economy, income, interest rates, retirement, risk management

How to Guarantee Retirement?

Several years ago, I read a post on LinkedIn which sounded the alarm bells that the “time is running out” for your retirement account.

I found it offensive and in poor taste, playing on the fears of the public at large. Throughout most of 2021 there has been a palatable undercurrent of fear in the market… on the part of investors, on the part of money managers, on the part of economists… Inflation rocketing higher, talk of asset bubbles left and right, issues around hiring and employment, falling consumer sentiment, and all of these leading to a slowing in the economy

The 5% pullback in September 2021 in the market reinforced that fear for some.

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economy, interest rates, retirement, risk management, Taxes

Trick or Treat? Revisiting The Potential Downside of Tax Reform for Investors

There is an old story that goes “beware what you wish for…” Things don’t always turn out as expected. In 2017, President Trump proposed and Congress approved a huge tax cut plan… the Tax Cuts and Jobs Act (TCJA). The results have been controversial.

Along those lines I watched a fascinating interview of Tom Lee, head of research at Fundstrat, on Bloomberg four years ago. His insight proved very valuable and accurate. (1)

His feeling is that a Tax cut, as it was being discussed, could be negative for investors long term. “There’s two reasons; First, when cutting tax rate you raise the after tax cost of debt. Leverage becomes a problem for a lot of businesses. Second, because you are cutting tax rates you are effectively giving cash to all businesses, even businesses where you want to reduce allocation.“

His observation was that companies that are currently struggling with cash flow will have a temporary life preserver tossed to them, but it will not change the fundamental issues facing a lot of industries. It will distort markets.

In fact, that is exactly what happened. Companies that were not profitable and not healthy continued to borrow and live off of debt instead of reforming their business models.

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economy, income, retirement, risk management

Being Too Fearful Can Hurt Financial Security

“It was the best of times, it was the worst of times, it was the age of wisdom, it was the age of foolishness, it was the epoch of belief, it was the epoch of incredulity, it was the season of light, it was the season of darkness, it was the spring of hope, it was the winter of despair.”


― Charles Dickens, A Tale of Two Cities

I have seen many people who are enraptured by the market moves since the COVID recession of 2020. Markets supported by seemingly unlimited aid from central banks around the world, driving equities to higher all-time highs, and rewarding risk taking behavior.

I have seen many people in the past year who are fearful in the current market environment… High market valuation, trade war fears, warnings from pundits, Fed policy moves, volatility… Because of fear, many people have decided to sit in cash or even liquidate their retirement savings.

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

Divestment From Fossil Fuels Gathers Steam

As an investor in today’s economy, you have a say in what companies you invest in and support. By investing in a company, you are effectively voting with your dollars.

By the same token, as an investor you also have the right to purposefully refuse to invest in a specific company or industry. Perhaps you disagree with their business model or you oppose the negative impacts they are having on society. This act of withholding investment is at the core of “Divestment”.

Without access to capital markets, fossil fuel companies cannot finance their operations. As fewer buyers come in to buy shares of fossil fuel companies, the potential value of these companies decline.

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

How to Reduce Your Carbon Footprint

People are becoming increasingly aware of the consequences of climate change. In October of 2018 the UN Panel on Climate Change stated we have 12 years to halt the growth of CO2 if we hope to avoid the worst possible consequences of global warming. (1) Yet following the shutdown of the global economy in 2020, the release of CO2 has accelerated. “In 2021 global energy-related CO2 emissions are projected to rebound and grow by 4.8% as demand for coal, oil and gas rebounds with the economy. The increase of over 1 500 Mt CO2 would be the largest single increase since the carbon-intensive economic recovery from the global financial crisis more than a decade ago, it leaves global emissions in 2021 around 400 Mt CO2, or 1.2%, below the 2019 peak.” (2)

Atmospheric CO2 in June 2021 stands at 418/ppm. In June 2020 the figure stood at 416/ppm. Ten years ago, in June 2011, the measure stood at 390/ppm. (3)

This awareness that the build-up of atmospheric CO2 is accelerating has led to many projects that are working to effect change. Greta Thunberg has raised the awareness of students and leaders to protest the inaction of adults on Climate. John Lui and others have organized eco-restoration camps to foster regenerative agriculture and to plant many more trees in degraded environments. Many foundations and pensions are pursuing divestment strategies from fossil fuel companies to reduce the capital available to produce carbon intensive projects. More people are turning to socially responsible investing as a way to have their own investments impact what the future will look like.

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economy, interest rates, retirement, risk management

2021 Inflation and Parallels to the Seventies

My most vivid memory of the Seventies is sitting in the car with my siblings and parents in a mall parking lot the week before Christmas and my mother crying because they couldn’t afford presents and had to file bankruptcy. For a 12 year old it made the challenges of real life… real.

The seventies were a traumatic time for many Americans… the end of the Vietnam war, the political chaos of Watergate and Nixon, the oil embargo, gas rationing throughout the decade, the suffocation of unions, the loss of jobs and industries as Japan and South Korea became exporters. Economic instability was an ever-present cloud.

Moving in waves through the decade, the economy suffered from bouts of inflation and deflation. It made policy decision-making challenging at best… boost the economy to keep it from slowing down, or is the economy running too hot?

When you drill down one sees many similarities between conditions that led to the “stagflation of the 1970s” and the situation we find ourselves in post COVID.

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Climate change, economy, environment, retirement, risk management

Global future growth… and Climate Change

A recent Bloomberg article titled “The Global Growth Hotspots of the Future Are Here” discussed an HSBC report which advises that investors need to focus on the growth of cities in the Emerging Markets. (1)

“While wealthier countries are more urbanized today, the proportion of urban to rural dwellers in emerging markets is expected to climb to 63 percent in 2050 from 50 percent now, according to the study, which draws on research by McKinsey and the United Nations.

Developing nations’ emissions are rising fast and the report predicted that their share of cumulative emissions would reach 51 percent by 2020. (2)

By 2050 some 5 billion people – more than half the world’s population – will live in emerging market cities, and account for more than half of global gross domestic product growth.

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Climate change, economy, entrepreneurship, environment, ESG, life insurance, new economy, protection, retirement, risk management, Socially Responsible Investing, SRI

Embracing the Future: An Interview with Charlotte Markward

I met Charlotte and her Husband Randy years ago at a Green Drinks in Philadelphia. It was before the days of Tesla, widespread solar power and organic food sections at the grocery store. People got together to share a beer and dream about a future that would be more sustainable. Things have changed a great deal in the past few years.

Charlotte is a graphic designer based in Philadelphia. She has agreed to share some of her experiences and insights so that we all might have an easier path to financial security.

Charlotte has been interested in supporting socially responsible investing for many years. I asked her what it means to her. Charlotte said, “For one thing it’s smart. We have a finite amount of resources and we are running out of them. To continue doing things in the old ways is to set yourself up for failure. Green investment is where the growth will be.”

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economy, income, interest rates, retirement, risk management

“Rising Prices in the Economy”: Inflation Post COVID

In September 2020 Jay Powell announced that the Federal Reserve would adjust how it reacts to inflation, one of its chief mandates, and allow inflation to run hotter for longer. The expectation is that it will be several years before the Fed raises interest rates. Traditionally, elevated rates of inflation indicate the economy is operating at full capacity and may be in danger overheating. Following the COVID recession of 2020 the Fed is trying to create a positive environment for the recovery.

In the Spring of 2021 signs of inflation are abundant. Since the fall of 2020 commodity prices had risen dramatically. Lumber prices had soared as supply constraints limited what was available, especially as housing prices went up and building accelerated. Copper surged to new record highs. Wheat, corn and other food commodities went up as the economy reopened and supply couldn’t keep up with demand.

Among tech businesses a shortage of computer chips affected the building of everything from cars to exercise equipment. “Just in time” supply chains showed increasing strain.

To top things off, a gasoline pipeline was held hostage by a ransomware attack in early May 2021. The result was gasoline shortages and higher prices throughout the east coast US.

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economy, interest rates, retirement, risk management

The Impact of Financial Euphoria

On a recent rereading of John Kenneth Galbraith’s “A Short History of Financial Euphoria”, he outlines common characteristics from past financial bubbles including the Tulip mania of 1637, the South Seas bubble of 1720, the various booms and busts of 19th century America, the market crash of 1929, and the October 1987 market crash. While the financial instruments vary, the behavior of investors has many elements in common. Bubbles in financial markets have several characteristics in common.

One of the elements Galbraith cites in the financial bubbles he analyzes is the introduction of new financial instruments. Such new instruments offer the “investment opportunity rich in imagined prospects…” (p51) Added to these new instruments is the element of leverage. Leverage allows investors to capture more profit than is normally possible. However, leverage also introduces fragility into the financial system when the value of investments start to fall and leverage needs to be unwound. The unwinding of leverage leads to additional sales and additional losses. The collapse of bubbles has an “inevitable and depressive aftereffect.” (p67) Such a depressive aftereffect is manifested in weakened consumer goods demand, shaken business confidence, a fall in business investment, and a rise in business failures. The bursting of bubbles has a “substantial and ultimately devastating economic effect.” (p89)

Another critical element in the development of bubbles is psychological. “Individuals were dangerously captured by belief in their own financial acumen and intelligence and conveyed this error to others.” (p51) In this aspect, bubbles not only develop from financial innovation but especially because of psychological behaviors and characteristics.

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