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IBM defines cybersecurity as “the practice of protecting critical systems and sensitive information from digital attacks.”
You may not be in the business of defending critical infrastructure from online threats. But fraud, identity theft, and online scams that target your finances pose significant challenges for everyone in today’s digital world. Armed with knowledge, vigilance, and a healthy dose of caution, you can minimize risks and stay safe online. Let’s start with SPAM We’ve all received emails that are obviously fraudulent. Others, however, appear to be legit. Be careful. The best advise with SPAM is to ignore the email. It may contain links that ask for personal information. The link could be malware, which might provide the spammer with access to sensitive files on your computer. Another risk is ransomware, which blocks access to files unless you pay a ransom (usually in Bitcoin) by their deadline. Avoid the unpleasant choice of paying the ransom or losing files. Back up your data on the cloud and/or an external hard drive. SPAM is also becoming more prevalent via text or instant messaging. Have you ever received an unsolicited text from a major corporation? Maybe it appears to come from Amazon, FedEx, or a well-known corporation. While some messages provide updates and estimated delivery times, others are generated by criminals, hoping you’ll respond by providing them with personal information. Let me give you a quick example. “Answer Few Questions Get Paid (dollar emoji).” This was clearly an attempt to defraud unsuspecting recipients. Poor grammar added to its fraudulent tone. Or, “USP-We are unable to deliver your package due to missing address information, please fill in you address promptly (includes a link).” Yes, UPS was spelled USP, and the link didn’t include UPS embedded within a random string of characters. How might you sidestep a financial minefield? Don’t give out your email or post it publicly. Never reply since a response informs the spammer that your email or phone number is legitimate. Think before you click on a link. Download filtering tools and anti-virus software, both for your computer and smartphone. Social media Have you received a brief instant message from a Facebook friend that’s worded in a way that doesn’t reflect your friend’s personality but happens to include a link? If so, their account was probably hacked. Confirm by contacting your friend through another platform. Have you received a friend request from an established friend on Facebook? In most cases, a criminal has impersonated your friend’s profile. Before accepting the friend request, talk to your friend and make sure it’s legitimate. Some folks have more than one profile on Facebook. Also, be leery of accepting friend requests from strangers. You don’t know them. Why would they send you a friend request? Consider this: would you give your phone number or address to a total stranger if asked? Becoming a ‘friend’ with a stranger offers them a peek at your private life. While we’re discussing Facebook (or, for that matter, social media in general), be careful what you post. It seems harmless to mention your anniversary, pet’s name, birthday celebration, first concert you attended, or your first job. But these can provide answers to security questions that will give a fraudster access to an account. Simply put, ignore the public post that asks, “Date yourself. What’s the first concert you attended, or first car owned?” Watch for online scams Some scams impersonate official government websites such as Social Security or the IRS. For starters, the IRS doesn’t send unsolicited emails and won’t discuss tax account information via email or use email to solicit sensitive financial and personal information from you. The IRS initiates contact with taxpayers via regular mail. Social security scams are also a growing problem. If there is an issue, Social Security will generally send you a letter. Callbacks occur only if you’ve requested one. Scammers may offer to increase benefits, protect assets, or resolve identity theft, but often demand payment via retail gift cards, wire transfers, pre-paid debit cards, or cash. That is a HUGE red flag! It screams fraud! The Social Security Administration won’t ask for something like a gift card, cash, or pre-paid debit card. They may also threaten to have you arrested or take legal action if you ignore their overtures. Just hang up the phone or ignore the email. That seems obvious, but fraudsters wouldn’t be spending time fishing for cash if these scams didn’t work. Cryptocurrency scams Scams involving, for example, Bitcoin have proliferated and scammers are looking for ways to cash in. According to the FTC, no legitimate business is going to demand cryptocurrency in advance or payment in cryptocurrency only. Are you being pitched a risk-free investment in crypto that guarantees big profits? If you send them money, expect to lose 100% of your investment. Keep online dating and investment advice separate. If you meet someone on a dating site, and they want to show you how to invest in crypto or ask you to send them crypto, you’re staring down the barrel of a scam. End contact immediately. They are only interested in mining your savings, not romance. Dodging identity theft Consider freezing your credit. When you freeze your credit report, no one can request your report. No one (including you) can apply for a loan or obtain a credit card while your credit is frozen. Collect your mail daily and review bank statements on a regular basis. Install and keep anti-virus software updated. This not only applies to PCs. Apple products aren’t immune from malware and viruses either. Create unique and complex passwords for each account. A good password manager program can easily assist you. But you may use the ‘default option’ if you use Google Chrome as your browser. Google will automatically supply you with a random string of characters, letters, and numbers and save the password for you. It’s generally considered to be a safe option and better than recycling a password that you’ve used numerous times (and one that might have been stolen and is available on the dark web). While we are on the topic of browsers, keep them updated. Updates not only incorporate fixes, new features, and efficiencies, but more importantly, they include the latest security updates. Free plug-ins for your browser can also provide an added layer of safety by warning you that a website you’ve clicked on has been compromised by hackers. Consider two-factor authentication. When you log into an account, a code will be sent to your phone or email that you must input before you can access the account. Final thoughts One can’t be completely safe online. But if you are proactive and take the necessary precautions, you greatly reduce your odds of becoming a victim. Many of the ideas I suggest may seem elementary. But in the moment we open that email, text, or answer the phone, our guard may be down. No one is immune from a momentary lapse of judgment. You’ve heard the adage, a penny saved is a penny earned. Well, a healthy amount of skepticism and caution online can pay huge dividends.
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An estate plan is an integral part of the financial planning process. It is conceived to carry out your wishes upon death.
Some folks choose DIY, or do-it-yourself wills or trusts. Ultimately, it is your choice, but given the complexity of estate planning, we strongly recommend that you seek guidance from an attorney. An attorney that specializes in estate planning can lead you through the process and draw up plans that will establish the appropriate strategy for you. As a part of the process, we will discuss gift taxes and gift giving. Estate planning and gift taxrules are complicated, and this will be a high-level overview. Please consider consulting your attorney or tax advisor for any questions. Under the current law, the lifetime exemption for gift and estate taxes last year was $11.7 million for individuals and $23.4 million per married couple. For 2022, the thresholds rise to $12.06 million per person and $24.12 million per couple. The annual gift-tax exemption in 2022 is $16,000 per donor, per recipient, up from $15,000 last year. The recipient may be your child, relative or a stranger. This means that a giver can give someone a gift that is valued up to $16,000 in a calendar year, and the giver will pay no federal gift taxes. If the gift comes from a couple, the limit doubles to $32,000. Even then, if you exceed the thresholds, it’s unlikely you will owe federal taxes on your gift, as we’ll explain in a moment. Please note that in 2019, the IRS clarified that individuals taking advantage of the increased gift tax exclusion in effect from 2018 to 2025 will not be adversely impacted after 2025, when the exclusion amount is scheduled to drop to pre-2018 levels. Because it is a gift, the recipient owes no federal income tax. However, the giver will not receive a tax deduction for the gift. Gifts to a qualified charity may be tax-deductible and are not subject to gift tax limits. What if your gift exceeds the prescribed limit? Do you, the giver, owe a gift tax? The short answer is probably not. You see, the annual limit is also applied to the lifetime exemption of $12.06 million per person and $24.12 million for a couple (for 2022). For example, if Mom gives a $20,000 gift in 2022 to her daughter, Mom exceeds the $16,000 annual limit by $4,000. Taxes can still be avoided. However, Mom would be required to file U.S. Gift Tax (and Generation-Skipping Transfer) Form 709 with the IRS. You may avoid the gift tax unless you top the lifetime exemption. If you exceed the lifetime exemption, the gift tax rate ranges from 18% to 40%. Beware of exceptions and rules for calculating the tax. If you are running up against the limit, please consider talking to your tax professional. What gifts are excluded?
As always, thank you for the trust, confidence and the opportunity to serve as your financial advisor.
One thing we must remember when looking at economic data, is that everything is distorted. The US (in fact, much of the world) panicked in 2020. COVID caused governments around the world to implement unprecedented policies. The US borrowed, printed, and spent its way through the lockdowns. We believe, and we don’t think it’s hard to understand, that the economic bill for these policies, is soon coming due.
We don’t expect a recession like in 2020, or a repeat of the Great Recession in 2008-09, but the unemployment rate will eventually go up, job growth will go negative, industrial production will fall, and so will corporate profits. At that point we won’t have a big debate about whether we’re in a recession; everyone will know it. In the meantime, before a real recession sets in sometime in 2023 or early 2024, many people will believe the recession is already here. Especially, as the shift away from goods and toward services gathers steam. Right before COVID started, in February 2020, “real” (inflation-adjusted) consumer spending on services was 64% of all real consumer spending. With the economy locked down, services fell to 59% of spending by March 2021. That five percentage point decline represented roughly $700 billion of spending. Consumers have clawed some of that back with services now up to 62% of total spending, with big recoveries in health care, recreation, travel, restaurants, bars, and hotels. And, we expect this trend to continue. Yes, companies like Peloton and Carvana, where investors apparently projected COVID-related trends to persist, have gotten hammered. Some look at layoffs at these companies, and others in similar straights, as a sign that recession is already here. But these aren’t macro-related developments; they are a realignment of economic activity from a distorted world to a more normal one. Another distortion from COVID policies was a big drop in labor force participation, which is the share of adults who are either working or looking for work. The participation rate was 63.4% in 2020 but now, even though the unemployment rate is back down to the pre-COVID low of 3.5%, participation is only 62.1%. Part of the problem might be inflation. “Real” hourly earnings are lower than they were pre-COVID. So fewer people might be participating, despite low unemployment, because they (correctly) realize the real value of work is less than it used to be. Another problem is that big-box stores and Amazon stayed open, while many small businesses in certain states were closed. Whether this represents a permanent shift in employment and productivity, or a temporary one, remains unclear Yet another shift is in housing. Home prices soared during COVID, with the national Case-Shiller home price index up a total of 41.4% rate in the past 27 months (through May 2022). That’s the fastest increase for any 27-month period on record, even faster than during the “housing bubble” of the 2000s. Meanwhile, with the government preventing landlords from evicting tenants, rent payments grew unusually slowly during the first eighteen months of COVID. But now rent payments are catching up. Expect a major transition in the next few years, with rents continuing to grow rapidly while home price gains slow to a trickle by late this year and then home prices remain roughly unchanged in the following few years. What a fiasco. More employment at large firms, less at small firms. More renters, fewer owners. Lower inflation-adjusted incomes. Distorted economic data. The costs of the lockdowns, one of the biggest policy mistakes in US history, are absolutely immense. Voters will react, and at least one house of Congress is likely to go the opposition party this November, meaning legislative gridlock for the next two years as the nation sorts all of this out To view this article, Click Here. Brian S. Wesbury, Chief Economist Robert Stein, Deputy Chief Economist Date: 8/22/2022 This report was prepared by First Trust Advisors L. P., and reflects the current opinion of the authors. It is based upon sources and data believed to be accurate and reliable. Opinions and forward looking statements expressed are subject to change without notice. This information does not constitute a solicitation or an offer to buy or sell any security With less than three months left before the 2022 mid-term elections, it is officially silly season when it comes to interpreting economic reports. For many analysts it’s pretty much all politics all the time, with data seen through a political lens first, and with real unbiased economic analysis coming maybe second, if ever.
It started off with those saying we’re in a recession because, at least based on the most recent reports, real GDP declined in both of the first and second quarters of the year. Never mind that the unemployment rate has dropped 0.4 percentage points so far this year. Never mind that payrolls are up an average of 471,000 per month, while industrial production is up at a 5.2% annual rate over the first six months of the year. Never mind that “real” (inflation-adjusted) gross domestic income was up in the first quarter (we’re still waiting for Q2 data) and has just as good of a track record as real GDP. The Federal Reserve raised short-term interest rates by three-quarters of a percentage point (75 basis points) on Wednesday. The day before, the Fed had released M2 money supply data for June and it fell slightly, the second decline in three months. At his press conference after the rate hike, Fed Chairman Jerome Powell was vague about the Fed’s future intentions on rates, but was not asked one single question about the money supply.
For now, with the federal funds rate at 2.375%, the futures market is leaning toward a rate hike of 50 bps in September. The Fed has apparently abandoned “forward guidance” partly because it has already pushed rates close to what many Fed members said is “neutral.” Meanwhile, the 10-year Treasury yield has fallen from north of 3.4% to under 2.7% suggesting the market thinks the Fed will either slow down rate hikes, or maybe even cut them next year. Unless, inflation falls precipitously, this makes no sense. “Core” PCE inflation is closing in on 5% and a “neutral” interest rate should be at least that high, or higher. The Fed has never managed policy under its new abundant reserve system with inflation rising this fast. No one, even the Fed, knows exactly how rate hikes will affect the economy under this new system. (See MMO) Many think the economy is in recession already, because of two consecutive quarters of declining real GDP. But this is a simplified definition. Go to NBER.Org to see the actual definition of recession. A broad array of spending, income, production and jobs data rose in the first six months of 2022. GDP is not a great real-time measure of overall economic activity for many reasons. Jerome Powell does not think the US is in recession, and neither do we. What we do know is that inflation is still extremely high and the only way to get it down and keep it down is by slowing money growth. And that does look like it’s happening. So far this year, M2 is up at only a 1.7% annual rate, after climbing at an 18.4% annual rate in 2020-21. By contrast, M2 grew at a 6.2% annual rate in the ten years leading up to COVID. Slow growth (or even slight declines) in M2 is good news. The problem is that the Fed never talks about M2 and the press never seems to ask. Moreover, slower growth in M2 may be tied to a surge in tax payments – when a taxpayer writes a check to the government, the bank deposits in M2 fall. Data on deposits at banks back this up. However, banks have trillions in excess reserves and total loans and leases are growing at double digit rates. At this point, it is not clear that the new policy regime can persistently slow M2. Will higher rates stop the growth of loans? This looks to be happening in mortgages, but it appears to be demand-driven, not supply-driven. The bottom line is that the Fed seems determined to bring inflation down but thinks raising short-term interest rates, all by itself, can do the job effectively, even at the same time that it is willing to hike more gradually when inflation is well above the level of rates. This is not a recipe for confidence in the Fed. Expect rates to peak higher than the market now expects and keep watching M2. To view this article, Click Here. Brian S. Wesbury, Chief Economist Robert Stein, Deputy Chief Economist Date: 8/1/2022
To many investors, this week’s GDP report is more important than usual. The reason is that real GDP declined in the first quarter and might have declined again in Q2. If so, this could mean two straight quarters of negative growth, which is the rule of thumb definition many use for a recession.
We think these investors are paying too much attention to the GDP numbers; the US is not in a recession, at least not yet. Industrial production rose at a 4.8% annual rate in the first quarter and at a 6.2% rate in Q2. Unemployment is lower now than at the end of 2021. Payrolls grew at a monthly rate of 539,000 in the first quarter and 375,000 in Q2. If we were already in a recession, none of this would have happened. That’s why the National Bureau of Economic Research, the “official” arbiter of recessions, uses a wide range of data when assessing whether the economy is shrinking. In addition, it’s important to recognize that once a year the government goes back and revises all the GDP data for the past several years. That happens in July, including with the report arriving this Thursday. Given the strength in jobs and industrial production, it wouldn’t surprise us at all if Q1 is eventually revised positive. In the meantime, we are forecasting growth at a +0.5% annual rate in Q2. Here’s how we get there. Consumption: “Real” (inflation-adjusted) retail sales outside the auto sector grew at a 2.2% annual rate, and it looks like real services spending should be up at a solid pace, as well. However, car and light truck sales fell at a 19.7% rate. Putting it all together, we estimate real consumer spending on goods and services, combined, increased at a modest 1.2% rate, adding 0.8 points to the real GDP growth rate (1.2 times the consumption share of GDP, which is 68%, equals 0.8). Business Investment: We estimate a 5.5% annual growth rate for business equipment investment, a 7.5% gain in intellectual property, but a 4.0% decline in commercial construction. Combined, business investment looks like it grew at a 4.4% rate, which would add 0.6 points to real GDP growth. (4.4 times the 14% business investment share of GDP equals 0.6). Home Building: Residential construction looks like it contracted at a 4.0% annual rate. Mortgage rates should eventually become a headwind, but, for now, it looks like an increase in spending on construction was more than accounted for by inflation in construction costs. A decline at a 4.0% rate would subtract 0.2 points from real GDP growth. (-4.0 times the 5% residential construction share of GDP equals -0.2). Government: Remember, only direct government purchases of goods and services (and not transfer payments like unemployment insurance) count when calculating GDP. We estimate these purchases – which represents a 17% share of GDP – were roughly unchanged, which means zero effect on real GDP. Trade: Exports have surged through May while imports, after spiking late in the first quarter, have remained roughly flat so far in Q2. That means a smaller trade deficit. At present, we’re projecting net exports will add 1.0 point to real GDP growth, although a report on the trade deficit in June, which arrives on July 27, may alter that forecast. Inventories: Inventories look like they grew at a slower pace in the second quarter than they did in Q1, suggesting a drag of about 1.7 points on the growth rate of real GDP. However, just like with trade, a report out July 27 may alter this forecast. Add it all up, and we get 0.5% annual real GDP growth for the second quarter. Monetary policy will eventually tighten enough to cause a recession, but that recession hasn’t started yet. Brian S. Wesbury, Chief Economist Robert Stein, Deputy Chief Economist Date: 7/25/2022 To view this article, Click Here |
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