FIG Topics of Interest

 

12/04/17

A cool $1 million has long been considered the gold standard of retirement savings. These days, it's only a fraction of what you will really need.

Click here to download a pdf of this article, Missile.pdf
 
 

11/29/17

Congress is headed toward passing another stop-gap spending bill that puts off for two more weeks some hard choices on funding the government and on a host of other issues that lawmakers are scrambling to wrap up before the end of the year.

Click here to download a pdf of this article, Missile.pdf
 
 

11/28/17

Ron Johnson of Wisconsin has said he opposes the bill as written because it offers more tax advantages to corporations than to pass-through businesses, such as partnerships and limited liability companies. He’s seeking changes, but it’s not yet clear whether Senate leaders will be able to satisfy his demands.
Johnson has said he’d vote no on the bill as it’s currently written because the measure offers major corporations a more generous tax cut than it offers to pass-throughs. The bill would provide such businesses -- which can range from mom and pop grocers to national law firms -- a 17.4 percent deduction on their business income. By comparison, the bill would cut the corporate tax rate to 20 percent from 35 percent beginning in 2019.

 “I’m not exactly sure what’s going to happen in committee; we’re working diligently to fix the problem,” Johnson told reporters from his home state Monday, according to his office. “If we develop a fix prior to committee, I’ll probably support it but if we don’t, I’ll vote against it.”
Bob Corker of Tennessee, meanwhile, has joined his fellow Republican James Lankford of Oklahoma in seeking a tax-increase trigger in the bill that would prevent it from increasing U.S. deficits. The official congressional scorekeeper has said the bill would boost federal deficits by $1.4 trillion over 10 years.

The mechanism under discussion might boost tax rates if the bill doesn’t result in a sufficient level of economic growth to cover the cuts, Lankford told reporters. The bill’s proponents say they’re confident it would produce additional annual growth of 0.4 percent -- though independent studies have questioned that assertion.

“This is not a threat,” Corker said of his possible “no” vote at the committee. He noted that he has said repeatedly that he will oppose tax legislation that adds to deficits.

Senate Finance Chairman Orrin Hatch, the chamber’s chief tax writer, said Monday evening that he’s concerned about the budget panel’s vote. “I’m very concerned about it,” the Utah Republican told reporters. “I think we’ll be fine, but I am concerned, yeah.”

Click here to download a pdf of this article, Missile.pdf
 
 

11/27/17

What to Watch This Week:

On Tuesday, the Senate Budget Committee is scheduled to meet on the tax legislation at 2:30 p.m. The panel, which has 12 Republicans and 11 Democrats, could decide to send the tax bill to the Senate floor. Trump is also scheduled to attend the regular policy lunch held by Senate Republicans. On Tuesday, the Senate Budget Committee is scheduled to meet, and it may send the bill to the Senate floor. Two GOP panel members have emerged as potential sticking points. One of them is Bob Corker of Tennessee and the other is Ron Johnson of Wisconsin, who wants more generous tax cuts for partnerships, limited liability companies and other so-called pass-through businesses. Senate leaders have said they want to address Johnson’s concerns.

If all goes well for GOP leaders, the Senate may begin floor debate, which would culminate perhaps Wednesday or Thursday in a “vote-a-rama”-- a chaotic session in which any senator can offer an amendment to the bill. Democrats would be expected to offer a variety of amendments designed to damage, delay or derail the measure -- which may lead to some political fireworks. The voting would probably take place overnight.

If Republicans have the 50 votes they need, Senate leaders may call for a floor vote on Thursday or Friday.

The bill’s path to passage isn’t clear yet. Three Republicans -- Tennessee’s Bob Corker, Arizona’s Jeff Flake and Oklahoma’s James Lankford -- have raised concerns about the measure’s effects on the nation’s debt, and Corker has said he won’t support legislation that adds to the deficit. He has said he’d allow for “reasonable” estimates of economic growth.

GOP Senator John Thune of South Dakota said on “Fox News Sunday” that even a small uptick in growth “would cover the cost” of the tax bill. But so far, he and other Senate leaders lack official findings to back their assertions.

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11/24/17

U.S. shoppers had splurged more than $1.52 billion online by Thanksgiving evening, and more bargain hunters turned up at stores this year after two weak holiday seasons as retailers opened their doors early on the eve of Black Friday.
U.S. shoppers had splurged more than $1.52 billion online by Thanksgiving evening, and more bargain hunters turned up at stores this year after two weak holiday seasons as retailers opened their doors early on the eve of Black Friday.

 

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11/22/17

“The decline in the unemployment rate seems to be weighing heavily in their thought process,” said Stephen Stanley, chief economist at Amherst Pierpont Securities in New York. “The Fed views policy from a risk management perspective and the risk is going too slowly.”
 

“I do think we could get a sense of their near-term expectations for a rate hike,” said JPMorgan Chase & Co.’s Chief U.S. Economist Michael Feroli in New York.

Dallas Fed President Robert Kaplan said Friday that “we are likely to overshoot maximum sustainable employment” and that needs to be taken into account in forming monetary policy.

“While growth is solid for now, the path of rate hikes next year is not set in stone,” said Chris Rupkey, chief financial economist with MUFG Union Bank in New York.

“If inflation fails to move up, then either they will have to slow the pace of hikes, or change the message to relate the need for tightening to financial stability as well as inflation,” said Jonathan Wright, an economics professor at Johns Hopkins University in Baltimore.



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11/21/17

The equivalent of trillions of dollars are held in all manner of assets in China, from the high-return wealth management products to so-called entrusted investments.
Taking the heftiest piece of the leverage pile first, wealth management products have had a precipitous rise over the past few years, but now seem to be feeling the heat of deleveraging. This is the asset class that is coming under renewed scrutiny from regulators.

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11/20/17

The White House says the true cost of the opioid drug epidemic in 2015 was $504 billion, or roughly half a trillion dollars.
In an analysis to be released Monday, the Council of Economic Advisers says the figure is more than six times larger than the most recent estimate. The council said a 2016 private study estimated that prescription opioid overdoes, abuse and dependence in the U.S. in 2013 cost $78.5 billion. Most of that was attributed to health care and criminal justice spending, along with lost productivity.
The council said its estimate is significantly larger because the epidemic has worsened, with overdose deaths doubling in the past decade, and that some previous studies didn't reflect the number of fatalities blamed on opioids, a powerful but addictive category of painkillers.

Click here to download a pdf of this article, Missile.pdf
 
 

11/14/17

"My aim today is not to argue for state-contingent price-level targeting," Evans said on Tuesday. "That may be a good way to go, but at this point, I just don't know. My point is that we should be planning for these inevitable future situations today."
Chicago Federal Reserve Bank President Charles Evans on Tuesday became the second Fed policymaker in recent days to call for a new approach to rate-setting that would allow the central bank to respond to shocks when interest-rate cuts alone are not enough.

 

One option is so-called price-level targeting, Evans said in remarks prepared for a European Central Bank conference in Frankfurt.

Under such a strategy, a central bank combats bouts of too-low inflation by allowing inflation to run too high for a time. Evans championed this policy in 2010 to deal with sagging inflation, but ultimately the Fed rejected such an "extreme" idea as too difficult to undertake during an economic crisis, Evans said on Tuesday.

Now that economic times are calmer, Evans said, the Fed can study and analyze this and other approaches, and prepare the public for their possible use in the next severe downturn if the Fed cuts rates to zero and still needs more firepower to get the economy growing again. Bouts of zero interest rates are likely to become more common in the future as potential economic growth slows, Evans and other Fed policymakers believe.

Last week, San Francisco Fed President John Williams embraced the idea of price-level targeting as a way to set rates in the future, though he too said such a shift would require plenty of study and debate.

Both men referenced the recent work of former Fed Chair Ben Bernanke, who last month argued for a framework where the Fed is to adopt price-level targeting on a temporary basis when rates became too low for conventional policy.

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11/13/17

Ways and Means Chairman Kevin Brady took a hard-line approach during a “Fox News Sunday” interview, saying the House won’t accept a tax bill that eliminates the deduction entirely. The House bill retains the deduction for property taxes up to $10,000.

https://www.bloomberg.com/news/articles/2017-11-13/house-senate-set-to-clash-over-state-break-tax-debate-update
The Senate Finance Committee will start debating late Monday afternoon the 247-page tax proposal released last week by Chairman Orrin Hatch. As of now, the “conceptual” mark has some significant differences with the tax bill the House Ways and Means Committee approved last week -- chief among them the Senate’s call for repealing the state and local tax deduction entirely.

“There are going to be things that we absolutely object to” in the bill that comes out of conference, said Scott Perry, a Pennsylvania Republican and member of the conservative Freedom Caucus. “But we’re going to have to look at it in its totality and say, ‘Yeah I don’t like it,’ but you have a binary choice” to vote for or against the tax bill, Perry said.
House Speaker Paul Ryan has promised that the differences will be settled in a conference between the two chambers, but some House lawmakers are concerned they’ll just be forced into a take-it-or-leave-it vote for a bill that looks much closer to the Senate version.
A final bill is more likely to resemble the Senate proposal, in part because the upper chamber has a slim majority and can only afford to lose two Republican senators and pass a bill without any Democratic support. The House has a wider majority and can afford up to 22 defections.

After the Senate Finance Committee markup, the panel will release legislative text and vote on the measure by the end of the week, according to Hatch. Majority Whip John Cornyn said the Senate plans to vote on their bill the week of Nov. 27. -- Anna Edgerton

What to Watch on Monday:

  • The Senate Finance Committee will begin debating the tax bill at 3 p.m. Monday, in a markup that is expected to stretch out for several days and could feature votes on numerous amendments.
  • Potential amendment related to the tax treatment of carried interest. The break for investment managers is likely to change in the Senate, even though the chamber’s current tax proposal doesn’t call for it, according to Pat Toomey of Pennsylvania and Chuck Grassley of Iowa.
  • On the House side, Majority Whip Steve Scalise said that GOP leaders would work to win over rank-and-file Republicans Monday evening. More changes to the House bill could still come before the planned floor vote this week. If GOP leaders need to make last-minute changes to guarantee enough Republican “yes” votes, they could stick in a manager’s amendment in the Rules Committee, which is scheduled to consider the bill on Wednesday.
Click here to download a pdf of this article, Missile.pdf