Social Security Trustees are projecting a "0.0%" Cost of Living Adjustment for 2016, while Part B premiums will rise by 50% for the top 30% of income earners. Steve and Sinclair review the reasons why and the calculations being made according to Jason J. Fichtner, a Senior Research Fellow at the Mercatus Center at George Mason University. In the Q & A segment Professor Wade Pfau, PhD, joins the A Team to review is vast work in the area of retirement income planning. He is well known in the financial planning industry for his work in the areas of safe withdrawal rates, sequence of returns risk, longevity risk, and how to plan retirement outcomes.
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When oil prices collapsed late last year, the $83 billion dollar FranklinTempleton Income Fund suffered mightily, losing more than $2 billion dollars on its energy-company investments according to the Wall Street Journal. Portfolio manager Ed Perks responded as portfolio managers at Franklin Templeton often do: He doubled down, purchasing $2 billion dollars more of energy-sector junk bonds. So far, the trade is a bust. Stock and bond prices declined further this summer as oil dropped. In August, fund investors pulled out about $1.47 billion dollars worth--the biggest departure in the fund’s 67-year history except for October 2008.
But Franklin Templeton isn't the only major bond fund holding junk. Vanguard, Loomis Sayles, Blackrock, and Lord Abbott all have added junk to their portfolios to bump up the stated yield. Here's the problem according to the Wall Street Journal--when rates rise and mass redemptions come in, these funds are forced to sell their most liquid high quality assets first, in order to raise cash. You may be thinking long term but the other investors are thinking "exit door" leaving you with a lower quality holding. In segments 2 and 3 today, Steve and Sinclair review insights from leading analysts and draw conclusions.
An analysis by The Wall Street Journal shows that some of the largest U.S. bond mutual funds have invested 15% or more of their money in what are referred to as “rarely traded securities”—bonds that do not trade quickly-- a practice that runs counter to long-held Securities and Exchange Commission standards. They found that many of the bonds currently being held in major bond funds could take 150 to 350 days to sell if redemptions came in heavily.
Companies operating large bond funds with more than 15% invested in bonds that trade sporadically include American Funds Inc., BlackRock Inc., Dodge & Cox, Loomis Sayles & Co., Lord Abbett & Co. LLC and Vanguard Group, according to the Journal’s analysis. In the Q & A segment, top rated real estate attorney Chris McNichol with Gust Rosenfeld of Phoenix joins the A Team to talk about investing in tax liens.
Shock jock newsletter writers are talking about the Chinese yuan replacing the dollar as the world's "reserve" currency. Is there any truth to it? Are we headed for the disruption of the financial world as we know it? Sinclair and Steve review some important facts and what you really need to know. In the Q & A segment, well known CFP and financial educator Michael Kitces joins the A-Team to review the actual value of Social Security payments and how "back door IRA's" work. Michael, who holds a Masters Degree in Taxation, likes the idea but also cautions about what can go wrong under the "step transaction rules."
According to the Wall Street Journal’s Dan Strumpf, interest-rate jitters are taking their toll on one of the stock market’s big success stories in recent years: high-dividend stocks. Double digit losses have now replaced double-digit gains of recent years. Investors plowed $48.4 billion into mutual and exchange-traded funds tracking utilities and REITs from 2010 through 2014, according to Morningstar Inc., but now, many large institutions are moving away. Learn the risks. In the Q & A segment, Neil MacNeal, whose stock split strategy has been recognized by Mark Hulbert at MarketWatch, and has doubled the Wilshire 5000 since 2000, returns to Mastering Money to talk splits with the A-Team.
Will the Fed raise? If so, what happens? Who are the winners and who are the losers? Deutsche Bank performed in depth research analyzing the history of Fed rate hikes and the consequences going back fifty years. Here’s a preview: over the past 35 years the market is most often up sharply—about 14 percent—heading into the rate hike, fairly flat in the 250 days after (average gain of 2.6 percent) then back to normal once 500 days have passed. Steve and Sinclair review the many reasons why this time "is different" according to Deutsche Bank. In the Q & A the A Team reviews a Gallup/Wells Fargo poll of investors--44% say they will "make a change" if the Fed raises. Also, 8 stocks one trader says to avoid, and record outflows at Franklin Templeton.
Steve and Sinclair review five Fed meetings in history that had a major impact on the economy and markets, from Fed chairman Marriner Eccles in the 1930s, to Paul Volker in the late 70s, to Greenspan and Bernanke. Will the September 17th meeting be historic? We'll see. In segment 3, CFP® Murray Titterington with IQ Wealth reviews his planning process.
Steve and Sinclair update the markets, then national gold expert Nick Grovich joins Mastering Money in segments 2 and 3. In segment 4, Steve talks about Required Minimum Distributions (RMDs) and when it may be advisable to delay the first distribution.
9-11 will always be a day to remember. Not sure why Congress is fine with giving the world's largest sponsor of terror $150 billion dollars to go on a shopping spree. Especially since they have vowed to wipe Israel off the map in 25 years or less. Steve and Sinclair review the incisive market insights of Sam Stovall, an analyst with the S & P Capital IQ research team. In the Q & A, Steve breaks down how to achieve an extra $2,000 a month for life, using 75% less capital, while maintaining access to your money and not disinheriting your heirs. (Invest the other 25% for capital gain, or create an increase in an estate by up to 30% to 50%)
…Before 2005, the expense ratio of all previously issued ETFs averaged 0.4 percent, according to Morningstar. Since 2005, the average expense of new funds has jumped to over 0.6 percent, and some new exchange-traded products are charging over 1.0 percent in fees annually. Then there is a thing called “Tracking Error”: ETF managers are supposed to keep their funds’ investment performance in line with the indexes they track. That mission is not as easy as it sounds. There are many ways an ETF can stray from its intended index. That tracking error can be a cost to investors. Throughout the trading day, the spread between underlying securities and the ETF can be signifcant. For example, on August 24 when the market opened down 5.3%, the Vanguard Dividend Appreciation fund VIG, was down a whopping 38% for more than an hour. Steve and Sinclair breakdown some of the pros and cons of ETFs. In the Q & A, Steve reviews a more effective approach to reducing risks on the bond side of the portfolio.