Broker Check

The RFG Weekly Wealth Report

July 11, 2016
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When the yield on 10-year Treasuries finished last week at 1.37 percent, a record closing low, Barron's called it a Kübler-Ross rally.

Elizabeth Kübler-Ross was a Swiss psychiatrist whose research identified the five stages of grief: denial, anger, bargaining, depression, and acceptance. According to Barron's, institutional money managers have reached the final stage of grief and accepted that bond yields may remain low for some time:

"Far from irrational exuberance, many institutional investors voice resignation (or worse) to the fact that they are forced to put money to work at record low yields - 1.366 percent for the benchmark 10-year Treasury note - since that's better than nothing, which literally is what they earn on the estimated $11.7 trillion of global debt securities with negative yields."

U.S. stock markets closed near record highs last week after the June employment report showed far more jobs had been created than expected. Once again, this raised questions about whether stocks are pricey in the current environment.

CANADA, EH? If there were a beauty contest among nations, Canada would probably be crowned Miss Congeniality. The second largest country in the world - known for breathtaking temperatures (-40 degrees Fahrenheit), magnificent scenery, open spaces, and friendly natives - has captured the interest of both Brits and Americans during 2016.

Canada was the top theoretical relocation choice among Brits following the Brexit vote. According to Citylab.com, 'move to Canada' was one of the two most popular 'move to...' searches in British cities. The second was Scotland, which took first among folks living in Manchester, Birmingham, Leeds, Liverpool, and Bristol.

U.S. Internet searches for the phrase 'how to move to Canada' were quite popular this year, too, according to The Economist. The search reached its 2016 crescendo to-date after the Super Tuesday primaries in March. Donald Trump won seven states and Hillary Clinton won seven states and American Samoa.

It wasn't the first time American presidential election choices inspired such angst among its citizens. 'Move to Canada' was a popular search phrase in 2004 after George W. Bush defeated John Kerry.

Regardless of the popularity of the search phrase, the number of American and British people who have migrated to Canada remains quite low. During each of the last 10 years, just 15,000 people from both nations together have sallied forth into the Great White North to become Canadian citizens.

Quote of the Week

Aaah, summer - that long anticipated stretch of lazy, lingering days, free of responsibility and rife with possibility. It's a time to hunt for insects, master handstands, practice swimming strokes, conquer trees, explore nooks and crannies, and make new friends.

--Darell Hammond, Founder and CEO of KaBOOM!

Golf Tip of the Week

Move Past Your Mistakes

Golf is a mentally taxing game, and a bad shot can eat away at your confidence. While it's important to train for the physical aspects of the sport, the mental side of the game becomes even more critical as you improve as a golfer. Here are some tips for overcoming negative thinking during your play:

  • Snap a rubber band against your wrist every time you catch yourself thinking negatively to train your mind to be aware of these thought patterns.
  • Reset yourself for each shot with a mental routine to get in the right frame of mind.
  • Go through a full practice shot routine when you catch yourself making frequent mistakes.
  • Play without expectations. Relax and try not to judge yourself after every shot.

Financial Question of the Week

What is the investment income surtax?

The net investment income tax (NIIT) is a 3.8% Medicare surtax levied on investment income.  The surtax can affect higher-income individuals, estates and trusts who have investment income.

While the NIIT mainly hits folks who consistently have high income, it can also strike anyone who has a big one-time shot of income or gain this year or any other year. For example, if you sell some company stock for a big gain, get a big bonus, or even sell a home for a big profit, you could have to pay.

If you are exposed to NIIT, several strategies may help. Choosing the correct strategy is highly dependent on your specific situation, but possible options include:

  • Avoiding realized gains during high income years
  • Realizing long-term gains during low income years
  • Selling loser securities to offset capital gains
  • Maximizing deductible contributions to tax-favored retirement accounts
  • Plan the timing of income and business expenses
  • Pay deductible expenses in high income years

Please contact my office if you would like to review your situation for possible strategies to reduce or avoid the 3.8% Medicare surtax.