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The Federal Reserve

With vacation time hanging heavy on my hands here on Isle au Haut off the coast of Maine, the solitude invited a plunge into the new book by Mohamed A. El-Erian. Mr. El-Erian, was the CEO of PIMCO, the bond trading behemoth, to list just one of his major accomplishments. His book is “The Only Game in Town --- Central Banks, Instability, and Avoiding the Next Collapse.” To this I add, “Oh, my!”

Bond yield curve can predict future

Bond interest rates serve as tea leaves for economists attempting to read into them a hint of future economic conditions. Generally speaking, low long-term interest rates indicate that the economy will be growing slowly and that nobody expects an economic boom anytime soon. The most perilous words for an investor to utter are: “this time it’s different.” Usually it’s not. Economic cycles just repeat themselves over the years in predictable ways.

Learning to avoid investing mistakes

Considering the fact that I will have written this weekly column for 17 years as of October, it is entertaining (for me, anyway) to sift through a raft of old material to see how much has changed. An October 22nd, 1999 column on Behavioral Economics talked about the relatively new science of understanding how people make financial decisions. To a large extent, we are our own worst enemies, and recognizing this fact has prompted the financial services industry to offer a variety of tools to help combat what is called “the status quo bias.”

Federal budget cuts often 'indirect taxes

For some people, it would appear that the only good government is no government. TSA airport screeners offer one of the purest in-your-face examples of cutting back a government service just as demand increases by 15 percent. The answer is long lines and frustrated passengers who are now being “taxed” by the value of their time spent in line and at the cost of missing flights. It’s the last thing anyone needs considering how little it costs per head to do it right.

Coal industry offers retirement saving lesson

<p>A television newscast recently recounted the conditions in Gillette, Wyoming which has been hit by the decline in the coal industry. The story centered on residents who had been laid off by the mining company that owned and operated the huge open pit mines in the area. It’s an industry that always fascinated me because of the scale of the equipment. A former neighbor who was an ace mechanic was on call 24 hours a day to be flown around the western coal-producing states.

Bonds drag down target-date funds

I experienced “sticker shock” this year when I reserved a car to use in Maine for my summer vacation. The cost for the exact same car I have rented in previous years was exactly 50 percent higher than last year. Checking with other rental companies left me equally stunned.

So inflation, whether prompted by demand (which is probably the case with vacation rental cars) or cost-push inflation (which will result from higher minimum wage laws), will mean that broad exposure to increased costs is undoubtedly on its way.

Recommendations in the best interest of clients

We are now at the pivot point of the Labor Department’s new rule mandating that advisors to retirement plans sell or recommend only what is in “the best interests of clients.” Before, they only had to recommend and sell what was “suitable.” An investment that was “suitable” because it included, say, some bonds or bond funds for someone close to retirement could, at the same time, be charging ongoing fees of 1 to 2 percent per year.

Future economic predictions

As Yogi Berra supposedly said, “It’s tough to make predictions, especially about the future.” So as a surprise to many, the S&P 500 Index came within a hair’s breadth of setting a new record during the first week of June but didn’t quite get there. Not that it really matters. The last high water mark for the S&P was on May 21st of 2015 when it hit 2,134, and in the past few weeks it clawed its way to about 2,115 before falling off a bit. Earlier this year, it had plummeted down to the 1800’s. Who knows?

Gains tax can cut into mutual funds' profits

Believe it or not, some people actually have investments outside of their tax-deferred IRA’s, 401(k)’s and other retirement plans. Typical sources of what are termed “after-tax” accounts can be the proceeds from selling a house, inheritances, selling a business interest, cashing in some stock options, receiving Required Minimum Distributions (RMD’s) and finally --- heaven forbid --- there are people who actually save and invest some of their take-home pay on an annual basis after maxing out their 401(k)’s.

Legacy of advocacy for healthy living

My indefatigable friend and mentor, Pax Beale, died a week ago at age 86 marking the end of what, for most people, would have been at least five different lives. Apart from a successful career spanning an eclectic variety of businesses, Pax’s greatest contribution was to help set in motion what we now recognize as “the fitness lifestyle.” Compared to the “couch potatoes” of America, Pax was the red hot chili pepper.

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