There are a couple of things going on here. First, a changing of the guard: Janet Yellen is set to succeed Ben Bernanke as chair of the Federal Reserve. Next, an improving economy: employment numbers have been surprisingly good as of late, pushing unemployment down to 7% recently. Lastly, lots of unease and lack of clarity: investors have been skittishly anticipating the end of the monetary stimulus provided by the Federal Reserve.
All of these things came together yesterday in possibly the most exciting monetary policy story since quantitative easing started.
Quantitative easing (QE), round infinity, the latest of the Federal Reserve's monetary stimulus, consisted of $85 Billion of purchases of long term bonds and mortgages. This held long term interest rates down, ostensibly to encourage long term investment. A possibly unintended side effect was to assure anyone holding or buying bonds that their prices would keep going up for a little while. The investor uncertainty around QE has been the speculation over when and how it would end, or taper off.
More information came to market yesterday when the Fed announced that they would start to reduce purchases to $75 Billion a month next month. This is not a huge reduction, but the timing is a great relief for a few reasons. Firstly, this frees Janet Yellen of the pressure of continuing the full scale purchases. With so much institutional momentum behind QE, it is a relief that the brakes are already being applied, if only tapped lightly. Second, since the tapering of QE was supposed to be based on the health of the economy, this is a good omen - the Fed believes that the economic trends will support the withdrawal of stimulus. Lastly, investors now have an extra crumb of information when analysing investments. The question of when reductions would happen is off the table, we get to speculate on everything else now!
Independent, Fee-Only Financial Advisor
Thursday, December 19, 2013
Thursday, December 05, 2013
Flying Mississippi!
We flew to Philadelphia, Pennsylvania for Thanksgiving. Philly is the home of the cheesesteak sandwich, Independence Hall, and the Flyers. More importantly, it's the home of my daughter.
Flying from the Jackson International Airport is a chore. There are no through flights. The options for carriers and schedules are limited. Usually, we end up on Delta. Of course, that means we have to travel through Atlanta.
Jackson's airport is small. The agent at the counter may also be the one at the gate. I've wondered if they also have to load the luggage and fill up the plane with fuel. Mainly, it's a one man show.
On the way back home, we went back through Atlanta. The flight from Philly to Atlanta was a little late taking off. The pilot said something about maintenance issues. That caused my ears to perk up! Couldn't we just change planes? After some time spent on the runway, we ascended. My perked up ears heard a high-pitched sound. I started saying my prayers before I realized there was a dog on the plane!
The yapping and crying lasted most of the flight. Good grief! We couldn't wait to get on the flight to Jackson where we could have some peace and quiet. Then I started hearing something. No, it couldn't be! Across the aisle from me was a passenger with a cat under his seat! He sheepishly apologized for the meowing. And I thought flying with kids was bad!
We made it home, glad to be back in Mississippi. We love home, but we love to travel. Despite its difficulties, air travel is really the way to go, so I was quite disappointed to hear the news today.
Southwest Air will no longer service Jackson. Yet another one bites the dust. We are left with so few options to get OUT of Mississippi that it makes staying here and doing business here difficult.
Mississippi is a small state. We are not a wealthy state. I understand that airlines have to make business decisions based on profit potential, but we NEED more options. It's time for our state government to step in and offer subsidies to support air travel to the Capitol City.
Business packages are put together all the time to encourage development in our state. Why not do this for air travel? It's the link that connects us so that other business happens. Surely, such an expenditure could be easily justified.
We could even request the planes have a Magnolia on the side. Mississippi Air-- now THOSE are some friendly skies!
Flying from the Jackson International Airport is a chore. There are no through flights. The options for carriers and schedules are limited. Usually, we end up on Delta. Of course, that means we have to travel through Atlanta.
Jackson's airport is small. The agent at the counter may also be the one at the gate. I've wondered if they also have to load the luggage and fill up the plane with fuel. Mainly, it's a one man show.
On the way back home, we went back through Atlanta. The flight from Philly to Atlanta was a little late taking off. The pilot said something about maintenance issues. That caused my ears to perk up! Couldn't we just change planes? After some time spent on the runway, we ascended. My perked up ears heard a high-pitched sound. I started saying my prayers before I realized there was a dog on the plane!
The yapping and crying lasted most of the flight. Good grief! We couldn't wait to get on the flight to Jackson where we could have some peace and quiet. Then I started hearing something. No, it couldn't be! Across the aisle from me was a passenger with a cat under his seat! He sheepishly apologized for the meowing. And I thought flying with kids was bad!
We made it home, glad to be back in Mississippi. We love home, but we love to travel. Despite its difficulties, air travel is really the way to go, so I was quite disappointed to hear the news today.
Southwest Air will no longer service Jackson. Yet another one bites the dust. We are left with so few options to get OUT of Mississippi that it makes staying here and doing business here difficult.
Mississippi is a small state. We are not a wealthy state. I understand that airlines have to make business decisions based on profit potential, but we NEED more options. It's time for our state government to step in and offer subsidies to support air travel to the Capitol City.
Business packages are put together all the time to encourage development in our state. Why not do this for air travel? It's the link that connects us so that other business happens. Surely, such an expenditure could be easily justified.
We could even request the planes have a Magnolia on the side. Mississippi Air-- now THOSE are some friendly skies!
Thursday, November 21, 2013
You Go, Girl!
I am absolutely over the moon about the impending approval of Janet Yellen as the next Chairperson of the Federal Reserve Bank. Dr. Yellen will be the first woman to hold this position. I'm especially proud of the fact that she didn't get there with a wink and a nod, but with a lot of hard work.
Dr. Yellen has been serving as the Vice-Chair of the Federal Reserve alongside Ben Bernanke. She has years of experience behind her in the central banking arena and is an intellectual powerhouse. I've been following her for the past few years, anticipating just such a moment.
So I acted a bit like a groupie as I watched her testimony before the Senate Banking Committee. She spoke clearly and confidently about the dual mandate of the Fed. Yes, they must keep inflation low, but first they must keep unemployment low. That second goal has alluded them, thus the aggressive action of the Fed over the last few years.
Yellen did not shrink from the committee's questions. She answered in simple and direct language that showed she possesses the heart of a teacher. She instructed Congress. Further, she lectured them on their responsibilities in a financial crisis. The Fed has done its part in the face of a dire financial situation. Congress has shirked its duty in the fiscal policy area.
The strength of this woman showed throughout her appearance. She will not shrink in the face of criticism. She will not deviate from her path and plan. This woman is no shrinking violet.
With nerves of steel and a twinkle in her eye, Dr. Yellen steps into the most powerful position on the planet. She will be the next Chairperson of the Federal Reserve Bank of the United States.
You go, girl!
Dr. Yellen has been serving as the Vice-Chair of the Federal Reserve alongside Ben Bernanke. She has years of experience behind her in the central banking arena and is an intellectual powerhouse. I've been following her for the past few years, anticipating just such a moment.
So I acted a bit like a groupie as I watched her testimony before the Senate Banking Committee. She spoke clearly and confidently about the dual mandate of the Fed. Yes, they must keep inflation low, but first they must keep unemployment low. That second goal has alluded them, thus the aggressive action of the Fed over the last few years.
Yellen did not shrink from the committee's questions. She answered in simple and direct language that showed she possesses the heart of a teacher. She instructed Congress. Further, she lectured them on their responsibilities in a financial crisis. The Fed has done its part in the face of a dire financial situation. Congress has shirked its duty in the fiscal policy area.
The strength of this woman showed throughout her appearance. She will not shrink in the face of criticism. She will not deviate from her path and plan. This woman is no shrinking violet.
With nerves of steel and a twinkle in her eye, Dr. Yellen steps into the most powerful position on the planet. She will be the next Chairperson of the Federal Reserve Bank of the United States.
You go, girl!
Tuesday, November 19, 2013
Beach Bonanza!
When we make our regular trips to The Redneck Riviera (aka Gulf Shores), we always pick up the local newspaper called The Islander. The Islander is usually full of useless information and a ton of fun, personal stories-- my favorite kind of publication.
An article of actual significance caught my eye on the front page, though. The City of Orange Beach voted to give each of their 433 employees a $2000 bonus for the year. What??? What city employee EVER gets a bonus? And how can ANY municipality afford such a luxury in these difficult times?
It seems that Orange Beach ended the year with a $5 million dollar bonus. Whoa! How did this happen? Was BP so generous to them that they were able to line their coffers for the year? Or maybe business was just so good on Alabama's coast that tax revenues overflowed.
I suspect the truth is somewhere in between. Regardless, this abundance is a sign of good economic activity in an area that has suffered hard hits from natural disasters and man-made disasters in years past. Well, good for them!
It just shows that economic recovery often comes unevenly. The health of any economy depends on local conditions and may not match national averages.
Just look at Detroit. The question to ask there is whether they will ever recover. Or Ohio. Beaten down by the loss of manufacturing jobs, they are gaining some traction finally. Or Mississippi-- wasn't great before the recession and just now getting back to status quo.
Then there's Orange Beach, Alabama-- land of milk and honey. Hurricanes and oil spills are only distant memories in Orange Beach. That $2000 bonus going into every city employee's pocket will only add to their good fortune.
And the Great Recession of 2008? In Orange Beach, it's "What recession?"
An article of actual significance caught my eye on the front page, though. The City of Orange Beach voted to give each of their 433 employees a $2000 bonus for the year. What??? What city employee EVER gets a bonus? And how can ANY municipality afford such a luxury in these difficult times?
It seems that Orange Beach ended the year with a $5 million dollar bonus. Whoa! How did this happen? Was BP so generous to them that they were able to line their coffers for the year? Or maybe business was just so good on Alabama's coast that tax revenues overflowed.
I suspect the truth is somewhere in between. Regardless, this abundance is a sign of good economic activity in an area that has suffered hard hits from natural disasters and man-made disasters in years past. Well, good for them!
It just shows that economic recovery often comes unevenly. The health of any economy depends on local conditions and may not match national averages.
Just look at Detroit. The question to ask there is whether they will ever recover. Or Ohio. Beaten down by the loss of manufacturing jobs, they are gaining some traction finally. Or Mississippi-- wasn't great before the recession and just now getting back to status quo.
Then there's Orange Beach, Alabama-- land of milk and honey. Hurricanes and oil spills are only distant memories in Orange Beach. That $2000 bonus going into every city employee's pocket will only add to their good fortune.
And the Great Recession of 2008? In Orange Beach, it's "What recession?"
Thursday, November 14, 2013
The Policy of Personal Finance
Yesterday I participated in a panel discussion on personal finance. The event was held at Mississippi College and was kicked off by Governor Bryant.
Not being a fan of the Governor, I held my tongue as he held forth on financial issues and the state of Mississippi's economy. He pointed to high rankings for Mississippi on business issues. I'm not sure who produced these rankings or how sound they are. After all, we still have one of the highest unemployment rates in the nation. We have the highest poverty rate and the lowest median household income. Nothing to be proud of here. Just about cut my tongue in two listening to him crowing about his accomplishments.
The Governor also used the time-worn phrase, "Government does not create jobs." Of course, this came after listening to his intro. Bryant has spent his entire adult life in public service. Government created HIS job. He mentioned one short stint in the private sector as an insurance agent. He didn't last. Guess some people are just meant for government service.
The first panel was composed of Representative Greg Snowden from Meridian, Treasurer Lynn Fitch, and State Insurance Commissioner Mike Chaney.
Fitch focused on her efforts to include Personal Finance in the K-12 curriculum. This is a laudable effort. She commented on the importance of educating our workforce about money management. I could not agree more. Of course, I cringed a little at her grammar. She might be good with money, but she could use a little more time in English class.
Chaney came out of the shoot talking about Obamacare. He asked the audience who didn't have health insurance. Several hands went up. He encouraged folks to use the website... in December! He gave out the toll-free phone number and talked about the navigator program. I was surprised at his audacity. Of course, I was also surprised that we had both Chaney and Bryant in the same room and no one ended up with a bloody nose!
Snowden was a total unknown to me. Don't know if he's a "D" or "R." I like that in an elected official. He addressed our budget woes and hammered on healthcare. He said the biggest issue we face is the rising cost of healthcare and how it is consuming our state budget. Couldn't agree more.
Fitch later spoke about the two college savings programs sponsored by the State of Mississippi. While MPACT is in decent shape, it remains frozen as we consider ways to fully fund the program. She claimed that Mississippi's MACS program is one of the best in the nation. I took issue with that.
Later, when I spoke personally to her, I voiced my concerns about the poor performance of the TIAA-CREF funds. She looked like a deer in the headlights and couldn't get away from me fast enough. Lost points with me on that one.
Chaney won me over big time when he addressed the flood insurance program. I'm from the Coast, so this is an issue that's near and dear to me. He is suing and is trying to get Congress to reconsider funding the program. He decried the ultraconservatives who believe government has no place in private insurance. He said, "These are regular folks down there. They are building our ships at Ingalls. Working at Stennis Space Center. Just doing their jobs. They need help." He gave figures on the huge increases in property insurance faced by many residents. Some are having to walk away from their homes as a result. You go, Mike!
Finally, it was my turn on a panel with one of my colleagues, Bobby Perkins, and an alum who was with our sponsor, David Landrum. It was a great opportunity to hold forth on one of my favorite topics. I was delighted to have a platform to educate folks about personal finance issues.
I wasn't too sure about this event going into it, but it turned out well. I learned a few things. I got to see our elected officials up close, and I got to spread the word about the importance of sound financial management. All in all, a good morning.
Not being a fan of the Governor, I held my tongue as he held forth on financial issues and the state of Mississippi's economy. He pointed to high rankings for Mississippi on business issues. I'm not sure who produced these rankings or how sound they are. After all, we still have one of the highest unemployment rates in the nation. We have the highest poverty rate and the lowest median household income. Nothing to be proud of here. Just about cut my tongue in two listening to him crowing about his accomplishments.
The Governor also used the time-worn phrase, "Government does not create jobs." Of course, this came after listening to his intro. Bryant has spent his entire adult life in public service. Government created HIS job. He mentioned one short stint in the private sector as an insurance agent. He didn't last. Guess some people are just meant for government service.
The first panel was composed of Representative Greg Snowden from Meridian, Treasurer Lynn Fitch, and State Insurance Commissioner Mike Chaney.
Fitch focused on her efforts to include Personal Finance in the K-12 curriculum. This is a laudable effort. She commented on the importance of educating our workforce about money management. I could not agree more. Of course, I cringed a little at her grammar. She might be good with money, but she could use a little more time in English class.
Chaney came out of the shoot talking about Obamacare. He asked the audience who didn't have health insurance. Several hands went up. He encouraged folks to use the website... in December! He gave out the toll-free phone number and talked about the navigator program. I was surprised at his audacity. Of course, I was also surprised that we had both Chaney and Bryant in the same room and no one ended up with a bloody nose!
Snowden was a total unknown to me. Don't know if he's a "D" or "R." I like that in an elected official. He addressed our budget woes and hammered on healthcare. He said the biggest issue we face is the rising cost of healthcare and how it is consuming our state budget. Couldn't agree more.
Fitch later spoke about the two college savings programs sponsored by the State of Mississippi. While MPACT is in decent shape, it remains frozen as we consider ways to fully fund the program. She claimed that Mississippi's MACS program is one of the best in the nation. I took issue with that.
Later, when I spoke personally to her, I voiced my concerns about the poor performance of the TIAA-CREF funds. She looked like a deer in the headlights and couldn't get away from me fast enough. Lost points with me on that one.
Chaney won me over big time when he addressed the flood insurance program. I'm from the Coast, so this is an issue that's near and dear to me. He is suing and is trying to get Congress to reconsider funding the program. He decried the ultraconservatives who believe government has no place in private insurance. He said, "These are regular folks down there. They are building our ships at Ingalls. Working at Stennis Space Center. Just doing their jobs. They need help." He gave figures on the huge increases in property insurance faced by many residents. Some are having to walk away from their homes as a result. You go, Mike!
Finally, it was my turn on a panel with one of my colleagues, Bobby Perkins, and an alum who was with our sponsor, David Landrum. It was a great opportunity to hold forth on one of my favorite topics. I was delighted to have a platform to educate folks about personal finance issues.
I wasn't too sure about this event going into it, but it turned out well. I learned a few things. I got to see our elected officials up close, and I got to spread the word about the importance of sound financial management. All in all, a good morning.
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