After attempting for several years to coax inflation back up to 2% in the US economy, the Federal Reserve has finally succeeded. The Commerce Department reported last Friday that consumer prices were 2.3% higher in May than they were the year before. Core inflation, which ignores food and energy prices, was up 2% year over […]
The Administration Roils the Stock Market
Economists tell us that there are a few things that can derail a strong economy. The government can raise taxes. The central bank (i.e. Federal Reserve) can raise interest rates. Prices can jump (i.e. inflation). War can break out. The U.S. economy has been performing very well for the past several quarters. Inflation is low. […]
Ladies and Gentlemen – Please Fasten Your Seatbelts
“LADIES AND GENTLEMEN – PLEASE FASTEN YOUR SEATBELTS” If you have every flown with a commercial airline, you have undoubtedly heard these words. This message is broadcast whenever the plane has encountered turbulence and there is resulting concern about the safety of the passengers and crew. After last week’s performance of the stock market, investors […]
How do the House and Senate tax reform proposals compare?
Last week we provided an overview of the House tax reform proposal. Later in the week the Senate released its version of the legislation. Below we add comments to our blog post last week and indicate the Senate’s proposal. We have highlighted the Senate version when it differs from that of the House. Income Tax […]
What’s in the administration’s tax reform proposal?
Last week, the Trump administration outlined its proposals for tax reform. Entitled the “Unified Framework for Fixing Our Broken Tax Code”, the proposals, if enacted, would result in the most significant changes to the tax code in 30 years. Reduction in the number of brackets For individuals, the proposal would reduce the number of tax […]
Is the stock market overvalued?
Professional money managers use various tools to measure the value of an investment. One common measure is the Price/Earnings ratio. To get a P/E ratio, take the price of a stock and divide it by its earnings. We will use Facebook. The closing price for FB (its ticker symbol) on Friday was $172.45 and its […]
A Market Update – March 28, 2017
The US stock market, as measured by the Dow Jones Industrial average, has now experienced six consecutive days of losses. This has not happened since 2011. The markets may be questioning whether the new administration will be able to execute on plans that include tax reform, reduced governmental regulation, better trade arrangements and fiscal stimulus. […]
Springwater’s Source – The Big Mac Index [September 2016]
The Big Mac index was invented by the British news magazine The Economist in 1986 as a half-serious guide to whether currencies are at their “correct” level. It’s based on the theory of purchasing power parity (or PPP), which is the idea that in the long run, exchange rates should move toward the rate that […]
Springwater’s Source – A(n Almost) Free Lunch for Investors?
This is Springwater’s Source, a topic or issue in personal finance and investing, shared visually. The Source will share one concept, once a month, in about a minute or less. Educated investors understand that there is a benefit to diversification. Setting aside grandma’s warning to not put “all your eggs in one basket”, there are […]
Springwater’s Source – Low Interest Rates and Expected Portfolio Returns
This is Springwater’s Source – a topic or issue in personal finance and investing, shared visually. The Source will share one concept, once a month, in about a minute or less. An important concept derived from financial economics is that of a “risk premium”. In a nutshell, this premium is what investors can expect to […]