted that those couples with separate financial accounts had a tendency to engage in some frivolous spending while those who had a joint financial account of which they were both engaged in management, had more moderate spending habits. This could be a valuable strategy for many people both in retirement and during the planing years as a matter of disciplining life style expenses.

It is my sincerest hope that some of the above information will be of benefit to the readers.

For The Record:

DJIA                20,914.62

S&P 500           2,378.25

NASDAQ         5,901

Suggested Reading:     “The Little Book of Comon Sense Investing” By John Bogle

By:   Edward Leone Jr. CFP RFC MBA DMD

Contact Information:    303-478-6793  edleonedds@gmail.com

We are short time into a new Presidential term. There is much speculation on what is likely to happen both positive and negative. On the economic front:

1. Will we be able to see moderation and control over ever-expanding Federal Debt?
2. Is unemployment truly improving? The January report say that 227,000 jobs were created, but the November and December reports were adjusted down by 39,000. Just how accurate are these numbers and what about labor force participation. Many potential workers are sitting on the sidelines.
3. Are US companies seeing increased profits or just using accounting variables and buy back of stock shares to make P/E ratios look better?
4. This business cycle is quite unusual and extended. When will we see investment market corrections at a significant level in the near future based on market supply and demand factors instead of QE?
5. Are reports on inflation accurate and representative of the increases in life style costs we are all experiencing and paying for at times with increases in personal debt?

Many of these issues will take time to unfold and factors such as tax and regulation reform will be significant factors in the direction of these issues along with the status of the global economy. EU, China, Japan and other economic players along with international trade dynamics will be important to monitor.

Political Leadership must find a way to put many political agendas aside and bring all players together to make positive progress.

Another area that should be of concern is the status of Social Security and Medicare. When these programs were introduced the economics worked in that the working class was paying for a very small elderly population of beneficiaries. The numbers of beneficiaries is increasing greatly along with the longevity factor and the number of working producers of tax support for these programs is shrinking. Adjustments will have to be made for these programs to continue into the future.

Those who are in the retirement phase of life along with those who are preparing and planning for this eventuality need to focus on the following factors of consideration:

1. Personal debt management
2. Longevity factors
3. Health care costs
4. Life style expense
5. Saving and investment strategies.

These factors are difficult to predict and plan for into the extended future. A strategy which recognizes these challenges with a disciplined approach to saving, investment, consideration of inflation and management of factors which can be influenced is the best approach to what may be termed as success. None of us know what the future holds so try to plan ahead and get professional help to avoid many of the personal emotional factors which tend to play into decisions over current and future success in life for the individual and the family unit.

Time will tell just where the current leadership in Washington goes to creat an environment where all of these issues can be managed in a safe and healthful environment.

For The Record:

DJIA            20,071.46

S&P 500       2,297.42

NASDAQ      5,666.77

Suggested Reading:  “The Laws of Wealth”  by Daniel Crosby

By Edward Leone Jr. CFP RFC MBA DMD

Contact Information:      303-478-6793     edleonedds@gmail.com

We are within a few days going to experience a new administration at the Federal Government level. For many this is a positive and for others, it is a threat. Time will tell just what direction social, economic, defense and regulatory issues will go.

Based on recent activity of the Federal Reserve Bank, it is likely that we will experience modest interest rate increases in this coming year. For the retired person this may be some what helpful in the provision of retirement income. A short-term liquid reserve held in a money market fund, along with investment in short-term and intermediate high-grade bonds should increase interest income while avoiding severe decline in bond principal since as interest rates rise, bond prices decline. It is expected that Social Security beneficiaries will see a .3% increase in benefit levels. The premium for Medicare Part B coverage averages $109 per month, but can be much higher for those in upper income levels, with surcharges–up to $370.80 per month. There will be no changes in maximum dollar contributions to qualified retirement plans. For the 401k, 403b and 457 $18,000 is the maximum with the opportunity for those over the age of the age of 50 to put in $6,000 more. For Simple IRAs the level of contribution is $12,500 and $15,500 for those over 50. The Traditional IRA level is $5,500 plus $1,000 for those over 50. For the SEP IRA and the Keogh Plans, the 2017 contribution limit is $54,000 or 25% of compensation which ever is less. Start retirement savings as early in life as possible to achieve a satisfying and affordable retirement experience.

Regarding pension benefits, an issue of which many of us should express concern, has to do with the funding of government pensions. We as tax payers are on the hook for these obligations. Many state governments are lacking in the pool of assets necessary to meet future pension benefit commitments: California, Kentucky, Minnesota, New Jersey, New Mexico, Oregon, Pennsylvania and Texas have less than 70% of the assets needed to meet these obligations. The case in New Jersey is the absolute worst condition with only 28% of the funds needed to meet future pension obligations available.

An issue which is in the news constantly but in a very political manner currently is hacking of digital information and identity theft. With the initiation of the tax season, this may be a concern for many of us. Please engage the following security protective steps:

1. protect access to your Social Security number
2. use antivirus and firewall software
3. be careful over how and with what entities you communicate digitally
4. check your credit report from time to time
5. respond to IRS communication which are in writing and mailed only.

It will be very interesting to see, as the future unfolds, if lower tax rates, reduced regulatory burdens, higher interest rates and increases in worker compensation along with government investment in infrastructure rebuilding will stimulate economic growth and corporate profitability to a point which will over come the concerns of many over the state of the economy and investment possibilities.

Once Again, Happy New Year!!

For The Record:

DJIA                     19,963.80

S&P 500               2,276.98

NASDAQ              5,521.06

Suggested Reading:    “The Breaking Point” By James Davidson

By Edward Leone Jr. CFP RFC MBA DMD

Contact Information:  303-478-6793    edleonedds@gmail.com

The election of Donald Trump as President Elect has created much excitement and optimism within financial markets along with some elements of concern. American financial firms are looking forward to dismantling of some regulation and the raising of rates which will boost trading activity. Bank and insurers’ stocks are up significantly since the election. These industries are highly leveraged. Will the Trump agenda of lower tax rates and economic stimulus spark economic growth enough in the future to stimulate the rebounds expected in many industries including manufacturing? Will the US be able to improve on the current status of international trade imbalances? What about the potential for stricter trade policies?

The economy is improving at a very slow pace over an extended period of time. The 2016 third quarter showed some stronger statistics with GDP at 3.2% and consumer spending on an up swing. Could this all be due to the coming Holiday Season? The US dollar is strong in international currency markets making imports into the US cheaper, but making our exports more expensive.

If the inflation rate increases as central banks across the globe would desire, gold, silver and other precious metal prices will increase. A counter balance may be that precious metal prices decline as interest rates go up. As those interest rates go up, bond prices will go down. We are already seeing a slight trend in this direction. We will have to see what goes here just as with so many other economic issues?

It is projected that Generation X and Millennials will have $15 trillion in investable assets in the future. This trend may be due to improving economic opportunities, work ethic and inheritance trends. Hopefully these people will do the following:

1. Be aggressive savers and engage an early start
2. Practice aggressive budget discipline
3. Target retirement savings at a minimum of 10 time final income levels
4. Set financial goals
5. Work longer into life
6. Seek skilled financial help and advice.

In my recent reading, I learned of observations in Central and South America that the Zika virus is attributed to increases in the occurrence of Guillain-Barre syndrome. This should be another caution in our travel plans since this disease can be very serious.

On the brighter side of things, it is my wish that all of our readers will experience happiness and prosperity through this Holiday Season and in the New Year.

FOR THE RECORD:

DJIA                         19,295.11

S&P 500                   2,214.73

NASDAQ                  5,330.70

SUGGESTED READING:    “Prepper’s Long Term Survival Guide” By Jim Cobb

By Edward Leone Jr. CFP RFC MBA DMD

Contact Information:   303-478-6793    edleonedds@gmail.com

The election event has concluded. I am concerned that many issues facing the Federal Government were not addressed by either candidate in a significant fashion. Programs such as Social Security, Medicare and Medicaid are not sustainable into the future in their current form. It is little recognized that the national budget deficit is growing again after some declines in the last several years. For 2016 it is at $588 billion as compared to $439 billion for 2015. Total Federal budget deficits represent 77% of GDP. The 50 year historical average has been 39%. What is going on and when will steps be taken to reduce Federal spending? The Government is sucking financial resource out of the economy which can be used by industry, businesses and consumers to grow the economy. It will likely take 18 months to 24 months to see the outcomes of any initiatives generated by the newly elected Government in addressing these issues.

It is important to note that there have been several tax increases imposed by the IRS for 2016:

Medicare Tax  1.45% to 2.35%

Top Income Tax Bracket  35% to 39.6%

Capital Gains tax  15% to 28%

Dividend Tax    15% to 39.6%.

WOW!!!

As a result of Obama Care legislation, it is anticipated that health care cost will go up more than 30% in the next year or two. What next??

It is clear that we have seen a very steady economic cycle with very slight economic growth and an improve labor market to a minor extent. A part of the challenges faced have to do with strained global economic issues and extraordinary policies employed by foreign central banks. We may see some revitalization in the US economy as a result of difficulties faced by foreign competitors. Production costs in China are accelerating. Wages and political issues are creating head winds there. It is observed that energy cost are accelerating there also. Electricity costs in the  US are 34% lower than in China and 50% lower than in Europe. The political climate here is much more stable than in China or Europe in spite of the presidential election circus we have witnessed. With an effort by our Federal Government to modify fiscal policy and regulation strategies, we may see the acceleration in economic growth which we normally see and have been expecting for these last 8 years.

It is still in my opinion, a reality to have a Thanks Giving for who we are and what we do!!

For The Record:

DJIA                 18,589.69

S&P 500          2,163.26

NASDAQ         5,251.07

Suggested Reading:   “The Intelligent REIT Investor” By Wiley

By Edward Leone Jr. CFP RFC MBA DMD

Contact Information:         303-478-6793      edleonedds@gmail.com

There are up coming Security and Exchange Commission rule changes of which we must become aware. The biggest issue for most of us will have to do with money market funds. Retail prime money market funds will retain the net asset value concept of $1 per share while institutional prime money market funds will be moving from a $1 per share net asset value to a floating net asset value concept. This action is the result of money market funds’ distress during the 2008 financial crisis. It is clear that some money market funds will not serve as well for cash positions as they once did.

The bullish trend in our equity markets is now seven and one half years old. It would have to last another two years without a 20% correction to be the oldest bull market ever recorded. This possibility is clearly an unknown with possible changing sentiments in government, central banks, legislatures and corporate board rooms. It appears that investors are more concerned than euphoric. Warren Buffet once said “when people are greedy be fearful and when people are fearful be greedy”.

ETFs with $2.4 trillion in invested assets are gaining in popularity as investment vehicles due to low costs, tax efficiency, transparency and liquidity. The variety of investment choices is ever-expanding make this modality a lasting investment trend.

Open enrollment time for Medicare is upon us. For those who are on Medicare or are qualified, now is the time to research and enroll or adjust coverages. Parts A, B, and C are easy to understand upon reading of materials presented by Medicare. Part D (drug coverage) is a moving target with annual plan design changed and annual premium structure changes. The website dealing with this issue can be confusing and difficult to navigate.  Good luck!

The IRS has announced that it will allow self corrections for those who do an IRA rollover and miss the 60 day deadline when taking assets into their own possession rather than a direct rollover to another administrator. It has been that a private letter ruling and a penalty assessed by the IRS was required in the event the deadline was missed. Self correction criteria revolve around IRA owner errors in asset placement and catastrophic events such as a death in the family or severe property damage. All of this can now be navigated online which can be more efficient and less extensive to resolve.

Before the next blog, we will have the privilege or burden of voting on a variety of legislative issues along with the chosing of those to represent us in implementing these legislative initiatives. GOOD LUCK!!

An investment in knowledge always pays the best interest.

For the Record:

DJIA                     18,138.38

NASDAQ              5,214.16

S&P 500               2,132.98

Suggested Reading:        “Investing at Level Three” by James Cloonan

By Edward Leone Jr. CFP RFC MBA DMD

Contact Information:    303-478-6793   edleonedds@gmail.com

The political rhetoric as we approach the election season is getting very deep. We are hearing a lot of what, but not very much how! Issues regarding economic growth, national security, budgeting and employment opportunities are among the many issues that need to be addressed. It will be a challenge for the White House and the Congress to take steps necessary to solve these and so many other issues we are facing as U S citizens.

Social Security is an issue that will be pressing over the next few years. The program is not sustainable in its present form. The Federal Government has been borrowing from the fund since there is so much money there. It seems such a waste to just let it sit there earning interest. The fund is now stacked with Government IOUs which we as tax payers are obligated to pay off! Program adjustments are unavoidable. A Yale professor recommends raising the full retirement age to 76. What else will come our way? What about the weak situation with Obama Care regarding higher premiums for insurance and the exit of many major insurers from the program. Just another situation to solve!!

Other government entities are also facing man challenges. The Illinois teacher pension program is lowering the assumed rate of return on investments in order to mitigate some of the legacy costs it can not afford to pay. The Japanese Government, in order to stimulate its equity markets, will own the majority of shares of 55 major companies by next year, accomplishing this with more borrowed money. Their national debt is at 280% of GDP currently. Are we here in the U S headed in the same direction? The trends toward deflation as being experienced by foreign central banks has caused government bonds in many foreign countries to be issued at negative interest rates. Foreign banks are offering negative interest rates on deposits. It costs the investors and depositors money to deal in these mediums. Where is this going to go? We are also not hearing much about the problems Hong Kong is having with the Chinese National Government. It appears that this former British Colony is in the process of revolt over government restrictions. Is this the next are of military conflict?

As you can see there are many issues which will cause our population to be concerned and nervous about future out comes. We need to come together as a society and implement steps to address our citizens needs and mitigation of global concerns. Those who are in retirement or getting close are much concerned about their economic well-being. This portion of the population needs to be aware of the following:

Down equity markets

Healthcare costs

Inflation

Tax structures

The ability to continue working if necessary

My comments contained in this blog have been quite negative. Looking back on the history of this country and the ability of its citizens to come together and solve problems on what have been perhaps more serious past challenges makes me feel that we will find a way to progress in a direction which will sustain what we know as the great United States.

For The Record:

DJIA                    18,479.91

NASDAQ             5,259.48

S&P 500              2,181.30

Suggested Reading:   “Extraordinary Wealth” By Ric Edelman

By Edward Leone Jr. CFP RFC MBA DMD

Contact Information;  303-478-6793   edleonedds@gmail.com

It is possible based on proposed U. S. Treasury regulations to take effect early next year, that the concept of valuation discounts for gift and generation skipping transfer taxes as we understand them today will be droped. It may be appropriate for those married with net worth above $14 million to consider some gifting strategies now or to investigate trust structure options.

The global economy stagnation is a continuing problem. Governments’ excessive taxation along with increasing regulation and spending are a drag.  The Central Bank activities of quantitative easing and low to zero interest rates has skewed credit markets to deflate economies not inflate them. Governments and large corporations have access to low-cost money, but the significant drivers of the economies — small businesses and individuals are restricted from adequate capital access. Progrowth structural economic changes are needed. I am not sure that I am hearing discussion of such issues here in the U. S. with election season rhetoric.

HSAs (Health Savings Accounts) are a valuable strategy to consider if available to you. You contribute money to pay medical bills pre-tax and both asset growth and payment of qualified expenses is tax-free. For 2016, individuals can put aside $3,350 and families can put aside $6,750. If you are over the age of 55 add another $1,000 to the opportunity. Given the current challenges with increasing healthcare costs and the activity occurring in the health insurance industry with cost shifting to the policy holder or plan participant, the HSA can be a helpful tool.

For many people in retirement or on the door step to such an event, generating adequate income from investment sources with this low interest rate environment is a challenge. Invesments that generate higher yields than money market funds and U.S. Treasury Bonds come with significant market price risks. Solutions for many are coming from dividend paying stocks and a variety of alternative investment products. Be careful if you are in such a position and seek qualified help in navigating the landscape. Regulators are generating new rules regarding money market funds. If in place, institutional money market funds will have to let their share price float instead of it being fixed at a steady $1. If the share price goes bellow $1, the fund sponsor is expected to back up the fund value. Depending on the credit rating of the fund sponsor, this may not be possible in some situations. You will recall the the U. S. Government backed up some money market funds in 2008. These assets are not generaly government insured by FDIC.

On a final note, the Department of Labor is generating universal fiduciary rules applied to investment advisor professionals. Certified Financial Planners have been engaged in the fiduciary standard for there work with cleints for many years (act always in the best interest of the client), but broker dealers and other sales people and other advisors have not adopted such a standard. If these new regulations are applied, there will likely be better protections for the investing public. Advisors fees may increase under the model and consumers will be more aware of potential conflicts of interest which occur from time to time in the brokerage industry. We will have to wait and see just how all of this evolves.

Enjoy a new school year which is just beginning. Students and parents must be engaged in advancing the learning skills of our society.

For The Record:

DJIA                 18,552.57

NASDAQ         5,238.38

S&P 500          2,183.87

Suggested Reading:  “Rescue Your Money” By Ric Edelman

By Edward Leone Jr. CFP RFC MBA DMD

Contact Information:  303-478-6793     edleonedds@gmail.com

There has been much media coverage in the past several weeks regarding the vote by UK citizens to separate from the European Union. This issue is a mater of complexity surrounding political, economic, international trade, social and military defense issues which will probably take some time to unfold and resolve. We are very much engaged in a global economy in which many participants will experience positive or negative impacts from actions taken by them regarding this issue along with the new relationships to be established between the UK and the EU. It is important to recognize that the EU as a combined economic unit including the UK, was the second largest global economy when measured by GDP just behind the US and just ahead of China and Japan. It is clear that the UK separation will change that status perhaps giving China a bit more influence with the International Monetary Fund regarding their currency when considered in the major currency basket at IMF which includes the dollar, euro, pound and the yen. The renegotiation of trade and defense treaties will involve many global players also. Challenges to global central banks will be significant since they develop policy matters based on clear visions of economic and development prospects. We are in a time of uncertainty and lower levels of confidence regarding many economic and social issues. Central Banks are clearly engaged in a Keynesian style stimulus program to bring economies out of a slump in the economic cycle. The US Federal Reserve and the Central Banks in Europe, Japan and China are printing currency in order to stimulate consumption and fend off deflationary trends. It will be interesting to see whether cyclical fix strategies will persist or that new foundation economic system principals will be employed. We are all aware of the government debt situations in the US, Japan, Greece, Italy, Portugal, France, Brazil, Argentina, Australia, Venezuela and Russia etc. . So what next and who knows?   I am concerned about the future of fixed income markets with the low interest yields offered at this time. Many yields are negative due to negative interest rates or are so low that net of inflation they are negative. Equity markets are clearly benfiting from low interest rates since investors need to look at the equity market favorably in spite of the usual higher risk due to volatility when comparing returns to those with bonds and other cash equivalents.

All of the issues address will be resolved in time. I suggest that those who are engaged in building assets and wealth use a strategy as follows:

1. adapt a long term strategy
2. be tax efficient
3. avoid excessive fees regarding investments and transaction costs
4. engage in fundamental analysis
5. be suspect of all you see, hear and read in the media– do adequate investigation
6. seek credible and quality guidance.

For The Record:

DJIA                   18,372.12

NASDAQ            5,005.73

S & P 500           2,152.43

Suggested Reading      “Currency Wars”  By James Rickards