I have often pointed out that the investment world is like a living
entity. By that, I mean that it inhales and exhales, although on a much
more irregular basis than humans.
The recent market downturn indicates that many investors seem to have
forgotten about the inhaling part of the equation. Between the downturn,
radical terrorism in Iraq, and the Ebola virus crisis, there are a lot
of nervous households around the country.
And right in the midst of these worrisome issues, the politicians are
trying to push everyone over the edge with their never-ending onslaught
of political ads. Yet, every once in awhile, something happens in the
investment world that adds a little levity and causes one to chuckle.
Such an incident recently occurred in the world of finance that I just
had to share with my readers.
Ben Bernanke served two terms as chairman of the Federal Reserve, the
central bank of the United States. He served under both President Bush
and President Obama, from 2006-14. In other words, he was gatekeeper of
our nation’s money supply and instrumental in guiding the country
through the financial crisis.
As Federal Reserve Chairman, his compensation was just under $200,000
per year. Since he left office, he has been on the speaking circuit
where he commands more than $100,000 per appearance. He is intelligent,
well educated, and widely known, not only in this country but also
throughout the world.
He is obviously well off financially and apparently knows how to handle
money. What brought a smile to my face was his recent attempt to
refinance his mortgage to a lower rate. In spite of his credentials, and
much to my amusement, he was initially turned down. Once the most
powerful man in the financial world couldn’t get a mortgage a year
later.
Of course, it was a happy ending for Ben. Details weren’t made available
to the public, but many mortgage experts speculate that the initial
denial was because he went from a making a steady income to one that was
collected from time to time. Pretty strange since he was actually
making much more.
I don’t necessarily want to be critical of the mortgage industry, but
prior to the recession, just about anyone who could fog a mirror could
get a mortgage.
Changes in the mortgage industry were most certainly in order, but, as
with so many changes in laws and regulations, the needle moved from just
being a problem all the way up to potential disaster. And somewhere
along the way, common sense got lost in the shuffle.
As is the case in many industries, it appears mortgage companies were
more focused on getting forms filled out correctly than on looking at
circumstances and letting common sense prevail.
The banks blame the regulators and are fearful of additional litigation
and fines. The regulators blame the banks for being too tight with their
purse springs.
As a result, households with great credit ratings and strong personal
balance sheets continue to have difficulty obtaining a mortgage. Just
ask Ben Bernanke.
I’m fairly confident he was able to get his paperwork through
underwriting with a simple phone call. But not everyone has his
connections. Hopefully this incident will serve as a wake up call for
bankers and regulators alike.
Monday, October 27, 2014
Monday, October 20, 2014
The buck starts here: The U.S. is still viewed as a safe haven
For many, this is an exciting time of the year. Hunters, for example,
are busy preparing for their pursuit of the big buck. Many retailers are
excited too, anticipating the onslaught of hunters coming in to gear up
and put the finishing touches on their hunting camps. And, no doubt,
anticipating some nice profits.
They’re already bagging bucks, as the bow season has been underway since Oct. 1. And when the traditional Nov. 15 opening date for the firearms season kicks in, more sales will be rung up.
It’s a simple fact. This time of year is important to Michigan. The hunt for the buck puts a lot of dollars into the state’s economy.The buck is also getting a lot of attention on the national scene. The buck I’m referring to here, of course, is the U.S. dollar, quite commonly referred to as a buck.
The slang term buck in connection to the dollar goes back to the days when the early settlers were trading with the Native Americans. The rate of exchange was a deer hide for a dollar, thus the term buck.
On a national as well as international level, the currency version of the buck has been making big news. Most Americans probably don’t pay much attention to how the U.S. dollar is doing relative to other currencies.
They don’t wake up in the morning, turn on the television and eagerly await the latest developments from the international currency scene. In other words, the dollar’s relationship to other currencies is something about which most Americans little know or care.
In reality, though, it has an impact on us each and every day. One example is the falling price of gasoline. The strength of the U.S. dollar versus foreign currencies is a major reason why gasoline prices have fallen. So far this year the dollar index, which is a measurement of the dollar’s strength against a basket of major foreign currencies, has climbed 7 percent. For 12 consecutive weeks the U.S. dollar is up against the euro and Japanese yen.
There’s no question that the rising dollar has taken a lot of economists by surprise, especially considering the staggering amount of our national debt. However, with all the turmoil around the globe, we are still viewed as the world’s safe haven.
One well-known politician was quoted as saying “It means we have the best horse in the glue factory.” While that’s not exactly what you would call high praise, a strong dollar does have some benefits. In addition to the falling price of gasoline, it also means a European vacation will be a bit cheaper than it was last year.
That’s not to say there aren’t any negatives. There are. For example, it’s now a lot more challenging for American car companies to sell their vehicles overseas. For that matter, almost any American company selling goods overseas now has a higher hurdle to overcome.
As consumers and investors, we need to be aware that the dollar’s movement up and down in value relative to other currencies can have an impact on our daily expenses and the value of our nest eggs. I believe it is a positive that, despite all of our nation’s financial issues, we are still viewed as the safe haven of the world.
They’re already bagging bucks, as the bow season has been underway since Oct. 1. And when the traditional Nov. 15 opening date for the firearms season kicks in, more sales will be rung up.
It’s a simple fact. This time of year is important to Michigan. The hunt for the buck puts a lot of dollars into the state’s economy.The buck is also getting a lot of attention on the national scene. The buck I’m referring to here, of course, is the U.S. dollar, quite commonly referred to as a buck.
The slang term buck in connection to the dollar goes back to the days when the early settlers were trading with the Native Americans. The rate of exchange was a deer hide for a dollar, thus the term buck.
On a national as well as international level, the currency version of the buck has been making big news. Most Americans probably don’t pay much attention to how the U.S. dollar is doing relative to other currencies.
They don’t wake up in the morning, turn on the television and eagerly await the latest developments from the international currency scene. In other words, the dollar’s relationship to other currencies is something about which most Americans little know or care.
In reality, though, it has an impact on us each and every day. One example is the falling price of gasoline. The strength of the U.S. dollar versus foreign currencies is a major reason why gasoline prices have fallen. So far this year the dollar index, which is a measurement of the dollar’s strength against a basket of major foreign currencies, has climbed 7 percent. For 12 consecutive weeks the U.S. dollar is up against the euro and Japanese yen.
There’s no question that the rising dollar has taken a lot of economists by surprise, especially considering the staggering amount of our national debt. However, with all the turmoil around the globe, we are still viewed as the world’s safe haven.
One well-known politician was quoted as saying “It means we have the best horse in the glue factory.” While that’s not exactly what you would call high praise, a strong dollar does have some benefits. In addition to the falling price of gasoline, it also means a European vacation will be a bit cheaper than it was last year.
That’s not to say there aren’t any negatives. There are. For example, it’s now a lot more challenging for American car companies to sell their vehicles overseas. For that matter, almost any American company selling goods overseas now has a higher hurdle to overcome.
As consumers and investors, we need to be aware that the dollar’s movement up and down in value relative to other currencies can have an impact on our daily expenses and the value of our nest eggs. I believe it is a positive that, despite all of our nation’s financial issues, we are still viewed as the safe haven of the world.
Monday, October 13, 2014
What if you’re never president of the United States?
Slightly less than two weeks ago, former President Jimmy Carter turned
90. It’s been 33 years since he left the Oval Office. I am not saying
that he’s the oldest former president, but no other president has
survived that many years beyond his term in office.
In a similar fashion, former President George H. Bush has also been living an active life since his term in office. I bring this up in a financial column because both former presidents illustrate the point that, for a variety of reasons, people today are living longer lives.
In fact, lifespans today are so much longer than in decades past, retirement can easily represent a third of a person’s life. Unlike you and me, neither of the former presidents has to worry about running out of money in retirement. Of course, their pension checks are funded by your tax dollars.
But longevity is one of the reasons that so many pension funds are either struggling or have been discontinued. Who could ever have imagined that so many people would live such long and fruitful lives?
By contrast, Civil War General and former President Ulysses S. Grant didn’t have it quite so well as former presidents have it today. He was elected to office at the young age of 46. When he left office, some poor financial decisions were made and he became dependent on his military pension.
Remember, there was no Social Security at the time. So, in order to supplement his retirement income and provide money for his heirs, he wrote his memoirs with the assistance of Mark Twain. Grant passed away from cancer at the young age of 63.
In today’s world there are definitely a lot more financial perks for former presidents and other politicians after they have left office. Such financial security did not exist a hundred years ago, but nowadays, I’m sure we would be shocked to hear that a former president was struggling with pocketbook issues.
My point is that the general public just doesn’t have the kind of income security that former presidents have. In fact, the majority of people today are nowhere near being on the financial trajectory that would lead them to a worry-free retirement income.
As someone who works with a lot of retirees, my observation has been that most people who worry least about their retirement income are those that began preparing early in their careers.
Yes, they contributed regularly into an IRA or whatever other retirement program that their employer provided. Just as important, they continued to participate in these programs whether the economic times were good or bad.
Like former Presidents Carter and Bush, I would prefer for everyone to have a relatively healthy and active retirement for many years to come. Unfortunately, you won’t have the financial benefits of being a former president. And, unlike President Grant, it’s highly unlikely you’ll find anyone willing to pay you a bundle for your memoirs.
That’s why it’s incumbent upon you to make certain you can reach age 90 with minimal financial concerns.
Having a reliable, steady income and a decent sized nest egg doesn’t just happen. It takes a lifetime of effort in order to make the retirement years the golden years we all dream about.
In a similar fashion, former President George H. Bush has also been living an active life since his term in office. I bring this up in a financial column because both former presidents illustrate the point that, for a variety of reasons, people today are living longer lives.
In fact, lifespans today are so much longer than in decades past, retirement can easily represent a third of a person’s life. Unlike you and me, neither of the former presidents has to worry about running out of money in retirement. Of course, their pension checks are funded by your tax dollars.
But longevity is one of the reasons that so many pension funds are either struggling or have been discontinued. Who could ever have imagined that so many people would live such long and fruitful lives?
By contrast, Civil War General and former President Ulysses S. Grant didn’t have it quite so well as former presidents have it today. He was elected to office at the young age of 46. When he left office, some poor financial decisions were made and he became dependent on his military pension.
Remember, there was no Social Security at the time. So, in order to supplement his retirement income and provide money for his heirs, he wrote his memoirs with the assistance of Mark Twain. Grant passed away from cancer at the young age of 63.
In today’s world there are definitely a lot more financial perks for former presidents and other politicians after they have left office. Such financial security did not exist a hundred years ago, but nowadays, I’m sure we would be shocked to hear that a former president was struggling with pocketbook issues.
My point is that the general public just doesn’t have the kind of income security that former presidents have. In fact, the majority of people today are nowhere near being on the financial trajectory that would lead them to a worry-free retirement income.
As someone who works with a lot of retirees, my observation has been that most people who worry least about their retirement income are those that began preparing early in their careers.
Yes, they contributed regularly into an IRA or whatever other retirement program that their employer provided. Just as important, they continued to participate in these programs whether the economic times were good or bad.
Like former Presidents Carter and Bush, I would prefer for everyone to have a relatively healthy and active retirement for many years to come. Unfortunately, you won’t have the financial benefits of being a former president. And, unlike President Grant, it’s highly unlikely you’ll find anyone willing to pay you a bundle for your memoirs.
That’s why it’s incumbent upon you to make certain you can reach age 90 with minimal financial concerns.
Having a reliable, steady income and a decent sized nest egg doesn’t just happen. It takes a lifetime of effort in order to make the retirement years the golden years we all dream about.
Monday, October 6, 2014
Many Michiganders can’t afford basic necessities
Because of unacceptable player behavior off the field, the National
Football League has been all over the news. To the league’s credit,
though, they’ve been partners with the United Way organization for more
than forty years.
Our great state is in the center of Big Ten Country. For non-sports enthusiasts, the Big Ten Conference now has 14 schools, and one of the recent additions is Rutgers, the State University of New Jersey.
I recently discovered that Rutgers was in Michigan this summer for something other than a football game. They conducted a study for the Michigan Association of United Ways. Called ALICE (Asset Limited, Income Constrained, Employed), the study dealt with “the population of individuals and families who are working, but are unable to afford the basic necessities of housing, food, child care, and transportation.”
It found that 40 percent of our state’s population falls into that category. In other words, nearly half of Michigan’s population struggles to make ends meet. I think you’ll agree it’s a sad state of affairs when so many Michigan households can’t afford basic needs as defined by ALICE.
As someone that enjoys surveys, studies and numbers, I found ALICE to be as thorough and detailed as any I have ever reviewed. It was almost to the point of being overwhelming.
What hourly wage is needed to make life in Michigan affordable? It varies from county to county, but overall for a family of four (2 adults/2 children), the magic number seems to be just over $25, a number easier to attain if more than one family member works.
According to the Bureau of Labor Statistics, 63 percent of our jobs pay less than $20 per hour, with most of them in the $10 to $15 per hour range. And that number is based on a full-time workweek, even as we are evolving into a nation of part-time workers.
In other words, Michigan is an expensive place to reside, while at the same time we are in need of higher paying full-time jobs. I suspect the high cost of living has driven a number of higher end households and businesses to relocate out of Michigan. And that’s on top of the many Michiganders who left looking for jobs during the economic downturn.
ALICE found our population to be very diverse, quite typical in this ever-changing world. Contrarily, it seems the phrase “a typical family of four” is becoming about as rare as a company that still provides a pension plan.
To Michigan’s credit, we were one of the first states to undertake this thorough analysis through United Way and Rutgers University. In many ways, the findings confirm reality.
Somehow, we need to continue to make Michigan an attractive place for businesses to call home. We need to re-establish our workforce as one that’s educated, dependable, reliable and enthusiastic.
I’ve personally observed that Michiganders who have been fortunate are also extremely generous. As we close in on the holidays, please remember to be generous to our neighbors who are in dire need and struggle to balance the budget every month.
While the study points out just how many are struggling, I’m confident that Michigan is poised to become one of the states where businesses want to set up shop and offer well-paying jobs.
Our great state is in the center of Big Ten Country. For non-sports enthusiasts, the Big Ten Conference now has 14 schools, and one of the recent additions is Rutgers, the State University of New Jersey.
I recently discovered that Rutgers was in Michigan this summer for something other than a football game. They conducted a study for the Michigan Association of United Ways. Called ALICE (Asset Limited, Income Constrained, Employed), the study dealt with “the population of individuals and families who are working, but are unable to afford the basic necessities of housing, food, child care, and transportation.”
It found that 40 percent of our state’s population falls into that category. In other words, nearly half of Michigan’s population struggles to make ends meet. I think you’ll agree it’s a sad state of affairs when so many Michigan households can’t afford basic needs as defined by ALICE.
As someone that enjoys surveys, studies and numbers, I found ALICE to be as thorough and detailed as any I have ever reviewed. It was almost to the point of being overwhelming.
What hourly wage is needed to make life in Michigan affordable? It varies from county to county, but overall for a family of four (2 adults/2 children), the magic number seems to be just over $25, a number easier to attain if more than one family member works.
According to the Bureau of Labor Statistics, 63 percent of our jobs pay less than $20 per hour, with most of them in the $10 to $15 per hour range. And that number is based on a full-time workweek, even as we are evolving into a nation of part-time workers.
In other words, Michigan is an expensive place to reside, while at the same time we are in need of higher paying full-time jobs. I suspect the high cost of living has driven a number of higher end households and businesses to relocate out of Michigan. And that’s on top of the many Michiganders who left looking for jobs during the economic downturn.
ALICE found our population to be very diverse, quite typical in this ever-changing world. Contrarily, it seems the phrase “a typical family of four” is becoming about as rare as a company that still provides a pension plan.
To Michigan’s credit, we were one of the first states to undertake this thorough analysis through United Way and Rutgers University. In many ways, the findings confirm reality.
Somehow, we need to continue to make Michigan an attractive place for businesses to call home. We need to re-establish our workforce as one that’s educated, dependable, reliable and enthusiastic.
I’ve personally observed that Michiganders who have been fortunate are also extremely generous. As we close in on the holidays, please remember to be generous to our neighbors who are in dire need and struggle to balance the budget every month.
While the study points out just how many are struggling, I’m confident that Michigan is poised to become one of the states where businesses want to set up shop and offer well-paying jobs.
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