Category Archives: News

Uptick in Jobless Claims

Source: Wall Street Journal 4/27/12 and http://ycharts.com/

The past several weeks has shown some slight increase of those making claims for unemployment benefits, from 375,500 from 2 weeks ago to 381,750 last week. This is a 4 week rolling average that peaked at over 600,000 in 2009. In 2010 we saw a decrease from nearly 500,000 early in the year to the low 400,000’s, in 2011 the claims were in the low to mid 400,000’s but since October of 2011 they have been below 400,000. This uptick since the end of March may illustrate slow economic growth, but probably not a double-dip recession like we saw hit the United Kingdom this month.  To put this into historical perspective, the lowest we have seen this rate in 10 years is 282,000 in January of 2006, and the earlier part of the last decade we saw the average similar to what we are seeing now.

Social Security Will Go Broke in 21 years

Source: Wall Street Journal 4/24/12

Reported yesterday that earlier estimates were 24 years, but now 21 years. If reserves for disability benefits were combined with retirement, reserves would be exhausted by 2033. Social Security and Medicare account for 1/3 of the federal budget. If the trust funds are not replenished, then benefits would be reduced by 25%.

Everyone should be concerned about this, even those that are already retired, since people are living much longer these days. 

Year of birth Full retirement age (FRA) Your Age this Year Years to retirement FRA Year of Retirement Age Soc Sec Reserves Exhausted (2033) & benefits could be reduced
1941 65 71 0 2006 92
1942 65 70 0 2007 91
1943 66 69 0 2009 90
1944 66 68 0 2010 89
1945 66 67 0 2011 88
1946 66 66 0 2012 87
1947 66 65 1 2013 86
1948 66 64 2 2014 85
1949 66 63 3 2015 84
1950 66 62 4 2016 83
1951 66 61 5 2017 82
1952 66 60 6 2018 81
1953 66 59 7 2019 80
1954 66 58 8 2020 79
1955 66 & 2 m 57 9 2021 78
1956 66 & 4 56 10 2022 77
1957 66 & 6 m 55 11 2023 76
1958 66 & 8 m 54 12 2024 75
1959 66 & 10 m 53 13 2025 74
1960 67 52 15 2027 73
1961 67 51 16 2028 72
    MoneyEducate.com

A lot of people wonder if Social Security will actually go broke, and not be able to provide them with benefits. I am doubtful this will happen, given that seniors represent the largest voting block, so politicians are always very concerned about their votes. We will have to see either rapid growth in GDP or most likely  increased taxes, reduced benefits, lower or no the inflation increases and older Full Retirement Ages for younger workers, to secure these benefits. Due to the recession, declined stock portfolios, many people have much lower retirement savings and will be depending upon Social Security for a major part of their retirement. This issue is going to continue to be a hot one.

Ohio Unemployment Compensation New Guideline

The Ohio Department of Jobs and Family Services (ODJFS) is notifying current and past recipients of unemployment compensation, the regular requirement to apply for 2 jobs per week is staying the same, except that recipients of unemployment compensation must keep a written record of actions taken including employer’s name and address, method of applying for work, type of work sought, dates of contact and the outcome of each contact. When they file each week for their weekly check, there will be new fields on the weekly claim form requiring entry of weekly job contact information. The Agency is informing unemployment compensation recipients that they are now conducting more frequent audits, and the written records you are required to keep may have to be submitted.

Stock Act Signed Into Law, Finally!

The Stop Trading On Congressional Knowledge, or Stock act was signed into law yesterday April 4th, 2012 by President Obama, prohibiting members of congress from buying and selling stock based upon inside information. It is about time that this was passed, given the 6 years the bill has been worked on and the opportunity for corruption it created for decades. The bill definitely stalled, but was recently given new life when 60 minutes featured it.

The law preventing everyone from investing based upon inside information has existed for decades, but congressman strangely were conveniently exempt from the law. This was political hypocrisy at the highest level, when members of congress had exempted themselves from law that effected everyone else, just so that it would provide them the opportunity to obtain wealth.

Before this law many congressman and women became millionaires trading on information that only they and few others had knowledge of, sometimes because of private committees that they were a part of. Some of these congressman and women probably crafted law and based their votes on the law knowing that it would provide them the opportunity to profit directly in their own investment portfolios. The corruption went further, when you consider there have been reports that some of the inside information was leaked to hedge funds. Many hedge fund’s investment minimums are so large that only the wealthy can invest in them. These are examples of congressman, their hedge fund friends and clients, and businesses that benefited, colluding using their political power to become wealthy or to add to their wealth. The gulf between the rich and the poor has expanded in recent years, is it any wonder that it has when you consider the special advantages afforded to a select few. Hopefully this is not the end of the story, I would love to see a reporter with courage to dig into the corruption further to trace who benefited from insider trading; the truth would be embarrassing to both political parties.

Is the Recession Over?

A few days ago there was another report of slight improvement in employment, for three months it has decreased from 8.9% to 8.3% lowest in about 3 years. This is a short-term calculation, and doesn’t take into consideration all of those not working or those working part-time and desire full-time employment.  5% is normal, anything north of 10% is really bad, the great recession saw 25% unemployment.  My sense talking to a lot of people, that the job market is slowly recovering which is great.  Sadly black, especially inner-city youth the number is much higher. For some alternative unemployment statistics go to http://www.shadowstats.com/alternate_data/unemployment-charts, which may illustrate the real much higher unemployment picture, which also shows improvement.

Are we still in a recession?  Recessions by definition are a business cycle retraction of two down consecutive quarters of GDP, or a 12 month 1.5 rise in unemployment. So technically the country is not in an official recession. There have been other positive indicators from industry that our economy is improving, so I have reason to be a guarded optimist.

From a personal finance perspective, many households are in a recession, because it will take more than a few good economic quarters for many to recover to pre-recession finances. Household finances recover when savings are replenished, debt is reduced, salaries increase- all allowing for more disposable income, which fuels consumerism and thus the economy.

Some people have the expectation in the back of their minds that they hope for the good old days of the mid 1980’s of nearly 10% GDP, or the later years of the 1990’s that had several peaks above 5%: Sourcehttp://www.tradingeconomics.com/united-states/gdp-growth.  It would take quite a bit of economic change for us to enjoy a high GDP, when you consider; economic growth is very slow, debt is massive individually and many countries, and entitlements are a huge problem in many industrialized nations. This all weighs things down, such as hiring, and wage increases making personal household finance’s recovery long-term.

The current value of some foreign currencies increasing, has been good for the US economy, such as Honda’s plans to move more manufacturing here. The other day I saw an article about a company headquartered in India opening a call center in Texas. Other economic things to be positive about are low-interest rates, personal debt decreasing and savings increasing.

I don’t expect any boom times again for the foreseeable short to intermediate term, for Americans to ride a wave to financial recovery. We are not unmoving ship at sea in the doldrums, there are winds in the sails, and some economic storms ahead.  Households would be wise to extract whatever wind that hits their sails, and stick to wise foundational personal finance habits: saving, living below means (spend less than make), giving, re-paying all debt and acquire no new debt, beware of schemes to get rich, and some start micro-businesses. In fact these are good habits to exhibit in all economic environments, we just are being forced to now. These are character, wisdom, learning and faith building times.

Christians should have peace no matter how bad things get, and level heads if the economy booms. God is in control, and he is the source of our daily bread, no matter what the headlines of the daily paper read.

Stock Act Gaining Momentum

I previously wrote about the federal lawmakers exemption from insider trading laws, allowing them the ability to buy and sell stocks, bonds and real estate using inside information. The lawmakers have access to privileged information that helped many of them to become multimillionaires, peddle influence, and secretly make the information available to hedge-fund managers that only the very wealthy can invest in.  If anyone else traded on inside information, it is a felony which brings possible fines and imprisonment.

The Stop Trading on Congressional Knowledge Act, also known as the Stock Act has been floating around for several years, would make this practice illegal, has passed the Senate, and is moving to the House, and could be voted on as early as next week. Lets hope that this bill gets passed and becomes law.

Global Warming and Personal Finances

A 1/27/12 column in the Wall Street Journal “No Need for Panic About Global Warming” written by 16 prominent scientists, seems to cast serious doubt in global warming (GW).

GW seems to be quite a divisive issue these days, at least that is what it seems to be if you pay attention to the national media. As a blogger, I try to not have a bias in my writing towards the agenda’s of the right or left. I am concerned though, when changes to economies are proposed that are very dramatic, which may negatively affect a great number of people’s financial stability. Those concerned about GW would also say that if we don’t act quickly enough, global warming will lead to worldwide drought and harm more than people’s finances.

Is the science backing global warming right on? Talking to a scientist at The Ohio State University, I was compelled to maybe believe as he did, after hearing the facts presented, that there may be something to GW. In addition, anecdotally it seems that there is indeed a dramatic reduction in glaciers and some polar ice. Is the change in temperatures caused by man? However after reading the article mentioned, it seems as if we might want to hold back on many of the proposed CO2 far-reaching policies, until there is more good science indicating human induced GW is real.

We are to be good stewards of our planet (Genesis 2:15), to pollute less, use alternative fuels and depend less upon foreign oil by using our own until alternatives can replace them. I think all of us can get behind this, but not when flawed science (maybe), is used to make draconian changes, to the great financial harm to a majority of humanity.

Obama Rejects Keystone Pipeline: Jobs, Energy, Politics and Money

We have not heard the end of the story of the trans-American pipeline to bring Canadian oil sand derived crude though a 1,700 mile pipeline, that Obama rejected yesterday (1/18/12). Conservationists are celebrating, since they believe the negative environment consequences of the line and special process to remove the oil from the sands. It seems that this is a result less of a values decision, since this seems like a win win on both sides, and more related to politics- too bad there is so much fighting in Washington and little cooperation.

The cost to personal finances in the short-term will be less job opportunities, higher cost of energy, and the risk that this oil could easily go to China potentially harming our international economic competitiveness and security. Stay posted on this important issue.

Jobless Rate Lowest in Nearly 3 Years

The Labor Department announced today that employers added 200,000 jobs last month, making the rate drop to 8.5%. This has dropped for four straight months.

This appears to be a good indication of an improving economy, however keep in mind December holiday hiring often adds a little to this, and counts only people actively looking for jobs (when looking at all of those out of work, the rate is over 15%).

Unemployment was 7.8% in January of 2009.

Politicians from all sides will be running with their own spin of this news for several days.

Unions Win More Freedom to Organize

Article in today’s Wall Street Journal about Unions Won More Freedom to Organize. This is a win for labor,  and a loss for big business, however time will tell if giving more power to unions will lead to more of them organizing, and effect business growth and their hiring. Most people though are concerned about how this will affect their personal finances. If you work in a position that could be unionized, that could mean better benefits and pay, if companies can afford it. On the other hand, companies wanting to expand by adding new factories or more employees always estimate their total human resource cost, and if unions make this higher, they may look for ways to cut back now, or open expand in a country that has lower labor costs. There is always a teeter totter effect to consider, and considering a poor economy and people just want any job, now may not be the time to give unions more power.

Positive News: National Activity Index indicates improving economy

The Federal Reserve Bank of Chicago yesterday released its monthly National Activity Index. This index  measures the activity of the US economy following 85 monthly indicators, relative to averages starting in 1967, with zero being the average. The index rose to minus .13 in October from minus .20 in September, this improvement is attributed to increases in manufacturing. To provide a historical perspective, the lowest the index has been, looking back 15 years, was in 2009 when it was nearly minus 4.00.

Wash DC Corrupt: Part 1

Watching the November 6th 2011 broadcast of CBS’s 60 Minutes, interview of Jack Abramoff, I was shocked with the reality I feared to be true: large corporations, political and industry associations, through lobbyists, have bought and paid for those we have elected to represent us in Washington. If you don’t remember who Jack is, he is the former lobbyist and businessman sentenced to several years in prison. Listen to the interview yourself to see if you conclude or wonder if all politicians are or will eventually become corrupt Jack Abramoff: The lobbyist’s playbook.

I don’t agree with a lot of what is being said by the Occupy Wall Street crowd, no one really does. But when corruption and injustice of those in power, have so much power, those lacking integrity will often prevail over those of honor in politics and industry. When this condition exists for a long time, and during economic recessions like we are experiencing now, isn’t protest inevitable when the rich continue to get richer?  Interestingly, some have actually contributed to the recession, may have financially benefited from it?  Now seems to be the time to put severe limits on the lobbying industry.

Observations of Occupy Wall Street

The Occupy Wall Street crowd, if it has done anything good, has started many discussions and is getting people to think beyond themselves. I like it when people discuss freedom, taxes, politics, power, poverty, labor, wealth, working, business, capitalism, communism, democracy, beliefs and the history of our country. What I don’t like about it is when people jump on the band wagon for their particular causes, as it seems celebrities, liberals, unions and the likes of George Soros have done. I equally don’t like it when conservatives respond negatively to everything that is being said. Christians are to respond thoughtfully, not to be knee jerk reactionary to the particular news of the day–me thinks.  Christians are to first look at the world through the Bible because it is God that is to set our world view, not other people through the lenses of their particular political biases, whatever they might be.

What is true about what is being said?  A small percentage of people do control wealth and thus to a large extent government. Is it 1%? Nobody really knows. If we ‘take it’ (that is, the power and wealth), who do they want us to give it to?  I think they would say, ‘the people.’  This is a silly answer, because we all know, if we look at history, that it means politicians; when any group of politicians gets too much power and wealth, it absolutely becomes corrupt and justice does not prevail for the 99%. It is just plain naive to think otherwise. Communism is the best example of this not working, and social democracies of some European countries are more recent examples of stagnant economies, few new small businesses, and excessive entitlement programs (some European countries will have nearly 50% of their population being supported by entitlements by 2020). It seems to be that balance of power and wealth is in labor, governments, politicians, business and people. Power must not be taken away or given up just because times are hard, from ordinary people who are free from excessive taxes to start and run businesses, own guns, vote, and worship in any fashion they wish. Capitalism and Democracy are harmed by power and greed, this is true, but I am not willing to throw it out or to trade it in for my freedoms to be taken away.

So how are Christians to think about and react to all of this? This is a good question for us all to answer. I don’t think we should be totally like the liberal or the conservative. Can Christians be for the poor and  justice, and for democracy and capitalism at the same time?  These are not mutually exclusive concepts. Christians have always done both: they give money and build systems to help the poor and to fight injustice, while at the same time running businesses, employing people, working hard as good employees and managing money well. We are to get behind politicians of integrity that have these same beliefs and are not corrupted by power and greed. I think that is what we are to do and what I’m actually seeing Christians doing. We just need to do more of it, and to do it for the sake of Christ. We are to be the positive light, pointing the way to Him in a dark and negative world.

How Does Obama’s College Loan Program Work?

Obama mentioned that as of January 2012, student loan re-payments will be limited to 10% of income, and any left over balance after 20 years, would be forgiven. Sounds good, similar to the current plan that already exists for some loans and some non-profit employment situations after 10 years. So the new plan seems to expand this to more people, but probably only some federal loans. More details are forthcoming, but how would the math work out? The answer is hard to tell, no one knows how much money they are going to make for the next 20 years. But for the fun of it, let’s assume a modest starting income of $25,000 (about $12 per hour), and increased 3% per year for 20 years: income increased to $43,838. Total payment if limited to 10% of income would total to $67,175.  The next part of the calculation I am not totally sure of: how is the loan calculated? Is unearned interest capitalized back into the loan? What will the interest rates be over the next 2o years?  To keep it simple, (but taking some chance of mathematical error), let’s assume a low 3% interest rate, loan calculated annually (not monthly payments), and a $50,000 loan. I calculate that the amount of loan left after 20 years is approximately $2,600. Not a big forgiveness – no big deal. Sounds better from the podium than in actuality. But wait… this has me thinking, what would stop me from borrowing a lot more, and take it easy my college years, not working to minimize loans- heck I will be limited to pay back only $$67k, party hardy!?  I’m sure there are more details to work out in the days and months to come. Stay posted. I think politicians of both parties need to take more math courses before being elected to office!

MLK day Post- How far have African American’s come economically?

Today is an important day, the national holiday for Martin Luther King Jr’s birthday. As a financial guy, I paused and wondered how far  African Americans have come financially since the 1960’s.

This afternoon I caught part of the NPR interview of Clarence B. Jones, African American lawyer who helped draft the “I have a dream” speech. He was asked how far we have come since 1963 and where we are on race in America today.

Toward the end of the interview, he commented regarding economic inequalities that linger today. He said, “you would have to be deaf dumb and blind to say extraordinary progress hasn’t been made.” However, our country hasn’t had sufficient reconciliation since slavery in many institutions today, and we are still suffering the consequence of it today. Slavery was so searing and deep into national fiber that there is still inequality in incomes, and although they have come a long way, the glass is half full and there is still a long way to go until the glass is full. Mr. Jones was troubled by the high rate of HIV, out of wedlock pregnancy and violence of African Americans. He challenged African American leaders to say those things aren’t because of what the white man did to us, but what we are doing to ourselves and what we are failing to take advantage of.

Listening to the interview, I found the discussion very thought-provoking and challenging, and as a white man I’m left wondering how I could help African Americans achieve their dreams.

Is the ‘American Dream’ dead?

Lately I have been wondering: Is the original “American Dream” dead and will there be a new Christ-centered one? Many of us baby boomers grasped the idea of college, career, family, house, and retirement. A life of success, fulfillment and fun, with big: houses, cars/SUVs, vacations, activities, and the wonderful life in the suburbs.

Things didn’t go according to plan for many people. We spent and borrowed too much, and we lived the large life that didn’t lead to success and happiness. The economy of the last 15 years didn’t cooperate either–underperforming stock market returns, unemployment, underemployment, jobs shifted overseas, and the demise not only of manufacturing jobs but also of higher paying middle level positions. Sometimes unfortunate things of life threw us curve-balls too.

The American Dream for many didn’t lead to happiness but contributed to epidemic divorce, obesity, substance abuse, and one of the highest anti-depressant consumption rates on the planet. Was it a dream or a nightmare?

How did we get here? During the first 450 years – The Original American Dream since the 1500’s, was the pursuit of life, not hindered by oppressive religions and governments where only a few people held most of the wealth and real estate. The opportunity to be one’s own person and own land, start a business, and provide for the family’s basic needs of food and shelter excited many people to immigrate to the New Land.

In modern times the post WWII society and Dream evolved to building wealth, accumulating things, consumerism, big homes in the suburbs, and retirement in leisure – now that people lived long enough to retire. We built great colleges, got advanced degrees, worked for The Company for the bulk of our careers. Yet for many of us, our careers have fallen off track: Companies got bought out and raided in the 80’s and 90’s as exemplified in the 1980’s ‘Wall Street’ movie. Many companies were forced to get rid of retirement pensions in the wake of competition in the 90’s. In the wake of NAFTA, companies moved to the Far East or south or north of the border, sometimes just to stay alive because of labor costs.

Enron like corporate and government greed and mismanagement has led to financially insolvent governments, large corporations, accounting firms and quasi-governmental agencies  in the 90’s and 2000’s, leading up to the worst financial condition that America has been in since the Great Depression of the 1930’s.

For many American’s, while our careers stagnated due to many of these causes, we continued to spend and not save. With no emergency funds we lacked the ability to weather a financial crisis, many even exhausting retirement accounts. Even prior to the recession, the average 401(k) balance was around $50,000 for people in their 50’s.

Is the economy going to have a major turnaround and lift us up on a new wave of prosperity? Is some new technology or green energy discovery going to bring us into a new age where we can once again capture the hope of a financial successful American Dream?

I’m wondering lately if within the Church a new dream might emerge: one based on values and not greed; one centered on community and not individual wealth; one with capitalism and freedom, not government control or regulation; one that lifts not just the upper classes but the poor; one with better education in the inner city and the suburbs; one that ties new small businesses and communities. This is one I hope will emerge.