Broker Check

The RFG Weekly Wealth Report

August 08, 2016
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It's déjà vu all over again!

The Chicago Board of Options Exchange (CBOE) Volatility Index, also known as the VIX, tracks the prices of options on the Standard & Poor's 500 (S&P 500) Index. Since options often are used to hedge portfolio risk, the VIX is considered to be a 'fear gauge' that has value with regard to market volatility during the next 30 days. The VIX moves higher when investors are worried and lower when they're feeling content. While this is not necessarily predictive, it does measure the current degree of fear present in the stock market.

Last Friday, the VIX dropped to 11.18, which was a two-year low. Financial Times attributed investor complacency to "...a buoyant U.S. jobs report and easy monetary policy.' However, it also pointed out analysts' concern that the current lack of fear reflects a disregard for threats to world economic stability as well as sparse trading during a vacation month.

Last year in early August, we saw a similar phenomenon. The VIX reached very low levels and then it zoomed from 13 to 53 between August 18 and August 24. At 53, the VIX was higher than when Standard & Poor's cut the credit rating of the United States in 2011, or at the apex of the European debt crisis in 2010. There is no gauge to predict whether the VIX will remain low or bounce higher during the next 30 days, but some investors are feeling bearish despite the VIX's outlook.

Regardless, the S&P 500 Index and the NASDAQ finished the week at record levels.

HAVE YOU LIVED UP TO YOUR PARENTS' EXPECTATIONS? In early August, The Harvard Business Review published an article about an unexpected source of career conflict: parents! Stew Friedman, the article's author, who is a Wharton professor and founding director of the Wharton Leadership Program wrote:

" professionals at various stages in life, from college students to mid-career executives, talk more about their mothers and fathers than their spouses and children as sources of career conflict. Here is a small sampling of what I've heard:

  • 'My parents have always made me feel that my accomplishments fall short of expectations; I'm a disappointment to them and this undermines my confidence in choosing a career direction of my own.'
  • 'My parents expect me to marry a particular (kind of) person, even if committing to that potential spouse would cut against my career goals.'
  • 'My parents insist I live in a particular geographic location, but this will seriously inhibit my career options and future growth.'
  • 'I feel obliged to care for my parents in their old age, but I cannot figure out how to coordinate the allocation of these responsibilities with my siblings; the resulting stress is a major distraction from my efforts to focus on work.'"

While it isn't a surprise to most people the needs and expectations of parents don't always sync with those of their children, Friedman had some suggestions for reducing disharmony: stakeholder dialogues. In other words, initiate conversations with the people who are most important to you and discuss mutual expectations. In the end, you may gain insight to and clarity around others' thoughts and expectations as well as the ways in which they influence your decision-making.

Quote of the Week

"The first week of August hangs at the very top of summer, the top of the live-long year, like the highest seat of a Ferris wheel when it pauses in its turning. The weeks that come before are only a climb from balmy spring, and those that follow a drop to the chill of autumn, but the first week of August is motionless, and hot. It is curiously silent, too, with blank white dawns and glaring noons, and sunsets smeared with too much color."

--Natalie Babbitt, Author of Tuck Everlasting

Golf Tip of the Week

In The Rough? Think Wedge.

When you find yourself in the deep rough, it's hard to get out using longer irons or fairway woods. Why? Because longer clubs need a shallow angle of attack, causing you to put too much rough between the clubhead and the ball. The angle makes it very hard to get the ball airborne and robs the shot of power and distance. Next time you find yourself in the rough, reach for a high-lofted iron or your wedge, which uses a short, steep angle, allowing you to pitch the ball up and out to a comfortable distance.

Financial Question of the Week

How much can I gift in 2016 without being taxed?

In 2016 the annual gift exclusion amount is $14,000.  Each individual donor can gift this amount to an unlimited number of donees. If you are married and wish to make gifts to your two children, you and your spouse together are allowed to gift $28,000 to each child for a total of $56,000. If your children are married, you and your spouse can gift as much as $56,000 to each couple without tax issues.

Taking advantage of the annual gift tax exclusion is one way to help reduce tax liability your estate may be subject to. Please contact my office if you would like to discuss other potential methods to reduce your taxable estate.