Friday Financial Five – June 5, 2015

Friday, June 05, 2015

Dan Forbes, GoLocalWorcester MINDSETTER™

Greek problems highlight tumultuous week

The bond market has been slammed this week, as the European Central Bank committed to holds rates at a record low. International Monetary Fund officials publicly called for the Federal Reserve to wait until 2016 for any rate hikes, though popular sentiment still believes the first hike will be this year. Greece’s problems, a badly kept secret, again are at the forefront of Europe’s problems. High unemployment continues with at 25 percent, double the number for the rest of the European Union. Jobs for young Greeks are even scarcer, with only half of those between the age of 15 and 24 employed.

GAO paints grim picture for households at retirement

The Government Accountability Office released a report on household savings for those approaching retirement. Quite scary is the finding that almost half of households age 55 and older have no retirement savings, such as IRAs or 401(k)s. Most of these households are also without alternate sources of savings or pensions. For those that do have savings, the median amount held by those aged 55 to 64 is $104,000 and half of those 64 and older rely on Social Security for the majority of their income.

Solar soaring as expenses drop

This may be the turning point where economics and environmental good finally become synchronized. Time magazine details the increase in homeowners using solar-panel systems and the conventional utility companies’ effort to slow the surge down. The number of homes and business using solar has increased from 20,000 in 2005 to 644,000 in 2014, with a record 187,000 installing systems last year. The average pre-tax price of a 6-kilowatt system has dropped to $20,867. Solar still accounts for less than 1% of the country’s power. Falling prices, tax credits, and financing through home equity and Title I loans will continue to push the use of pollution friendly systems higher.

Social Security Identity Defense Act

The assault on personal information is staggering, and cyber security continues to be a hot button financial area. The rise in criminals filing fraudulent tax returns and claiming tax refunds has led to the proposal of the Social Security Identity Defense Act of 2015. The IRS only recently agreed to release phony tax returns to the rightful taxpayer to assist them in figuring out what exactly has been stolen. This follows the IRS revealing a data breach last month that resulted in personal information being stolen from over 100,000 tax returns. The Defense Act will require the IRS to notify potential victims of identity theft, something that hasn’t been required in the past.

Bitcoin’s fall from grace

Bitcoin was all the rage in 2013 as the price zoomed up over $1,000. The virtual currency roughly halved in 2014, and the price has steadily fallen to the current level of $225. There is some reason for optimism, as noted by Bloomberg writer Katie Brenner. She notes that some banking institutions have implemented bitcoin friendly technology, while Coinbase, a startup that stores bitcoins, received $75 million in funding. That the currency hasn’t completely faded is positive, but it’s a far cry from replacing the dollar, as was speculated years ago.

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

Related Slideshow: Massachusetts Business Rankings

See how Massachusetts stacked up.

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WalletHub

Massachusetts has 2015's 28th highest insurance premium penalties for high risk drivers, according to a WalletHub report.

Mass is behind Colorado and New Mexico who come in at 26 and 27 spots respectively while Mass is ahead of Tennessee and the District of Columbia who rank 29 and 30 respectively.

Massachusetts ranks 14th overall in the category of DUI conviction annual premium increase with an amount of $756.

Massachusetts ranks 20th overall in the category of speeding over 20 mph annual premium increase with a total of $261 while ranking 21 overall in the category of two accidents annual premium increase with a total of $1,364.

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WalletHub

Massachusetts has been ranked as the 5th most eco-friendly state in the country, according to a recent study by WalletHub.

Mass ranks tenth in environmental quality and fourth in Eco-Friendly Behaviors landing them in 8th overall.

Mass is behind Minnesota and New York who are in the fourth and third spots respectively, and in front of Washington and New Hampshire who come in at the six and seven spots.

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The Economist

Small Business Friendliness Grade: D+

The Economist grades states on an A+ to F grading scale for its small business climate. Massachusetts ranks near the bottom of the nation, joining New Mexico and New York in receiving D+ grades. 9 states scored worse than a D+ in the Economist rankings.

Overbearing bureaucracy and excessive licensing is stifling small business in America.

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CNBC

#25 CNBC

CNBC ranks each state in cost of doing business, economy, technology and innovation.

Massachusetts' unemployment rate as of May 2014 was 5.6 percent. The state added 9,100 jobs in the month of May.

Forbes

#13 Forbes

Forbes ranks each state in business costs, economic climate, and growth prospects.

The most damning in the commentary:

Massachusetts’ business costs, including labor, energy and taxes, are the highest of the 48 contiguous states—only Hawaii is higher—at 20% above the national average.

ChiefExecutive.net

#47 ChiefExecutive.net

ChiefExecutive.net ranks each state in taxations and regulations, workforce quality, and living environment.

The most damning in the commentary:

Taxation and regulation are always the key barometers. Massachusetts and Oregon are the worst.

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Tax Foundation

#25 Tax Foundation

Tax Foundation ranks each state in corporate tax rank, sales tax rank, and unemployment insurance tax rank.

Massachusetts ranked #49 in unemployment insurance tax.

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Wallet Hub

#10 Wallet Hub

Wallet Hub ranks each state in ROI rank, state tax rank, and overall government services.

Massachusetts ranked #49 in worst roads and bridges, but ranked #7 in overall government services.

ALEC

#41 ALEC

ALEC ranks each state in economic performance and outlook.

Although Massachusetts ranked low in economic performance, a forward-looking forecast is based on the state’s standing in 15 important state policy variables. Some of these variables include top marginal personal income tax rate and sales tax burden.

Kauffman Foundation

#29 Kauffman Foundation

Kauffman Foundation ranks each state in entrepreneurship.

Entrepreneurial activity generally is highest in Western and Southern states
and lowest in Midwestern and Northeastern states.

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Free Enterprise

#18 Free Enterprise

Free Enterprise ranks each state in performance, exports, innovation + entrepreneurship, business climate, talent pipeline, infrastructure.

Massachusetts's reputation as a hotspot for science and technology endures in this year's rankings. The commonwealth is a center for STEM jobs and university research and development, ranking 4th and 2nd, respectively, in those two categories. It also ranks 6th as a center for high-tech establishments. Massachusetts is taking aggressive steps to bolster economic activity with high-impact university-industry R&D projects and new tools for tech-based startup companies.