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Climate change, economy, environment, ESG, retirement, risk management, Socially Responsible Investing, SRI

Mixed Economic Signals, Debt Issues and Fossil Fuel Companies

James Cox

Several years ago, Bloomberg Businessweek did a bio pic on Hank Paulson, Bush’s Treasury secretary who served during the Financial Crisis of 2008. After reviewing the events that led to the Crisis, connecting the dots, and seeing the impact of what happened, Paulson had this to say at the end of the film…

“The whole reason I’m doing this, is not because I want to look back, but because I have increasingly come to the view that it’s important that there be a historical record for those that come after me, so we don’t replay this movie all over again.” (1)

Fast-forward to November 2019, and we saw many positive and negative conditions developing that raised questions about the stock market and the health of the US economy.

Since the summer of 2019 financial conditions have noticeably weakened as the trade war with China has started having a significant economic impact. American and Chinese officials have spoken publicly that progress is being made. Hopes of a trade deal had driven equity markets higher, but as of December 2019 there is still no deal.

The trade war had caused a real decline in business investment and optimism. A CFO survey in the Fall of 2019 showed, “U.S. business optimism dropped this quarter to its lowest level in three years, according to third-quarter results from the Duke University/CFO Global Business Outlook. A majority of CFOs expect a recession to start before the presidential election.” (2)

This lack of business confidence had slowed growth in the economy and motivated the Fed to cut interest rates several times this year. This was all before COVID crippled the economy in the Spring of 2020…

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income, retirement

First Steps to Retirement Planning

James Cox

Many people are paralyzed into inaction when they start thinking about the challenge of planning for retirement. The truth is there are a few first steps anyone can take on their own to improve their chances for success.

A first step is to determine how much income you can expect to receive from social security. In years past SSA would mail annual statements for people to see their expected benefits. Things have changed… go to google and search for “my social security”. You will create an account and through this account be able to determine your numbers.

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charitable giving, life insurance, protection, Taxes

A beloved relative has passed away and left me an inheritance… What should I do?

James Cox

I have had several clients experience the passing of a beloved family member in the past 6 months. All ages, all walks of life. To a person they struggle with the desire to have their father or spouse or daughter back with them again, and how to move forward without them.

I have lost both of my parents; my mother passed away at 42 from lung cancer. I know the pain they suffer. Looking back, her illness and death really hurt my father and younger brother financially. She didn’t have life insurance. Due to the illness many of the family’s assets were exhausted. My father and brother did the best that they could do, but it was a difficult journey.

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economy, interest rates, retirement, risk management

March Jobs Day – “There is a huge fog that is blanketing future economic outlooks.”

James Cox

The geopolitical crisis of the past month has changed the global economic roadmap ahead. Russia’s invasion of Ukraine has disrupted flows of commodities and driven up prices stoking already high inflation. As a result…

Tom Keene points out “We are not focused on payrolls…” (1)

March 4, 2022 was the release of the jobs report for February. The estimate for new jobs is for 421k, and a 3.9% unemployment rate.

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Climate change, economy, environment, risk management, Socially Responsible Investing, SRI

“We are talking about a genuine existential issue”: An interview with Ian Dunlop, Sustainability Consultant based in Australia

James Cox

This article is an update from an interview in 2016 with more recent comments from Ian Dunlop and James Cox.

Ian Dunlop’s life has been spent in the center of the carbon economy and the climate change debate.

His bio from LinkedIn chronicles his background…

Ian Dunlop has wide experience in energy resources, infrastructure, and international business, for many years on the international staff of Royal Dutch Shell. He has worked at senior level in oil, gas and coal exploration and production, in scenario and long-term energy planning, competition reform and privatization. He chaired the Australian Coal Associations in 1987-88. From 1998-2000 he chaired the Australian Greenhouse Office Experts Group on Emissions Trading which developed the first emissions trading system design for Australia. From 1997 to 2001 he was CEO of the Australian Institute of Company Directors. Ian has a particular interest in the interaction of corporate governance, corporate responsibility and sustainability. An engineer from the University of Cambridge (UK), MA Mechanical Sciences, he is a Fellow of the Australian Institute of Company Directors, the Australasian Institute of Mining and Metallurgy and the Energy Institute (UK), and a Member of the Society of Petroleum Engineers of AIME (USA). He is Chairman of Safe Climate Australia, a Director of Australia 21, Deputy Convenor of the Australian Association for the Study of Peak Oil, a Fellow of the Centre for Policy Development, a Member of The Club of Rome and a member of Mikhail Gorbachev’s Climate Change Task Force. He advises and writes extensively on governance, climate change, energy and sustainability.

He grew up in the middle of the oil and coal business, and over the years he has come to his own conclusions about climate change and the impact it will have on humanity’s future. I interviewed him mid-May 2016 to learn more. I wanted to learn more about what can be done about climate change, what the role of business is, and what the impact on the economy is.

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Climate change, economy, retirement, risk management

Ukraine, the Global Framework and Climate

James Cox

On February 24, 2022, Russia invaded Ukraine. A number of times today I heard the phrase, “this changes things fundamentally.” The question is what does it change and how do we move forward? In particular, what does this mean for the climate crisis?

The climate crisis requires a level of international cooperation that has never been seen. The breakdown of the framework that came out of Glasgow and COP26 is the latest example of the challenge we face.

Events in Ukraine underscore deeper systemic issues that we need to address in order to be effective on an international scale.

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economy, protection, retirement, risk management

How to Deal with Being Laid Off: 5 Strategies To Prepare For Job Change

James Cox

Each day we read reports that the economy is booming.

“U.S. housing and consumer are strong” (1)

“Factory output is poised to speed up.”

“Stronger global growth expectations and a weaker dollar should help.”

“The stock market hits record highs…”

With that being the case, you might find it surprising that several large corporations have recently announced they will be laying off large numbers of employees, especially managers. (2)

Companies which are facing an increasingly tough business environment are being forced to “slash costs and stabilize”. (3) Some companies find themselves at a disadvantage because of the move away from fossil fuels. (4) Some companies have failed to innovate in order to remain competitive. Some companies have to carry legacy costs that newer competitors, especially those in the technology or e-commerce space do not have. Many companies are struggling to keep up with commodity and wage costs that are rising with inflation.

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income, retirement, Taxes

RMD: What are the Risks and How Can We Address Them?

James Cox

Several recent studies show peoples number one fear is running out of money during retirement. (1)

To prepare us for retirement the IRS gives workers the ability to set up qualified accounts in order to save for retirement and get tax deferred growth. By deferring taxes money saved can grow faster. You put money away, not paying taxes now, but paying taxes on the money when you pull it out during retirement.

When you get to retirement, you can start pulling money from your account. In the past it has been considered good practice to not draw more than 4% from an account during retirement in order to make sure you don’t outlive your money. In the past bond yields have been 5-7% and that makes a 4% draw down possible. Now over the past 5 years bond yields have been around 2-3% and because many retirees rely on bonds to deliver income to their portfolio, many economists and advisors have been advising clients to withdraw less from their IRAs; this is so retirees don’t run out of money when they are older.

Now what if I told you there was a tax law that requires you to draw more income from your account, without any consideration for how long you or your spouse will live, and without regard for whether you will run out of money or not.

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economy, interest rates, retirement, risk management

Feb Jobs Day… “Buckle Up”

James Cox

It has been a turbulent week…

Price of gasoline rose to the highest since 2014 at $3.43/gallon. Brent crude is at $93 per barrel.

Inflation number to be released next week is expected to rise to 7.3%, from 7.1% in January

On Thursday, the ECB announced it would pull back from QE faster than expected after their meeting on 2/3/22. ECB pivoted away from their policy of “lower rates for longer”. As a result, Italian yields are up dramatically. Yields of Italian bonds started the week at 1.2%… by Friday yields were over 1.7%. Negative yielding debt is at lowest level since 2018.

At a meeting in the UK, Bank of England Governor Bailey called on unions to hold off on demands for pay increases. Union officials called it “a sick joke”.

In equity markets Facebook (Meta) fell 25% and lost over $200billion in value overnight due to slower growth. The next day Amazon rose 15% and gained over $150billion in value on earnings and price hikes. These are massive flows of capital.

On Wednesday, ADP released numbers this week showed a decline of 301,000 jobs due to Omicron and a worsening in economic conditions due to rising bond yields. The question is how much of the drop is due to Omicron which is fading, and how much is due to a slowdown in the economy which could worsen as the Fed raises rates starting in March.

The White House warned “the January jobs number will be ugly”.

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economy, interest rates, retirement, risk management

What do rising rates mean for investors? In 2018, in 2020… and today in 2022

James Cox

In January of 2022 markets sold off as investors came to grips with the realization that the Fed was committed to end Quantitative Easing (QE), raise rates by March of 2022, and begin selling assets from its balance sheet. After years of “easy money” monetary policy, the Fed had been forced to change direction due to rising inflation worries. (1)

“The market is significantly overvalued, which works okay when interest rates are at record lows,” said Mark Zandi, chief economist at Moody’s Analytics. “But when rates rise, valuations become a real issue, so the market is adjusting to the new interest rate reality.”

To understand how this affects your portfolio and retirement savings a bit of historical context can be helpful.

So first… a history lesson…

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