New normal?

Same author as the previous post, but since he's making sense, you get another dose. Here, Jack Hough reasonably argues that the abrupt market/economy adjustments of the past year have simply brought us to the levels we should have been at all along. In other words, we're not in extraordinary times now — we were in extraordinary times over the past few years. Or, welcome to the new normal.

(Note: he's not saying the wrenching adjustment process of the past year is going to be the norm going forward. He's saying where the economy and stock market are today might not be far from where we should be.)

A reminder for newer readers — when we post articles like this, we're not necessarily saying "we think this article is right." Instead, we're trying to provide compelling food for thought to help you build a healthy perspective on the markets and economy. If we think something is spot-on accurate, we'll normally say so.

Posted by Mark at 10:39 AM | Comments (0)
Category(s): Current Market Events, Economy

Email this post

Ugly truths of the car industry

I'm not totally jiving with everything in this article (like the paragraph about health costs), but this author raises some really good points about our domestic auto industry. In light of the expected Chrysler bankruptcy today, it's worth a quick read.

Posted by Mark at 10:29 AM | Comments (0)
Category(s): Economy

Email this post

Goodbye Countrywide, hello flat-fee closing costs

Monday, the infamous Countrywide name was scheduled to disappear forever, as Bank of America (BoA) tries to cut the memory cord with that symbol of the subprime disaster years.

While it is mildly interesting to see the deep-sixing of a brand that was the largest mortgage financer in the US (financing 20% of America's mortgages) just a few years ago, the really interesting news is the new pricing structure BoA announced that same day.

If you've ever taken out a mortgage, you've likely been baffled by the array of fees that make up your "closing costs." They differ from one lender to the next, with certain items called different things...you'd almost get the idea they were meant to be intentionally confusing and hard to compare (I'm shocked...shocked!).

BoA is taking a significant step towards ending the closing cost confusion by offering flat-fee mortgages. Depending on your state, you'll either pay $2,995, $2,495, or $1,995 for your loan costs. At present, these flat-rate terms are only available for new purchases (not refinances) and only through BoA branches. But it's a start.

I don't know that those specific price points are anything to write home about, but it seems like a step in the right direction in terms of clarifying this often-confusing aspect of buying a home. If it forces other lenders to follow suit, it could lead to a more easily navigated landscape for consumers shopping for a mortgage.

Posted by Mark at 9:44 AM | Comments (0)
Category(s): Family Finances

Email this post

Interstate Batteries

A friend of mine posted this on his Facebook page. I thought you'd be interested to hear about one of the corporate good guys, since it's usually the bad apples that get the attention.

Interstate Batteries - God's Love Commercial

Posted by Mark at 4:25 PM | Comments (0)
Category(s): Christian Interest

Email this post

Dave Ramsey's Town Hall for Hope

Popular financial-talk-show host Dave Ramsey, whose daily radio program is heard on more than 400 stations, presented a national "town meeting" last week, streamed live to 6,000 locations (including many churches).

The goal of the Town Hall for Hope was "to eliminate fear and spread the truth," he said in news release.

During the 90-minute event, Ramsey, who also hosts a program on the Fox Business Network, spoke about the strength of the U.S. economy, the virtues of capitalism (when wedded to a timeless moral code), and the need for people to take personal responsibility for their financial lives.

In the Q-&-A portion of the webcast, he talked with a caller who was worried about investing in a economy so laden with debt. Watch that four-minute interchange here (after a 30-second commercial for Fox Business).

According to Inside Radio, the Town Hall of Hope was the largest-ever syndicated webcast. More than one million people participated, according to estimates.

At the end of his daily radio program, Ramsey always stresses that "there's only one way to financial peace, and that's to walk daily with the Prince of Peace, Christ Jesus."

Posted by Joseph at 2:50 PM | Comments (0)
Category(s): Current Market Events

Email this post

Go see "The Cross"

I've been posting weekly encouragement from the Psalms ... last week's is here.

This week I want to send another kind of encouragement your way. I've just returned from watching The Cross, a documentary on the life and ministry of Arthur Blessitt. Before going, all I really knew about him was that he had traveled the world carrying a cross. It was a strange ministry, to say the least.

I came away so impressed with his faithfulness, courage, and humility. The film was much more moving and inspiring than I anticipated. If you want to be encouraged this week, go see it. Take others with you. I would think it will also speak to teens. It's hard to imagine a Christian going to see it and not hearing/seeing at least one or two things that they can relate to and apply to their spiritual walk.

As for non-Christians, they would see a loving, living, breathing example of the Christian faith. The gospel is there to be seen, but not in a confrontive way at all. I'd be surprised if they were offended by anything in the film. They may or may not be attracted to the gospel, but they can't help being impressed with Arthur Blessitt.

"The Cross" is slowly being released around the country. You can check out whether it's playing in your area here. Highly recommended!

Posted by Austin at 4:45 PM | Comments (0)
Category(s): Christian Interest

Email this post

Bottom or bounce

In this month's Level 4 column, I tried to offer a little perspective regarding whether the March lows were likely to be the ultimate bear market bottom, or if the recent rally has merely been a bear market trap. It's tricky to figure that out until after the fact.

Since writing that article, I've bumped into a couple other articles weighing in on the same question. William Hester, writing for the Hussman Funds, has a couple of compelling charts that sure seem to indicate this has only been a bear market rally, not a true bottom. The article is good, but dense, and you can learn all you need to know just by quickly looking at the charts.

Mark Hulbert has a different take on the matter, arguing essentially that it doesn't matter. His main point is that even if March was the ultimate low point for this bear market, new bull markets typically drop back within their first few months and retest the earlier lows.

Posted by Mark at 3:50 PM | Comments (0)
Category(s): Current Market Events

Email this post

May issue now available

The May 2009 issue of the newsletter has just been posted to the website.

Readers following our Fund Upgrading strategy are advised that two fund changes are being made this month.

Web Members can read the write-ups of the new funds we're adding here.

Posted by Mark at 2:22 PM | Comments (0)
Category(s): SMI General Announcements

Email this post

Refinancing to a fixed-rate mortgage

Hopefully most readers have long-ago done this, but it occurs to me that we haven't really discussed that the current interest rate environment is ideal for homeowners to refinance out of adjustable-rate loans and into low-rate fixed mortgages. A huge number of homeowners have been refinancing this year to take advantage of the current historically-low interest rates.

Some think these low rates will be with us for some time, but I personally wouldn't wait around if I had an adjustable-rate mortgage and planned to stay in that house for more than a year or two. The ability to lock in 15- and 30-year rates around 5% is a no-brainer, especially given the alternative of a variable rate that is extremely vulnerable to future inflationary (upward) pressure. Nobody knows when those inflationary winds will start blowing in earnest, but some think we may be seeing the first traces already breezing through the bond market.

At any rate, hopefully this post is redundant and any readers with variable-rate mortgages have already refinanced to low fixed-rates. If not, now is an extremely opportune time to do so.

Normally I'd encourage the 15-year loan for anyone who can swing the higher payment, but given the economic uncertainty and the fact that 15- and 30-year rates are pretty close in many markets, it may be worthwhile for some to consider sticking with the 30-year loan and simply doubling up your principal payments (rather than being locked into the higher 15-year payment). I'm not advocating any radical change in philosophy here. I'm simply acknowledging that in an extremely uncertain economic and job climate, payment flexibility may be more valuable than shaving an extra eighth or quarter off the interest rate. It's real easy to turn a 30-year loan into a 15-year with principal prepayments; it's very difficult to do anything to ease the pressure of a 15-year loan payment if you're unfortunate enough to lose your job at some point.

Posted by Mark at 2:33 PM | Comments (0)
Category(s): Economy, Family Finances

Email this post

Forecasting follies

Joseph's post from Friday linked to an editorial I wrote a few years back. In it, I said:

A certain humility is in order concerning one's ability to profit (and help others profit) from correctly anticipating coming economic events. Unfortunately, this does not seem to have occurred to the publishers of the leading financial magazines. The bold headlines, which claim the ability to know what's going to be best for you in the coming months, virtually shout from the covers. For example, Kiplinger's January cover promised to explain "where to put your money now" along with "eight stocks to buy today."

This is potentially harmful stuff. It incorrectly conveys a sense of predictability concerning the economy and markets, and downplays the reality of risk. As we have documented previously, financial magazines have a mediocre track record when it comes to their specific investment recommendations. Compounding the damage, they rarely revisit their recommendations and announce when it may be time to sell.

This reminded me of a regular feature of SMI during our first decade. "False Prophets" was a column wherein I would take an occasional look, with the benefit of hindsight, at how various magazines' recommendations fared. I would examine the track records of Forbes, Money, Consumer Reports, and others. Invariably, their recommendations trailed the market.

I guess I stopped running the articles because I assumed everyone got the point — don't rely on financial magazines for portfolio recommendations. But we have thousands of new readers since those days, and perhaps many of the new ones don't understand the poor history of the magazines' forecasts.

So, for old times sake, I dug out the 2006 Kiplinger's that I had quoted from to see how their stock picks had done that year. Keep in mind, here is what Kiplinger's said at the time:

Stocks to Own in 2006
Look for these eight companies to deliver great returns for investors.
Our picks are riding the improved economy.

As a group, the eight stocks returned +8.9% in 2006. That compared rather unfavorably to the +15.9% return for the overall market. Three of them lost money. Discovering this was not in the least surprising. Based on my previous experience checking into these kinds of forecasts, I would have been shocked if they had, as a group, beaten the market.

As I pointed out in the editorial: If it's your desire to have confidence in managing your finances rather than relying on the guesswork of others, ask God to help you learn the essential basics you need in order to become a faithful and effective steward.

Posted by Austin at 10:15 AM | Comments (0)
Category(s): Investing Principles

Email this post

Perspective on Obama's $100M budget cut

Since we're doing perspective posts today (see post below), we may as well make it a double.

Here's MarketWatch's surprisingly candid take on President Obama's announcement today that he's asking his cabinet to find $100 million in budget savings:

To get a handle on how insultingly trivial the announcement is, one need only compare the targeted cuts to the administration's spending plan for 2010.

With cuts in federal spending by $100 million, the government will save roughly 1/36,000 of the $3.6 trillion it expects to spend next year.

Put another way, if the budget were a yardstick, the administration would be proposing to shorten it by 1/1000 of an inch. That's 25.4 microns, or about half the width of a human hair.

Ouch. Guess you have to start somewhere, but it's a little late to play the fiscal responsibility card.

UPDATE: The Associated Press notes that "[t]he thrifty measures Obama ordered for federal agencies are the equivalent of asking a family that spends $60,000 in a year to save $6."

The Heritage Foundation has a picture worth a thousand words.

Posted by Mark at 4:32 PM | Comments (0)
Category(s): Economy, Taxes

Email this post

Perspective on today's losses

The market delivered some pretty ugly losses today, but it's worth noting that they come on the heels of the market's best six-week stretch in over 70 years.

Yeah, I know. It sure doesn't feel like we've just experienced the best six-week run in 70 years. That's a pretty good illustration of what the behavioral economists tell us about investors feeling market losses two-and-a-half more times as strongly as they do gains.

Posted by Mark at 4:23 PM | Comments (0)
Category(s): Current Market Events

Email this post

If your employer cuts your retirement-plan match

Since the middle of last year, at least 200 companies have either reduced or suspended matching contributions to their 401(k) plans. The Big Three automakers are among them, and so are Sears, UPS, Xerox, Black and Decker, Forbes, and Starbucks. (More on this list.)

If your employer follows suit, should you keep contributing? Or should you redeploy your resources elsewhere? After all, losing the match — or a significant portion of it — removes one of the key advantages of a 401(k).

As with many financial questions, the answer is: "It depends."

If you have consumer debt, it may be more financially advantageous to stop your retirement contributions for awhile and use that money to pay down your debt. Remember, paying down debt yields a guaranteed return. Reducing the cost of borrowing has the same bottom-line effect as increasing the return on your investments.

Another option is to redeploy your retirement contributions into building up your emergency savings. Having a financial cushion will be invaluable if your employer is eventually forced to cut your position and you find yourself out of work.

One more option — if you're already clear of consumer debt and have your emergency savings in place — is to redeploy your company 401(k) contributions toward a personal IRA. There is not much reason to do this if you are satisfied with the choices in your employer's plan. And besides, your employer might re-institute the match when the economy turns around.

But if you've been unhappy with the options in your company 401(k) and think it might be awhile before the full matching program is resumed, opening your own deductible IRA or Roth IRA might be a good choice. A deductible IRA will offer you an upfront tax benefit, of course, but if you think taxes will be higher in the future (and it is certainly looking that way) the Roth is more attractive because your withdrawals in retirement will be tax free.

A word of caution: if you suspend your retirement contributions to pay down debt or build your emergency savings, be sure to resume your retirement funding once your debt payment and/or savings goals are met. Waiting several years to re-launch your retirement savings is likely to have a large negative impact on your future nest egg.

Posted by Joseph at 3:44 PM | Comments (0)
Category(s): Retirement

Email this post

"I want you to trust me in your times of trouble, so I can rescue you and you can give me glory."

We continue to look to the Lord for wisdom ("I keep asking that the God of our Lord Jesus Christ, the glorious Father, may give you the Spirit of wisdom and revelation, so that you may know him better" Ephesians 1:17) and the Psalms for encouragement:

But, O my soul, don’t be discouraged. Don’t be upset. Expect God to act! For I know that I shall again have plenty of reason to praise him for all that he will do. He is my help! He is my God! From Psalm 42

O my soul, why be so gloomy and discouraged? Trust in God! I shall again praise him for his wondrous help; he will make me smile again, for he is my God! From Psalm 43

God is our refuge and strength, a tested help in times of trouble. And so we need not fear... From Psalm 46

For all the animals of field and forest are mine! The cattle on a thousand hills! And all the birds upon the mountains! ... for all the world is mine and everything in it.... I want you to trust me in your times of trouble, so I can rescue you and you can give me glory. From Psalm 50

Earlier weekly selections from the Psalms can be found here: Week 1, Week 2, Week 3, Week 4, and Week 5.

Posted by Austin at 5:02 PM | Comments (0)
Category(s): Christian Interest

Email this post

Inflation experiment

The Fed is “running a laboratory experiment” on what drives inflation: the money supply or the output gap, says Laurence Meyer, a former Fed governor and now vice chairman of St. Louis-based Macroeconomic Advisers.

That's the summary of an excellent Bloomberg article on inflation and the recent government actions. There are two competing heavyweight theories squaring off right now. Call it Keynes vs. Friedman II.

Nobel-prize winner Milton Friedman contended that “inflation is always and everywhere a monetary phenomenon.” In other words, when you create too many dollars, it will eventually show up as inflation as more dollars chase the same supply of goods.

SMI tends to agree with the Friedman economic view of the world, so you've been exposed to a regular diet of this sort of thinking. We believe the government's massive spending will ultimately be inflationary (which is why we'll be exploring the inflation topic in the cover article of next month's newsletter).

While Friedman is a big name and his followers are widespread, his view is by no means unchallenged. The primary competing viewpoint on inflation comes from Keynes, whose economic theories dominated for decades (some would say until they were disproven during the 1970s by rampant inflation coupled with stagnant growth; i.e., the infamous "stagflation").

The article explains how the current economic situation is viewed through Keynes' framework:

At the root of that concern is substantial and growing slack in the economy, which, according to White House chief economist Christina Romer, is operating 5 percent to 10 percent below potential. That means the economy will have to grow a percentage point above trend — reckoned by the administration to be about 2.5 percent annually — for five or more years before the slack is used up.

The Phillips curve — developed by economist A.W. Phillips using Keynesian concepts — posits that such excess will reduce inflation as firms stuck with idle capacity cut prices and workers facing layoffs accept smaller wage hikes.

In essence, it boils down to this: can the government get away with significant money creation (to help spur the economy out of its present trouble) without causing serious inflation at some point down the line? Friedman would likely say no, Keynes would likely say yes.

Even if inflation is the eventual result, there's the tricky issue of timing. As San Francisco Fed President Janet Yellen is quoted in the article as saying a few weeks ago, “For some time to come, disinflation, and even deflation, will represent greater risks than inflation."

Much more to come in the May issue of SMI.

Posted by Mark at 1:44 PM | Comments (0)
Category(s): Economy, Inflation Watch

Email this post

Move over Google, there's a more charitable way to search

In their attempt to become the next big search engine, GoodSearch offers a compelling reason to quit Googling. It contributes financially to charities based on your searches: Fifty percent of the revenue generated from advertisers is shared with the charity, school or nonprofit organization of your choosing.

GoodSearch (which is powered by Yahoo!) has a simple tag line: You Search We Give. And with 77,000 non-profits available and 100 new ones being added a day, they really mean it. Don't see your charity or school listed? You can submit one no problem. Want to know how much has been raised? Easy peasy. At the time of this post, $3,743.72 had been given to Compassion International. Not bad. There are even browser add-ons to make GoodSearch easier to use.

So if you're already using Yahoo! as your search engine, switching is a no-brainer. And unless you're just in love with Google, you might consider this way to help out the charities that are closest to your heart.

Posted by Matthew at 5:07 PM | Comments (0)
Category(s): Giving and Stewardship

Email this post

How your brain processes investment advice

Our January 2009 cover story, "How to Avoid Panic and Reduce Fear," reported on recent research in the field of neuroeconomics. That research suggested that "[i]nvestors are biologically induced into short-term thinking by the stress hormones released during episodes of acute fear. Fear has the effect of inducing concrete short-term thinking with poor flexibility in judgment."

Now, researchers at Atlanta's Emory University (School of Medicine and Department of Economics) say getting financial advice appears to suppress areas of the brain responsible for making value judgments. In other words, people tend to simply accept financial advice and act on it without weighing that advice carefully in the context of their own situation and goals.

The research is published in the March issue of PLoS One (from the Public Library of Science) in an article titled, "Expert Financial Advice Neurobiologically 'Offloads' Financial Decision-Making Under Risk."

Here is a summary from an Emory news release:

Study participants were asked to make a series of financial choices...while undergoing fMRI scanning. During portions of the testing, the participants had to make decisions on their own; during other portions, they received advice from a financial expert about which choice to make.

"Results showed that brain regions consistent with decision-making were active in participants when making choices on their own; however, there occurred an offloading of the decision-making process in the presence of expert advice," says Jan B. Engelmann, PhD, Emory research fellow in the Department of Psychiatry and Behavioral Sciences....

"This study indicates that the brain relinquishes responsibility when a trusted authority provides expertise," says [Gregory Berns, professor of neuroeconomics and psychiatry at Emory University School of Medicine]. "The problem with this tendency is that it can work to a person's detriment if the trusted source turns out to be incompetent or corrupt."

The research appears to underscore a point Austin makes in the first chapter of The Sound Mind Investing Handbook (excerpt here):

Most people have only vague notions as to what their long-term investments goals are. As a result, they move through life as responders, deciding on a case-by-case basis whether to say yes to the various investment opportunities that randomly come to their attention....

Because they're not quite sure where they're going, they tend to watch the crowd to see where it's going. They begin listening for the hot tips, taking the gurus seriously, and putting too many eggs in the same basket....

To find peace of mind in your investment decisions, you need to become an initiator rather than a responder. Initiators have a concrete game plan in mind. They have made the effort to develop a strategy that specifically takes into account their long-term financial goals as well as their own personal investment temperament.

At SMI, our purpose is not to make decisions for you. Our purpose is to supply you with information that will help you make decisions for yourself, so you can be a "good and faithful steward" of the Lord's resources.

So when you get advice from us, keep your brain in gear! Weigh that counsel. Pray over it. See if it fits with your priorities and your temperament. Then act with the confidence that comes from knowing you have a long-term, God-honoring plan.

Jason Zwieg, author of our February 2008 cover article, "The High Cost of Fear," has more on the Emory research here.

Posted by Joseph at 4:03 PM | Comments (0)
Category(s): Investing Principles

Email this post

Louisville Tea Party report

It was 45 degrees and overcast but the spirits were high at the Louisville Tax Day Tea Party rally. Roughly a couple thousand people came to show their patriotism by song, sign, and speech. Among the rally participants were folks from every walk of life, age, and political party (the organizer is a registered Democrat). In case you didn't follow us on Twitter, here were a few of my favorite lines from the various speeches.

A college student quoted Thomas Jefferson's, "A government big enough to give you everything you want is a government big enough to take from you everything you have."

A woman started her speech, "I'm just a mom without a teleprompter."

The chair of the local Republican Party quoted Milton Friedman's, "If the government were in charge of the Sahara Desert, in 5 years there would be a shortage of sand."

And the mere mention of Barney Frank resulted in a collective "Boooo" that went echoing throughout downtown, perhaps the loudest outburst of the event.

Hopefully the 2,000+ rallies happening today will get the attention of our representatives. All in all I believe it was a successful grassroots effort. If you attended one in your city/town, we'd love to hear your assessment.

Posted by Matthew at 4:07 PM | Comments (0)
Category(s): Taxes

Email this post

April 15 - Time for a TEA Party

We've mentioned the growing TEA Party movement (that's "Taxed Enough Already") that's been bubbling up from the grassroots over the past few months. While some TEA Parties were held earlier in the year, most of them will occur tomorrow, on April 15.

Some will no doubt question the point of gathering in local communities and cities across the nation to protest the reckless spending of our government. Does anyone actually pay attention to this stuff?

Given the mocking coverage the events are receiving from some quarters of the media, it seems the TEA Party movement is at least beginning to be recognized. I would guess that a political class that relies on apathy and inertia to continue its reckless trajectory must get at least a little nervous when large numbers of its citizens start organizing and expressing the fact that they are "TEA'd off." (Sorry, I had to slip at least one of those in somewhere.)

Check out this map of TEA Parties scheduled for tomorrow. Pretty impressive. For most people, there's something going on near enough to consider attending.

Here are a few other TEA Party links:

Main TEA Party website

FOX News coverage of the TEA Parties, including live video streams from several locations

Pajamas TV coverage of the TEA Parties

It's the heaviest part of the monthly writing cycle here at SMI, so we're planning to send a single representative from the SMI offices tomorrow. Matthew is planning to attend and report back on what he finds here in the weblog.

If at all possible, we encourage you to go to your local TEA Party. And if you're so inclined, we'd love to hear about your experience — how many people you think were there, a brief recap of what went on, and so forth. Hopefully we'll have reports from all around the country.

As the political philosopher Edmund Burke once said, "When bad men combine, the good must associate; else they will fall one by one, an unpitied sacrifice in a contemptible struggle."

The popular modern paraphrase: All that is necessary for evil to triumph is for good men to do nothing.

This is a small something. If you can, we encourage you to get involved. When it comes to statements like these, the number of those involved does matter.

Update: Glenn Reynolds reflects on the potential impact of the TEA Parties on American politics.

Posted by Mark at 4:47 PM | Comments (0)
Category(s): Taxes

Email this post

SMI now on Twitter!

SMI is doing a trial run on Twitter under the username SoundMindInvest.

What is Twitter? Simply put, it's a free social messaging utility for staying connected in real-time. The updates (known as "tweets") are limited to 140 characters, but there is no limit to the number of tweets you can make, nor the number of followers you can have.

Why is SMI trying Twitter? For starters, we think it's important to be familiar with the popular social media options out there. We established an SMI Facebook presence last year and continue to learn how to best utilize it to broaden SMI's reach.

Secondly, our reader demographic skews towards a "mature" (i.e., older) audience. SMI has had a harder time reaching the younger crowd, which isn't too surprising, given that it's a reach for most younger people to pay for investing counsel when they don't have much money invested yet. Establishing a presence on sites like Twitter and Facebook will hopefully help attract younger readers, or at the very least, put SMI on their radar. Ideally, we'll be able to convey the fact that SMI offers significant benefits even to those still in the "getting out of debt" phase of life. (There's a reason so many new readers write to us saying, "if only I had found SMI 10 years ago" or "when I was younger.")

So what does this mean for you? The Sound Mind Investing website will still be the best place to go for the most up-to-date information. But due to the viral nature of social media, our name spreads simply by Twitter users following us. So if you're using Twitter, by all means, come follow us.

Furthermore, if you know someone who could benefit from SMI but they're not ready to become members, letting them know they can follow us on Twitter (and/or Facebook) may help get them familiar with who we are and what we do.

If you haven't tried Twitter, check it out. It's fun and easy. If you have any questions, shoot me an email at mpblog@soundmindinvesting.com.

Happy Twittering.

Posted by Matthew at 4:08 PM | Comments (0)
Category(s): SMI General Announcements

Email this post

The tax man cometh?

An editorial in the Washington Post tries to dispel the notion (one we tried to dispel in this August 2007 blog post) that the wealthy don't pay their fair share of taxes.

In 2006, the top 20 percent of earners paid 70 percent of all federal taxes.... The very richest — the top 1 percent of taxpayers, with household incomes of over $332,000 — paid 28 percent of all taxes.... The lowest 20 percent of households paid only 0.8 percent of all federal taxes....

Based on these numbers, it would be hard to argue that the country doesn't already have a significantly progressive tax system.

(A related chart from RealClearMarkets.com is here.)

The Post then makes the point that given all the spending going on these days, "taxes will have to go up" at some point.

But who will pay?

When taxes go up, they should be increased in a way that makes the tax code more progressive [i.e. the people at the top should pay even more].... But there is a limit to how much the tippy top should bear. President Obama has promised that taxes will not be increased for families making under $250,000. That is a promise that will probably have to be dropped down the road. There just isn't enough revenue to be found above that figure.

Hmm. Who knew?

APRIL 15 UPDATE: In remarks on "tax day," President Obama reiterated his pledge of tax increases only for those who earn above $250,000: "We've made a clear promise that families that earn less than $250,000 a year will not see their taxes increase by a single dime," he said.

Posted by Joseph at 3:52 PM | Comments (0)
Category(s): Taxes

Email this post

"May the joy of the Lord be given to everyone who loves him and his salvation."

As is our custom, the SMI office is closed today for Good Friday. But I'm dropping by the blog briefly to post our weekly meditations from the Psalms (previous such posts can be found here). Today I've gathered our passages from Psalms 36-40.

Your steadfast love, O Lord, is as great as all the heavens. Your faithfulness reaches beyond the clouds.... How precious is your constant love, O God! All humanity takes refuge in the shadow of your wings. You feed them with blessings from your own table and let them drink from your rivers of delight. For you are the Fountain of life; our light is from your light. Pour out your unfailing love on those who know you! Never stop giving your blessings to those who long to do your will. From Psalm 36

Be delighted with the Lord. Then he will give you all your heart’s desires. Commit everything you do to the Lord. Trust him to help you do it, and he will.... all who humble themselves before the Lord shall be given every blessing and shall have wonderful peace.... Day by day the Lord observes the good deeds done by godly men, and gives them eternal rewards. He cares for them when times are hard; even in famine, they will have enough.... The steps of good men are directed by the Lord. He delights in each step they take. If they fall it isn’t fatal, for the Lord holds them with his hand. I have been young and now I am old. And in all my years I have never seen the Lord forsake a man who loves him; nor have I seen the children of the godly go hungry. Instead, the godly are able to be generous with their gifts and loans to others, and their children are a blessing.... Don’t be impatient for the Lord to act! Keep traveling steadily along his pathway and in due season he will honor you with every blessing.... The Lord saves the godly! He is their salvation and their refuge when trouble comes. Because they trust in him, he helps them and delivers them from the plots of evil men. From Psalm 37

Lord, help me to realize how brief my time on earth will be. Help me to know that I am here for but a moment more. My life is no longer than my hand! My whole lifetime is but a moment to you. Proud man! Frail as breath! A shadow! And all his busy rushing ends in nothing. He heaps up riches for someone else to spend. And so, Lord, my only hope is in you. From Psalm 39

I waited patiently for God to help me; then he listened and heard my cry. He lifted me out of the pit of despair... and set my feet on a hard, firm path, and steadied me as I walked along. He has given me a new song to sing, of praises to our God. Now many will hear of the glorious things he did for me, and stand in awe before the Lord, and put their trust in him. Many blessings are given to those who trust the Lord.... may the joy of the Lord be given to everyone who loves him and his salvation. May they constantly exclaim, "How great God is!" From Psalm 40

Posted by Austin at 4:01 PM | Comments (0)
Category(s): Christian Interest

Email this post

Training inmates to become legitimate entrepreneurs

The Washington Times has an update on Catherine Rohr, the woman who quit her Wall Street job and now helps turn prisoners into businessmen. (We first mentioned her in a post last summer.)

In 2004, while helping out with a Prison Fellowship outreach at a Texas prison, it occurred to Ms. Rohr that "the very entrepreneurial skills that landed these drug dealers and thieves in prison might be the very thing that could help them get back on the right track," according to the Times.

[S]he secured permission from the Texas Department of Corrections to launch the Prison Entrepreneurship Program (PEP), where murderers, burglars and drug lords are given the chance to become businessmen....

In five years, the program has graduated more than 400 prisoners. Ninety-eight percent have landed steady jobs within four weeks of release, most making at least $11 per hour. Fifty-eight have started their own businesses, ranging from T-shirt printing to software development.

PEP now has nearly 1,500 volunteers involved in training, including more than 1,000 business executives and 450 MBA students from 24 schools.

Many graduates [from the PEP program] find well-paying jobs, and several become the entrepreneurs they dreamed they would be. While more than half of the nation´s prisoners are rearrested within three years, PEP's recidivism rate is less than 10 percent.

The Times story is a welcome reminder in a world of bad news that good things are happening too.

Posted by Joseph at 4:19 PM | Comments (0)
Category(s): Christian Interest

Email this post

A financial genius? Or a financial hustler?

Early in the "Rich Dad, Poor Dad" craze, SmartMoney (a magazine published by Dow Jones) did a very interesting interview with/investigation of the author, Robert Kiyosaki. I liked the article very much because it introduced a note of caution with regard to the best-selling book that was influencing countless families. I attempted to get reprint rights to use as a cover article in SMI, but SmartMoney's rates were prohibitive.

This week I was tossing out stacks of old magazines when I came across the one from February 2003 that carried that particular article. Knowing that older content often finds its way to the publisher's Internet site, I looked to see if it was available. If so, I planned to post on the topic and link to the article.

Alas, it wasn't to be found. But I did find that Mr. Kiyosaki remains a controversial figure. Here is a lengthy rundown of his career by real-estate writer John Reed. Having not heard of Mr. Reed, I can't vouch for his accuracy, but he does appear to be a reputable voice with respect to real-estate writing/reporting. Here's his take.

This three-part series, published by Steve Braun of homeschoolblogger.com, likewise is quite critical. Again, I can't vouch for the accuracy of the allegations. Braun, however, links to a WSJ article by Jonathan Clements, a familiar and reliable source.

Finally I found mention of Kiyosaki on the Motley Fool site. It references the SmartMoney article, also taking a dim view of the advice in "Rich Dad, Poor Dad." You can read it here.

I would have balanced the above links with positive reviews, but I didn't come across any (although I didn't check the reader reviews at Amazon). Perhaps you know of some. If you have links to more favorable assessments of the author, his book, or his strategy, feel free to post them in the Comments section.

Posted by Austin at 2:36 PM | Comments (0)
Category(s): Family Finances

Email this post

I.O.U.S.A. (again)

Back in early January, I noted that CNN was airing the documentary I.O.U.S.A. over the weekend. But then I, probably like many of you, got busy and never actually watched it.

For those of you who want to watch this but don't necessarily feel like you can sink 90 minutes (or however long it is) into it, you'll be glad to learn there's a short version created for people like us. In fact, I watched it this morning on YouTube. Powerful, disturbing stuff.

Okay, for some of you, 30 minutes is still too long. I'll do the heavy lifting for you. Watch the first 15 minutes, then jump ahead to minutes 20-22 and watch the financial warfare bit. That'll give you a really good feel for the key material.

If this fires you up enough to actually want to do something about it, a good first step might be to check out the National Tea Party Day activities in your area next week. Obviously we need to vote and be involved that way, but these rallies are a good way to show our elected officials that the people are getting restless. Sadly, getting that message across loud and clear is probably the only thing that will push them to act before the bottom completely falls out.

Posted by Mark at 11:48 AM | Comments (0)
Category(s): Economy, Taxes

Email this post

"Pundits' predictions are not only wrong but egregiously wrong..."

Recently Mark and I noted with some amazement a column by Paul Farrell, MarketWatch's resident bear and all-purpose curmudgeon. For years we'd read his columns with a shake of the head over his pessimism and cynicism. So we were both rather shocked to read his "6 reasons I'm calling a bottom and a new bull" article. Farrell turning bullish? This is "man bites dog" material.

I don't know, of course, if his new bullish stance will prove correct. But I do agree, for the most part, with his six points. I especially thought it worth sharing from his fourth point — "Famous media-darling pundits inevitably flameout." This is something we have pointed out over the years, and Farrell backs it up with some stats from a recent study.

A month ago Newsweek's science columnist and former Wall Street Journal legend Sharon Begley wrote a fascinating piece, "Why Pundits Get Things Wrong." Her opening: "Pointing out how often pundits' predictions are not only wrong but egregiously wrong ... is like shooting fish in a barrel, except in this case the fish refuse to die. No matter how often they miss the mark, pundits just won't shut up."

Think of all the media darlings you know as Begley reviews the data: And "the fact that being chronically, 180-degrees wrong does not disqualify pundits is in large part the media's fault: cable news, talk radio and the blogosphere need all the punditry they can rustle up, track records be damned."

The data comes from Philip Tetlock, a research psychologist at Stanford University: "Tetlock's ongoing study of 82,361 predictions by 284 pundits" concludes that their accuracy has nothing to do with credentials such as a doctorate in economics or political science, or on "policy experience, access to classified information, or being a realist or neocon, liberal or conservative."

What matters? "The best predictor, in a backward sort of way, was fame: the more feted by the media, the worse a pundit's accuracy. ... The media's preferred pundits are forceful, confident and decisive, not tentative and balanced. ... Bold, decisive assertions make better sound bites; bombast, swagger and certainty make for better TV."

They can be totally wrong, so long as they're assertive and entertaining. "The marketplace of ideas does not punish poor punditry. Few of us even remember who got what wrong. We are instead impressed by credentials, affiliation, fame and even looks — traits that have no bearing on a pundit's accuracy."

Posted by Austin at 3:49 PM | Comments (0)

Email this post

What the supermarkets won't tell you

SmartMoney starts their piece entitled 10 Things Supermarkets Won't Tell You this way:

When the economy slows and businesses begin to feel the heat, grocery stores are often exceptions to the rule. That’s because when consumers cut back on frills like eating out, they tend to make even more trips to the supermarket. Still, all bets may be off in the wake of the crash of 2008.

For me, grocery stores seem the least predatory of all retailers. I don't know if it's just my naivete, the fact that I'm buying essentials and not luxuries, or the no-frills environment. But reading an article like this reminds me that I probably have it 180 degrees wrong.

Any shenanigans you've experienced that didn't make the list?

Posted by Matthew at 3:46 PM | Comments (0)
Category(s): Family Finances

Email this post

Not feeling the recession?

Do you ever watch the news coverage of the current "terrible" recession and think to yourself, "I just don't see that here"? There could be a good reason why you don't.

I've linked to similar charts in the past, but this Forbes series of U.S. foreclosure and unemployment maps are worth a fresh look. They vividly illustrate how concentrated the worst of the housing and unemployment woes are. And by extension, they explain why many people simply aren't feeling this recession the way the national news implies "most Americans" are.

That's not to say the problems aren't real. Some, particularly in the financial arena, have long-reaching implications. But chances are pretty good that your local economy isn't doing as poorly as the national figures, unless of course you live in one of the handful of hot spots illustrated on these maps.

Posted by Mark at 3:25 PM | Comments (0)
Category(s): Economy

Email this post

Longtime SMI reader a guest on MoneyLife

One of our loyal SMI readers, Connie Parks, was Chuck Bentley's guest recently on Crown Financial Ministries' MoneyLife program. Connie is a Crown Money Map coach.

She talked about how husbands and wives can work together on their finances. Details — and audio — are here.

Great job, Connie!

Posted by Joseph at 4:09 PM | Comments (0)
Category(s): Family Finances

Email this post

WANTED: SMI Handbook reviews

As you may recall, we released the 5th Edition Sound Mind Investing Handbook late last year.

What you may not know is that Crown Financial Ministries is now the distributor of the book (except for orders that come through our site). Furthermore, we're doing some co-branding with Crown, given that the book is listed as a "Destination 5" resource on the Crown Money Map. This designation now appears on the back cover of the SMI Handbook.

Crown has already gotten the book listed on Amazon. We have updated the listing and enabled the "Look Inside" option where you can view the contents of the book before buying it. But currently, all the reviews are actually for the previous edition. We've been very fortunate as we have two dozen reviews of older editions and it AVERAGED a perfect 5 star rating! We hope it continues with this new 5th edition.

If any of you would like to give the new edition a review on Amazon, we certainly would appreciate it. Our readers' feedback is immensely important to us and serves as one of our top sources of referrals. We would be very grateful to any of you who can help continue this tradition and begin to build a new track record of quality reviews.

Thanks.

Posted by Matthew at 4:02 PM | Comments (0)
Category(s): SMI General Announcements

Email this post

TARP money starting to be repaid

One of the early arguments made in favor of the financial system bailouts was that the money wasn't really being spent, per se. Instead, much of it was expected to be recovered, at no cost to the taxpayer.

I'm still skeptical about that.

But this news is encouraging — some smaller banks are starting to repay their TARP I money. Apparently the increasingly toxic provisions attached to the money are becoming too much for many banks to tolerate if they don't absolutely need it. So they're paying it back. As they should.

UPDATE: Two of our commenters noted that the government appears to be making it difficult to repay TARP funds. Fox Business Network host Stuart Varney offers a case in point in Saturday's Wall Street Journal: "Obama Wants to Control the Banks." Related video below.

Posted by Mark at 2:10 PM | Comments (0)

Email this post

"I will praise the Lord no matter what happens. I will constantly speak of his glories and grace."

With the market up 20%+ over the past four weeks, perhaps your anxiety is falling a bit. Nevertheless, our hope is not in the market's recovery but in the faithfulness of our Father in heaven. Here are this week's selections from the Psalms (chapter 34, TLB) to remind us to keep looking up:

I will praise the Lord no matter what happens. I will constantly speak of his glories and grace. I will boast of all his kindness to me. Let all who are discouraged take heart. Let us praise the Lord together and exalt his name. For I cried to him and he answered me! He freed me from all my fears. Others too were radiant at what he did for them. Theirs was no downcast look of rejection! This poor man cried to the Lord — and the Lord heard him and saved him out of his troubles. For the Angel of the Lord guards and rescues all who reverence him.

Oh, put God to the test and see how kind he is! See for yourself the way his mercies shower down on all who trust in him. If you belong to the Lord, reverence him; for everyone who does this has everything he needs. Even strong young lions sometimes go hungry, but those of us who reverence the Lord will never lack any good thing.

For the eyes of the Lord are intently watching all who live good lives, and he gives attention when they cry to him. But the Lord has made up his mind to wipe out even the memory of evil men from the earth. Yes, the Lord hears the good man when he calls to him for help and saves him out of all his troubles. The Lord is close to those whose hearts are breaking; he rescues those who are humbly sorry for their sins. The good man does not escape all troubles — he has them too. But the Lord helps him in each and every one.

Earlier selections can be found here: Week 1, Week 2, and Week 3.

Posted by Austin at 11:44 AM | Comments (0)
Category(s): Christian Interest

Email this post

Compassion Challenge ends

Word just came in that the SMI Funds have met their goal of releasing 100 children from poverty! While their website doesn't have the last few children posted yet, they've confirmed that 50 new sponsorships have been initiated (matched by 50 more from SMI Advisory Services).

Thank you to all of those who contributed to reaching this goal. There are few things you can do with $32 per month that will have the type of tangible impact that sponsoring a child in need does.

While SMI Advisory Services will no longer be matching further sponsorships, it's still a great idea to consider sponsoring a Compassion child. Learn more at Compassion's website.

Posted by Mark at 3:46 PM | Comments (0)
Category(s): Giving and Stewardship

Email this post

Bulls and bears

Haven't run one of these in a while, so it's probably good to be reminded that — as always — both the bears and bulls have strong cases backing their respective points of view. There always have to be two reasonably strong arguments to be made, otherwise we wouldn't have a market in equilibrium between buyers and sellers. It's easy to lose sight of that when one side has the upper hand for an extended period of time.

Posted by Mark at 1:51 PM | Comments (0)
Category(s): Current Market Events

Email this post

Sector Rotation update

As we've discussed the past few months, our current SR holding has nearly half its assets in cash. That has helped keep it near the top of the rankings during the market decline the past six months. The fund fell down the rankings some during March as stocks rallied, but not so much that it fell out of the top quartile. So we'll hold it another month.

Posted by Mark at 10:56 AM | Comments (0)
Category(s): SMI Advanced Strategies

Email this post