Financial Insights- March 15, 2021

Written by Daniel Mannix

On March 15, 2021

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Following two months of sluggish growth and a general lack of good news, January numbers for spending, income, savings, and inflation couldn’t have been better. The Commerce Department reported that spending rose 2.4%, the best in seven months. Much of this was attributable to the $600 checks sent by the government following the Coronavirus relief bill that was passed in December. These checks also helped personal incomes, which rose by 10%, leading to a savings increase. There is the possibility that personal income will be flat or drop a little in February without the assistance of government checks, but further help is now expected from the newest relief bill passed by Congress. Lastly, inflation over the past 12 months was a modest 1.5%, which is well below the Fed target of 2%. This should help keep interest rates from rising too much in the near term. The pent-up demand that is likely to be unleashed later this year could temporarily cause some higher inflation, which would likely be a good thing in the short run as long as it stays in a range no higher than 2.5–3%.



Early this month Senator Elizabeth Warren, D-MA, introduced the Ultra-Millionaire Tax Act that would apply to only 0.05% of all taxpayers or about 100,000 households. Those who have a net worth between $50 million and $1 billion would pay a tax of 2% of that wealth each year, which to our way of thinking, is essentially an estate tax. Those who have a net worth above $1 billion would pay an additional 1% surtax for a total of 3% of their net worth. The Congressional Budget Office projects that this would raise $3 trillion over the next 10 years. While it is fairly easy to measure some assets (home value, stocks, bonds, savings, etc.) and liabilities (mortgages, personal loans, etc.), it is much harder to value non-traditional assets, such as a privately-held business. Determining the actual net worth of this very fortunate group could be extremely difficult.



It is hard to believe that about a year ago on March 23rd the market hit rock bottom having plunged 34% in only six weeks – the shortest bear market in history. It was only a few days later that Congress passed and the President signed the first Coronavirus stimulus bill. One part of this bill waived Required Minimum Distributions (RMDs) for 2020. But many people had already taken money from their IRAs. Fortunately, the bill provided the opportunity to return the money to the IRAs as long as it was rolled over by August 31, 2020. However, by now, anyone who did take money out of an IRA has received a 1099-R from the custodian showing the distribution. What do you do when filing your taxes to show that you put the money back and should not be taxed on it? First, you report the income on Line 4a of the 1040, but then on Line 4b you report the amount you put back into the IRA and write “rollover” next to it. You subtract Line 4b from Line 4a and the net is your taxable amount. If you returned all of the RMD, then it will equal zero. If you had money withheld for taxes when you took your RMD, then be sure to include this on line 25b. As always, be sure to discuss this with your tax adviser.



When the word “tax” comes to mind, especially this time of year, people immediately start thinking about income taxes, but there are more taxes than just income taxes.  There are sales taxes, property taxes, Social Security and Medicare taxes, and estate taxes to name a few. According to a recent study by Self-Financial here are the five highest and lowest tax states with the average lifetime income and lifetime taxes paid by a resident of each state… 


1) New Jersey, $1,881,648/$931,698 / 49.4%;

2) Rhode Island, $1,640,484/$766,521 / 46.7%;

3) New Hampshire, $1,693,476/$778,837 / 45.9%;

4) California, $1,580,580/$710,882 / 45%; and

5) Massachusetts, $1,881,648/$827,185 / 44%.


1) Alabama, $1,317,168/$322,419 / 24.4%;

2) Louisiana, $1,385,280/$339,910 / 24.5%;

3) West Virginia, $1,277,388/$321,023 / 25.1%;

4) Montana, $1,298,304/$334,173 / 25.7%; and

5) Oklahoma, $1,313,892/$341,646 / 26%.



After much debate and bargaining, the Senate and House agreed on the latest version of stimulus from the government to fight the pandemic’s effect on the economy. The President signed it immediately. The total package comes to $1.9 trillion with no support from Republicans in either chamber of Congress. So much for a honeymoon for the new President. Bipartisanship is still a lost art in Washington. Who is getting what? What is “hidden” in this bill? First, two things didn’t make it into the bill: 1) the original House version would have put a cap on retirement plan contributions that was nothing more than an accounting gimmick; and 2) an increase in the minimum wage was eliminated from the House version that upset the progressives. According to President Biden, 85% of Americans will get $1,400.  A family of four will get $5,600. The phase out threshold is $80,000 for an individual and $160,000 for a married couple. Unemployment checks will be increased by $300 per week until early September and the first $10,200 will be tax free. Yes, unemployment checks are generally taxable, which comes as a surprise to many recipients. There is a provision that exempts student loan forgiveness from being taxable income for the next four years. We suspect this is a lead into a future provision for outright forgiveness at some level. Seven billion dollars is set aside for PPP loans to non-profits and news services and another $1 billion for live venues. Further, $350 billion is earmarked for state and local governments. And, $140 billion will go to K-12 education and another $40 billion for colleges and universities. As we learn more, we will be sure to share it.



Ray Ferrara, our Chair and CEO, was recently quoted in an AARP article written by John Waggoner. For those that are having trouble developing and sticking to a budget, it provides a few tips. You can read the article here – How to Create a Household Budget That’s Right for You (



The meme stock that exploded onto the investing scene earlier this year, provoking U.S. Congressional hearings over the “gamification” of online stock trading, is yet again making its proverbial trip “to the moon” as the Reddit faithful have coined it. One year ago, the stock was trading at $4 per share. In what can only be described as a meteoric rise, GME shares almost reached $350 in late January, only to crash back down to $40 just three weeks later. Three weeks after that, we now find GME trading back above $250 – all while arguably having no change in the company’s fundamental value. The volatility is alarming for most but alluring for some. For more on the company’s wild ride and what drove it, see our article from last month.

Investing can quickly turn into a get-rich-quick scheme as herd behavior and FOMO (fear of missing out) quickly grab ahold of the masses – an intoxicating drug that goes back to the Tulip Mania of the 1600s


So what do we think about GME now?

Momentum is a powerful force…until it’s not. At some point, assets that become completely untethered from fundamental value come crashing back down to Earth. It’s a game of musical chairs. In this trading strategy, one is simply hoping for someone else to pay a higher price than they did so that they don’t find themselves holding the proverbial bag. An investing strategy, on the other hand, is rooted in fundamentals and based on a higher expected intrinsic value of an asset than what the market is currently pricing it at. Should someone invest in GME? We will answer that question with another, “What is fundamentally different with the company today at $250 per share than when it was trading at $4 per share?”


The just-released study: Fearless Woman: Financial Literacy and Stock Market Participation looked at two factors surrounding financial literacy: knowledge and confidence.  

The researchers asked men and women three basic financial literacy questions about interest compounding, inflation and investment diversification. Though this study confirmed that men tend to be more financially literate than women, the research quantified that self-doubt plays a significant role in women’s literacy. 

One of the study’s key findings: “Only two-thirds of women’s lower financial literacy can be traced to weaker financial knowledge. One-third hinges on their self-doubt around financial knowledge and decision-making.”    

Interestingly, one of the authors of this study, Annamaria Lusardi said: “Many women think they don’t know [the answers], but when you force them to give an answer they often actually do know.”

Over the long term, these disparities in women’s confidence and knowledge affect women’s participation in the stock market and ultimately in the accumulation of wealth. Let us know if you would like to answer the three research questions.