Morning Market Preview for September 17th, 2024

When it comes to financial planning, managing your "Qualified Term" is not only about preparing for a comfortable retirement but also about strategically reducing your current tax liabilities. This term essentially measures how long your retirement assets can sustain your lifestyle. Here's a detailed explanation of how optimizing your Qualified Term can lead to tax savings now while also securing your financial future.

What is Qualified Term?

The Qualified Term is a financial metric that evaluates the sustainability of your retirement savings based on your current lifestyle and planned retirement spending. It helps you understand how many years your retirement assets, such as 401(k)s or IRAs, can support you post-retirement, taking into consideration your annual withdrawal rate and the expected growth of your investments.

Immediate Benefits: Reducing Tax Bills

1. Pre-Tax Contributions: Contributing to qualified retirement plans like a traditional 401(k) or IRA allows you to make pre-tax contributions, which reduce your taxable income. By maximizing these contributions, you can lower your current tax bill significantly. Simply put: Every dollar you contribute to a qualified retirement account reduces your taxable income by that amount. If you make $75,000 and contribute $12,000 then your taxable income is reduced to $63,000.

2. Tax-Deferred Growth: Investments in these accounts grow tax-deferred, meaning you don't pay taxes on the earnings until you withdraw them, potentially at a lower tax rate in retirement. This can result in substantial tax savings over the course of your career.

3. Tax Credits and Deductions: Depending on your income and how much you contribute, you may also qualify for additional tax credits or deductions. These benefits enhance the immediate financial advantages of strategic retirement planning.

Long-Term Advantages: Secure Retirement Planning

1. Ensuring Sufficient Retirement Funds: Understanding and managing your Qualified Term helps ensure that your retirement savings are sufficient to support your desired lifestyle for many years post-retirement.

2. Strategic Withdrawal Planning: An optimal Qualified Term involves planning the timing and amount of withdrawals from your retirement accounts to ensure financial stability in retirement while minimizing tax liabilities.

How an Arena Investor Advisor Can Optimize Your Qualified Term

1. Tailored Financial Strategies: An Arena Investor Advisor can develop personalized strategies that optimize both your immediate tax benefits and long-term financial goals. They can help determine the right contribution levels to your qualified accounts to maximize tax efficiency now and sustainability later.

2. Adapting to Financial Changes: Life events and financial markets ebb and flow. Your financial advisor will monitor changes and adjust your plan as necessary, ensuring that your Qualified Term remains aligned with your evolving financial situation.

3. Educational Support: For newcomers to financial planning, understanding the nuances of qualified accounts, tax implications, and retirement planning can be overwhelming. Your Arena Investor Advisor will provide clear, jargon-free explanations and ongoing education to empower your financial decision-making.

4. Advanced Planning Tools: Utilizing sophisticated planning tools from industry-leading apps and platforms , Arena Investor Advisors can illustrate various scenarios and strategies, showing you how different approaches affect your Qualified Term and tax liabilities.

All In All

Your Qualified Term is a critical element in your financial strategy, impacting both your current tax situation and your future financial security. By effectively managing this term, you're taking a proactive approach to reduce your immediate tax burden while ensuring a stable, financially secure retirement.

With the expert guidance of an Arena Investor Advisor, tailored to your unique financial needs and goals, you can navigate the complexities of tax planning and retirement with confidence, ensuring that you make the most of your financial resources today and tomorrow.

Built for The One in the Arena

Arena Investor is on a mission not only to help with financial planning, and investment management, but also with education. Keep reading, watching, following, and sharing great Arena Investor content. And as always if you want professional advice, we are glad to be your teammate – along a financial journey you can actually enjoy.

You’re the Hero.
    We’re the Guide.

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Note: Economics is the study of how society uses resources for the development, production, procurement, distribution, and consumption of tangible products (such as iPhones) and intangible services (such as Apple Music).

John Maynard Keynes

The most important name in today’s worldwide economic system is John Maynard Keynes. Keynes is the one who developed economics as we know it. He wrote “The General Theory of Employment Interest and Money” in 1936 in the UK. Similar to Copernicus seeking to understand the movement of the Sun, planets, and stars, Keynes wanted to understand unemployment because The Great Depression was such a problem in the 1930s, and the existing understanding of economics did not explain what was happening (or what could be done about it) very well enough for governments to partake in righting the economic ship during the storm.

Note: Come back later for more articles about other economists across the ages, such as The Austrian School of economics (also very significant).

Keynes wanted to understand

He wanted to know what existing economics at the time could not explain about The Great Depression – but he did so with an emphasis on unemployment and by taking snapshots of the economy, as if it was static. So what he developed is useful, but lacks usefulness on growth or inflation issues.

More specifically, Keynes wanted to understand how employment and prices affect each other; how government affected employment and prices; and more than anything, he wanted to know how to “control” (or at least influence economies/money), such as how to drive employment up. 

More or less, Keynes used existing approaches that microeconomists used when evaluating businesses, plus some new approaches to expand economic knowledge into something bigger: macroeconomics

Simply put, Keynes took what was small or local and made it big – big enough for governments to use. Naturally, macroeconomics includes microeconomics since the economy of each piece would be part of the economy of the whole.

Milton Friedman came later

He pointed out that Keynesian Economics could not explain the relationship between price levels and economic output. He called this “the missing equation.” Friedman melded classical economics understandings of Adam Smith (and others) with Keynesian Economics. Friedman concluded that the classic theories worked in the long-run, but Keynesian Economics works in short intervals.

Local isn’t universal

“What goes up must come down” is right locally (in your backyard), but on a bigger scale it is wrong . The meteorites from space that have landed on Earth did not come back down to their origin when they “went up.” They never came back down.

Building on Friedman’s work

An economist from New Zealand began working with 100 years of UK data on the relationship between unemployment and inflation. The economist’s name was AW Phillips, and his work became known as The Phillips Curve. This curve was adopted by economists worldwide and is now a major contributor to economics. It shows that as unemployment rises, wages increase, and when unemployment falls, wages decrease.

Friedman and fellow economist Edmund Phelps felt that manipulating monetary policy (such as managing inflation) was not the right way to manage unemployment and that unemployment should be left “natural” and unaltered by central banks, the banks of governments.

Then in the 1970s and 1980s the US experienced both high unemployment and high inflation. Phelps and Friedman then clarified the understanding to show that The Phillips Curve was true if inflation was unanticipated. If it was anticipated, then the conditions were different. This ushered in a whole new element to economics: Expectations are part of the equation in a significant way.

Nowadays, we see expectations set by world governments very deliberately so they can use it as another way to manage economic systems. Something like “a period of somewhat-higher inflation can be expected in the next two quarters,” is common to hear from a Fed Chairman (Federal Reserve Chairman) since this economic understanding came to be.

Of note, since the late 80s/early 90s, economic growth theory is what has dominated economist efforts (since inflation, employment, and prices were already being managed with Keynesian and Friedman understanding), and GDP expansion continued as a top priority.

Back to The Great Depression

Let’s not forget how the interest and need for macroeconomics got started: The Great Depression. The Great Depression was not just in the US. It was global. It started in the US in 1929 though, and by 1930 it had reached the UK. Half of Britain’s trade (sales around the world) disappeared, and in some areas unemployment reached 70%! No wonder efforts were made to understand economics better.

The US had an awful time through The Great Depression too of course, as did countless other countries. For the US, The Great Depression did not end until we entered WWII in 1941. The statistics and the stories are really sad, and to this day people and governments study, fear, and work to avoid the conditions that led to The Great Depression.

Note: The Industrial Revolution followed by The Great Depression followed by WWII followed by The Cold War firmly cemented Keynesian Economics into world governments for a variety of reasons.

Boom and bust

Economic booms (a hot economy) and busts (a cold economy) are now known as business cycles. You may think that you always want your economy hot, but that is actually not true. Booms can lead to bubbles and bubbles pop and you get busts. Understanding business cycles is just one piece of the economy. Another piece of the economy is understanding growth.

Note: As investors, if we understand where things have been we can better understand where things are going — and that’s a major strategic advantage.

Let’s talk about GDP

When you add up all of the goods (such as iPhones) and services (such as Apple Music) you get GDP (Gross Domestic Product). GDP is measured as Total County Production measured in dollars (if you’re the US). GDP has been growing for 200 years for capitalist countries.

Note: there is no purely capitalist country, but each country has rules and people that are more capitalistic than others.

GDP across decades has a very obvious upward trend

But GDP throughout the weeks, months, quarters, and a year can (and do) have significant ups and downs. It is within these ups and downs that successful investors thrive and profit.

Let’s talk about inflation too

The last concept to introduce in this article is inflation. For most people the word has nothing but negative connotations. But in the world of Keynesian economics inflation is a given, and it's managed with government actions. 

Simply put: inflation is a rise in prices. 

Often people think inflation is simply a devaluing of currency by printing too much currency, but consider this: if currency was devalued then prices would go up, no? They would. So devaluing currency is a type/cause of inflation, but there are other types/causes too.

It’s right to monitor and take appropriate action against inflation

When prices go up enormous amounts this is called hyperinflation. For instance, between WWI and WWII Germany had inflation of 230% per month at times! That means every day prices went up 4% on average. So if milk cost $1 on Monday, it cost $1.04 on Tuesday, $1.08 on Wednesday, $1.12 on Thursday, and $1.17 on Friday. By the end of the month milk would cost $2.30. By the end of the year milk would cost $8.20. And a $25,000 car would cost $180,020.60 if those hyperinflation rates happened to us today. No wonder it scares people.

Historically, the US has managed inflation well

In the last 100 years, our worst experience had been in the 1970s when inflation reached 7% from 1973-1975. However, in 2022 inflation met or exceeded 7.5%. 

The US government used many tools and decision-makers to keep it down and return to the 3-4% average we have had since 1946 (on the heels of WWII). Before WWII, the US averaged about 1.7% inflation.

Around the world though, countries have been far more adversely affected by inflation. As mentioned, Germany experienced 230% inflation per year. Israel saw 400% inflation in 1985; Argentina has seen 700% inflation; Bolivia saw 12,500% in 1984. There are many more examples, but Keynesian economics does indeed have the understanding, tools, and systems that manage inflation well.

Inflation is like cancer to economies — and it must be detected early and expertly managed. When inflation is detected, it gets everyone’s attention!

So that’s the introduction to economics. There is a lot more to follow, but we hope you liked what you read, and we hope you have learned something too. Is this enough understanding for you to go start investing in stocks with great success? No. But we can build to that.

The key concepts in this article to remember are:

• John Maynard Keynes “invented” macroeconomics for governments
• Government using macroeconomics to influence and manage a country’s economy
• Milton Friedman identified the relationship between prices and economic output
• AW Phillips identified the relationship between Unemployment and inflation, known as The Phillips Curve
• Phelps-Friedman established expectations as a key component of an economy
• Business cycles, GDP, and inflation as the major factors government considers
• Since the late 80s/90s, economic growth has become the priority for economists

Built for The One in the Arena

Arena Investor is on a mission not only to help with financial planning, and investment management, but also with education. Keep reading, watching, following, and sharing great Arena Investor content. And as always if you want professional advice, we are glad to be your teammate – along a financial journey you can actually enjoy.

You’re the Hero.
    We’re the Guide.

‍

Good morning, Heroes!

Here’s your Morning Market Preview for September 11th, 2024
Read, or listen relaxingly for a few minutes – whichever you prefer!

Key Economic Reports

• Tomorrow’s market may react to new data regarding U.S. inflation, as investors await further insights into consumer price trends. The Consumer Price Index (CPI) and core CPI are set for release, key indicators used to measure inflation. These reports are critical as they will provide insight into how inflation is behaving and influence Fed decision-making.

Key Events & Earnings Reports Today

MIND Technology

• MIND Technology, Inc. specializes in providing advanced technology solutions primarily to the marine survey, defense, seismic, and security industries.
  
  

• Importance: The earnings report underscores MIND Technology's role not just as a company reporting financials but as a trendsetter in technology adoption, operational efficiency, and market expansion strategies. This makes their earnings not only a reflection of past performance but a predictor of future market trends and investor sentiment in the tech sector.
  
  
• Expectations: Investors and analysts are likely expecting MIND Technology to report on several key metrics including revenue, earnings per share (EPS), and possibly updates on gross margins, given the mention of 77% gross margins in recent discussions. There's an anticipation of continued or improved profitability, especially with hints of cost-cutting measures and operational efficiencies.

The Fed

• The Fed's next meeting is scheduled for the 17th and 18th. Expectations of whether they will continue or pause rate hikes will depend on tomorrow’s CPI report, which will provide clues on inflation’s trajectory.

Stocks

Year-to-Date Performance:

• Up Most: Utilities & Information Technology continue to lead the way at 20.32% and 19.27%, respectively.
  
  
• Down Most: Energy and Consumer Discretionary trail all other sectors still at 3.39% and 4.44%, respectively.

5 Day Moving Average: This is the percent of Large Cap stocks above their 5 day average

• Up Most: Real Estate is at 90% the last 5 days, and Utilities at 74%.
  
  

• Down Most: Energy is down to 14% the last 5 days and by far the biggest laggard.

Crypto

• Bitcoin: Up to about $57,101 at the open, and is up 36.93% this year.
  
  
• Ethereum: Also up, at about $2,351 at the open, and is up 3.62% this year.
  
  
• Top Gainers Recently: Luna and Zcash are both up a good bit recently at 4.18% and 3.7% respectively.

Bonds

• 2-Year Treasury Yield: Open at 3.59%, continuing its yield decline this year.
  
  
• 10-Year Treasury Yield: Open at 3.637%, also continuing its yield decline this year.

Gold

• Open Price: $2,504.85 per ounce, up again, now up 22.07% this year, driven by safe-haven buying amid economic uncertainties.

Real Estate

• 30-Year Fixed Mortgage Rate: Around 6.22%, down a bit more than 6% this year.
  
  
• Trends: A cooling market continues its shift towards more affordable housing options.

Geopolitical Aspects

• Global markets are being influenced by ongoing concerns surrounding U.S.-China relations, with trade and supply chain issues still in focus. Additionally, rising energy prices are a key global concern impacting market sentiment.

Worldwide Market News

• In global news, China’s economic slowdown continues to be a focal point for investors. Global supply chain disruptions and inflation concerns are still top of mind, influencing commodity prices and corporate earnings.

Built for The One in the Arena

Arena Investor is on a mission not only to help with financial planning, and investment management, but also with education. Keep reading, watching, following, and sharing great Arena Investor content. And as always if you want professional advice, we are glad to be your teammate – along a financial journey you can actually enjoy.

You’re the Hero.
    We’re the Guide.

P.S. Simple Explanations of Key Concepts to Level Up Your Financial Education

CPI: Measures inflation by tracking price changes in everyday goods. A higher CPI suggests rising inflation.

Earnings Reports: Companies release quarterly reports to show profits or losses. Investors look at these to predict future stock prices.

Treasury Yields: The interest rate the government pays to borrow money. Higher yields mean investors expect future inflation or higher interest rates.

Cryptocurrencies: Digital assets like Bitcoin are volatile but can provide high returns. Their value is influenced by market demand and adoption.

Real Estate: Higher mortgage rates make home buying more expensive, which can cool down the housing market.

Understanding these elements helps in navigating the financial markets, where each piece of information can be a puzzle piece in predicting market movements or making informed investment decisions.

You’re the Hero.
    We’re the Guide.