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Don’t Give Your Kids An Inheritance, Give This Instead

What Can Be Better Than An Inheritance? A Personal Matching Program

Getting an inheritance can be a good thing – or a bad thing.

While Millennials may wish their inheritance will someday pay for their retirement, that may or may not happen. According to a 2018 Charles Schwab Study, more than half (53%) of young people ages 16-25, “believe their parents will leave them an inheritance, versus the average 21% of people who actually received an inheritance of any kind.”

And, if they do receive an inheritance when they are close to retirement, that may not help them. It turns out that one out of three Baby Boomers who received an inheritance spent it within two years, according to research conducted by Dr. Jay Zagorsky, Senior Lecturer at Boston University Questrom School of Business, based on data from the Federal Reserve and a National Longitudinal Survey funded by the Bureau of Labor Statistics that studied the period 1985-2008.

A Better Option: A Savings Program With A Kick

Wouldn’t it be a better option to help youthful members of the family set up a savings program with a kick to it – a match that you arrange to ignite interest, leverage time and boost returns through compounding?

Let’s say your son “Steve” is a 20-year-old college student who lives at home with you. Steve has a part-time job during the school year and works full time over summer breaks.

Steve hasn’t developed a rule set for saving money. He is not eligible for a 401(k) at work. He is not thinking about a far-off retirement, but he believes he might benefit from a nice inheritance, probably just when he might need the money when he retires.

As Steve’s Mom or Dad, you know better. You’d like Steve to learn how to become financially secure in his own right.

Let’s Make A Deal

Here’s how you can help. You make a deal with Steve:

“For every dollar you save, I will match you dollar-for dollar for five years. But there is a catch. My match goes into a retirement plan for you, a Roth IRA, that you must agree not to touch until you retire someday in the far away future.” 

That gives Steve something to think about. If he saved, say $500 a month of his own money, he would have $30,000 of savings in five years. He would also have an additional $30,000 funded by his parents in a Roth IRA that he would agree not to touch. Nothing wrong with that deal. . . But what about the constraint on not using that Roth money until retirement?

Maximizing Roth Limits While Avoiding Gift Taxes

That $500 monthly ($6,000 yearly) figure is magical.

It is the maximum ($6,000) that can be contributed to a Roth IRA per year, the annual limit for funding a Roth, according to the IRS.

It also happens to avoid a gift tax obligation (the parents’ match is a gift). Since $6,000 is well under the $15,000 annual exclusion, Steve’s parents would not be subject to gift taxes for funding the Roth. (Read “IRS Announces High Estate And Gift Tax Limits For 2020.”)

Will Steve Accept The Offer?

For Steve to see the full potential of the matching program, you’ll want to show him what the Roth can accomplish over the decades between now (age 20) and age 65, a period of 45 years. The Roth will need to be invested for long-term capital appreciation potential. The best way to do that is through a simple S&P 500 Index Fund.

What If The 45 Years Turn Out To Be Terrible Markets?

This is where history comes in handy.

For skeptics, we can look at the worst performing 45 year market periods since the 1920s. For the optimists, we can review the best. While history will not repeat itself exactly, history does provide a frame of reference.

Let’s go back in time to see the worst outcome for a five year program of monthly investments in an S&P 500 Index Fund with a 45 year horizon.

That 45-year period ended with the Financial Crisis (1963-2008).

Had Steve started his five-year, $500 a month program ($30,000 invested) at the worst of times, his age 65 value would have grown to $1,192,643, an average annual return of 9%.

What If The Next 45 Years Turn Out To Be Terrific Markets?

If Steve had lucked into the best 45 year period (1946-1991), he would have had $4,368,046 at age 65 (highest 45-year holding period), an average annual return of 12.4%.

What If Returns Are Just Average?

What about the median return (1931-1976)? Steve would have had $2,421,743 at age 65, an average annual return of 10.9%.

What If Steve Wanted Safety Over Capital Appreciation?

If Steve had been very conservative, he may have considered the safest option, a money market fund that tracked 90 day T-Bills. The best 45-year period for money market funds (1956-2001) would given Steve an age-65 retirement nest egg of only $356,519, a 6% average annual return.

You can see these comparisons graphically in the chart below.

The point is this: Steve can’t control what type of market he will experience. But history can give him a frame of reference.

Is Steve Convinced?

To accept his parent’s matching proposal, Steve needs to see the benefit of investing in himself (and having others invest in him through the match). His interest needs to be ignited through the math behind the market, the math that leverages time and boosts returns through compounding.

Your Role As A Parent

As we approach the holidays, there will be opportunities to get together with young adults in your family. Why not impart some sage advice – in fact, not just once, but as often as possible.

Your Advice

Start saving now in a Roth IRA. Fund your 401(k) at work as soon as you become eligible; contribute each payroll period without stopping until you retire; maximize your match. Choose investments based on long-term capital appreciation potential. Take advantage of the math of compounding. And, if a parent or family member is willing to match your savings, go for it.

Survey Question

After reading this post, what is the likelihood that you will make a Roth matching proposal with your child, grandchild, niece or nephew? I’d like to know what you think. Click here to take a quick survey.

Look for my next post on what happens when someone in Steve’s position starts contributing to his 401(k) at work.

Follow me on Twitter or LinkedIn. Check out my website.

I got my start on Wall Street as a lawyer before moving to money management more than 25 years ago. My firm, Jackson, Grant Investment Advisers, Inc. (www.jacksongrant.us) of Stamford, CT, is a fiduciary high-net-worth boutique specializing in managing retirement portfolios. I approach investing with a blend of optimism (everyone can do something to improve their financial situations) and a dose of healthy skepticism (don’t invest unless you understand what can go wrong). These themes describe my “voice” whether on-air (NBC Nightly News, CNBC, NPR) or presenting (AARP, AAII, BetterInvesting) or in print. I began writing in earnest in 1996 (You and Your 401(k), an investor’s view of 401(k)s). Recent books are: Retire Securely (2018), offering concise action-oriented insights for retirees, pre-retirees and Millennials (Excellence in Financial Literacy Award “EIFLE”); The Retirement Survival Guide (2009/2017), a comprehensive tool chest for all financial levels and ages (EIFLE Award); and Managing Retirement Wealth (2011/2017), a guide for high net worth individuals (EIFLE Award). I’ve written over 1,000 weekly columns (Clarion Award, syndicated by King Features). When the time is right, I comment on SEC rule proposals.

Source: Don’t Give Your Kids An Inheritance, Give This Instead

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This is Stock Market For Beginners 2019 edition video! This video should help out all beginners in the stock market who want to know how to invest in the stock market in 2019. I try to do a stock market for beginners video each year and this is the 2019 edition. We will discuss how to buy stocks, where to buy stocks, how much money do you need to buy stocks, how to invest in the stock market, what is the best brokerage for buying stocks and so much more. I hope you get a tremendous amount of value out of this stock market for beginners video today. Enjoy! Learn How I pick Stocks in this course linked below. Enjoy! https://bit.ly/2DT5ER9 Learn How To Make Money From Trading Stock Options Here https://bit.ly/2QaHSX6 To join my private stock group click below. https://bit.ly/2OSUMDS * My Instagram is : FinancialEducationJeremy Financial Education Channel Sign Up to Get The Top 5 Investing Apps I Use And How I Use Them http://bit.ly/jeremystop5

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3 Purchases or Investments You Can Make to Save Money on Your Business Taxes

With a little over one month to go in 2019, small business owners should think about purchases or investments that make good business sense and will give them a break on their taxes.

Owners with available cash and a wish list should consider what equipment they need. Or, do they want to create a retirement plan or make a big contribution to an existing one? If they have home offices, are there repairs or improvements that can be done by Dec. 31? But owners should also remember the advice from tax professionals: Don’t make a decision based on saving on taxes. Any big expenditure should be made because it fits with your ongoing business strategy.

A look at some possible purchases or investments:

Need a PC or SUV?

Small businesses can deduct up-front as much as $1,020,000 in equipment, vehicles and many other types of property under what’s known as the Section 179 deduction. Named for part of the federal tax code, it’s aimed at helping small companies expand by accelerating their tax breaks. Larger businesses have to deduct property expenses under depreciation rules.

There is a wide range of property that can be deducted under Section 179 including computers, furniture, machinery, vehicles and building improvements like roofs and heating, air conditioning and ventilation systems. But to be deducted, the equipment has to be operational, or what the IRS calls in service, by Dec. 31. So a PC that’s up and running or an SUV that’s already in use can be deducted, but if that HVAC system has been ordered but not yet delivered or set up, it can’t be deducted.

It’s OK to buy the equipment and use it but not pay for it by year-end — even if a business buys the property on credit, the full purchase price can be deducted.

You can learn more on the IRS website, www.irs.gov. Search for Form 4562, Depreciation and Amortization, and the instructions for the form.

Home Office Repairs

Owners who run their businesses out of their homes and want to do some repairs, painting or redecorating may be able to get a deduction for the work. If the home office or work space itself is getting a makeover, those costs may be completely deductible. If the whole house is getting a new roof or furnace, then part of the costs can be deducted.

To claim the deduction, an owner can use a formula set by the IRS. The owner determines the percentage of a residence that is exclusively and regularly used for business. That percentage is applied to actual expenses on the home including repairs and renovation and costs such as mortgage or rent, taxes, insurance and maintenance.

There’s an alternate way to claim the deduction — the owner computes the number of square feet dedicated to the business, up to 300 square feet, and multiplies that number by $5 to arrive at the deductible amount. However, repairs or renovations cannot be included in this calculation.

Owners should remember that the home office deduction can only be taken if the office or work area is exclusively used for the business — setting up a desk in a corner of the family room doesn’t quality. And it must be your principal place of business. More information is available on www.irs.gov; search for Publication 587, Business Use of Your Home.

Retirement Plans

Owners actually have more than a month to set up or contribute to an employee retirement plans — while some can still be set up by Dec. 31, plans known as Simplified Employee Pensions, or SEPs, can be set up as late as the filing deadline for the owner’s return. If the owner gets a six-month extension of the April 15 filing deadline, a SEP can be set up as late as Oct. 15, 2020, and still qualify as a deduction for the 2019 tax year.

Similarly, contributions to any employee retirement plan can be made as late as Oct. 15, 2020, as long as the owner obtained an extension. This means owners can decide well into next year how much money they want to contribute, and in turn, how big a deduction they can take for the contribution.

You can learn more at www.irs.gov. Search for Publication 560, Retirement Plans for Small Business.

–The Associated Press

By Joyce M. Rosenberg AP Business Writer

Source: 3 Purchases or Investments You Can Make to Save Money on Your Business Taxes

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Silicon Valley Investors Are Bonkers For European Startups

Index Ventures partner Danny Rimer always planned to move back to London from Silicon Valley. But when Rimer returned to England a year ago after seven years establishing Index’s U.S. foothold with stakes in companies like Dropbox, Etsy and Slack, he had company: investors from U.S. venture capital firms Benchmark, NEA and Sequoia were also appearing at startup dinners, leading deals and even looking to open offices.

“We’ve always been surprised at how our U.S. peers flew over Europe,” says the Canada-born and Switzerland-raised Rimer, 49, who opened Index’s London office in 2002. As a full-time European resident again, he debuts at No. 3 on the 2019 Midas List Europe, thanks to multi-national investments including Discord, Glossier, Farfetch and Squarespace. Rimer says he watched as investors flocked to pour money into India, China, and Latin American countries, instead. “A very successful Welshman talked about Europe being a museum,” says Rimer, alluding to billionaire investor Michael Moritz, the Sequoia partner and Google and Yahoo investor who moved from Wales to Silicon Valley decades ago. “Now his firm is all over the geo looking.”

More money is flowing into European tech than ever, and it’s increasingly coming from venture capital’s elite U.S. firms. European startups are likely to receive a record $34.3 billion in investments this year, according to investment firm Atomico, with 19% of funding rounds including an American firm, double the portion when Atomico started tracking in 2015. Those American investors will account for about $10 billion, or nearly one-third, of the total amount invested.

American interest in European companies isn’t new: Palo Alto, California-founded Accel opened a London office nearly twenty years ago, and other firms followed suit. But many retreated in subsequent economic down cycles, says Philippe Botteri, No. 6 on Midas List Europe. Botteri, a French citizen, started his venture career at Bessemer Venture Partners in San Francisco and joined Accel in London in 2011. The years leading up to the U.S. firms’ return witnessed a global economic crisis, while access to customers, engineering talent and programs like startup accelerator Y Combinator drove a host of European founders, such as Stripe’s Collison brothers, to relocate to the U.S. Considered a splintered market with regional regulations and languages, Europe faced a fresh hurdle with “Brexit,” when the United Kingdom voted in a 2016 referendum to leave the European Union, a process still ongoing. Its ruling body, the European Union, has made an anchor policy of challenging big tech companies on how they use data.

Blossom Capital founder Ophelia Brown says she was met with incredulity when, as a young investor at Index Ventures between 2012 and 2016, she visited West Coast counterparts and described the opportunity in European tech. “Everyone would push back: Europe was a little travel, a little ecommerce, a little gaming,” she says. “They felt there was nothing of substance.” In 2017, when she set out to raise Blossom’s first fund, many U.S. investors told her the opportunity for new firms seemed greater in the U.S. and China. Just two years later, Brown says she now hears from institutions asking how to get more exposure to Europe’s startup scene.

What’s changed: A mix of high-profile public offerings such as Adyen and Spotify and a maturing ecosystem that’s made it a much easier draw for U.S. firms, facing intense competition at home, to risk millions in Europe. Spotify, the Stockholm-based music streaming service that went public via direct listing in April 2018, and Adyen, the Amsterdam-based payments company that went public two months later, have created nearly $50 billion in combined market value. The IPOs of Criteo in Paris and Farfetch in London have also produced a network of millionaires primed to write “angel investor” personal checks into smaller tech companies. Today there are 99 unicorns, or companies valued at one billion dollars or more, compared to 22 in 2015, according to Atomico’s data.

“The question used to be, can Europe generate a $1 billion outcome, and then you had Spotify and Adyen creating tens of billions of market cap,” says Botteri, who notes that winners are also coming from a broader base of cities in Europe – 12 hubs, not all from London and Tel Aviv. (As on the Midas List Europe, European investors often include Israel’s tech-heavy startup scene.) “Now the question is, can Europe generate a $100 billion company? And my answer is, just give it a few years.”

For startups in far-flung places like Tallinn, Estonia, where Pipedrive was founded in 2010, or Bucharest, where UiPath got its start, the influx of U.S. venture capital counts for more than just money – it means access to former operators who helped scale businesses like Facebook, Google and Slack, introductions to customers in New York or executive hires in San Francisco. And with their stamps of approval comes buzz that can still kickstart a startup’s brand recognition, investors say.

But they also come with a risk: heightened pressure to deliver, board members who may be 5,000 miles away, and potentially overheated valuations that can prove onerous should a founder misstep. Sarah Noeckel, a London-based investor at Dawn Capital and the publisher of women-in-tech newsletter Femstreet, has tracked a number of recent seed-stage deals in which a U.S. investor swooped in with an offer too rich for local alternatives to match, for companies that sometimes haven’t sold anything yet. “I think there’s little validation at this point how it actually plays out for them,” she says.

For the U.S. investors, there’s a clear financial incentive to “swoop in.” On average over the past year, one dollar’s worth of equity in a European startup in a Series A funding round would have cost $1.60 in the U.S. for a comparable share, according to the Atomico report. Investors insist that for the most in-demand companies in Europe, such as London-based travel startup Duffel, which raised $30 million from Index Ventures in October, prices already match Silicon Valley highs.

All the more reason that as U.S. investors hunt in Europe like never before, they’re doing so quietly. Though Lightspeed Venture Partners announced its hiring of a London-based partner, Rytis Vitkauskas, in October, other U.S. firms have been on the ground without advertising it publicly. Leaders from NEA, with $20 billion in assets under management, passed through London in recent weeks on a venture capital tour as the firm plans to invest more heavily in Europe moving forward, sources say. Sequoia partners Matt Miller and Pat Grady, meanwhile, have been spotted around town meeting with potential job candidates. (Sequoia’s never employed a staffer in Europe before.) NEA and Sequoia declined to comment.

“Everyone would push back: Europe was a little travel, a little ecommerce, a little gaming. They felt there was nothing of substance.”

Blossom Capital founder Ophelia Brown

Many more U.S. investors now pass through London; some even stretch the meaning of what it means to visit a city through months-long stays. “I always used to have to travel to the West Coast to see friends that I made from the show,” says Harry Stebbings, who has interviewed hundreds of U.S. venture capitalists on his popular podcast, ‘The Twenty Minute VC.’ “Now, every week I can see three to five VCs in London visiting.” For the past several months, longtime Silicon Valley-based Accel partner Ping Li has lived in London with his family. Asked if he’d moved to the city without any public announcement, Li demurred – “I would argue that I’m spending a lot of time on British Airways,” he says – before insisting he plans to return to California in three to six months. “I don’t think you can actually be a top-tier venture capital firm without being global,” he says. Firms without plans for a permanent presence in London are creating buzz among local investors, too. Kleiner Perkins investors Mamoon Hamid and Ilya Fushman have been active in Europe recently, they confirm. Benchmark, the firm behind Snap and Uber, invested in Amsterdam-founded open-source software maker Elastic, which went public in 2018, and more recently London-based Duffel and design software maker Sketch, based in The Hague. “Europe’s just more in the spotlight now,” partner Chetan Puttagunta says.

Against the backdrop of Brexit, the inbound interest can feel like a surprise. London-based investors, however, appear to be shrugging off concerns and hoping for the best. “In and of itself, it means nothing,” says Index Ventures’ Martin Mignot, a French and British citizen investing in London and No. 7 on the Midas List Europe. “The only real question is around talent, whether it’s going to be more difficult for people to come and work in London, but how difficult that is remains to be seen.” Or as his colleague Rimer quips: “Having spent seven years in the U.S., I don’t exactly think the political climate of the U.S. was necessarily more welcoming.”

When Rimer attended the Slush conference, a tech conference of 25,000 in Helsinki in November, he brought along a guest: Dylan Field, the CEO of buzzy San Francisco-based design software maker Figma. If Field were European, Index would be leading him around Silicon Valley; instead, with 80% of Figma’s business outside of the U.S., Rimer wanted Field to experience the energy of Europe’s tech community first-hand. Explains Rimer: “It’s just a reflection of the reality today.”

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I’m an associate editor at Forbes covering venture capital, cloud and enterprise software out of New York. I edit the Midas List, Midas List Europe, Cloud 100 list and 30 Under 30 for VC. I’m a Fortune Magazine and WNYC alum. My tech focus would’ve perplexed my college self, as I studied medieval history and archaeology at Harvard University. Follow me on Twitter at @alexrkonrad and email me at akonrad@forbes.com. Securely share tips at https://www.forbes.com/tips/

Source: Silicon Valley Investors Are Bonkers For European Startups

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A interview with Venture Capitalist and Co-Founder of Andreessen Horowitz, Marc Andreessen In this interview, Marc discusses how Silicon Valley works and why it is so hard to replicate. Marc also talks about what he looks for in investments and gives advice to students. 📚 Marc Andreessen’s favourite books are located at the bottom of the description❗ Like if you enjoyed Subscribe for more:http://bit.ly/InvestorsArchive Follow us on twitter:http://bit.ly/TwitterIA Other great Venture Capitalists videos:⬇ Marc Andreessen: Venture Capital Investment Philosophy:http://bit.ly/MAndreessenVid1 Billionaire Chris Sacca on Investing, Venture Capital and Life:http://bit.ly/CSaccaVid1 Billionaire Peter Thiel on Entrepreneurship, Innovation and Competition: http://bit.ly/PTheilVid1 Video Segments: 0:00 Introduction 1:58 Something you really screwed up? 3:09 How does Silicon Valley work? 6:33 Why has Silicon Valley never been replicated? 10:24 Where does the value of cryptocurrency come from? 12:46 Is it going to disrupt governments? 14:26 What makes a fundable company? 19:23 What do you see in the future? 22:48 Advice to students? 24:52 How do you get rid of fear? Marc Andreessen’s Favourite Books🔥 Life: The Movie:http://bit.ly/LifeTheMovie Confessions of an Economic Hit Man:http://bit.ly/ConfessionsEconomic And the Money Kept Rolling In (and Out) Wall Street:http://bit.ly/MoneyKeptRolling Last Call:http://bit.ly/LastCallMA Startup Rising:http://bit.ly/Startuprising Interview Date: 29th March, 2018 Event: Udacity Original Image Source:http://bit.ly/MAndreessenPic1 Investors Archive has videos of all the Investing/Business/Economic/Finance masters. Learn from their wisdom for free in one place. For more check out the channel. Remember to subscribe, share, comment and like! No advertising.

Last Week Confirms It. Goodbye, Recession – Hello, Bull Market

 

It is time to get excited, optimistic and bullish. Last week put the final nails in the “Oh, woe is me” recession coffin. RIP.

Last week’s good news supported and confirmed recent anti-negative and pro-positive improvements. Here is the wonderful list:

Earnings reports are driving a shift to the positive

Compare these two headlines from The Wall Street Journal:

  • October 9: “U.S. Earnings Flash a Worrying Signal”
  • November 2: “Earnings Tide Lifts Most Stocks – Investors are getting a more positive picture of American corporations’ health than that painted by analysts in buildup to earnings season”
Today In: Money

The cause? Earnings reports continue to be positive on balance, with most of the September quarter-end earnings reports now in. The 336 S&P 500 companies reporting September results so far (from October 15 through November 1) represent 67% of the 500 companies and 75% of the $27T market capitalization. (Many of the remaining 164 companies will report October or November quarter-end results later.)

While reports of companies beating expectations are widespread, a good way to view investors’ complete evaluation is by examining stock performance. Below is a graph of the one-month returns (including dividend income) for all of the 336 reporting companies. I have broken out the so-called “safe” stocks (REITs and utilities) because they have been beneficiaries of both reduced interest rates and bearish thinking – therefore, expect them to underperform.

Clearly, Wall Street views this earnings report season as favorable. Additionally, the need and desire for “safe” stocks has given way to the pursuit of growth.

The Federal Reserve cuts and quits

Finally! While rates remain abnormally low (meaning there is music to be faced in the future), at least the game of will-they-or-won’t-they looks over for now. That is helpful because businesses, consumers and investors now can make decisions based on a stable rate environment.

GDP growth is just fine

A good example of how negativity can take time to turn positive is the last week’s third quarter GDP growth report. Expectations had been for a seasonally adjusted, real (adjusted for inflation), annualized rate of 1.6%, down from 2% last quarter. Instead, it came in at 1.9%. That is good news, but most reports focused on the “continued slowing” instead of the desirable surprise.

Think of that report this way. For a quarter that had its problems, growth was still around 2%, in line with the average post-recession growth rate. Looking at a longer time period provides a good perspective for that 1.9% growth rate.

Employment and consumer spending are good

The recession pundits keep expecting these shoes to drop, but they do not. The problem is the factors leading up to reduced employment are absent. Following, so long as consumers are employed, they will spend. Therefore, in spite of that previous sharp drop in consumer confidence, consumer spending has remained strong and consumer confidence has improved.

The Wall Street Journal’s November 2 lead story (print edition) says it best: “Jobs, Consumers Buoy Economy, Defying Slowdown Across Globe.”

The bottom line

Last week offered an outstanding combination of good news that removes recession pessimism and reintroduces growth optimism for 2020. Stock ownership (excluding “safe” stocks) continues to look desirable.

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During my 30-year career, I managed and consulted to multi-billion dollar funds. Using the “multi-manager” approach, I worked with leading investment managers. I now manage personal accounts and write about my analysis and decisions. … From my 50-year personal/professional investment experience, I developed the skills I use to find opportunities and avoid risks. Because markets are ever changing, I choose the strategies (safety, income, value and growth) that conditions warrant. … My one regular activity is to seek developments and trends being ignored or misinterpreted by investors. These are the situations that consistently produce higher return opportunities (or higher risk levels). … I am a CFA charterholder with an MBA from Stanford Graduate School of Business and a BS in Finance from San Diego State University. I am a former Washington DC CFA board member and currently serve on the AAUW Investment Advisers Committee and the City of Vista Investment Advisory Committee. … For more, please see my LinkedIn bio at http://www.linkedin.com/in/johntobeycfa

Source: Last Week Confirms It. Goodbye, Recession – Hello, Bull Market

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Traders Jon and Pete Najarian are joined by Sarat Sethi, managing partner at Douglas C. Lane & Associates, and Anastasia Amoroso, global investment strategist at J.P. Morgan Private Bank, to discuss calls on Netflix, Apple and Juniper Networks.

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