Friday Financial Five–August 2nd, 2013

Friday, August 02, 2013

Dan Forbes, GoLocalProv Financial Expert

 

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Stocks and real estate charge ahead

The S&P topping 1700 has equity investors wondering what to do with investment portfolios. As always, the prudent course of action is to review gains and allocation, while considering a rebalance. If certain asset classes have greatly outperformed, it may be time to lock in some gains. As for real estate, the market has shown clear signs of moving from a buyer’s market to a seller’s market. Those waiting on the sidelines can find themselves in the dubious position of paying a higher price and borrowing at what has been a steadily increasing mortgage rate.

July is painful for municipal bonds

The spike in interest rates and the Detroit bankruptcy hurt municipal bonds in both Rhode Island and Massachusetts last month. Nationally, Lipper reported that over $11.8 billion was pulled from muni funds in July. There is a precedent for the sell-off in muni’s, such as the one that occurred in the first three months of 1994. While sell-offs have often been followed by a bounce back within the short term, a number of the country’s major cities have financial issues making it necessary to review national fund holdings.

President Obama again talks tax holiday

Still looking for ways to get the nation’s employment jump-started, President Obama again spoke this week of a corporate tax overhaul. The major goal is to get money back in the states from companies stashing cash overseas by offering a one-time low tax rate. Some major details are still unclear, but the president champions a top tax for big businesses to 28 percent and a focus on manufacturing, small business investment and clean energy. Will a lower top tax rate for big corporations mean more of the burden falls on small businesses?

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Harvard endowment leans environmental

Harvard, typically on the cutting edge in many categories, might also set a trend for environmentally conscious investing. In response to student pressure, the university created a position specifically to help guide endowment investments away from fossil-fuel companies. The debate about fossil fuels effect on the environment continues, but there is an investment reality. The companies that develop alternatives to finite resources are going to make investors extremely wealthy. It is many years away, but it will happen.

The Island of A-Rod

Contained within the ever spiraling story of Alex Rodriguez’s downfall is the possibility that he’ll sustain financial losses the size of a small country’s GDP. He first signed a $252 million contract with Texas, opted out of that, and signed a new deal with the Yankees worth close to $300 million. He now has over $100 million left on that deal and the word is the Yankees will look to void it if A-Rod is banished from baseball for life. The loss of endorsements is another factor. The combined losses would be more than the annual Gross Domestic Product of Nauru, Montserrat, and Tuvalu.

 

Dan Forbes is a regular contributor on financial issues. He is a CFP Board Ambassador. He leads the firm Forbes Financial Planning, Inc in Providence, RI and can be reached at [email protected].

 

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