History can mess up your investments, according to Morgan Housel of the Motley Fool. Using history as your only screen for investments is dangerous, and dangerous is expensive in the investment world. What starts as an honest attempt to objectively study the past quickly becomes a field day of confirming your existing beliefs. Psychologists call it Confirmation Bias, and we all suffer from it. Think stocks are expensive? History agrees. Think stocks are cheap? History agrees. Think tax cuts spur economic growth? History agrees. You can win any economic argument you want using a version of history, written somewhere. You just need to be the last person on the podium. Interesting insights on Mastering Money today. In the Q & A segment, IQ Wealth CFP® Murray Titterington, formerly with Morgan Stanley and Merrill Lynch, joins the A-Team to talk Social Security.
Is there a difference in the amount of wealth that can be created by reinvesting dividends versus spending dividends? Yes, and it is substantial--IF--you give it 20 to 50 years. Steve and Sinclair break down and analyze the outcomes of two investors who bought Coca Cola in 1962 to 1965 when Coke was trading at $80 a share with $10,000. One of the investors spent all dividends. The other reinvested dividends. Who came out better? You will want to review the difference from several points of view in both the Getting Smart segment and the Q & A session.
Is Saudi Arabia setting things up for a big oil spike? Some experts who follow supply and demand within the oil industry believe so. SA has exceeded all records of production in an attempt to crush the shale industry, and in so doing, their reserve spare supply is now dwindling. Steve and Sinclair review an article by oil commentator Nick Cunningham who points out that Saudi Arabia wins either way--a low price or a high price, and at some point, demand and supply will change equilibrium. Meanwhile, big private equity investors are moving into oil and gas as a contrarian investment reports the Wall Street Journal.
Today on Mastering Money, Steve and Sinclair review the rising costs of Obama Care--those under Medicare age can expect increases in premiums of 20% to 40% as insurers discover how many claims are coming in. Could be a shocker for many people making more than $75k a year. The penalty for not having Obama Care is in full effect and can be as much as 2% of a person's AGI. In segment 3, Steve reviews capital gains brackets for various types of assets and income levels. Don't forget, if you sell that property outright, your AGI can skyrocket, putting you in the highest bracket and under the shadow of the Pease provision, where your deductions are reduced by 3%. The Obamacare Tax of 3.8% is a reality, and exposure to the Alternative Minimum Tax can also enter in. Listen in.
This year, institutional managers have pulled $3.5 billion from REITs and utilities funds, according to Morningstar. The retreat has persisted even as soft U.S. economic data raise increasing questions about how soon the Fed will raise rates. Utilities and MLPs had big years last year, but are down over five percent this year. Steve and Sinclair review a Wall Street Journal article on the risks in high dividend stocks and High Yield Bonds (aka Junk bonds). In the Q & A, Steve reveals several advanced estate and tax planning strategies.