Is the Economy Bad or Good? Everybody seems to agree that the economy is broken. Why? And more relevantly, why might they be wrong? As we know, Trump promised to make America great again, and Biden is spending $2 trillion to build back better. Despite the fact that 80% of the population are expressing concern for their or their children's future, what we see when we look at the numbers relative to the rest of the world, is that the United States’ economy is a stunning success. GDP I'll give you an example. America is the world's richest, most productive, and innovative country. Let's look at China. China has grown phenomenally since the 1990s. Back in 1990, the United States was 25% of global GDP. Despite China's phenomenal growth, the United States still is at 25% of GDP. In fact, back in 1990, the G7, supposedly the biggest economies in...

For years, we've preached “stay short-term on your bonds”, but today's the inflection point where the interest rate risk we've worried about is now offset by reinvestment risk. So, what is reinvestment risk? For the past few years, we've preached short-term bonds and inflation-protected bonds. Today, the Vanguard Ultra Short-Term Bond ETF has a forward yield of 5%. That's tough to beat. The Fed is expected to raise interest rates by a quarter percent within the next 24 hours, so by the time you're reading this, it may already have happened. There's an 89% probability. We're going to assume it's going to happen. What is Reinvestment Risk? Yesterday's trap was long maturity bonds with higher yields. A lot of broker dealers sold a lot of elderly people a lot of long bonds, and they got crucified when interest rates went up. Yes, they continued to get that three, 4% yield,...

A week or two ago, I read a great article in The Economist and it was talking about a new form of gambling that seems to have taken hold in the United States, and it's trading options just hours before they expire. As many of you already know, options can be bought 30, 60, 90 days, sometimes even longer out, and they become quite volatile in the last few hours of trading. In the graph below you can see just how much this activity has increased since all the GameStop traders started getting involved in the stock market post-COVID. Increasing Option Action In fact, in early 2020 before COVID really took hold, daily transaction volume was just 20 million transactions. It rose to 40 million in one year. This year, in February, we saw an average of 45 million options trades per day, and one day it peaked at 68...

What is a Central Bank Digital Currency (CBDC) A question came up recently: what is a central bank digital currency and why should we even care? Well, a central bank digital currency is in essence a digital form of the country's fiat currency issued and regulated by a central bank, or to put it another way, it's a digital dollar bill. Not to be confused with crypto, which is decentralized and not backed by any institution. 2 Types of Central Band Digital Currencies There are two types of these devices. One is wholesale, one is retail. Wholesale central bank digital currencies are for interbank relationships. Really, the benefit of that will just be simplicity, reduced costs, more rapid transfers. It's going to be part of the plumbing of the financial system. Doesn't really affect you and me. What would affect you and me though, is the retail version that could...

So there's been a lot written about the importance of the U.S. dollar being the global reserve currency. What happens if we lose that status and is that even likely? Periodically, you'll read this discussion about the reserve currency status and how with the debt and other factors, the United States is at risk of losing that status. A couple of questions will follow. One is "so what?" And two is "what does it mean?" First, what is the reserve currency? A reserve currency is basically a core currency that's used for global trading. It's a currency that people in other countries want to hold, and the fact of the matter is that the United States is not only a core currency, it is the preeminent core currency. The two other major core currencies are the euro and the renminbi from China. Why is it important? Why do we care?...

This is the fifth video in this series. In the first four, we identified real estate investment opportunities, we discussed the challenge of capital gains and depreciation, we talked about using 1031 exchanges to defer that depreciation. But is there a way to just eliminate those capital gains? A qualified opportunity zone. What is it? It's essentially a designated geographic area, usually a low-income community, and it's designated within the rules of the Tax Cuts and Jobs Act of 2017. It is designed to incentivize investment in areas that are underserved financially, that need economic development. There's a whole debate as to how effective this has been, but that's not the purpose of this video. If you invest a high capital gain rollover into a qualified opportunity zone and you hold it for five years, 10% of those capital gains that you invested on top of the gains in the...

In the last three videos we've talked about real estate investing, capital gains, depreciation, recapture, and how to defer those using 1031 exchanges. As we know, 1031 exchanges defer capital gains on real estate transactions, but sometimes they're tricky. Today we're going to talk about some advanced strategies to maximize the benefit of 1031 exchange. So, you want to do a 1031 exchange. You’ve got the property. You've sold it. But for whatever reason, maybe it's a very rich real estate market, maybe there's just a lack of inventory, you can't identify in 45 days, or you can't close in 180. That may be a financing issue. What are you going to do? Well, all is not lost. There's actually a strategy called a Delaware Statutory Trust, a DST. It's a very complex trust, but it's okay, you're not inventing it. There are alt investors, there are private investors, who...

With all the news of bank failures, just how fragile is the banking system today and what, if anything, can you do about it? If you're one of my clients, you already know that interest rates, when they rise, cause bond values to fall. Long bonds fall a lot. This is why for the last two to three years, we have been putting our clients in short-term bonds to protect them from the ravages of the bond market in a rising interest rate environment. Somehow, to my great fascination and to the consternation of regulators, the Silicon Valley Bank, Signature Bank, First Republic Bank*, and probably more to come broke that most fundamental rule, and when loaded up with cash post-COVID because everybody got disbursements, they got bailout money, they got PPA money, they wanted to put that money somewhere and they decided that treasuries weren't yielding enough, "We'll put...

I’ve previously talked about real estate as an investment asset class. Of course, the challenge already identified is that when you sell investment real estate, you now must recapture depreciation and you'll be also taxed on capital gains. Are there strategies to defer gains or maybe even eliminate them on the sale of your property? The short answer is yes. There are three primary strategies available. One is the 1031 exchange, the second is a qualified opportunity zone, and the third is the installment sale. Now, in the last video we talked about the simplest one - your personal residence. If you own a personal residence for more than a certain amount of time and lived in it two out of five years, the sale of that property, if you're an individual, you can roll over $250,000 of capital gain, if you're married, $500,000 of capital gain into your next...

If you're a real estate investor, of course one of the big bugaboos is real estate taxation - how do you maximize the tax benefit of your real estate investment? To an extent, almost all of us are real estate investors, even if we're not thinking about it. As a homeowner you're enjoying a mortgage interest deduction, probably, and a property tax deduction. There are limits, a $10,000 cap here, a million dollar mortgage there. But in essence, even a homeowner is getting some kind of tax break. And should you sell that house between $250,000 and $500,000 in capital gain can get rolled into a future house. All good reasons if you're staying put, to consider real estate for your residence because it's also an equity building tool. However real estate investors, in addition to these breaks, can depreciate the property and enjoy other much more sophisticated benefits. Depreciation...