Friday, December 29, 2017

Following the Words of the "Prophets" to Profits?

The AARP has an end-of-the year warning for you: Most predictions about 2018 stock market performance will be wrong. 
In an online article dated December 15 and titled “Market Forecasts Could be Hazardous to Your Wealth”, AARP reminds readers that the financial experts are not all that good at predicting the future of the stock market, or of anything else.  The article’s author, Allan Roth, cites a Wall Street Journal report that financial “strategists as a whole have missed the actual return of the S&P 500 index [of stocks] half the time by more than 9 percent annually.”  That’s not a small margin of error.  For 2017 the experts’ consensus for stocks’ performance was a rise in the index of between 2.45% and 2.79%.  As of mid-December, the actual performance was an increase of 19%.
Not all the economists are wrong, though.  Gary Schilling, for example, nailed every one of his 12 predictions for the 2008 economy, including the housing bubble burst.  Imagine the disappointment of those who then chose to follow his advice for 2009, when all 12 of his predictions turned out dead wrong.
It seems the most insightful relevant comment comes from baseball legend Yogi Berra in the form of one of his trademark Yogi-ism’s: “It’s tough to make predictions, especially about the future.”
So what am I going to do for this year-end posting?  No, not make predictions, but share what others are saying about what 2018 holds in store for the nation’s economy (and thus, to at least some degree, your personal finances).  Here are ten forecasts for the twelve months ahead.  I’m including in parentheses the sources where I found the predictions, but keep in mind most of them are just the consensus of many economists.
And I’m adding my own touch.  For each prediction I’m flipping a coin: “heads” means the prediction will come true; “tails” means it will be wrong.  Next year around this time let’s compare and see if the experts were right or if the random toss of a coin was a better seer.
1. Bitcoin (the so-called crypto-currency which is all the [speculative] rage now) will decline in value in 2018. (Motley Fool) The coin toss says no, it will not decline.
2. Brexit (Great Britain’s exit from the European Union) will be chaos, causing the defeat of Prime Minister Theresa May and the election of the Labour Party’s Jeremy Corbyn.  (Fortune) The coin toss says no to it all.
3. Growth in the Gross Domestic Product of the U.S. will not reach 3% in 2018.  (Fortune)  The coin toss says it will.
4. The price of crude oil will be $60 per barrel next Christmas.  (Fortune)  The coin toss agrees.
5. The Standard & Poor’s 500 index will be at 2950 at the end of 2018.  (Brian Belski at BMO Capital Markets, and many others)  No argument from the coin toss.
6. The yield on the 10-year Treasury note will be 2.8% next December.  (Kiplinger)  The coin toss affirms that prediction.
7. Inflation will be 2.1% in 2018. (Kiplinger)  The coin toss says no.
8. “A new form of energy” will be discovered on Venus. (Blind—and dead—Bulgarian mystic Baba Vanga)  The coin toss says no.  I realize this prediction on its face is not directly about the economy or your finances, but if such an energy source is actually discovered it will profoundly impact financial markets.  And in hopes of racking up a perfect prediction record for myself, I’m going to weigh in on this one: It won’t happen.
9. Unemployment will fall below 4% in the U.S. (Wallethub) The coin toss doesn’t agree.
10. Credit card debt in the U.S. will break all-time records, topping $1 trillion.  (Wallethub)  The coin toss affirms it.
Do whatever you can to not make #10 come true.  And have a Happy New Year.

Until next time,


“But the prophet who prophesies peace will be recognized as one truly sent by the Lord only if his prediction comes true.” Jeremiah 28:9 NIV®*

*Scripture quotations taken from the Holy Bible, New International Version® NIV®
Copyright © 1973, 1978, 1984, 2011 by Biblica, Inc.™
Used by permission.  All rights reserved worldwide.

Friday, December 22, 2017

In Defense of Scrooge

The case presented against Ebenezer Scrooge last week was rock solid.  To escape conviction as a tight-fisted, stingy, hard, unfeeling man who cares for nothing and nobody other than Money, he is going to have to present a very strong, even unique, defense.  He doesn’t disappoint.
“I’m not the man I used to be.”
That’s it.  Scrooge does not—cannot—deny the witness of those who suffered most at his greedy hands.  He cannot change history.  He sadly admits that he lost many an opportunity to do good with his wealth, that he allowed riches to crowd out human companionship.
Yes, Scrooge actually enjoys keeping books and tracking money.  But that is not his crime; it is that it became his only passion. His business prospered while his soul shrank.
“I’m not the man I used to be.”
Ask the men he encountered on the street that one Christmas morning who were so taken by his kind demeanor that they spontaneously exclaimed, “Merry Christmas, sir!”  Or Bob Cratchit who the next morning became the beneficiary of a generous raise in salary.  Or Bob’s son, Tiny Tim, who, it might be said, owes his life to Ebenezer Scrooge.
“I’m not the man I used to be.”
We all have our “gifts”, our talents.  Scrooge and I find fulfillment in keeping financial records.  I enjoy writing this blog.  Bookkeeping and writing: two things I know most people would be loathe to do even for a salary.  I only hope that I’ve never let it interfere with doing the right thing and that it has never prevented me from experiencing love and friendship with fellow travelers on this planet.
Scrooge blew it, no doubt about that.  But he changed, and that changed the world around him into a better place.  No one could have predicted that outcome from Scrooge’s earlier days.  But that doesn’t matter.  It’s not how we start out, it’s how we end up.  And that we can say that has a great deal to do with the event we celebrate this week.
“I’m not the man I used to be.”

Merry Christmas to you.


“For unto us a Child is born, to us a Son is given, and the government will be on his shoulders.  And He will be called Wonderful Counselor, Mighty God, Everlasting Father, Prince of Peace.” Isaiah 9:6 NIV®*

*Scripture quotations taken from the Holy Bible, New International Version® NIV®
Copyright © 1973, 1978, 1984, 2011 by Biblica, Inc.™
Used by permission.  All rights reserved worldwide.

Friday, December 15, 2017

The People v. Ebenezer Scrooge

I ran into my college roommate when walking out of church a few weeks ago.  Mark and I spent a few minutes catching up on each other’s life; but then randomly and without any obvious lead-in from the previous conversation, he recalled a time when he walked into our dorm room to find me at my desk writing figures in a notebook.  It didn’t look like homework, so he asked me what I was doing.  I told him I was recording an expenditure—seventy-nine cents spent at the campus snack shop.  Decades later he still marveled that I kept a record of seemingly inconsequential financial transactions.
I glanced over at my wife who rolled her knowing eyes.  She has lived with that quirk of mine much, much longer than anyone else has.  She is a good record-keeper in her own right, but to list every single expenditure and every cent of income—even to the level of this one actual entry:“Income: $0.05  Source: Found on street”—well, NOBODY in his right mind does that.
As Mark and I parted, I walked away pondering just what kind of man I am.  The image that came to mind was…Ebenezer Scrooge, the miserable and miserly old man of A Christmas Carol, bent over his business ledgers and thinking of little other than money.  Scrooge—the epitome of greed and selfishness; the antithesis of the Christmas spirit.  In fact, as we approach Christmas, let’s put him—and vicariously all like him—on trial for his greed.
The prosecution presents its case:
His “biographer”, Charles Dickens, weighs in first: Scrooge is “tight-fisted…a squeezing, wrenching, grasping, scraping, clutching, covetous old sinner.”  He often, after work, “beguiled the rest of the evening with his banker’s book.”
Mrs. Scrooge reluctantly charges: Scrooge has “one master-passion” that “engrosses” him: “GAIN”.  He “weighs everything by Gain.”  (She capitalizes the word as if to distinguish it as a god to her husband, and certainly occupying a more important place in his heart than she does.)
Mrs. Bob Cratchit: He’s “an odious, stingy, hard, unfeeling man.”
A little less harsh and with an implicit plea for mercy, Scrooge’s nephew, Fred tells the court: “[H]is offences carry their own punishment….His wealth is of no use to him.  He don’t do any good with it.  He don’t make himself comfortable with it.”
Marley, Scrooge’s now-deceased business partner, cannot, for obvious reasons, be in the courtroom, but the judge has indicated he may admit hearsay evidence that Marley was equally consumed by his work, bound by a chain of “cashboxes, keys, padlocks, ledgers, deeds, and heavy purses wrought in steel” and that he and Scrooge were complicit in their greed and money-grubbing ways.
It doesn’t look good for Mr. Scrooge.  But next week the defense presents its case.
Until next time,


“The greedy bring ruin to their households.” Proverbs 15:27 NIV®*

*Scripture quotations taken from the Holy Bible, New International Version® NIV®
Copyright © 1973, 1978, 1984, 2011 by Biblica, Inc.™
Used by permission.  All rights reserved worldwide.

Thursday, December 7, 2017

Rehabilitating Michael Vick

I suspect Michael Vick makes the “my favorite athletes” list of precious few people. No, he usually ends up at the other extreme, managing to land at the top of the Nielsen and E-Poll Market Research list of most disliked athletes in February 2012, and probably wouldn’t fare much better today if he were still an active player in the NFL.
He didn’t start that way.  Vick gained national attention as the star quarterback of the Virginia Tech football team for two years, a tenure that saw him lose only one regular season game (in which he did not play the entire game) and took him to an exciting national championship showdown with Florida State University.  He declared himself eligible for the NFL draft after the second year and became the highest paid NFL player in history up to that time, going on to demonstrate his stunning athleticism as the quarterback for the Atlanta Falcons.
But in 2007 it came crashing down around him when, as evidence against him mounted, he pled guilty to running an illegal dog-fighting ring.  He eventually served 18 months in federal prison.  He lost all his endorsement deals and declared bankruptcy in 2008.
Vick and his apparently competent but unheeded financial advisor later cited Vick’s propensity for listening to the advice of friends over the advisor’s counsel, bad investments and business ventures, and overspending on himself and others as the main causes of his bankruptcy.  From a ten-year, $130 million dollar contract with the Falcons to millions in debt in just a few short years—he looked like just another free-spending, self-centered star.
I remember Vick at the time appealed to his faith in God that would get him through the ordeal, lamenting that he’d lost his way but had rediscovered his spiritual roots.  I also recall that many people accused him of playing the Jesus Card as his get-off-easy pass.  I can’t say I wasn’t one of them.  And could anyone blame me?  How many crooks play that game?  It’s easy to get jaded and cynical about these appeals to faith when the appellants are guilty of despicable acts but suddenly turn to heaven…after getting caught.
Released from prison in May 2009, Vick was eventually allowed back into the NFL and in 2010 was named its Comeback Player of the Year, setting career highs for passing yards and touchdowns.  He retired from playing this year and became a studio analyst for football telecasts at Fox.
He has never really shaken the Bad Boy label, despite his efforts at promoting animal rights causes and performing other public service.  In fact, in 2013 he cancelled several book signings due to “credible threats” against the retailers, his publisher, and even his family.  I suppose he will always carry the baggage of his past.  No redemption for him.
But I’m one skeptic who has changed his tune.  On November 17, ESPN reported that Michael Vick had just the day before made the final $1.5 million payment to creditors to whom he owed money when he declared bankruptcy nine years ago.  Vick had opted NOT to file under Chapter 7 bankruptcy which would have allowed him to liquidate his assets and not owe anything more.  ESPN reported that instead he went on a restrictive budget as part of an effort to repay his creditors.  “I didn’t want to stiff people who never stiffed me,” they quoted him as saying.  So in the end he had repaid $17.4 million, about 99 cents on the dollar of his outstanding debt.  It’s almost unheard of in bankruptcy cases.
I don’t recall seeing this story making the headlines anywhere other than ESPN, certainly not to the extent that the media covered Vick’s fall from grace.  But he stands tall in my estimation.  Perfect?  Who of us is?  But to use that common expression, he “put his money where his mouth is”.  Faith-talk, God-talk….that’s easy.  Here’s a man who put cleats on his faith and walked a righteous path.
Thank you, Michael Vick.  I even forgive you for trouncing my University of Virginia Cavaliers, twice, in the annual Commonwealth Cup matchup.
Until next time,


But Zacchaeus stood up and said to the Lord, ‘Look, Lord!  Here and now I give half of my possessions to the poor, and if I have cheated anybody out of anything I will pay back four times the amount.’  Jesus said to him, ‘Today salvation has come to this house.’” Luke 19:8,9 NIV®*

*Scripture quotations taken from the Holy Bible, New International Version® NIV®
Copyright © 1973, 1978, 1984, 2011 by Biblica, Inc.™
Used by permission.  All rights reserved worldwide.

Friday, December 1, 2017

Is a Health Savings Account in Your Future?

So last week’s post explained Flexible Spending Accounts (FSA’s) and Health Savings Accounts (HSA’s) and how they differ.  I’ve been enrolled in a high-deductible health plan for several months now, and opened an HSA to go along with it.  I’m thinking I made the right choice.  But would it be right for you?  Let’s consider a couple of family situations and whether they make good candidates for the high-deductible/HSA combination.

1. A young, healthy couple (or individual):  You and your spouse are free of any chronic medical conditions, rarely go to the doctor or have to fill a prescription, and do not expect to become pregnant over the next twelve months.  Many employers who help pay for their employees’ health plan coverage will encourage people to sign up for the high-deductible option because the premiums are lower and it saves them (and the employee!) money.  To entice people to go that route, they will even contribute some of the money they are saving into an HSA for the employee/family.  That’s free, untaxed money; and if it’s not spent this year it continues to accumulate in the account for future use and can even be invested.  And the investment returns are also never taxed if spent on qualified expenses.  If that employer contribution exceeds your expected expenses during the plan year, it’s a no-brainer: go with the HSA.  Even if that contribution is less than expected expenses, or if the employer contributes nothing, the lower premiums may still make this choice a bargain.

For the next two scenarios, let’s use these policy descriptions to work through the examples:

High-deductible plan with HSA: $3000 deductible for individual, $6000 for family; then a 20% co-pay on next $3000 for each individual, after which insurance pays 100%, unlimited.  Employer contributes $1000 to the HSA for an individual policy, $2000 for a family policy.
Employee’s cost of family policy: $80/month ($960/year)

Regular policy without HSA: Deductible is $250/individual, and two individuals must meet their deductible to meet the family deductible of $500.  Then there is a 20% co-pay on the next $5000 of family expenses, after which the insurance pays 100%, unlimited.
Employee’s cost for the policy: $220/month ($2640/year).

2. A couple with one having predictably high expenses, but the other healthy: Even though the employer kicks in $2000 to an HSA for a family policy, it may all be spent on one individual’s medical expenses, as in this scenario with a high-deductible plan.

Adult A: $20,000 in expected medical expenses                       
                                    $3000 deductible
                                        600 the 20% co-pay on the next $3000 of expenses
                                    $3600 total for adult A

            Adult B: $400 expected medical expenses; out-of-pocket:
                                    $400 deductible and total for adult B
Family’s total out-of-pocket: $4000 medical expenses + $960 policy cost - $2000 employer contribution to HSA = $2960

But what if they had the other policy?
            Adult A: $20,000 in expected medical expenses; out-of-pocket:
                                    $250 deductible
                                    1000 co-pay on the next $5000 of expenses
                                    $1250 total for adult A

            Adult B: $400 in expected medical expenses; out-of-pocket:
                                    $250 deductible
                                        30 co-pay on $150
                                    $280 Total for adult B
Family’s total out-of-pocket: $1530 medical expenses + $2640 policy cost = $4170

3. Family of two adults and two children under 12: Assumes the adults are still relatively young and healthy and the children will have fairly low, predictable expenses; with the traditional plan:

            Adult A: $600 in medical expenses                Adult B: $750 in medical expenses
                        $250 deductible                                              $250 deductible
                            70 co-pay on $350                                        100 co-pay on $500
                        $320 total adult A                                           $350 total adult B

            Child A: $2000 in medical expenses              Child B: $1200 in medical expenses
                        $400 co-pay on $2000                                                $240 co-pay on $1200

Family total out-of-pocket: $1310 medical expenses + $2640 policy cost = $3950

With the high-deductible option, no one in the family meets the $3000 individual deductible, so they must bear all the costs, and insurance pays nothing.  So:
Family total out-of-pocket: $4550 medical expenses + $960 policy cost – $2000 employer’s contribution to HSA = $3510

In all three scenarios the HSA option would have been the better choice, although the third one was borderline because children’s expenses are predictably unpredictable.  Moreover, my calculations do not account for the tax savings realized through an HSA.

But my point here is to show you how you should do your own calculations if you ever have a choice of insurance plans.  And remember, although I tried to make these scenarios realistic based on my own experience and the types of health plans I’ve seen, these are completely hypothetical policies and situations and are not intended to direct or advise you to choose a particular type of health coverage.  You MUST run your own numbers and make your own decision.

Until next time,

“We make our own decisions, but the Lord alone determines what happens.” Proverbs 16:33 CEV