SACRAMENTO, Calif. — California Gov. Gavin Newsom on Friday announced that oil refineries could start selling more polluting winter-blend gasoline ahead of schedule to ease soaring fuel prices, directly contradicting his own goals for reducing climate pollutants.
The average cost of a gallon of gas was $6.30 in California on Friday, far above the national average of $3.80, according to AAA. Newsom administration officials said the difference between state prices and the national average has never been larger.
The Democratic governor also called on state lawmakers to pass a new tax on oil company profits and return the money to California taxpayers. Lawmakers don’t return to the Capitol until January, Newsom’s office provided few details on the proposal.
“They’re ripping you off,” he said of the oil industry in a video posted to Twitter.
Oil industry representatives said it is state regulations that cause higher prices in California than the rest of the country. The summer blend of gasoline that refineries are required by law to produce in the hotter months costs more money to make but is designed to limit pollutants like smog. Most refineries can’t switch to the winter blend until November.
Switching from the summer to winter blend would likely save consumers 15 to 20 cents per gallon, said Doug Shupe, a spokesman for the Southern California Automobile Club, an affiliate of AAA. Gas prices in Los Angeles are close to breaking a record of $6.46 set in June, he said.
“If these prices go up to $7 a gallon, a 15-cent drop is not really going to mean much to drivers,” Shupe said.
Prices are spiking in part due to limited supply because some oil refineries are offline due to routine maintenance or other problems, he said. The California Air Resources Board, which regulates refineries, said high prices could also be due to part to a refinery fire and Hurricane Ian.
It’s the latest spat between Newsom and the oil industry, which holds political and economic sway in California despite the state’s aggressive climate policies. But Newsom’s dual actions Friday also illustrate the complicated reality Newsom faces as he tries to wean the state off oil and gas while responding to economic reality.
Earlier this year, for example, Newsom’s administration turned to generators and power plants that run on fossil fuels to help avoid rolling power blackouts during a heat wave.
By urging air regulators to let oil companies switch to a winter blend earlier, Newsom is acknowledging that state rules play a role in prices, said Kara Greene, a spokeswoman for the Western States Petroleum Association.
Refineries typically perform maintenance in the spring or fall as they prepare to switch fuel blends, she said. It will take time for refineries to prepare the winter blend, and Newsom’s order may have little immediate effect, she said. If Newsom truly wanted to lower prices, he could suspend the state’s gas tax or relax other regulations, she said.
“It’s a conscious decision to try and put the responsibility back on the oil industry,” she said.
Newsom said he expected the relaxation of refinery rules to increase supplies by 5% to 10% because refiners have already started to produce and store the gas.
“Any impacts on air quality caused by this action are expected to be minimal and outweighed by the public interest in temporarily relaxing” the limits, the air board said in a statement.
Starting in January, oil companies will be required to disclose their monthly profits to the state under legislation Newsom recently signed. Consumer Watchdog called on Newsom earlier this week to call a special legislative session to approve a tax on those profits.
Jamie Court, the group’s president, said he applauded Newsom’s efforts to deal with “an industry that’s out of control.”
Democratic leaders in the state Legislature said a windfall tax on oil profits deserves “strong consideration,” while Republicans said Newsom should immediately suspend the state gas tax to provide relief.
Major oil companies saw record profits this summer, and the price of crude oil has dropped since the end of the summer.
The California Energy Commission on Friday wrote a letter to executives of five major oil companies asking why prices rose so dramatically, what actions the state could take to lower prices and why refinery inventory levels have dropped.
Greene, of the petroleum association, said California regulations raise the price of oil by just under $1 in California, but other observers say its lower. Court, of Consumer Watchdog, says its around 60 cents, while Severin Borenstein, an energy economist with the University of California, Berkeley, says its closer to 70 cents.
Borenstein has also identified an unexplained surcharge that he says has caused Californians billions of dollars since 2015.
Newsom in 2019 directed the state attorney general to look into whether oil companies were overcharging Californians. Attorney General Rob Bonta has said his office is still investigating.
One cruel truth the stock market confirmed this past week is that trying to pick the bottom for technology stocks is a fool’s errand. The Nasdaq Composite’s terrible September—it was down 10.5% on the month—has made the bottom-fishing that took place over the summer look ill-advised. As I’ve noted before, the first downturn in tech earlier this year was all about valuations. This new phase of the decline is all about softening earnings. When it comes to price-to-earnings ratios, the market is running into a denominator problem.
The market downturn, the weaker economy, and the reversal of some pandemic-era trends have exposed weaknesses in the business models of companies such as
Peloton Interactive
(SNAP), and investors have adjusted valuations accordingly. But there are still some powerful underlying secular trends that should eventually drive tech stocks higher. Investors with long time horizons and strong stomachs might consider inching into the market. I have a few ideas on where to look.
Stocks declined again on Friday, closing out September with large losses across the board as the rally from the June lows partway through August faded into memory.
The S&P 500 SPX, -1.51%
fell 1.5% on Friday. The benchmark index slumped 9.3% for September, leading to a 2022 loss of 24.8%. The Dow Jones Industrial Average DJIA, -1.71%
gave up 1.7% on Friday, for a September decline of 8.8%. The Dow has now fallen 20.9% for 2022. The Nasdaq Composite Index COMP, -1.51%
pulled back 1.5% on Friday for a September drop of 10.5% and a year-to-date plunge of 32.4%. (All price changes in this article exclude dividends.)
Below is a list of stocks in the S&P 500 that fell the most during September.
Nike Inc. NKE, -12.81%
was down 13% on Friday for a September decline of 22%, after the company warned that discounting to clear inventory would continue to affect its earnings performance. Here’s how analysts reacted.
Most financial planners advise young people to start saving early — and often — for retirement so they can take advantage of the so-called eighth wonder of the world – the power of compound interest.
And many advisers routinely urge those entering the workforce to contribute to their 401(k), especially when their employer is matching some portion of the amount the worker is contributing. The matching contribution is – essentially – free money.
New research, however, indicates that many young people should not save for retirement.
The reason has to do with something called the life-cycle model, which suggests that rational individuals allocate resources over their lifetimes with the aim of avoiding sharp changes in their standard of living.
Put another way, individuals, according to the model which dates back to economists Franco Modigliani, a Nobel Prize winner, and Richard Brumberg in the early 1950s, seek to smooth what economists call their consumption, or what normal people call their spending.
According to the model, young workers with low income dissave; middle-aged workers save a lot; and retirees spend down their savings.
Source: Bogleheads.org
The just-published research examines the life-cycle model even further by looking at high- and low-income workers, as well as whether young workers should be automatically enrolled in 401(k) plans. What the researchers found is this:
1. High-income workers tend to experience wage growth over their careers. And that’s the primary reason why they should wait to save. “For these workers, maintaining as steady a standard of living as possible therefore requires spending all income while young and only starting to save for retirement during middle age,” wrote Jason Scott, the managing director of J.S. Retirement Consulting; John Shoven, an economics professor at Stanford University; Sita Slavov, a public policy professor at George Mason University; and John Watson, a lecturer in management at the Stanford Graduate School of Business.
2. Low-income workers, whose wage profiles tend to be flatter, receive high Social Security replacement rates, making optimal saving rates very low.
Middle-aged workers will need to save more later
In an interview, Scott discussed what some might view as a contrary-to-conventional wisdom approach to saving for retirement.
Why does one save for retirement? In essence, Scott said, it’s because you want to have the same standard of living when you’re not working as you did while you were working.
“The economic model would suggest ‘Hey, it’s not smart to live really high in the years when you’re working and really low when you’re retired,’” he said. “And so, you try to smooth that out. You want to save when you have relatively high income to support yourself when you have relatively low income. That’s really the core of the life-cycle model.”
But why would you spend all your income when you’re young and not save?
“In the life-cycle model, we are assuming you are getting the absolute most happiness you can out of income each year,” said Scott. “In other words, you are doing your best at age 25 with $25,000, and there is no way to live ‘cheaply’ and do better,” he said. “We also assume a given amount of money is more valuable to you when you are poor compared to when you are wealthy.” (Meaning $1,000 means a lot more at 25 than at 45.)
Scott also said that young workers might also consider securing a mortgage to buy a house rather than save for retirement. The reasons? You’re borrowing against future earnings to help that consumption, plus, you’re building equity that could be used to fund future consumption, he said.
Are young workers squandering the advantage of time?
Many institutions and advisers recommend just the opposite of what the life-cycle model suggests. They recommend that workers should have a certain amount of their salary salted away for retirement at certain ages in order to fund their desired standard of living in retirement. T. Rowe Price, for instance, suggests that a 30-year-old should have half their salary saved for retirement; a 40-year-old should have 1.5 times to 2 times their salary saved; a 50-year-old should have 3 times to 5.5 times their salary saved; and a 65-year-old should have 7 times to 13.5 times their salary saved.
Scott doesn’t disagree that workers should have savings benchmarks as a multiple of income. But he said a high-income worker who waits until middle age to save for retirement can easily reach the later-age benchmarks. “Savings for retirement probably is more in the zero range until 35 or so,” Scott said. “And then it is probably faster after that because you want to accumulate the same amount.”
Plus, he noted, the home equity a worker has could count toward the savings benchmark as well.
So, what about all the experts who say young people are best positioned to save because they have such a long timeline? Aren’t young workers just squandering that advantage?
Not necessarily, said Scott.
“First: saving earns interest, so you have more in the future,” he said. “However, in economics, we assume that people prefer money today compared to money in the future. Sometimes this is called a time discount. These effects offset each other, so it depends on the situation as to which is more significant. Given interest rates are so low, we generally think time discounts exceed interest rates.”
And second, Scott said, “early saving could have a benefit from the power of compounding, but the power of compounding is certainly irrelevant when after-inflation interest rates are 0% – as they have been for years.”
In essence, Scott said, the current environment makes a front-loaded lifetime spending profile optimal.
Low-income workers don’t need to save either
As for those with low income, say in the 25th percentile, Scott said it’s less about the “income ramp that really moves saving” and more that Social Security is extremely progressive; it replaces a large percentage of one’s preretirement income. “The natural need to save is not there when Social Security replaces 70, 80, 90% (of one’s preretirement income),” he said.
In essence, the more Social Security replaces of your preretirement income, the less you’ll need to save. The Social Security Administration and others are currently researching what percent of preretirement income Social Security replaces by income quintile, but previously published research from 2014 shows that Social Security represented nearly 84% of the lowest income quintile’s family income in retirement while it only represented about 16% of the highest income quintile’s family income in retirement.
Source: Social Security Administration
Is it worth auto-enrolling young workers in a 401(k) plan?
Scott and his co-authors also show that the “welfare costs” of automatically enrolling younger workers in defined-contribution plans—if they are passive savers who do not opt-out immediately—can be substantial, even with employer matching. “If saving is suboptimal, saving by default creates welfare costs; you’re doing the wrong thing for this population,” he said.
Welfare costs, according to Scott, are the costs of taking an action compared to the best possible action. “For example, suppose you wanted to go to restaurant A, but you were forced to go to restaurant B,” he said. “You would have suffered a welfare loss.”
In fact, Scott said young workers who are automatically enrolled into their 401(k) might consider when they’re in their early 30s taking the money out of their retirement plan, paying whatever penalty and taxes they might incur, and use the money to improve their standard of living.
“It’s optimal for them to take the money and use it to improve their spending,” said Scott. “It would be better if there weren’t penalties.”
Why is this so? “If I didn’t understand that I was being defaulted into a 401(k) plan, and I didn’t want to save, then I suffered a welfare loss,” said Scott. “We assume people figure out after five years that they were defaulted. At that point, they want their money out of the 401(k), and they are optimally willing to pay the 10% penalty to get their money out.”
Scott and his colleagues assessed welfare costs by figuring out how much they have to compensate young workers at that five-year point so that they are OK with having been inappropriately forced to save. Of course, the welfare costs would be lower if they didn’t have to pay the penalty to cash out their 401(k).
And what about workers who are automatically enrolled in a 401(k)? Are they not creating a savings habit?
Not necessarily. “The person who is confused and defaulted doesn’t really know it’s happening,” said Scott. “Maybe they’re getting a savings habit. They’re certainly living without the money.”
Scott also addressed the notion of giving up free money – the employer match — by not saving for retirement in an employer-sponsored retirement plan. For young workers, he said the match isn’t enough to overcome the cost of, say, five years of below-optimal spending. “If you think it’s for retirement, the match-improved benefit in retirement doesn’t overcome the cost of losing money when you’re poor,” said Scott. “I’m simply noting that if you are not consciously making the choice to save, it is hard to argue you are making a saving habit. You did figure out how to live on less, but in this case, you did not want to, nor do you intend to continue saving.”
The research raises questions and risks that must be addressed
There are plenty of questions the research raises. For instance, many experts say it’s a good idea to get in the habit of saving, to pay yourself first. Scott doesn’t disagree. For instance, a person might save to build an emergency fund or a down payment on a house.
As for the folks who might say you’re losing the power of compounding, Scott had this to say: “I think the power of compounding is challenged when real interest rates are 0%.” Of course, one could earn more than 0% real interest but that would mean taking on additional risk.
“The principle is about, ‘Should you save when you are relatively poor so you can have more when you are relatively rich?’ The life-cycle model says, ‘No way.’ This is independent of how you invest money between time periods,” Scott said. “For investing, our model does look at riskless interest rates. We argue that investment expected returns and risks are in equilibrium, so the core result is unlikely to change by introducing risky investments. However, it is definitely a limitation of our approach.”
Scott agreed there are risks to be acknowledged, as well. It’s possible, for instance, that Social Security, because of cuts to benefits, might not replace a low-income worker’s preretirement salary as much as it does now. And it’s possible that a worker might not experience high wage growth. What about people having to buy into the life-cycle model?
“You don’t have to buy into all of it,” said Scott. “You have to buy into this notion: You want to save when you’re relatively rich in order to spend when you’re relatively poor.”
So, isn’t this a big assumption to make about people’s career/pay trajectory?
“We consider relatively rich wage profiles and relatively poor wage profiles,” said Scott. “Both suggest young people should not save for retirement. I think the vast majority of median wage or higher workers experience a wage increase over their first 20 years of working. However, there is certainly risk in wages. I think you could rightly argue that young people might want to save some as a precaution against unexpected wage declines. However, this would not be saving for retirement.”
So, should you wait to save for retirement until you’re in your mid-30s? Well, if you subscribe to the life-cycle model, sure, why not? But if you subscribe to conventional wisdom, know that consumption might be lower in your younger years than it needs to be.
U.S. stocks dropped sharply Friday, with major indexes posting their lowest finishes since 2020 and logging a third straight quarterly decline as investors grew more fearful that aggressive interest rate hikes by the Federal Reserve will drive the economy into a downturn in an attempt to quell inflation.
What’s happening
The Dow Jones Industrial Average DJIA, -1.71%
dropped 500.10 points, or 1.7%, to close at 28,725.51.
The S&P 500 SPX, -1.51%
dropped 54.85 points, or 1.5%, to end at 3,585.61.
The Nasdaq Composite COMP, -0.43%
shed 161.88 points, of 1.5%, finishing at 10,575.61.
The drop left the Dow and S&P 500 at their lowest since November 2020, while the Nasdaq posted its lowest close since July 29, 2020. The Dow dropped 8.8% in September, while the S&P 500 tumbled 9.3% and the Nasdaq lost 10.5%.
For the quarter, the Dow dropped 6.7%, the S&P 500 declined 5.3% and the Nasdaq gave up 4.1%.
What’s driving the market
In keeping with the historical pattern, U.S. stocks suffered during the month of September as an assertive Federal Reserve helped push Treasury yields and the dollar higher, which in turn undermined equity valuations.
Investors on Friday digested a reading from the personal consumption expenditure inflation index for August, which showed that core consumer prices climbed by 0.6% last month, more than Wall Street’s forecast of 0.5%. The core inflation measure excludes volatile food and energy prices.
“That means the Fed will remain hell-bent on killing inflation. And the best way to do that is to increase rates, kill the housing market, and get rental costs down. The PCE doesn’t have housing and rents as a big component as the CPI does, so the fact that it is rising is a warning sign,” said Louis Navellier, founder of Navellier & Associates, in emailed comments.
The reading largely confirmed similar data from the consumer-price index, another closely watched inflation barometer, which sent stocks lower earlier this month. Since that report was released just over two weeks ago, the S&P 500 has fallen more than 10%.
Helping to underscore this point, data out of the eurozone showed inflation accelerated at a record pace last month.
In other news, investors also heard from Fed Vice Chair Lael Brainard, who reiterated that the central bank would keep interest rates elevated to combat inflation, even if it harms the economy.
Since it will take time for high interest rates to bring inflation down, Brainard said the Fed is “committed to avoiding pulling back prematurely.”
Investors were also keeping an eye on megacap tech stocks. Apple Inc. AAPL fell 3% on Friday after leading markets lower a day earlier following a downgrade by Bank of America.
A final reading on the University of Michigan consumer-sentiment index for September showed consumers’ view of the economy improved somewhat during the month due to falling gas prices, even as their outlook remained broadly pessimistic.
Investors are now facing “what may be one of the most important earning seasons in a very long time, with a major rally in the cards if earnings don’t disappoint, and if the bears are right, lead to a further leg down if earnings disappoint and 4th quarter estimates are cut,” Navellier said.
Micron Technology MU, +0.18%
stock rose 0.2% after a report that Japan will grant it a $320 million subsidy to make advanced memory chips at its Hiroshima plant. That came a day after Micron posted quarterly earnings that included a forecast for a loss in the coming quarter and plans to scale back a build out of capacity.
— Steve Goldstein and Barbara Kollmeyer contributed to this article
Money manager Matt Patsky stood at the window of his hotel on the Portuguese island of São Miguel in March last year, looking out over the Atlantic, and thought: I’m not sure we can retire here after all.
He told his husband, “I don’t know [if] we could live here. It looks like the people are crazy. There are people going in the water, swimming in the ocean. How crazy do you have to be to go swimming in the Atlantic in March?”
Patsky, 56, mentioned this to a local real-estate agent later that day. The man didn’t understand the issue. The water, he said, was probably no cooler than 65 degrees.
How these Americans save money in retirement: They live in Spain
As Boston-based Patsky adds: In New England you’re lucky if the water gets that warm in August.
It’s “one of the great selling points of the Azores,” he says. “It is rarely below 60. It is rarely above 80. And the water temperature tends to be steady between 65 and 75 degrees.”
Patsky says he and his husband, a retired businessman who’s 66, are “80%” sure they are going to live outside the United States when they retire. They are tired especially of the politics and the racial tensions.
The No. 1 thing that attracted them to the Azores — which lie barely more than twice as far from Boston as from Lisbon — wasn’t the weather. It was the emigration.
Portugal, they discovered, offers the all-round fastest, cheapest, easiest way to get a so-called golden visa, putting the recipient on a fast track to permanent residence and citizenship.
You have to have means, but this is not purely for Rockefellers. If you want to get Portuguese residency, and a passport, you need to buy a home in the country and generally to put at least some money into fixing it up, and spend at least seven days a year in the country for the next five years.
After six months, you get a residency card. After five years, a passport.
The threshold prices vary, depending on the type of home you buy and where you buy it, but they start at €280,000 (about $310,000).
As part of the deal, says Patsky, you have to buy the home with cash. You can’t take out a Portuguese mortgage. But you can always raise the cash by remortgaging a U.S. home. The money thresholds are lower than in many other countries. And the seven-day requirement lets Patsky continue his job in Boston, as the CEO of socially responsible investing company Trillium, during the five years.
Europe is by far the most popular destination by continent, with about a quarter of a million U.S. retirees, based on Social Security direct deposits. That includes nearly 13,000 in Portugal.
“Portugal has been so welcoming to the LGBT community, that you are seeing a huge number of LGBT couples looking at Portugal,” reports Patsky. On their trips to the Azores, Patsky says he and his husband have been bumping into other LGBT couples from the U.S. looking at golden visas as well.
On a recent trip they overheard four American women at the next table in a restaurant. It was “two lesbian couples from Philadelphia, looking at the ‘golden visa’ and looking at property in the Azores. We ended up sitting with them with my iPad open looking at property.”
You can see the islands’ attraction. There are regular flights from various North American and European cities, Patsky says. “It’s a 4½-hour flight from Boston, and, because of our large Azorean population [in New England], there are actually daily flights,” he says.
Pretty much everyone on the island speaks some English, which is taught in schools as a compulsory second language.
“It’s like living in a Portuguese fishing village,” Patsky says of Ponta Delgada, the main city on São Miguel. “It has a lot of the same feel as Provincetown [on Cape Cod], in terms of being a fishing village. It’s quaint.” The population is about 70,000. “It’s a good size, and it’s got a very vibrant economy.”
Thanks to some spectacular cliffs, São Miguel — one of the nine islands that the Azores comprise — has hosted the Red Bull World Cliff Diving World Series on several occasions, including last year.
Patsky and his husband love the island’s natural beauty. “January, we were swimming, we were at the hot springs. Incredible. This really is nice weather year round. There is no traffic. There is no rush hour.” The longest distance you could drive on the island, from one point to another, would take you an hour, he says.
And unlike in Boston, he adds with a laugh, you don’t see snow.
Both members of the couple are equally eager to retire abroad, Patsky says, in no small part to flee America’s rising racial tensions and poisonous politics. Last year Patsky’s husband, originally from the Philippines, was run over at a pedestrian crossing in Boston, Patsky recalls, and was left lying on the pavement with multiple fractures. When a policeman arrived at the scene, he asked the prone 65-year-old for his Social Security number to determine whether he was in the U.S. illegally, Patsky says.
“My husband and I want to make sure that our retirement is spent in a country that respects the dignity of every person,” Patsky says, “and that treats access to health care as a human right.” Portugal has a public health service, modeled after Britain’s National Health Service, which is available to all residents.
They are hardly alone in looking at the Azores. This is starting to turn into a well-trodden exit route. “There are hotel chains that are selling villas at exactly the price point you need to get the golden visa,” Patsky says. They’ll even rent the villa out for you to tourists, to generate income, and say they’ll buy it back after the five years are up.
Patsky says the couple won’t be moving for at least five years. Patsky’s remaining at the helm of Trillium following its takeover by Australia’s Perpetual Ltd. PPT, -1.13%.
He says one of the key appeals of Portugal’s visa program is that he can carry on working full time in the U.S. while at the same time completing the steps needed to get his Portuguese passport.
Naturally, there are forms to fill out. You’ll need the usual financial and employment records. You’ll also need an FBI report to prove you have a clean rap sheet. (Pro tip from Patsky: Don’t get your fingerprints done at the police station on card. Get them done electronically at the post office and apply online. It will save you weeks.)
As for that major retirement headache, health care, you will need to prove you have health insurance in your home country every year during the initial five years, Patsky says. Medicare counts.
And when you finally retire to the country full time? After your five-year period you’ll have a Portuguese passport. And that means an EU passport. And so you can move anywhere in the EU, including those places with the most lavish, generous public health insurance.
“You can pick wherever you want to retire because it’s the EU,” Patsky says.
PLANO, Texas, July 30, 2020 (Newswire.com)
– Landmark Management Group, a provider of consumer finance solutions, has completed a CEO transition. Joel Mussat, a longtime executive in the consumer finance industry, has been appointed CEO of the Company.
“Landmark plays a vital role in ensuring access to the proper consumer finance solutions available today,” said Mussat. “I am humbled and honored to join the Company’s leadership team.” As CEO of Landmark, Mussat will be tasked with the management and growth of the family of brands within Landmark.
“Joel is a strategic leader and experienced C-level executive with expertise in driving growth in the consumer finance industry,” said Company spokesman Craig Rodgers. “This experience has positioned him well to help lead the company into its next phase of growth. His experience building consumer-friendly solutions and leading customer-centric teams will help propel us to future levels of continuous growth.”
Mussat joins after a lengthy career which includes 10 years in management consulting (Accenture and IBM/PwC Consulting), and 11 years as an executive at Plano, Texas-based Rent-A-Center, Inc. He holds a BA degree from the University of Michigan and an MBA from Cornell University, where he was a recipient of the Park Foundation Fellowship Award.
About Landmark Management Group
Landmark Management Group is a Plano, Texas-based management firm focusing on consumer finance-related services. Its portfolio of companies was recognized as a “Top 100 Places to Work” and placed fifth by The Dallas Morning News in the Dallas/Fort Worth Metroplex in 2017, and also won the “Best at Communicating” award in 2017. For inquiries, contact craig.rodgers@landmarktx.com.
