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Have you got itchy feet?
The U.S. economy added 236,000 jobs in March, just shy of the 238,000 forecast by economists polled by the Wall Street Journal. The unemployment rate declined to 3.5% in March from 3.6% in February.
The latest data was calculated before the collapse of Silicon Valley Bank and Signature Bank last month, an event that…
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April is National Financial Literacy Month. To mark the occasion, MarketWatch will publish a series of “Financial Fitness” articles to help readers improve their fiscal health, and offer advice on how to save, invest and spend their money wisely. Read more here.
Do you know the difference between a stock and a bond, or a mutual fund and an exchange-traded fund? MarketWatch put together a meat and potatoes — although that’s always relative — quiz for our savvy readers. We’ve stuck to some familiar topics — taxes, stocks, interest rates, savings and inflation. There are 10 questions — with one bonus question thrown in for good measure.
You don’t know what you don’t know until you get an incorrect answer in a financial literacy quiz. Some of the questions are tricky, but we hope they are fun and that — most importantly — readers learn something new. Financial literacy helps us to plan for the future, gives us peace of mind and brings more understanding and less fear about the complex world of investing and retirement.
Our aim is to raise awareness of Financial Literacy Month. If you get 10/10, including the bonus question, buy yourself (and a friend) a popsicle. If you didn’t answer all the questions correctly, buy yourself a popsicle anyway. We, at MarketWatch, aim to democratize and demystify financial news, and make this sometimes intimidating subject as accessible as possible.
If you found it useful and/or entertaining, share it with a friend.
–Quentin Fottrell
Question 1: What is the difference between a tax deduction and a tax credit?
(a) A tax deduction reduces your income taxes directly. A tax credit reduces your taxable income.
(b) A tax deduction reduces your taxable income. A tax credit reduces your income taxes directly.
(c) Both reduce your income taxes directly.
Question 2: Which way do bond prices move when interest rates rise?
(a) Bond-market prices fall as interest rates rise. Bond prices rise when interest rates decline.
(b) Bond-market prices rise as interest rates rise. Bond prices fall when interest rates decline.
(c) Bond-market prices fall as interest rates rise, but bond prices also fall when interest rates decline.
Question 3: What has been the average annual total return, with dividends reinvested, for the S&P 500 over the past 30 years?
(a) 9.7%, according to FactSet.
(b) 3%, according to FactSet.
(c) 6.5%, according to FactSet.
Question 4: What is compound interest and how does it work?
(a) Compound interest reflects the linear gain that comes from all the reinvested interest of your savings and investments, which allows your initial investment/deposit to gain value regardless of the amount of interest you pay.
(b) Compound interest reflects the exponential gain that comes from all the reinvested interest of your savings and investments, which allows your initial investment/deposit and the additional interest to increase in value.
(c) Compound interest reflects the amount of interest you pay every month on a loan, and the total amount of interest you have paid over the lifetime of that loan.
Question 5: What is APR and how is it different from a regular interest rate?
(a) APR is the annual interest on a loan calculated on the initial loan, including additional costs and fees, but not on the accumulated interest incurred on the loan.
(b) APR is the annual interest on a loan calculated on the initial loan and the accumulated interest over the first year.
(c) APR is the annual interest on a loan calculated on the initial loan, including additional costs and fees, and the accumulated interest over the lifetime of the loan loan.
Question 6: What percentage of your income should you spend on rent?
(a) Most real-estate experts say you should spend no more than 20% of your income on housing costs, which is considered to be a tipping point for becoming “cost-burdened.”
(b) Most real-estate experts say you should spend no more than 50% of your income on housing costs, which is considered to be a tipping point for becoming “cost-burdened.”
(c) Most real-estate experts say you should spend no more than 30% of your income on housing costs, which is considered to be a tipping point for becoming “cost-burdened.”
Question 7: What’s an ETF?
(a) ETFs, or Exchange-Traded Funds, are baskets of investments — stocks, bonds, or commodities — that investors can buy throughout the trading day like stocks.
(b) ETFs, or Exchange-Traded Funds, are baskets of investments — stocks, bonds, or commodities — that investors can only buy at the end of the trading day.
(c) ETFs, or Exchange-Traded Funds, are baskets of investments — stocks, bonds, or commodities — that investors can only buy during or at the end of the trading day.
Question 8: What is the difference between a stock and a bond?
(a) A stock is a temporary investment in a company, while a bond is issued by a company to reward shareholders.
(b) A stock is a share in the ownership of a company, while a bond is issued by a company to finance a loan.
(c) A stock is a share in the ownership of a company, while a bond is issued by a company to finance the stock.
Question 9: If you were born in 1960 or later, at what age can you receive your full Social Security in the U.S.? Bonus question: At what age can you receive your maximum Social Security benefit?
(a) Full retirement age in the U.S. is 65 for those born in 1960 and after. While you can start collecting your Social Security retirement benefits as early as 62, your benefits are permanently reduced. Your Social Security benefits max out at age 70. By delaying until 70, your benefit is 76% higher than if you had claimed at the earliest possible age (62).
(b) Full retirement age in the U.S. is 65 for those born in 1960 and after. While you can start collecting your Social Security retirement benefits as early as 62, your benefits are permanently reduced. Your Social Security benefits max out at age 67. By delaying until 67, your benefit is 76% higher than if you had claimed at the earliest possible age (62).
(c) Full retirement age in the U.S. is 67 for those born in 1960 and after. While you can start collecting your Social Security retirement benefits as early as 62, your benefits are permanently reduced by a small percentage each month until you reach 67. Your Social Security benefits max out at age 70. By delaying until 70, your benefit is 76% higher than if you had claimed at the earliest possible age (62).
Question 10: What is the Federal Reserve’s desired rate of inflation?
(a) 2%
(b) 3%
(c) 2.5%
Bonus question! What is considered a good credit score?
(a) 560
(b) 680
(c) 800
Getty Images/iStockphoto
Answer 1:
(b) A tax deduction reduces your taxable income. A tax credit reduces your income taxes directly.
Answer 2:
(a) Bond-market prices fall as interest rates rise. Bond prices rise when interest rates decline.
Answer 3:
(a) 9.7%, according to FactSet.
Answer 4:
(b) Compound interest reflects the exponential gain that comes from all the reinvested interest of your savings and investments, which allows your initial investment/deposit and the additional interest to increase in value.
Answer 5:
(c) APR is the annual interest on a loan calculated on the initial loan, including additional costs and fees, and the accumulated interest over the lifetime of the loan.
Answer 6:
(c) Most real-estate experts say you should spend no more than 30% of your income on housing, which is considered to be a tipping point for becoming “cost-burdened.”
Answer 7:
(a) ETFs are Exchange-Traded Funds. These are baskets of investments — stocks, bonds, or commodities — that investors can buy or sell throughout the trading day.
Answer 8:
(b) A stock is a share in the ownership of a company, while a bond is issued by a company to finance a loan.
Answer 9:
(c) Full retirement age in the U.S. is 67 for those born in 1960 and after. While you can start collecting your Social Security retirement benefits as early as 62, your benefits are permanently reduced. Your Social Security benefits max out at age 70. By delaying until 70, your benefit is 76% higher than if you had claimed at the earliest possible age (62).
Answer 10:
(a) 2%
Answer for bonus question!
(b) 680. Although credit scores vary depending on the model, according to Experian, credit scores between 580 and 669 are considered “fair,” scores between 670 and 739 are regarded as “good”; 740 to 799 are considered “very good”; and scores of 800 and above are considered “excellent.”
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Details about the Internal Revenue Service’s spending plans for a major cash influx are about to come to light, Treasury Secretary Janet Yellen said Tuesday.
More than half a year after Congress authorized $80 billion in new funding for the tax-collection agency over the next decade, Yellen said details are coming this week on how the IRS will put the money to use in improving customer service, upgrading internal technology and making sure the richest taxpayers are paying their fair share.
The $80 billion infusion is part of the Inflation Reduction Act, which passed Congress last summer without Republican support and plenty of GOP skepticism that the additional funding would be used appropriately, depicting it instead as engendering a sort of tax-collection police state in which middle-income individuals could find themselves targeted by armed IRS agents.
From the archives (August 2022): Fact check: No, the IRS is not hiring an 87,000-strong military force with funds from the Inflation Reduction Act
Yellen spoke Tuesday at the swearing-in ceremony for Danny Werfel, the newly confirmed IRS commissioner. Werfel “will lead the IRS through an important transition” after a period during which the agency “suffered from chronic underinvestment,” Yellen said in prepared remarks.
During Werfel’s confirmation hearing in February, senators from both parties pressed him about how he would oversee the new money’s use.
The U. S. House of Representatives is under Republican control, and observers expect lawmakers to give hard looks at the funding of the IRS. The House, in fact, voted in January to repeal the $80 billion. The measure isn’t expected to go further, with Democrats retaining control in the Senate and President Joe Biden, a Democrat, in the White House.
Some of the money will go toward modernizing the taxation experience. Within the first five years of the decade-long plan, taxpayers should be able to file all of their tax documents and respond to all IRS notices online, according to a Treasury official.
There are a handful of IRS notices for which taxpayers currently have that capacity. By the end of fiscal 2024, another 72 notices, which include Spanish-language notices, will add online capacity, the official said.
By the end of fiscal 2025, taxpayers, along with accountants and other professional tax preparers, should be able to peruse their accounts and view and download information, including payments and notices, the official said.
The IRS has already been hiring more staff, including 5,000 customer-service representatives to improve phone service, which has fallen off during the pandemic.
Tax Day is weeks away, on April 18. As of late March, income-tax refunds are 11% lower than they were last year. They are averaging $2,903 versus $3,263 at the same point last year. It’s an outcome many tax-code watchers predicted after pandemic-era boosts to certain tax credits went away.
The same day Yellen spoke, a new watchdog report said the IRS still has plenty of work to do processing the backlog of tax returns that built up during the pandemic.
During last year’s tax-filing season, the IRS hired 9,000 employees and shifted more than 2,400 workers from other areas to cut the backlog, according to Treasury’s inspector general for tax administration.
By last July the IRS had transcribed all tax-year 2020 paper returns but still had 9.5 million unprocessed 2021 paper returns. “The inability to timely process tax returns and address tax account work continues to have a significant impact on the associated taxpayers,” the report said.
At this point, the IRS says it has processed all paper and electronically filed returns that it received before this January. The agency said it still has 2.17 million unprocessed tax returns from the 2022 tax year and 2021 returns that needed fixes and corrections.
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The numbers: Mortgage rates are down for the first time in six weeks, as the U.S. economy deals with bank collapses and an uncertain road ahead.
The 30-year fixed-rate mortgage averaged 6.60% as of March 16, according to data released by Freddie Mac FMCC on Thursday.
That’s down 13 basis points from the previous week — one basis point is…
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What advice would you give to a widow and widower considering marriage on how to manage finances — and deal with adult children?
We are both 60 years old and plan to work a few more years, mostly for health insurance. We both have about $1.5 million in retirement savings accounts. Our spouses’ 401(k)s and IRAs rolled into our accounts.
I have another $500,000 in a brokerage and he has almost another $1 million. We both own homes with $300,000 mortgages. Mine is worth $500,000, Paul’s (not his real name) home is worth $1 million. We have no other debt.
We both have one married, and one unmarried child that we help. We both have two grandchildren.
We should be set up very well. Here’s the concern: His married, well-off daughter is very aggressive about inheritance. She wants the family home retitled in a trust. She wants all life insurance and brokerage beneficiaries in her name. Her brother has had drug-addiction problems, so she’s cutting him out even though it seems he’s the one who will need help.
“‘She wants the family home retitled in a trust. She wants all life insurance and brokerage beneficiaries in her name.’”
The daughter isn’t thrilled about our relationship and suggests we just live together. For religious reasons, I would never do this. Grandma shacking up? What example would I set for my grandchildren?
As a widowed couple, we are realistic enough to plan for the time one of us is left alone. Paul has diabetes, high blood pressure and already sees a cardiologist. What if he has a heart attack? Stroke? Or if he dies?
What’s a fair way to mingle finances and allow security for me should he predecease me while allowing Paul’s daughter to ultimately inherit?
By the way, my children have never raised money as an issue. After we both cared for spouses through cancer, they know life is short and just want us to be happy.
Happy to Have Found Love Again
She is overstepping the line, and overplaying her hand.
The first rule of inheritance is that it’s not yours until the decedent’s money is sitting in your bank account. Your fiancé’s daughter can make all the demands she likes, but the only thing your fiancé has to do is say, “You don’t need to be concerned. My affairs are all in order. I’ve always taken care of my own affairs, and I am not changing now.”
How your fiancé decides to split his estate is entirely up to him, and can be done in consultation with a financial adviser and attorney, taking into account each of his children’s individual needs. For instance, if you move in together, he could give you a life estate, allowing you to live in the home for the rest of your life, and dividing the property between his two children thereafter.
Given that you have your own home, however, you may decide to rent it out, and move back there in the event that he predeceases you. There are so many ways to split an inheritance. You could look at the intestate laws of your state, and follow them. In New York, the spouse inherits the first $50,000 of intestate property, plus half of the balance, and the kids inherit the rest.
“Paul” may decide to set up a trust for his son, so he can provide an income for him over the course of his life. If he has or had issues with addiction, this will help him while not putting temptation in his way with a lump sum of money. The best kind of trust is the one that deals with any recurring issues directly, and takes into account the person’s circumstances.
Martin Hagan, a Pennsylvania-based estate-planning attorney who has practiced for four decades, writes: “First, it would authorize distributions only if the beneficiary is actively pursuing treatment and recovery. Second, it would limit distributions to paying only for the expenses incurred in carrying out the treatment plan that will have been developed for the beneficiary.”
You have $2 million collectively in a retirement and brokerage account and $200,000 equity in his home, and you can use these next seven years or so to pay off your mortgage, while your fiancé has $2.5 million and $700,000 in equity on his home. You are both well set up for retirement, and let’s hope you have many years to spend together.
The financial services industry has many opinions. You should, advisers say, have 10 times your salary saved by the time you’re 65 years old. You don’t mention your salary, but I would be surprised if many people in America had that much money saved, especially given all of the unexpected events — divorce, illness, job loss — that can occur in the intervening years.
You also have other priorities than dealing with an aggressive daughter/daughter-in-law. AARP suggests that most people should look into long-term care insurance between the ages of 60 and 65, around the time most people are eligible to qualify for Medicare. If you do it earlier, it can serve as a savings account in the event that you never need long-term care, AARP says.
As retirement columnist Richard Quinn recently wrote on MarketWatch, everybody’s circumstances are different. “Living in retirement isn’t about averages. It isn’t about what other people do or the opinions of experts, especially online instant experts who don’t know anything about you and have yet to experience many years of retirement themselves.”
Don’t give too much oxygen or power to your future daughter-in-law. Her father should give her a stock answer, and be firm. If she persists, he can say, “The subject is closed. I need you to respect the decisions I make about my own life, respect my privacy on these matters, and it would be nice if you would be happy for us, and support us in our marriage together.”
You can’t change people. But you can change wills.
You can email The Moneyist with any financial and ethical questions related to coronavirus at qfottrell@marketwatch.com, and follow Quentin Fottrell on Twitter.
Check out the Moneyist private Facebook group, where we look for answers to life’s thorniest money issues. Readers write in to me with all sorts of dilemmas. Post your questions, tell me what you want to know more about, or weigh in on the latest Moneyist columns.
The Moneyist regrets he cannot reply to questions individually.
More from Quentin Fottrell:
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Time kills deals. So if you’ve ever struggled to write a business proposal, check out the most recent episode of the Launch Your Business Podcast.
You’ll learn how to write proposals that get accepted and don’t take forever to write. I’ve provided a few of the key takeaways below.
But as heads up, this is a rather detailed guide (which includes a sample proposal) so I suggest saving it, blocking off time to read it, and sharing it with another business owner who could use the help.
The process of writing a proposal actually starts with the sales call and the questions you ask. So, once the prospect indicates a willingness to move forward, here are the three questions you must ask.
“What do you need to see in the proposal?”
Too often we assume the prospect wants a 30 page essay on how you’re going to change their life when they really just want an invoice. Asking this question upfront will save you a lot of time and stress.
And, you can go as far to ask if they’d prefer a specific format, details or even an example of a proposal that’s been accepted in the past. The more you know, the faster you can move and the more likely you are to have your proposal accepted.
“Who else needs to see this proposal in order for it to be approved?”
You might have a great relationship with the prospect you’re chatting with but you never know if there’s a spouse or coworker – who you haven’t met – that also needs to be involved in the approval process. And since they weren’t involved in any other conversations you wouldn’t be aware of any stipulations or questions they may have about the engagement.
You can speed up the sales process and avoid a lot of back and forth by understanding whether or not it makes sense to have a call with an additional stakeholder. This additional call would allow you to develop rapport with them and answer any questions they may have before you write the proposal.
“How soon would you like to start?”
You’re going to ask this just in case they take forever signing the proposal. So, let’s say the state they need to get started by May 29th. If it’s May 22nd and they still haven’t signed the proposal you can email them and say “Hey, if you want to get started by the 29th the contract needs to be signed this week. I’ll need to send you some onboarding materials and it will take me a few days to prep in advance.”
This should get you a response since you’re referencing the deadline they created. Hopefully it doesn’t come to that point but you’re prepared just in case it does.
So now that we have all the information we need, it’s time to write the proposal. And, my approach is based on the book Million Dollar Consulting proposals by Alan Weiss. I picked it up when I first started my business and was surprised by the fact a proposal didn’t have to be a dissertation. In fact, his recommended format is only one and a half pages long. I’ll walk you through all the sections now.
Overview
The first is the overview. And, this is the part where you explain what you’ll do along with the impact it will have on the company or organization. The example you’ll find on my website is based on a service provider who helps companies optimize their email marketing campaigns.
The overview is fairly basic. I’ll share an excerpt from the sample proposal below.
The goal of this engagement is to provide tactic-level guidance and support as it applies to your optimizing your email marketing strategy. Key outcomes include increasing your list size and revenue generated per subscriber.
Key Performance Indicators
The next section is where you’ll indicate how success will be measured. These are the key performance indicators or KPIs. And, I’ll share an excerpt from the sample proposal again.
Key Metrics of Success:
The metrics you mention will obviously be different and you want to agree on these during a conversation with the prospect.
For example, let’s say you offer training that helps companies boost their employees morale. And, the goal is to reduce turnover and increase employee satisfaction.
The KPIs might be:
Your KPIs are important because anyone should be able to quickly scan them and immediately understand the impact of your work. So, be sure to put some thought into these.
Services Provided
We have our overview, and our KPIs, now we’re going to list the specific services you’ll provide. And, unless requested, you should keep this relatively brief. Stick to bullet points if possible.
Here are the services referenced in our sample.
The Consultant agrees that they shall provide their expertise to the Client for all things pertaining to optimizing their email campaigns including:
Again, this will all be based on the service you offer but you get the point, keep it brief. If you want to provide more details I suggest adding sub bullets as opposed to paragraphs.
For example, I referenced email list maintenance . A sub-bullet could break down exactly what I mean by that.
I don’t want to turn this into an email marketing lesson but you get the point here, provide additional details without getting into the weeds.
Fulfillment Process
After providing information on the services, it’s time for the next section, which is your process. What does the client journey look like from start to finish? The more you can help someone visualize the entire engagement, the easier it will be for them to wrap their head around it and say yes. Again, you want to use bullet points here.
So, here’s the process based on the email marketing training we’ve been talking about.
So now it’s your turn. Jot down every milestone that takes place from beginning to end, but say it in a concise manner.
Delivery & Communication
The next section describes how you’ll provide this service and how you will stay in communication during the project. This one is rather basic as well but it’s important. So, here’s an example for you.
The Consultant will perform work remotely unless otherwise noted.
In addition to emails and messages, the Consultant will meet with the Client once per week to discuss progress and continue implementation of solutions. The consultant agrees to respond to all client communications within one business day with the goal of answering any questions within 48 hours.
That last part is important since it establishes expectations for how quickly you’ll get back to a client. I usually get back to people relatively quickly but this is a great way to establish communication protocols.
Terms of Agreement
The next part is the terms of the agreement. And by terms I’m not referring to a legal contract, this is just a summary of when the engagement will start and end.
This Agreement shall begin on [Begin date] and continue for [Time period]. Either Party may terminate this agreement for any reason with [Days written notice] days written notice to the other Party.
Again, this clearly isn’t a legal contract. But if you are looking for help with writing legal contracts I’ve provided more information on my site at terryrice.co/proposal
Compensation
The last part is exciting and scary at the same time, compensation. As you may have guessed, this is the part where you state how much it will cost and when you’ll get paid.
Here’s the copy provided in the sample.
In consideration for the services referenced, the client shall pay the consultant a flat rate of $30,000.
Consultant shall invoice client on the following schedule:
So, a few things to call out here. Always get paid before you do any work, even if it’s just a 20% deposit. And youre doing this in case the client backs out for one reason or another after you’ve already started working. For larger engagements I like to break these down into phases, especially if it’s going to take several months. You can choose to get paid upon completion of each stage of the process.
So there you have it, an easier approach to writing proposals that don’t take forever.
And, if you want to create them even faster, use a template that can be quickly customized. I use a tool called Honeybook for this and you can also use it to send invoices.
As a heads up they have a promotion where you can use the service for just one dollar per month for the first eight months. So it’s a great opportunity to try it out for a very low price. You can sign up here. And, I should note, I’m an affiliate partner for HoneyBook and will receive a small commission if you choose to use their service. But like I said, it’s my go-to platform, which is why I highly recommend it.
I know the process of creating proposals can be challenging so my goal here was to help you save time and avoid confusion.
But before we go I want to address a few questions that may be on your mind.
And those are valid questions. In fact, it happens to me quite often. But fortunately the foundation you’ve established is so clear, the prospect will ask more pointed questions as opposed to being confused about what the heck you’re going to do.
These are buying questions, not “What the heck are you talking about?” questions. So you may just need to make a few adjustments before your prospect is ready to sign and you get paid!
What’s next?
Block off one hour to complete your proposal. But remember, done is better than perfect.
And if you’d like help growing your professional service business consider joining my video course, The Solopreneur’s Shortcut. Through a combination of videos, worksheets and templates you’ll discover how to package, price and promote your services so you can attract high-paying clients.
Either way, I wish you the best of luck and if you have any questions feel free to contact me on LinkedIn or Instagram.
To hear the full conversation and get access to additional resources tune in to this week’s episode of the Launch Your Business podcast.
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Terry Rice
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The Securities and Exchange Commission said Monday it has filed charges against Stephen J. Easterbrook, former chief executive of McDonald’s Corp., for making “false and misleading” statements to investors about the circumstances that led to his ouster in November 2019.
The agency has also filed charges against McDonald’s for “shortcomings” in its public disclosures relating to Easterbrook’s severance agreement.
McDonald’s
MCD,
fired Easterbrook for exercising poor judgment and violating company policy by engaging in an inappropriate personal relationship with a McDonald’s employee. However, the separation agreement struck with the executive concluded that his termination was without cause, allowing him to retain substantial equity compensation that would have been forfeited in other circumstances.
“In making this conclusion, McDonald’s exercised discretion that was not disclosed to investors,” the SEC said in a statement.
In July 2020, McDonald’s discovered in an internal probe that Easterbrook had engaged in other, undisclosed relationships with employees. Those findings were not disclosed prior to Easterbrook’s termination, in the knowledge that they would influence the board’s decision making, according to the SEC.
“When corporate officers corrupt internal processes to manage their personal reputations or line their own pockets, they breach their fundamental duties to shareholders, who are entitled to transparency and fair dealing from executives,” said Gurbir S. Grewal, the SEC’s director of the division of enforcement.
The SEC is charging Easterbrook with violating anti-fraud provisions of the SEC Securities Act of 1933 and the Securities Exchange Act of 1934. Easterbrook has consented to a cease-and-desist order and five-year officer and director bar and a $400,000 civil penalty, without admitting to or denying the charges.
McDonald’s is charged with violating section 14(a) of the Exchange Act and Exchange Act Rule 14a-3. The fast-food giant has consented to a cease-and-desist order, without admitting to or denying SEC findings. The SEC has opted not to fine the company, as it cooperated with the agency and clawed back compensation after its probe.
The stock was slightly lower Monday in early trades.
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The U.S. House Ways and Means Committee released six years of former President Donald Trump’s tax returns on Friday.
Experts will be looking closely at large business losses reported by Trump that significantly reduced his tax liability. For instance, he paid no federal taxes in 2020.
“Trump paid miniscule income taxes in 2015-2020, and almost no income taxes for the prior three decades,” said Steve Rosenthal, a senior fellow at the Tax Policy Center in Washington, in an email.
“We also have learned that, in the 1990s and 2000s, Trump claimed business losses of tens and sometimes hundreds of millions annually. I studied these a few years ago and found some real, and some fake,” he added.
“It is still early to determine how much of Trump’s most recent losses were real or fake,” Rosenthal said.
Read: Trump paid $0 taxes in 2020. He’s not alone
Analysts are also going to pore over the documents for any details of Trump’s foreign business dealings.
Some certified public accountants who looked at the documents say the returns show that the U.S. tax system has been written to “incentivize” real estate investing.
Bottom line: In order to generate these kinds of losses, you need to be super rich. It’s not a poor man’s game,” said Jonathan Medows, managing member of Medows CPA PLLC in New York.
Read: CPAs have questions about Trump’s tax returns
David Cay Johnston, a Pulitzer Prize winning author and longtime Trump critic, in a post on his non-profit news organization DC Report, called the former president’s tax returns “a rich environment in which questionable conduct is found throughout the filings and needs only seasoned auditors to uncover fictional expenditures.”
He said that Trump was warned by two New York state judges in trials about his 1984 taxes not to deduct huge expenses in businesses with no revenue.
“That Trump persisted in using the same fraudulent technique in six years of recent tax returns is powerful evidence of criminal intent,” Johnston wrote.
In a statement, Trump said his returns show “how I have been able to use depreciation and various other tax deductions as an incentive for creating thousands of jobs.”
Key words: Trump on release of his tax returns
Some experts said they were going to look at the returns for details about Trump’s foreign sources of income. The documents show that Trump had foreign bank accounts while he was president.
See: What could be learned from Trump’s tax returns
Democrats on the Ways and Means Committee said they voted to release the Trump tax returns to help improve the tax laws. Republicans warned that the release would set a precedent where political parties routinely release the tax returns of their opponents.
Another question is why the Internal Revenue Service failed to audit Trump’s tax returns as it routinely does for U.S. presidents.
See: Trump taxes could rev up fight over IRS funding
On Jan. 3, Republicans will take control of the House along with the tax-writing committee.
Rep. Don Beyer, a Democrat from Virginia who is a member of the Ways and Means Committee, said the Trump tax returns “underscore the fact that our tax laws are often inequitable and that enforcement of them is often unjust.”
Rep. Kevin Brady, the Republican from Texas who was the minority leader of the Ways and Means panel and is leaving Congress in January, said Democrats did not release the Trump tax records for any legislative purpose but wanted to “unleash a dangerous new political weapon” at the former president.
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What fresh shenanigans and money dilemmas enthralled readers in 2022?
Another year of broken promises, dodgy dealings and moving letters about how to get back on one’s feet after divorce, unemployment and even a 15-year abusive relationship.
The most widely-read Moneyist of 2022, however, was actually one of the shortest letters from someone called ‘Surprised Sister.” The answer, as is often the case, was not so simple, nor so short.
Here is the No. 1 Moneyist column of the year: ‘We are surprised and bewildered’: My brother passed away and left his house, cash and possessions to charity. Can his siblings contest his will?
My response: There are times to contest a will: a parent who was being controlled by a new friend or greedy child, and/or someone who was forced to change their will when they were not of sound mind.
But her own legal advice notwithstanding, I suggested she should accept your brother’s wishes. Feeling aggrieved that she did not inherit his estate is not enough to break his will.
Separate the emotions from the finance, and the answer often reveals itself. But there were others that ran the gamut from romance to stocks. They other most-read columns are an eclectic bunch:
Here are the 5 runner-ups:
It would be nice to offer to take the booze off the check, you were a non-drinker, would you speak up at one drink or two or three, if your date split the entire bill 50/50?
The financial intricacies of dating are like an onion that can be peeled ad infinitum. We’ve had plenty to chew over. Paying for one of your date’s drinks is OK, paying for two is pushing it.
“The Other Brother” wrote that his father offered three children a choice: stocks or cash. The other two siblings took the cash. He took the cash. The stock soared. Dems are the breaks.
Her siblings could have chosen stocks over cash, but they wanted immediate gratification. That was their decision, and they are going to have to take ownership of their choice and live with it.
They have been in a 20-year relationship and have a 10-year-old child. “Not on the Deed” said she and her partner have had several tense “discussions” about adding me to the deed.
I told her that her contribution to your partnership is valuable, her sense of worth is valuable, and her role as a homemaker and a mother is also valuable. Yes, he should add her.
Even amidst the fights over inheritances, some breaches of social and financial etiquette seem so bizarre some people might think, ‘That behavior is too outrageous to be believable.”
The letter writer received free theater tickets, they split the bill 50/50 even though her friend had a cocktail, and she paid $10 for parking. Is he obliged to take her out again? No-can-do.
Another dating story, this time where the guy chose a fancy restaurant and, as the date wore on, things took a turn for the worst, at least in the letter writer’s eyes: She was asked to split the bill.
What if they didn’t get along? What if he was an abortion-rights supporter and she was anti-abortion? What if he was a Republican and she was a Democrat? Or vice-versa? Always be prepared to pay.
Follow Quentin Fottrell on Twitter.
You can email The Moneyist with any financial and ethical questions related to coronavirus at qfottrell@marketwatch.com.
Check out the Moneyist private Facebook group, where we look for answers to life’s thorniest money issues. Readers write to me with all sorts of dilemmas. Post your questions, tell me what you want to know more about, or weigh in on the latest Moneyist columns.
The Moneyist regrets he cannot reply to questions individually.
More from Quentin Fottrell:
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It’s been a year of contradictions.
The recession drum beats on, interest rates are rising, and the stock market has taken a tumble, and yet retail sales have risen 6.5% in the last 12 months, trailing a 7.1% increase in the cost of living.
There are other reasons people should consider cutting back on spending in 2023. The personal saving rate — meaning personal saving as a percentage of disposable income, or the share of income left after paying taxes and spending money — hit 2.4% in the third quarter from 3.4% in the prior quarter, the Bureau of Economic Analysis said.
“There are signs that people are pulling back on certain expenditures. ”
That is the lowest level since the Great Recession and the eighth-lowest quarterly rate on record (since 1947). Adjusted for inflation, savings are down 88% from their 2020 peak and 61% lower than before the pandemic, according to government data. The personal saving rate hit 2.4% in November vs. 2.2% in October.
Are people buying stocks during a bearish market, and/or have they run out of their pandemic-era savings? Whatever the reasons, more judicious investing and spending decisions seem to be the most prudent approach — especially given the uncertain economic outlook for 2023.
There are signs that people are already pulling back on certain expenditures. Although retail sales are up on the year, they did decline 0.6% month-on-month in November to mark their biggest decline in almost a year, largely because of weak car sales.
About those new cars: New-vehicle total sales for 2022 are projected to reach 13,687,000 units, down 8.4% on the year, according to a joint forecast from J.D. Power and LMC Automotive. MarketWatch reporter Philip van Doorn explains all the reasons why you may wish to skip buying a new car in 2023, in addition to their rising prices.
So what else should you save your money on in 2023? MarketWatch writers give their verdict below.
During the pandemic, people loved to buy special purpose acquisitions companies, known as SPACs. In 2021, 613 SPACs listed on U.S. stock exchanges through initial public offerings, according to SPAC Insider. The year before, there were 248 SPAC IPOs. There had never been more than 100 of these before in a single year. There were SPACs associated with Donald Trump and Serena Williams. There were so many, that one was called Just Another Acquisition Corp.
SPACs exist as a means to take private companies public, and theoretically give these shell companies a faster and less regulatory burdensome means to access public capital. The U.S. Securities and Exchange Commission warned investors last April that so-called advantages of the SPAC process, such as reduced legal liability, may not prove to be so solid if tested in court.
The SPACs raised money even though they had no commercial operations or business, and tried to use the cash to buy something that did exist. But investors who bought SPACs that merged with private companies since 2015 have suffered losses of 37%, on average, a year after the merger, according to a recent study. The SPAC and New Issue ETF
SPCX,
has slipped 12% this year. The frenzy for SPACs has predictably gone bust. But if you see one, just stay away from it.
— Nathan Vardi
There are two main reasons not to invest in cryptocurrency in 2023, and neither has to do with the precipitous drop in value for most of the major coins in the last year, including but not limited to bitcoin
BTCUSD,
ethereum
ETHE,
and tether
USDTUSD,
Investors have long been conditioned to buy the dip and find value where others fear to tread, and then make money on the upswing.
Crypto is different because there’s no correlation to long-held market theories, and buying it amounts more to speculation than to investing. That might seem semantic, but if you look at financial planning holistically, then you treat investing as an exercise in risk tolerance — and crypto is all risk.
Which leads to the other main reason to avoid crypto in the next year: If you do buy it, there’s really no safe way to store it. There’s no federal insurance covering exchange failures and little cyber-theft protection for individuals. That leaves you on your own, which is not a good place to be with your money.
— Beth Pinsker
On the consumer front, if you’re really into virtual reality, there is nothing wrong with jumping on the new Meta Quest two and Meta Quest Pro headsets that were introduced in 2022 by Meta Platforms Inc.
META,
The problem is that you might feel like you bought a BlackBerry
BB,
phone in early 2007. Apple Inc.
AAPL,
is expected to finally show off what engineers at the Silicon Valley giant have been cooking up in a years-long project to jump into augmented and virtual reality, and consumers are expected to at least get a glimpse at Apple’s attempt this year, if not a chance to buy whatever the company produces.
The headsets don’t come cheap: Meta said earlier this year it was raising the price of Meta Quest 2 headsets by $100 to $399.99 (128GB) and $499.99 (256GB). The iPhone’s introduction 15 years ago changed the way people look at smartphones, and Apple’s expected jump into this field in 2023 could leave anyone who spent their money on a Meta Quest headset wishing for a new reality.
— Jeremy Owens
Struggling companies with business models that appear to some to be dying and/or struggling do not generally perform well in the stock market. But during the pandemic these companies often had stocks that soared. What drove them was social media sentiment, driven on platforms like Reddit, by a swarm of retail investors.
There was video game retailer GameStop
GME,
movie theater chain AMC
AMC,
and smartphone dinosaur Blackberry. AMC recently announced the sale of another $110 million in stock, adding to a total that has already exceeded $2 billion since the theater chain got swept up into meme-stock madness. CEO Adam Aron wrote on Twitter that the move put the company “in a much stronger cash position.”
GameStop recently reported its seventh consecutive quarterly loss and reiterated its goal of returning to profitability in the near term, but analysts have signaled that many challenges lie ahead. During the company’s recent third-quarter conference call, Chief Executive Officer Matt Furlong said that GameStop would be open to exploring acquisitions of a strategic asset or complimentary business if they were available “in the right price range.”
Buying meme companies like this worked for some in a booming stock market fueled by ultra-low interest rates. But we are now in a bear market with interest rates that are elevated. Corporate fundamentals are back in vogue. So are quaint investment ideas like cashflow. More likely than not, the days of buying meme stocks are over.
— Nathan Vardi
In recent years, Tesla Inc.
TSLA,
has stood alone as the best option for electric vehicles, while other manufacturers struggled to get production running. But in 2023, there should be many more types of electric cars available, at prices that are expected to trend downward as the year goes along. Teslas range in price from $46,990 for the Tesla Model 3 to $138,880 for the Tesla Model X Plaid.
With major manufacturers such as General Motors Co.
GM,
Ford Motor Co.
FORD,
Toyota Corp. and Volkswagen
VOW,
VLKAF,
jumping into the fray, and young Tesla wannabes like Rivian Automotive Inc.
RIVN,
Lucid Group Inc.
LCID,
and FIsker Inc.
FSR,
expected to start producing cars, consumers will have many more options for EVs.
Meanwhile, Tesla has done little to update the Model 3 since it was introduced in 2017, and has increased prices at a level that Chief Executive Elon Musk has admitted is “embarrassing” for a company that claimed to have a goal of mass-market pricing for EVs.
The average price of a new EV is $64,249, while a new gas car is $48,281, according to Liz Najman, a climate scientist and communications and research manager at Recurrent Auto, an EV research and analytics firm focused on the used-vehicle market. After years of not having much choice beyond Tesla for EVs, 2023 appears to be the year that changes.
— Jeremy Owens
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Are you less happy at work since you befriended that new recruit? Have they told you stories about how colleagues have constantly undermined them? Or do you have a boss who excludes you from key meetings — and then asks why you did not attend a meeting even though you are pretty sure you were not invited to begin with? If so, you may be working with a gaslighter.
Gaslighters, as the name suggests, cast themselves in a positive light — friend or confidante who is here to help — but actually operate much more effectively in the shadows. Merriam-Webster named “gaslighting” the word of the year. Searches for the word on merriam-webster.com surged 1,740% in 2022 over the prior year year, despite there not being an event that the publisher — known for its dictionaries — could point to as a cause of the spike.
It defines gaslighting as “psychological manipulation of a person usually over an extended period of time that causes the victim to question the validity of their own thoughts, perception of reality, or memories and typically leads to confusion, loss of confidence and self-esteem, uncertainty of one’s emotional or mental stability, and a dependency on the perpetrator.”
Perhaps the reasons were more personal — or professional — than political. My social media feed is now full of thought pieces on how to spot one of these saboteurs. The comments sections read like the show notes of a True Crime podcast — gruesome yet hard to turn away from.
The term was coined in a 1938 play, “Gas Light,” a psychological thriller set in Victorian London and written by Patrick Hamilton.
The term was further popularized after George Cukor’s 1944 film, “Gaslight,” based on the play, in which Gregory (Charles Boyer) tries to convince his wife Paula (Ingrid Bergman) that she has lost her reason. While he turns on the lights in the attic while searching for hidden jewels, the gaslight flickers in the rest of the house. He tells Paula that she is merely imagining the dimming of the lights.
The workplace is fertile ground for such behavior, given what’s at stake: money, power, status, promotion, rivalry and the intrigue that often comes with office politics.
I’m in the business of helping people work out their conflicts at work. None of this surprises me. In fact, I dedicated a whole chapter in my book, “Jerks at Work,” to gaslighters.
“‘For gaslighters, slow and steady wins the race, and the best ones make friends with their victims first.’”
What has surprised me is how wide-ranging the definition of “gaslighting” has become. Everything from “not respecting personal boundaries” to “talking so much shit about me I couldn’t get hired for two years” seems to fall under the umbrella.
What I’ve learned from my doom scrolling is that the word “gaslighter” — probably the worst name to bestow on a colleague or boss — seems to refer to anyone who’s done a whole bunch of bad things to us at work, especially things that involve humiliation.
So what really is a gaslighter, and why is it important to distinguish one from, say, a demeaning boss with a chip on their shoulder and a penchant for public shaming?
If we stick to the clinical definition, gaslighters have two signature moves: They lie with the intent of creating a false reality, and they cut off their victims socially.
They position themselves as both savior and underminer, creating a negative and fearful atmosphere, spreading gossip and taking credit for other people’s work. They are often jealous and resentful, and aim to undercut others in order to further their own position.
You may also be an unwitting pawn in the gaslighting of another colleague. The gaslighter might try to convince you that Johnny is trying to steal your leadership role on a project, and encourage you to freeze him out in the cafeteria at lunch time, or simply be extra wary about sharing important information.
For gaslighters, slow and steady wins the race, and the best ones make friends with their victims first. For this reason, it could also be considered a form of workplace harassment.
They often flatter them, make them feel special. Others create a fear of speaking up in their victims by making their position at work seem more precarious than it is. And the lies are complex, coming at you in layers. It takes a long time to realize your status as a victim of gaslighting, and social isolation is a necessary part of this process.
“‘It takes a long time to realize your status as a victim of gaslighting, and social isolation is a necessary part of this process.’”
But there’s a difference between an annoying coworker or micromanaging boss, and a gaslighter, who lies and conspires to undermine your position. “The gaslighter doesn’t want you to improve or succeed — they’re out to sabotage you,” according to the careers website Monster.com. “They will accuse you of being confused or mistaken, or that you took something they said the wrong way because you are insecure. They might even manipulate paper trails to “prove” they are right.”
Examples cited by Monster.com: “You know you turned in a project, but the gaslighter insists you never gave it to them. You can tell someone has been in your space, moving things around, or even on your computer, but you don’t have proof. You are the only one not included in a team email or meeting invite, or intentionally kept out of the loop. Then when you don’t respond or show up, you are reprimanded.”
Knowing this, what can you do to prevent yourself from becoming a target? First, recognize that gaslighters don’t wear their strategy on their sleeve. Flattery, making you feel like you’re a part of a special club, or questioning your expertise are not things that raise gaslighting alarm bells.
Rather than looking out for mean behavior by a boss or coworker, look out for signs of social isolation. A boss who wants to cut you off from coworkers and other leaders should raise red flags, even if the reason is that “you’re better than them.”
Second, recognize that lie detection is a precarious — and from a scientific perspective, almost impossible — business. Don’t try to become a lie detector, instead take notes, so you can put your “gaslighter” on notice that you are wise to their tactics. You can also use the notes as evidence if you decide to later raise the situation with Human Resources.
Here are some ways to beat the gaslighter: Send emails with “a summary of today’s meeting” so you can document the origin of ideas and make sure they don’t steal credit from you. Furthermore, document things that happened in person, and share it with your would-be gaslighter. And speak up at meetings. Don’t allow yourself to be browbeaten into submission.
The more you document, the more difficult it will be to be victimized. But a word of warning: Don’t try to confront gaslighters — instead, go to your social network to build your reality back up. Trying to beat these folks at their own game is a losing strategy. But these small things, done early in a working relationship, can work wonders.
Tessa West is a New York University social psychology professor with a particular interest in workplace behavior, and author of “Jerks at Work: Toxic Coworkers and What to Do About Them.“
Related stories:
‘We’re like rats in a cage’: Sick and tired of their jobs, American workers strive to regain their agency, their time — and their sanity‘
People are seeking a genuine connection with their colleagues’ — one that goes beyond ‘Hollywood Squares’ Zoom meetings. Not all workers are happy with remote work.‘
We want to hear from readers who have stories to share about the effects of increasing costs and a changing economy. If you’d like to share your experience, write to readerstories@marketwatch.com. Please include your name and the best way to reach you. A reporter may be in touch.
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We want to hear from readers who have stories to share about the effects of increasing costs and a changing economy. If you’d like to share your experience, write to readerstories@marketwatch.com. Please include your name and the best way to reach you. A reporter may be in touch.
For many people living in the U.S., these are tough — and confusing — times.
On Friday, the Labor Department reported 263,000 new jobs in November, while the unemployment rate held steady at 3.7%. Layoffs remain low, despite mass job cuts in the tech sector. Average hourly wages have also risen 5.1% in the past year, but still lag behind inflation for many workers. And there were 10.3 million job openings in October — slightly down from the previous month’s 10.7 million.
Some people might see the latest economic data as both challenging and confusing.
After all, the cost of living rose 7.7% on the year in October. The once red-hot housing market is finally cooling, thanks to mortgage rates that have more than doubled over the last year amid the Federal Reserve’s attempts to rein in inflation, and rents, while moderating, have surged from pre-pandemic levels. Borrowing money to cover increased precarity is becoming more expensive too, with the average credit-card APR at 19.2% as of Nov. 30, according to Bankrate.
“‘It’s just mind-boggling, the disconnect that we’ve seen.’”
Given all the conflicting signals, economists say it can be difficult for consumers to know exactly how to feel about the economy right now. “It’s not new, this disparity between the actual facts on the ground about what’s going on in the economy and the sentiment,” said Heidi Shierholz, president of the Economic Policy Institute, a left-leaning think tank.
“I remember this summer it was just unambiguously the strongest jobs recovery we’ve had in decades,” she added. “There’s just absolutely zero chance that we were in a recession — not only were we not in a recession, we were in just an extraordinarily fast recovery — and the polling, a huge share of people actually thought we were in a recession. It’s just mind-boggling, the disconnect that we’ve seen.”
Still, the fact that inflation is eating into people’s savings — and that essential goods like food, energy and housing have spiked in cost — is bound to make many people unhappy.
“Going into the pandemic, more than seven out of every 10 extremely low-income renters were already spending more than half of their income on rent. And then the pandemic hits; we saw a lot of low-wage workers lose their jobs and see an income decline,” said Andrew Aurand, vice president for research at the National Low Income Housing Coalition. “Then in 2021, we see this huge spike in prices. For a variety of reasons, they’ve struggled for a long time, and since the pandemic, it’s gotten even worse.”
Moderate-income Americans are struggling too. Maybe you can’t afford your favorite family meals, as the price of grocery store and supermarket purchases has jumped by 12.4% from last year. Or maybe you’re putting off a trip to see family this holiday season thanks to the higher cost of airfare, or you’re worried about losing your job as some business leaders warn of a recession. Perhaps you’re forced to rely on credit cards and personal loans, as credit-card debt is up 15% from a year ago.
MarketWatch has chronicled many of these changes, detailing renters’ frustrations, families’ tough choices at the grocery store, and the reality faced by would-be home buyers sidelined by higher rates and dwindling affordability.
But we would like your help telling an ongoing story about the American economy, centering the experiences of everyday people. Our readers know better than anyone about how today’s economic conditions have impacted their daily lives.
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It is three weeks before Black Friday, but the Federal Reserve is about to make the post-holiday debt hangover a little more intense.
By the time the latest rate hikes filter through the very rate-sensitive credit card industry and pump up customers’ annual percentage rates a little more, experts say it will be some point in December 2022 or January 2023. Right in time for many holiday gifts and expenses to post on credit cards bills — and there to make the costs of a carried balance a little extra expensive.
Every year, many people accumulate credit card debt through the holiday season, pay it off in the early part of the following year and then repeat the process.
What’s different now is the presence of four-decade high inflation, coupled with fast-rising interest rates that the Fed hopes will ultimately cool those rising prices, although without sending the economy to a recessionary thud.
Wednesday’s rate move is the fourth straight 75-basis-point rate hike to the federal funds rate, taking it to the 3.75% -4% range, when it was near zero last year’s holiday season. By now, Americans are all too acquainted with 2022’s fast-rising interest rates. They just haven’t gone through a Christmas and Hanakkuh with it yet.
“It’s not the time to overspend and have a problem with paying your bills later. We know the economy is sending mixed messages,” said Michele Raneri, vice president of financial services research and consulting at TransUnion
TRU,
one of the country’s three major credit reporting companies.
It’s extra important to think through a holiday budget and how much relies on credit, she said. “People need to think about how much they can afford to repay and how long it will take to repay it.”
Last month, third-quarter earnings from major banks like JPMorgan Chase & Co.
JPM,
Wells Fargo
WFC,
Citibank
C,
and Bank of America
BAC,
indicated consumer finances, on the whole, are not yet showing cracks under inflation’s strains. (Other numbers show the strain, like the personal savings rate that’s been dwindling.)
Now, two forecasts suggest many people ready to spend the same amount for this year’s holiday cheer as they did last year.
People are planning to spend an average $1,430 on gifts, travel and entertainment this year, which is around the $1,447 spent last year, according to PwC researchers. Three-quarters of people said they were planning to spend the same or more than last year and respondents said credit cards were one of their top ways to pay.
“ Compared to last year, credit card balances are getting bigger, more people are sitting on balances and debt costs are getting pricier.”
By another measure, Americans will pay an average $1,455 on holiday-related gifts and experiences, essentially flat from last year, say Deloitte researchers.
More than one-third of surveyed consumers say their financial outlook is worse than the same point last year. Nearly one-quarter of people were concerned about credit card debt as of late September, Deloitte’s numbers show in an ongoing tracking of consumer mood.
It’s understandable to see the concern with households amassing a collective $890 billion in credit card debt through the second quarter. Compared to last year, balances are getting bigger, more people are sitting on balances and debt costs are getting pricier because the interest rates applied to those balances are rising.
When people were carrying a credit card balance month to month, the sum was $5,474 on average, according to Raneri. That’s through the end of September and it’s a nearly 13% rise year over year, she said. The 164 million people carrying a balance is a 5% increase from last year, she noted.
Credit cards carrying a balance during the third quarter had an average 18.43% APR, Federal Reserve data shows. That’s up from 16.65% in the second quarter and up from 17.13% in 2021’s third quarter.
Credit card issuers typically determine their rates by applying a “prime rate” — typically three percentage points on top of the federal funds rate — and the issuer’s profit margin, said Ted Rossman, senior industry analyst at Bankrate.com.
By late October, the rate on new card offers was 18.73%, according to Bankrate data. At this point last year, it was 16.31%, Rossman said. In a few weeks, the rates on new offers should beat the all-time record of an average 19% APR, exclusive to new offers, he added.
While it can take a billing cycle or two for a higher APR to make its way to an existing credit card account, Rossman noted the APRs on new offers could rise in a matter of days.
Here’s a hypothetical to show how much more expensive credit card debt becomes with every extra hike. Suppose the $5,474 balance is on a credit card with the current 18.73% average. If a person has to resort to minimum payments, Rossman said, they’d be paying $7,118 just in interest to pay off the debt.
“ In a few weeks, the rates on new credit card offers should beat the all-time record of an average 19% APR.”
What if the 18.73% APR gets kicked up 75 basis points to 19.48%? If that same borrower has to pay minimums, they are now paying $7,417 in interest to snuff the principal debt of $5,474, Rossman said.
The example has its limits because people may pay more than the minimum and they may incur more credit card debt as they pay off the old one. But it shows a bigger point: “Unfortunately, anybody dealing with credit card debt is a loser from the series of rate hikes. It was already expensive. It’s getting more so,” Rossman said.
While decisions during the Fed’s November meeting can have a ripple effect on holiday-time borrowing costs, observers say the real question about Wednesday is the clues Federal Reserve Chairman Jerome Powell drops for what’s next. The central bank’s committee voting on interest rate increases reconvenes in mid-December.
On Wednesday, the Fed said in a statement it expected further rate increases, but also said it would be watching to see if there were lag effects with its tightening policies, which could slow or limit the total amount of increases.
“People, when they hear lags, they think about a pause. It’s very premature, in my view, to think about or be talking about pausing our rate hike. We have a ways to go,” Powell told reporters at a Wednesday afternoon press conference.
The economy is strong enough to handle higher rates, Powell said. For one thing, households have “strong balance sheets” and “strong spending power,” he noted.
Stock markets first jumped higher after the latest interest rate announcement. But they gave up the gains — and then some — by the end of the day. The Dow Jones Industrial Average
DJIA,
was down more than 500 points, or 1.6% while the S&P 500
SPX,
was down 2.5% and the Nasdaq Composite
COMP,
closed 3.4% lower.
Top economists in major North American-based banks forecasted the Fed will keep raising interest rates “until the first quarter of next year before potentially lowering rates through the end of 2023,” Sayee Srinivasan, chief economist at the American Bankers Association, the banking sector’s trade association, said ahead of Wednesday’s latest rate hike.
“Top economists polled as part of a banking industry panel expect Fed rate increases through at least the first quarter of 2023.”
The forecast, coming through an ABA advisory committee, is no sure thing. “Everything depends on the ability of the Fed to bring inflation down, so that will remain their clear priority,” said Srinivasan.
Meanwhile, rising costs may cause more people to put the holiday cheer on plastic, even their decorations. The majority of Christmas tree growers in one poll are expecting wholesale prices to climb 5% to 15% for this season.
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My boyfriend owns a house with a 30-year mortgage balance of $150,000 on a 4% interest rate. He has $275,000 in cash and retirement accounts. He is retired.
My house is paid off. I have $50,000 in cash and retirement accounts. I would like to retire within one to two years.
We wish to cohabitate but have not been able to agree on a fair “rent” to pay. He is not willing to live in my house because it has fewer amenities.
“‘He believes I should pay half of his monthly cost at his nicer, more expensive house. He could pay off his mortgage and save $600 a month, but he likes to have cash. ‘”
He believes I should pay half of his monthly cost at his nicer, more expensive house. He could pay off his mortgage and save $600 a month, but he likes to have cash.
I have forgone that luxury and paid off my mortgage. I am now working on building my savings. I don’t feel it is fair for me to pay half of the mortgage interest expense.
I don’t know what repair and maintenance costs should be expected from me, if I have no equity in his house. There are many points of view, none of which feels fair.
These are the options he set forth:
· I live in his house and thus get to rent mine out. Pay him half of what I net from that rental.
· Pay half of the actual costs of living expenses and upkeep on his house while I live there.
· Pay him what I pay to live in my current home for taxes, insurance, and utilities: $800/month.
What say you, Moneyist?
House Owner & Girlfriend
I’m sure your house is just as nice. And just because he believes you should pay half his costs, does not make it so. If you are paying no mortgage on your own home, I don’t believe you should pay one red cent more to live in his home.
That is to say, you should not come out of this arrangement paying more, just because (a) he would like you to live in his home and (b) he would like you to help him pay off his mortgage, or his tax and maintenance.
You both made different choices: Yours was to have a home that’s free-and-clear of a mortgage, so you can spend this time building up your savings for retirement and/or a rainy day.
You have worked hard to pay off your mortgage, and you have $50,000 in savings, less than 20% of your boyfriend’s savings. He has $150,000 left on his mortgage, and that’s his choice.
“If his aim is to find help to pay off half of his mortgage, he can find a tenant to do that for him. ”
You are not the answer to his long-term financial plans, you are his partner in life. If his aim is to find help to pay off half of his mortgage, he can find a tenant to do that for him. What do you expect of you? Forget what he expects.
By the way he is approaching this arrangement, it seems like he wants the equivalent of a detergent and a fabric softener — a girlfriend and a tenant in one handy bottle to keep his financial plans smooth and clean.
Bottom line: You should not compromise any plans to build your nest egg. The lady’s not for turning. Only acquiesce to his plan if — with the help of an actual tenant in your home — it helps you too.
In other words, the desired outcome for you is more important than the suggestions he has put forward. He could save $600 a month! That’s his business. Not yours. What do you want to have in your pocket every month?
Figure out what you want, and then work your way backwards based on that goal. For instance, if you can pay him $800 a month, charge $1,600 rent for your home, and put $800 towards your savings, do that.
You’ve come a long way. Don’t let these negotiations scupper that.
Check out the Moneyist private Facebook group, where we look for answers to life’s thorniest money issues. Readers write in to me with all sorts of dilemmas. Post your questions, tell me what you want to know more about, or weigh in on the latest Moneyist columns.
The Moneyist regrets he cannot reply to questions individually.
By emailing your questions, you agree to having them published anonymously on MarketWatch. By submitting your story to Dow Jones & Co., the publisher of MarketWatch, you understand and agree that we may use your story, or versions of it, in all media and platforms, including via third parties.
Also read:
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‘We will not outlive our money’: How can we give $10,000 to our nieces and nephews without offending the rest of the family?
‘S‘I hate to be cheap’: Is it still acceptable to arrive at a friend’s house for dinner with just one bottle of wine?
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America’s high inflation rate will produce a 7% increase in the size of the standard deduction when workers file their taxes on their 2023 income, according to new inflation adjustments from the Internal Revenue Service.
It’s also going to pump up tax brackets by 7% as well, according to the annual inflation adjustments the IRS announced this week.
Many tax code provisions — but not all — are indexed for inflation, so the announcements are a recurring event. But when inflation is persistently clinging to four-decade highs, these annual adjustments carry extra significance.
“When inflation is persistently clinging to four-decade highs, these annual adjustments of approximately 7% for the standard deduction carry extra significance.”
Start with the standard deduction, which is what most people use instead of itemizing deductions.
The standard deduction for individuals and married people filing separately will be $13,850 for the 2023 tax year. That’s a $900 increase from the $12,950 standard deduction for the upcoming tax season.
For married couples filing jointly, the payout climbs to $27,700 for the 2023 tax year. That’s a $1,800 increase from the $25,900 standard deduction set for the upcoming tax year.
The increases in the marginal tax rates reflect the same 7% rise. For example, the 22% tax bracket for this year is over $41,775 for single filers and over $83,550 for married couples filing jointly. Next year, the same 22% bracket applies to incomes over $44,725 and over $89,450 for married couples filing jointly.
“The changes seem to be much larger than previous years because inflation is running much higher than it has in previous decades,” said Alex Durante, economist at the Tax Foundation, a right-leaning tax think tank.
The IRS arrives at its inflation adjustments by averaging a slightly different inflation gauge, the so-called “chained Consumer Price Index” instead of the widely-watched Consumer Price Index, Durante noted. That’s an outcome of the Trump-era Tax Cuts and Jobs Act of 2017, he added.
“The reason they do this is because the regular CPI is thought to overstate inflation because it doesn’t take into account the substitution that shoppers can make as cost rise,” Durante said. Shoppers substitute when they swap a more expensive item for cheaper one, and research shows many Americans are using the tactic.
The IRS inflation adjustments come after September CPI data last week showed inflation of 8.2% year-over-year, slightly off from 8.3% in August. Also last week, the Social Security Administration said next year’s payments would include an 8.7% cost of living adjustment.
“The payout on the earned income tax credit — geared at low- and moderate-income working families who have been hit hard by red-hot inflation — is also increasing. ”
The payout on the earned income tax credit is also increasing. The maximum payout for a qualifying taxpayer with at least three qualifying children climbs to $7,430, up from $6,935 for this tax year. The longstanding credit is geared at low- and moderate-income working families who have been hit hard by red-hot inflation.
More than 60 provisions are slated for an increase inline with inflation, but many portions of the tax code are not indexed for inflation. Depending on the circumstances, the taxes or the tax breaks kick in sooner.
Capital gains tax rules one example. The IRS lets a taxpayer use capital losses to offset capital gains taxes. If losses exceed gains, the IRS allows a taxpayer to deduct up to $3,000 in excess loses. They can then carry the remainder of the capital loses to future tax years. It’s been more than four decades since lawmakers last set the limit, according to Durante.
“While more than 60 provisions are slated for an increase inline with inflation, many portions of the tax code are not indexed for inflation. They include capital gains tax. ”
Given the stock market’s rocky downward slide this year, many investors might welcome a fast-approaching tax break — even if it only enables a $3,000 deduction.
At the same time, a married couple selling their home can exclude the first $500,000 of the sale from capital gains taxation, and it’s $250,000 for a single filer. It’s been that way since the exclusion’s 1997 establishment.
The once white-hot housing market may be cooling, but many sellers may still be facing the point when taxes kick in. The median home listing was over $367,000 as of early October, according to Redfin
RDFN,
The child tax credit is another example. After the payout to parents last year jumped to $3,600 for children under age 6 and $3,000 per child age 6 to 17, it’s back to a maximum $2,000. The credit’s refundable portion climbs from $1,500 to $1,600 during tax year 2023, the IRS notes.
Proponents of the boosted payouts and some Congressional Democrats want to revive the larger payments in negotiations tied to corporate taxes. The high costs of living are a strong reason to bring back the boosted credit, they say.
Related:
What smart strategies can lower your tax bill as year-end approaches? Read this before making any tax moves.
Three things the best 401(k)s offer that can help you save a lot more
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Shares of International Business Machines Corp. rallied in extended trading Wednesday, after the tech software, consulting and infrastructure giant reported third-quarter results that beat expectations and offered up a more upbeat full-year sales forecast.
IBM
IBM,
reported earnings as Wall Street tries to gauge the impact of a tough foreign-exchange environment, and the state of business spending on tech services amid worries over a downturn. But the company saw gains in hybrid cloud services, products like open-source software platform Red Hat, its consulting services and its zSystems servers and software.
“Globally, clients view technology as an opportunity to enhance their business, which is evident in the results across our portfolio,” Chief Executive Arvind Krishna said in a statement. He added that he now expects full-year sales growth “above our mid-single-digit model.”
That’s a bit more optimistic than the forecast he gave over the summer, when IBM reported second-quarter results. Krishna, at that time, said he continued “to expect full-year revenue growth at the high end of our mid-single-digit model.”
Wall Street expects IBM’s full-year sales to come in at $59.667 billion, according to FactSet. Analysts expect 2022 earnings per share of $9.28. IBM also said it continued to expect around $10 billion in consolidated free cash flow for the year.
For the third quarter, the company reported a net loss of $3.2 billion, or $3.54 per share, compared with a $1.1 billion profit, or $1.25 per share, in the year-earlier period. On an adjusted basis, IBM earned $1.81 per share.
Sales came in at $14.1 billion, compared with $13.3 billion a year ago.
Analysts polled by FactSet expected adjusted earnings per share of $1.79, on revenue of $13.517 billion.
Revenue in the company’s software segment grew 7.5%. Consulting revenue rose 5.4%, while the company’s infrastructure segment jumped 14.8%.
Shares gained 4.8% after hours on Wednesday.
Prior to the results, analysts had zeroed in on the impact of the strong dollar and what Morgan Stanley, in a recent note, described as “continued wage pressure in consulting.” IBM has also been trying to lean more into cloud and AI technology, unloading some businesses in an effort to narrow its focus.
Last year, in a move toward that goal, IBM spun off its infrastructure services business into Kyndryl Holdings
KD,
But afterward, some analysts raised questions about IBM’s ability to grow sales and compete in the cloud-services industry. Francisco Partners, an investment firm, this year also acquired health-care data and analytics assets that were part of IBM’s Watson Health segment.
In January, IBM declined to provide an earnings-per-share forecast. The company also changed how it organizes its business segments at the beginning of this year.
But during the spring, Krishna said he saw “demand staying strong” even if economic growth flattens or enters into a brief recession, with the decision to halt business in Russia, following its invasion of Ukraine, the only drag on results.
IBM stock is down 8% year to date. By comparison, the S&P 500 Index
SPX,
is down 22%.
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You probably already know that because of market-capitalization weighting, a broad index such as the S&P 500
SPX,
can be concentrated in a handful of stocks. Index funds are popular for good reasons — they tend to have low expenses and it is difficult for active managers to outperform them over the long term.
For example, look at the SPDR S&P 500 ETF Trust
SPY,
which tracks the S&P 500 by holding all of its stocks by the same weighting as the index. Five stocks — Apple Inc.
AAPL,
Microsoft Corp.
MSFT,
Amazon.com Inc.
AMZN,
Alphabet Inc.
GOOG,
GOOGL,
and Tesla Inc.
TSLA,
make up 21.5% of the portfolio.
But there are other considerations when it comes to diversification — namely, factors. During an interview, Scott Weber of Vaughan Nelson Investment Management in Houston explained how groups of stock and commodities can move together, adding to a lack of diversification in a typical portfolio or index fund.
Weber co-manages the $293 million Natixis Vaughan Nelson Select Fund
VNSAX,
which carries a five-star rating (the highest) from investment-researcher Morningstar, and has outperformed its benchmark, the S&P 500.
Vaughan Nelson is a Houston-based affiliate of Natixis Investment Managers, with about $13 billion in assets under management, including $5 billion managed under the same strategy as the fund, including the Natixis Vaughan Nelson Select ETF
VNSE,
The ETF was established in Sept, 2020, so does not yet have a Morningstar rating.
Weber explained how he and colleagues incorporate 35 factors into their portfolio selection process. For example, a fund might hold shares of real-estate investment trusts (REITs), financial companies and energy producers. These companies are in different sectors, as defined by Standard & Poor’s. Yet their performance may be correlated.
Weber pointed out that REITs, for example, were broken out of the financial sector to become their own sector in 2016. “Did that make REIT’s more sensitive to interest rates? The answer is no,” he said. “The S&P sector buckets are somewhat better than arbitrary, but they are not perfect.”
Of course 2022 is something of an exception, with so many assets dropping in price at the same time. But over the long term, factor analysis can identify correlations and lead money managers to limit their investments in companies, sectors or industries whose prices tend to move together. This style has helped the Natixis Vaughan Nelson Select Fund outperform against its benchmark, Weber said.
Getting back to the five largest components of the S&P 500, they are all tech-oriented, even though only two, Apple and Microsoft, are in the information technology sector, while Alphabet is in the communications sector and Tesla is in the consumer discretionary sector. “Regardless of the sectors,” they tend to move together, Weber said.
Exposure to commodity prices, timing of revenue streams through economic cycles (which also incorporates currency exposure), inflation and many other items are additional factors that Weber and his colleagues incorporate into their broad allocation strategy and individual stock selections.
For example, you might ordinarily expect inflation, real estate and gold to move together, Weber said. But as we are seeing this year, with high inflation and rising interest rates, there is downward pressure on real-estate prices, while gold prices
GC00,
have declined 10% this year.
Digging further, the factors also encompass sensitivity of investments to U.S. and other countries’ government bonds of various maturities, credit spreads between corporate and government bonds in developed countries, exchange rates, and measures of liquidity, price volatility and momentum.
The largest holding of the Select fund is NextEra Energy Inc.
NEE,
which owns FPL, Florida’s largest electric utility. FPL is phasing-out coal plants and replacing power-generating capacity with natural gas as well as wind and solar facilities.
Weber said: “There’s not a company on the planet that is better at getting alternate (meaning solar and wind) generation deployed. But because they own FPL, some of my investors say it is one of the largest carbon emitters on the planet.”
He added that “as a consequence of their skill in operating, they re generating amazing returns for investors.” NextEra’s share shave returned 446% over the past 10 years. One practice that has helped to elevate the company’s return on equity, and presumably its stock price, has been “dropping assets down” into NextEra Energy Partners LP
NEP,
which NEE manages, Weber said. He added that the assets put into the partnership tend to be “great at cash-flow generation, but not on achieving growth.”
When asked for more examples of stocks in the fund that may provide excellent long-term returns, Weber mentioned Monolithic Power Systems Inc.
MPWR,
as a way to take advantage of the broad decline in semiconductor stocks this year. (The iShares Semiconductor ETF
SOXX,
has declined 21% this year, while industry stalwarts Nvidia Corp.
NVDA,
and Advanced Micro Devices Inc.
AMD,
are down 59% and 60%, respectively.)
He said Monolithic Power has been consistently making investments that improve its return on invested capital (ROIC). A company’s ROIC is its profit divided by the sum of the carrying value of stock it has issued over the years and its current debt. It doesn’t reflect the stock price and is considered a good measure of a management team’s success at making investment decisions and managing projects. Monolithic Power’s ROICC for 2021 was 21.8%, according to FactSet, rising from 13.2% five years earlier.
“We want to see a business generating a return on capital in excess of its cost of capital. In addition, they need to invest their capital at incrementally improving returns,” Weber said.
Another example Weber gave of a stock held by the fund is Dollar General Corp.
DG,
which he called a much better operator than rival Dollar Tree Inc.
DLTR,
which owns Family Dollar. He cited DG’s roll-out of frozen-food and fresh food offerings, as well as its growth runway: “They still have 8,000 or 9,000 stores to build-out” in the U.S., he said.
In order to provide a full current list of stocks held under Weber’s strategy, here are the 27 stocks held by the the Natixis Vaughan Select ETF as of Sept. 30. The largest 10 positions made up 49% of the portfolio:
| Company | Ticker | % of portfolio |
| NextEra Energy Inc. |
NEE, |
5.74% |
| Dollar General Corp. |
DG, |
5.51% |
| Danaher Corp. |
DHR, |
4.93% |
| Microsoft Corp. |
MSFT, |
4.91% |
| Amazon.com Inc. |
AMZN, |
4.90% |
| Sherwin-Williams Co. |
SHW, |
4.80% |
| Wheaton Precious Metals Corp. |
WPM, |
4.76% |
| Intercontinental Exchange Inc. |
ICE, |
4.52% |
| McCormick & Co. |
MKC, |
4.48% |
| Clorox Co. |
CLX, |
4.39% |
| Aon PLC Class A |
AON, |
4.33% |
| Jack Henry & Associates Inc. |
JKHY, |
4.08% |
| Motorola Solutions Inc. |
MSI, |
4.08% |
| Vertex Pharmaceuticals Inc. |
VRTX, |
4.01% |
| Union Pacific Corp. |
UNP, |
3.99% |
| Alphabet Inc. Class A |
GOOGL, |
3.03% |
| Johnson & Johnson |
JNJ, |
2.98% |
| Nvidia Corp. |
NVDA, |
2.92% |
| Cogent Communications Holdings Inc. |
CCOI, |
2.81% |
| Kosmos Energy Ltd. |
KOS, |
2.68% |
| VeriSign Inc. |
VRSN, |
2.15% |
| Chemed Corp. |
CHE, |
2.06% |
| Berkshire Hathaway Inc. Class B |
BRK.B, |
2.00% |
| Saia Inc. |
SAIA, |
1.97% |
| Monolithic Power Systems Inc. |
MPWR, |
1.96% |
| Entegris Inc. |
ENTG, |
1.93% |
| Luminar Technologies Inc. Class A |
LAZR, |
0.96% |
| Source: Natixis Funds | ||
You can click on the tickers for more about each company. Click here for a detailed guide to the wealth of information available free on the MarketWatch.com quote page.
The Natixis Vaughan Select Fund was established on June 29, 2012. Here’s a 10-year chart showing the total return of the fund’s Class A shares against that of the S&P 500, with dividends reinvested. Sales charges are excluded from the chart and the performance numbers. In the current environment for mutual-fund distribution, sales charges are often waived for purchases of new shares through investment advisers.
Here’s a comparison of returns for 2022 and average annual returns for various periods of the fund’s Class A shares to that of the S&P 500 and its Morningstar fund category through Oct. 18:
| Total return – 2022 through Oct. 18 | Average return – 3 Years | Average return – 5 Years | Average return – 10 years | |
| Vaughan Nelson Select Find – Class A | -20.2% | 11.8% | 10.8% | 13.0% |
| S&P 500 | -21.0% | 9.4% | 9.7% | 12.0% |
| Morningstar Large Blend category | -20.3% | 8.1% | 8.2% | 10.7% |
| Sources: Morningstar, FactSet | ||||
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The numbers: The National Association of Home Builders’ (NAHB) monthly confidence fell 8 points to 38 in October, the trade group said on Tuesday.
It’s the tenth month in a row that the index has fallen.
Outside of the pandemic, the October reading of 38 is the lowest level since August 2012.
A year ago, the index stood at 80.
The index’s ten-month drop is a new record. The index last fell for 8 months straight in 2006 and 2007.
Key details: All three gauges that underpin the overall builder-confidence index fell.
All four NAHB regions posted a drop in builder confidence, led by the south and the west.
It’s also likely that this year will be the first time since 2011 that single-family starts see a decline, the NAHB added.
Big picture: Builders continue to struggle to find buyers with the current rate environment.
Now they’re saying they’re worried about that depressed demand impacting supply moving forward.
Specifically, they’re concerned about housing affordability worsening, with potentially fewer new homes being built in the future.
Mortgage rates have doubled from last year, now exceeding 7%, which has considerably cooled buyer demand.
Home price growth is moderating, but prices have not come down substantially — yet.
The median sales price for a new home was $436,800 in August, according to the U.S. Census Bureau.
What the NAHB said: Builders are expecting single-family starts to fall for the first time in 11 years — and expect additional declines through 2023, said NAHB Chief Economist Robert Dietz, due to the Federal Reserve’s projected rate hikes to control inflation.
“While some analysts have suggested that the housing market is now more ‘balanced,’ the truth is that the homeownership rate will decline in the quarters ahead as higher interest rates, and ongoing elevated construction costs continue to price out a large number of prospective buyers,” he added.
“This situation is unhealthy and unsustainable,” Jerry Konter, a home builder and developer from Savannah, Ga. and the NAHB’s chairman, said in a statement.
“Policymakers must address this worsening housing affordability crisis,” he added.
What are they saying? “The housing sector – sentiment, building activity and sales – is collapsing under the weight of a rapid increase in interest rates and elevated prices, which are crimping affordability and demand,” Rubeela Farooqi, chief U.S. economist at High Frequency Economics, wrote in a note.
So expect building activity to be depressed, she added.
Market reaction: The yield on the 10-year Treasury note
TMUBMUSD10Y,
fell to 3.98% on Tuesday morning.
While the SPDR S&P Homebuilders ETF
XHB,
traded slightly higher during the morning session, and the big home-builder stocks, from D.R. Horton Inc.
DHI,
to Toll Brothers
TOL,
to Lennar
LEN,
edged higher.
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This may surprise you: Wall Street analysts expect earnings for the S&P 500 to increase 8% during 2023, despite all the buzz about a possible recession as the Federal Reserve tightens monetary policy to quell inflation.
Ken Laudan, a portfolio manager at Kornitzer Capital Management in Mission, Kan., isn’t buying it. He expects an “earnings recession” for the S&P 500
SPX,
— that is, a decline in profits of around 10%. But he also expects that decline to set up a bottom for the stock market.
Laudan, who manages the $83 million Buffalo Large Cap Fund
BUFEX,
and co-manages the $905 million Buffalo Discovery Fund
BUFTX,
said during an interview: “It is not unusual to see a 20% hit [to earnings] in a modest recession. Margins have peaked.”
The consensus among analysts polled by FactSet is for weighted aggregate earnings for the S&P 500 to total $238.23 a share in 2023, which would be an 8% increase from the current 2022 EPS estimate of $220.63.
Laudan said his base case for 2023 is for earnings of about $195 to $200 a share and for that decline in earnings (about 9% to 12% from the current consensus estimate for 2022) to be “coupled with an economic recession of some sort.”
He expects the Wall Street estimates to come down, and said that “once Street estimates get to $205 or $210, I think stocks will take off.”
He went further, saying “things get really interesting at 3200 or 3300 on the S&P.” The S&P 500 closed at 3583.07 on Oct. 14, a decline of 24.8% for 2022, excluding dividends.
Laudan said the Buffalo Large Cap Fund was about 7% in cash, as he was keeping some powder dry for stock purchases at lower prices, adding that he has been “fairly defensive” since October 2021 and was continuing to focus on “steady dividend-paying companies with strong balance sheets.”
After the market hits bottom, Laudan expects a recovery for stocks to begin next year, as “valuations will discount and respond more quickly than the earnings will.”
He expects “long-duration technology growth stocks” to lead the rally, because “they got hit first.” When asked if Nvidia Corp.
NVDA,
and Advanced Micro Devices Inc.
AMD,
were good examples, in light of the broad decline for semiconductor stocks and because both are held by the Buffalo Large Cap Fund, Laudan said: “They led us down and they will bounce first.”
Laudan said his “largest tech holding” is ASML Holding N.V.
ASML,
which provides equipment and systems used to fabricate computer chips.
Among the largest tech-oriented companies, the Buffalo Large Cap fund also holds shares of Apple Inc.
AAPL,
Microsoft Corp.
MSFT,
Amazon.com Inc.
AMZN,
and Alphabet Inc.
GOOG,
Laudan also said he had been “overweight’ in UnitedHealth Group Inc.
UNH,
Danaher Corp.
DHR,
and Linde PLC
LIN,
recently and had taken advantage of the decline in Adobe Inc.’s
ADBE,
price following the announcement of its $20 billion acquisition of Figma, by scooping up more shares.
To illustrate what a brutal year it has been for semiconductor stocks, the iShares Semiconductor ETF
SOXX,
which tracks the PHLX Semiconductor Index
SOX,
of 30 U.S.-listed chip makers and related equipment manufacturers, has dropped 44% this year. Then again, SOXX had risen 38% over the past three years and 81% for five years, underlining the importance of long-term thinking for stock investors, even during this terrible bear market for this particular tech space.
Here’s a summary of changes in stock prices (again, excluding dividends) and forward price-to-forward-earnings valuations during 2022 through Oct. 14 for every stock mentioned in this article. The stocks are sorted alphabetically:
| Company | Ticker | 2022 price change | Forward P/E | Forward P/E as of Dec. 31, 2021 |
| Apple Inc. |
AAPL, |
-22% | 22.2 | 30.2 |
| Adobe Inc. |
ADBE, |
-49% | 19.4 | 40.5 |
| Amazon.com Inc. |
AMZN, |
-36% | 62.1 | 64.9 |
| Advanced Micro Devices Inc. |
AMD, |
-61% | 14.7 | 43.1 |
| ASML Holding N.V. ADR |
ASML, |
-52% | 22.7 | 41.2 |
| Danaher Corp. |
DHR, |
-23% | 24.3 | 32.1 |
| Alphabet Inc. Class C |
GOOG, |
-33% | 17.5 | 25.3 |
| Linde PLC |
LIN, |
-21% | 22.2 | 29.6 |
| Microsoft Corp. |
MSFT, |
-32% | 22.5 | 34.0 |
| Nvidia Corp. |
NVDA, |
-62% | 28.9 | 58.0 |
| UnitedHealth Group Inc. |
UNH, |
2% | 21.5 | 23.2 |
| Source: FactSet | ||||
You can click on the tickers for more about each company. Click here for Tomi Kilgore’s detailed guide to the wealth of information available free on the MarketWatch quote page.
The forward P/E ratio for the S&P 500 declined to 16.9 as of the close on Oct. 14 from 24.5 at the end of 2021, while the forward P/E for SOXX declined to 13.2 from 27.1.
Don’t miss: This is how high interest rates might rise, and what could scare the Federal Reserve into a policy pivot
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