Tag: investment
With Massive Tax Breaks, Corporate Chiefs Are Behaving Like Con Men

With Massive Tax Breaks, Corporate Chiefs Are Behaving Like Con Men

Apple CEO Tim Cook announced this week that the company would repatriate $252 billion, give or take a few billion, then create some American jobs and invest in America – for a change.

This is a result of the massive tax cut Congressional Republicans awarded corporations like Apple that were hoarding trillions in profits overseas.

Corporate lobbyists told Congress to lower the tax rate on those overseas caches or companies like Apple wouldn’t pay a cent of the taxes they owed on those profits. Congress complied. That is highly productive corporate extortion.

As a result, Apple’s announcement that it would invest some of the repatriated profits in U.S. operations is tainted. Also sullied are the boasts by other corporations that they’ll use small parts of their annual tax savings to pay workers one-time bonuses and tiny wage increases – only to turn around and lay off thousands of workers.

 The corporate extortion and maltreatment of workers defy the advice that BlackRock CEO Laurence D. Fink offered the CEOs of the world’s largest companies in a letter delivered Jan. 16. Fink’s words carry some weight since his firm is the largest investor in the world with more than $6 trillion. The letter described as flawed the CEO-favored philosophy of shareholder capitalism, under which corporations shirk responsibility to everyone but shareholders.

Fink said stakeholder capitalism, under which corporations are accountable to employees, customers and communities, as well as shareholders, is a more effective long-term strategy. “To prosper over time, every company must not only deliver financial performance, but also show how it makes a positive contribution to society,” he counseled.

But CEOs at the likes of Apple, AT&T and AFLAC don’t want to hear that. These executives want their corporations to be considered people for the legal perks. But they don’t want their firms to assume humans’ citizenship obligations. These CEOs are trying to make Americans think corporations should get good citizenship awards because a handful of the nation’s 30 million employers are paying bonuses to workers from the gargantuan tax breaks that Congress gave them.

But it’s a con. The bonuses are fine, but they’re one-time events and trivial compared to the bountiful and permanent tax breaks corporations reaped from their years of lobbying Republicans.

In addition, the President’s Council of Economic Advisors said that slashing the corporate tax rate would boost the average American’s wages between $4,000 and $9,000 a year. A one-time bonus of $1,000 doesn’t get close to that.

Apple, for example, held $252 billion in profits off shore, refusing for years to pay the 35 percent corporate tax rate that would be required to return it to the United States. Now, however, Republicans in Congress have slashed the rate corporations will have to pay on overseas profits to 15 percent. Republicans also cut the rate that corporations must pay on U.S. profits to 21 percent, giving firms like Apple that moved work offshore a better deal than corporations that remained exclusively American.

It means Apple will pay only $38 billion in taxes on its overseas profits and get to keep $43 billion that it otherwise would have owed the federal government. For actual-human American citizens, as opposed to corporate-humans like Apple, that means the federal government will have $43 billion less for important services like the Children’s Health Insurance Program, opioid addiction treatment, federal school funding for special-needs children, adoption services for foster kids and workplace safety inspections.

Cook tried to sound like a Boy Scout in a statement about bringing the money home: “We have a deep sense of responsibility to give back to our country and the people who help make our success possible.” But if the corporation really had a deep sense of responsibility to the United States, it would have paid the taxes it owed and not moved all of its manufacturing off shore.

 But, hey, Apple will invest its ill-gotten gains in the United States, right? Well, maybe not so much.

Apple, which had more money stashed overseas than any other American corporation, projected that its direct impact on the U.S. economy over the next five years would be more than $350 billion, but the New York Times determined, based on Apple’s past spending and projections, that its investment would be only about $37 billion more than what Apple would be expected to spend over that time in the United States. That’s good. But it’s not $350 billion in new dollars. It’s a con.

Apple says its investment will include a new headquarters and 20,000 new hires. And that’s great too. But it pales before Amazon, which had 10 percent of what Apple did overseas.  Long before any tax break, Amazon’s CEO Jeff Bezos promised a second headquarters and 50,000 new high-paid positions.

BlackRock CEO Fink told Apple’s Cook and other large company CEOs this week that they have a duty to explain to investors and shareholders what they will do with the extra cash that the Republican tax break will afford them and how they’ll use it to create long-term value.

Fink, whose investment firm is looking for sustainable, enduring growth, not illusory, short-term profits, warned, “Without a sense of purpose, no company, either public or private, can achieve its full potential. It will ultimately lose the license to operate from key stakeholders. It will succumb to short-term pressures to distribute earnings, and, in the process, sacrifice investments in employee development, innovation, and capital expenditures that are necessary for long-term growth.”

But the vast majority of executives who announced they’d share the bounty of the Republican tax breaks with their employees didn’t explain how they’d spend their windfalls or offer workers long-term value.

The conservative group Americans for Tax Reform, which supported tax breaks for the rich and corporations, compiled a list of about 125 companies that announced their workers would benefit this year from some portion of the corporate tax break.

The overwhelming majority of these are one-time bonuses. It’s true that the average worker will appreciate an extra $200 to $1,000. But none of the companies promised that $1,000 would arrive in workers’ paychecks every year, even though corporations will enjoy the tax breaks every year.

Some firms, mostly banks, said they would increase the wages of their lowest-paid workers to $15 an hour. That bank workers, responsible for the correct calculation of savings and withdraws and for safekeeping depositors’ life savings, are making starvation wages of less than $15 an hour, is frightening.

In addition, the list of financial institutions includes big ones like Wells Fargo, Capital One and PNC Financial, all of which pay their CEOs more than $12 million a year, raising the question of why those fat cats made sure they got the big bucks but never got around to paying the workers who handle the money a living wage.

Other big names that have announced one-time bonuses or pathetic wage increases are Walmart, AT&T, Comcast, Boeing and AFLAC. Again, it’s great any time additional money finds its way into the pockets of those whose labor creates corporate profits. But all of these companies were involved in a massive public relations con.

Comcast and AT&T announced $1,000 bonuses, then laid off workers. Comcast dumped 500 and AT&T dumped thousands.

Walmart pulled the same trick. It boasted of bonuses ranging from $200 to $1,000 and raises for its lowest-paid workers to $11 an hour. That’s still not a living wage and was done only to keep up with Target, which announced in September a base wage of $11. And Walmart topped it off with layoffs. About 11,000 former Walmart workers won’t be around to get those raises.

AFLAC said it would place a one-time contribution of $500 in workers’ 401(k) accounts amid allegations in lawsuits that it lied to applicants about the pay they would receive and failed to give workers commissions they had earned.

Boeing got in on the good publicity by saying it would spend $300 billion on workers, but its workers will see no new money. Instead of raises or bonuses, Boeing will spend the money on worker training, upgrading its factories and matching workers’ donations to charities – for which, of course, it can claim another tax break.

Clearly, none of these con men CEOs actually care about their workers. Maybe, however, they will care about what activist investor BlackRock thinks. And its CEO has made it clear he believes good corporate governance takes into consideration worker, community and environmental needs.

First Steps for Your Baby’s Financial Future

First Steps for Your Baby’s Financial Future

Dear Carrie: I’ve just had a baby! Things are pretty crazy in my house right now, but I want to be sure I give my daughter every opportunity I can. I have a little bit of money saved up, but I’m uncertain what the best use is for it. Should I buy a savings bond, a CD, open an investment account or put it all in a college fund? — A Reader

Dear Reader: First, congratulations to both you and your daughter. I’d say she’s pretty fortunate to have a mother who, in the midst of all the new baby responsibilities, is already thinking about the future. As a parent myself, I can tell you that the future — and all the related expenses — comes all too quickly!

Being ready for those expenses goes hand-in-hand with smart saving habits, so it’s great that you’ve already begun. Whatever the future holds, continuing to save will be the cornerstone of providing a solid financial foundation for your daughter.

In terms of what to do with the money you’ve already saved, that depends on how you expect to use it. While college is often a primary goal, there will be a number of interim financial goals that you’ll want to meet as your daughter grows up. Let’s look at how you might plan for each.

Consider a 529 Account for College Saving

When it comes to planning for higher education, a tax-advantaged college savings account such as a 529 Plan is often the best choice. This is a state-sponsored program that lets parents, relatives and friends invest for a child’s college education. The account belongs to you, not your child, and you remain in control of the money.

Usually you have a choice of professionally managed investment portfolios. Potential earnings grow tax-deferred. And you pay no federal taxes on earnings as long as you use the money for qualified higher education expenses such as tuition, books, and room and board.
Opening minimums vary by state, but can be as low as $25. You’re not limited to your own state’s 529, so you’re free to shop around at different financial institutions (though you should first consider any state tax benefits your own state’s plan may offer). Plus, you can set up automatic contributions — say $50 or $100 a month — making it easy to keep saving.
If grandparents want to help, gift tax rules make it easy for them to contribute larger amounts. This can benefit their estate planning as well as your college planning.

Designate Different Accounts for Other Needs
While a college account may be at the top of your list, there will be other opportunities — say, music lessons or private schools — that you want to provide for your daughter along the way. To save for these eventualities, consider a couple of other types of accounts.
–Custodial Brokerage Account: This is a brokerage account managed by a parent or guardian on a child’s behalf. It offers minor tax advantages and has minimal restrictions on how the money can be spent as long as it’s for the benefit of the child beyond daily living expenses. Unlike a 529, there are no recommended investment portfolios. You can choose from a wide variety of investments — stocks, bonds, mutual funds — according to your feelings about risk. A key difference is that the child takes control of the money at the “age of majority,” which is 18, 21 or 25 depending on state rules. That’s something to think about.
–Regular Brokerage Account: This is a taxable account that you could open in your own name and earmark the savings and investments for your daughter. You’d then have the control and freedom to use the money as you see fit.
–Passbook Savings Account: This could be for short-term savings needs. It’s also an account your daughter could contribute to, as she gets older.
As for investments, equities generally have the greatest potential for long-term growth.  Realize, though, that because stocks are volatile, they should be reserved for goals beyond a 3-5 year time frame. For shorter-term goals, CDs and Savings Bonds are safer; the downside is that they carry very low interest rates.

Create a Plan
If you have a savings plan, putting money aside will be easier, so here’s what I suggest right now. Assuming college is your first goal, put the money you currently have saved in a college savings account and commit to adding more each month. There are a number of online calculators to help you determine a realistic monthly savings goal.
As you’re able to save more, consider a brokerage account or passbook savings account for other types of expenses. Once you know your monthly college savings goal, you might also establish a monthly savings goal for this account and put it on automatic.

Don’t Forget your Daughter’s Financial Education
As your daughter gets older, be sure to involve her in the process. Help her create her own savings goals and have her save a portion of any money she gets. This will get her into the savings habit early, teach her how money grows, and help her make good spending decisions. Because no matter how much you save for your child, teaching her to be financially independent is really the greatest opportunity you can give her.
Carrie Schwab-Pomerantz, CERTIFIED FINANCIAL PLANNER(tm), is president of Charles Schwab Foundation and author of The Charles Schwab Guide to Finances After Fifty, available in bookstores nationwide. Read more at http://schwab.com/book. You can e-mail Carrie at askcarrie@schwab.com. This column is no substitute for an individualized recommendation, tax, legal or personalized investment advice. Where specific advice is necessary or appropriate, consult with a qualified tax advisor, CPA, financial planner or investment manager. To find out more about Carrie Schwab-Pomerantz and read features by other Creators Syndicate writers and cartoonists, visit the Creators Syndicate website at www.creators.com.
COPYRIGHT 2015 CHARLES SCHWAB & CO., INC. MEMBER SIPC.
DIST BY CREATORS SYNDICATE, INC. (0316-1055)

Photo: U.S. Republican presidential candidate Gov. John Kasich (R-OH) holds a baby while former Republican presidential nominee Mitt Romney (R) speaks at a campaign rally at the MAPS Air Museum in North Canton, Ohio March 14, 2016. REUTERS/Aaron P. Bernstein

How To Find Competent Financial Adviser

How To Find Competent Financial Adviser

By Tim Grant, Pittsburgh Post-Gazette (TNS)

The No. 1 red flag that an investor may be dealing with a bogus financial adviser, according to money coach Liz Davidson, is if he or she guarantees a high percentage return with no risk. This type of investment simply does not exist, and investors should run out of that office as if the building were on fire.

“It’s just not realistic to expect someone can provide you with a consistent return regardless of what the stock market is doing,” Davidson said. She said Bernie Madoff, who ran a Ponzi scheme that ripped his clients off for billions of dollars, is a prime example. “Regardless of what the market was doing, his returns were very steady.”

Another big red flag, she said, is when an adviser is fixated on selling a specific product instead of getting to know you and your specific needs.

For today’s unstable financial times, Davidson has authored a book titled What Your Financial Advisor Isn’t Telling You: The 10 Essential Truths You Need to Know About Your Money, which offers tips on how to find a competent adviser; how to evaluate that adviser’s effectiveness; and advice on navigating a 21st-century climate where pension plans have died out and doubts remain about the future of Social Security.

“I’m a believer that you should look for an adviser with 10 or more years of experience and ideally have a certified financial planner designation,” she said. “Only a small fraction of a percentage of advisers are fraudulent. However, there are varying levels of competence among advisers.”

Even large well-known brokerage firms are not completely above suspicion.

The Securities and Exchange Commission announced earlier this month that J.P Morgan’s brokerage business agreed to pay $4 million to settle charges that it falsely stated on its private banking website and in marketing materials that advisers are compensated “based on our clients’ performance; no one is paid a commission.”

“JPMS misled customers into believing their brokers had skin in the game and were being compensated based on the success of customer portfolios,” said Andrew J. Ceresney, director of the SEC enforcement division in a prepared statement. “But none of the factors JPMS used to determine broker compensation was tied to portfolio performance.”

According to the SEC’s order, JPMS made false and misleading statements about broker compensation from 2009 to 2012. JP Morgan did not admit wrongdoing in the settlement.

Your worst financial enemy?

Davidson, the founder and CEO of Financial Finesse, is a provider of workplace financial wellness programs. She works with employees on all aspects of their financial lives. That approach, she said, allows her to understand the full financial picture employees face.

She has run the Los Angeles-based company for 17 years. Prior to that, she was an investment banker and hedge fund manager.

She said many of the most important financial issues people are coping with are things a financial adviser cannot help them with, such as choosing the person you spend your life with. That will matter more for your financial security than anything a financial adviser can do.

“You can recover from investment losses, or even job losses, but a partner who ruins your credit, raids your accounts or leaves you with a mountain of debts when he or she dies is much more devastating — and it can take much longer to recover both emotionally and financially,” she wrote in the book.

Davidson said she chose to include a chapter on life partners because most financial advisers will not work to teach couples how to manage money together.

“They are not marriage therapists,” she said. “They won’t pop up in in your living room to settle disputes about how you are saving, spending and investing your money.”

That’s the investor’s job. “You have to take responsibility for making sure you and your partner are on the same page financially,” Davidson said.

She said the safest and most profitable investment is one that no adviser can make for you — pay off your “bad debt.” Bad debt includes any debt on items that do not appreciate in value, such as car loans and credit card balances.

Financial advisers, for the most part, are focused on what is available to invest, not on what people owe.

“We talk to a lot of people who have high-interest credit card debt, and they are working with an adviser,” Davidson said. “They are losing money that way.

“The high interest rate credit card debt is typically at 15 percent to 25 percent. That is the same rate of return you get by paying off that debt, and no adviser can guarantee a return that size.”

©2016 Pittsburgh Post-Gazette. Distributed by Tribune Content Agency, LLC.

Photo: Author and money coach Liz Davidson offers advice on how to find a competent financial adviser. (Fotolia)

 

How To Avoid Huge Losses In The Next Stock Market Plunge

How To Avoid Huge Losses In The Next Stock Market Plunge

By Gail MarksJarvis, Chicago Tribune (TNS)

It was a brutal week that finished with a relatively happy ending for people paralyzed with fear about the stock market, but a disaster for some who tried to escape danger at any cost.

Despite a horrifying 1,100-point plunge at the start of the week, and more nail-biting downturns later, by the close on Friday the damage was not nearly as bad as you might have imagined. The Dow Jones Industrial Average finished the week about 1 percent higher than where it began the week, although the Dow remains down 6.6 percent for the year.

If you have a 401(k) you are probably looking at losses, but nothing like what they were when the Dow was down 11 percent early last week.

People who were hit hard by the downturn tried to run for the exits while the stock market was plunging. Even those who tried to pick a moment when the downturn wasn’t too bad got hurt. For example, Monday for a short time the Dow seemed to be recovering. After being down 1,100 points stocks began to climb, and at a point when the Dow was down only about 150 points, people might have assumed they would bail out and escape any future danger. But it didn’t work that way, and never does if you are trying to get out of mutual funds in a plunge.

People with mutual funds often don’t realize that when they get cold feet about 401(k)s or any other investments, they can’t just get out of their funds on a moment’s notice. Instead, you have to wait until the end of the day even if you notify the fund hours earlier to get you out. So last Monday, a person might have decided to bail when stocks were down just 150 points around noon, but the loss they had to take was more like 600 points because that was the carnage in stock funds by the end of the day.

To make matters worse, since nervous people sold their funds at the worst of times, they didn’t get the benefit of the recovery that came late in the week.

It wasn’t only mutual fund investors who took a hit in the rush to the exits.

Sometimes people buy exchanged traded funds so they can sell their funds on a moment’s notice during scary moments. But last week was an extremely scary period, and individuals in ETFs got hurt too.

People yanked $29.5 billion out of stock funds during the week through Thursday, the largest move on record since 2002, according to analyst Michael Hartnett of Bank of America Merrill Lynch. As they sought safety they dumped $22 billion into money market funds, the largest amount since December 2013.

So many people were trying to flee all at once that it didn’t matter when they contacted their brokers and said “sell” now. The value of the funds fell precipitously before the selling actually could be completed, so people ended up losing far more money than they expected.

This happened in solid stocks too, like General Electric. Usually it’s a mild-mannered stock with relatively calm ups and downs. But in the midst of wild selling Monday it fell about 20 percent. It hit a low of $19.37 before climbing to $25.16 by the end of the week.

It was tough to find enough buyers for stocks and ETFs when so many wanted to sell all at once. So many people were going onto sites like Schwab and TD Ameritrade to sell, there were technical troubles. Details will be examined in the weeks ahead, but the lessons for individuals are simple.

If you think you are going to escape from danger in stocks when it hits, there’s probably little chance. Last week people panicked over a slowdown in China, but China’s problems have been brewing for a long time.

Analysts are not sure what to expect for the weeks ahead, and say that more worries about China and the Federal Reserve raising interest rates could cause more downturns. But they can’t be sure. If you were panicked last week, shave away some stock exposure — not all — during an upturn.

Also, if you invest in stocks or exchange traded funds, never make the mistake that too many people made last week. They simply told their brokers to “sell” with what are known as market orders. When brokers get such orders they sell your stocks or ETFs whenever they are able. That means you might decide when you’ve lost 5 percent to sell, but maybe end up losing 10 or 20 percent by the time your order actually is concluded.

To protect yourself, always sell with a “limit order.” With such an order you tell your broker what price you want to use when selling. That keeps you from selling at an unknown price along with the panicky mobs.

Photo: A pedestrian looks at an electronic board showing the stock market indices of various countries outside a brokerage in Tokyo, Japan, August 27, 2015. REUTERS/Yuya Shino