Friday Financial Five – May 15, 2015

Friday, May 15, 2015

Dan Forbes, GoLocalWorcester MINDSETTER™

Fed rate hike more likely toward year’s end

Former Fed official, Greg Valliere, says a June rate hike isn’t likely to happen. Fear that Chairwoman Yellen and the Fed might push for a hike this summer led to a rather stagnant market over the first quarter. Marketwatch cited Valliere, as well as indications from futures contracts that December is the first month with a greater than 50 percent chance of seeing a rate hike. The stock markets reacted favorably to news of this further delay.

Workers still not capitalizing on employer matches

401(k) analyzer, Financial Engines, estimates there are $24 billion in untapped retirement plan contribution matches. They estimate that 25 percent of participants don’t receive any match, similar to the result TIAA-CREF produced in a survey last year. The bottom line is that too many people are leaving “free money” on the table. Those that have a company match must be sure to contribute at least enough to double their money courtesy of their employer.

Mortgage interest rates on the rise

Those that hesitated over the last few weeks to lock in a mortgage rate on purchase or refinance may face increased projected payments. The 30 year loan rate is moving steadily higher, with Freddie Mac calculating the average at 3.85% and Bankrate.com having the rate approach 4%. An improving economy is cited as the impetus for the bump in many areas.

Chicago debt gets downgraded

The financial crisis highlighted inefficiencies within ratings agencies such as Moody’s, Fitch, and Standard & Poor’s. In the last few years, there hasn’t been much national attention on the agencies’ rating of municipal debt, so Moody’s recent downgrade of Chicago’s credit to junk status merits attention. The state of Illinois saw state pension reforms voided recently, a major reason for the downgrade of nearly $9 billion in debt. The third largest city in the nation might be the first recent domino to fall, with smaller cities cities facing unfunded pension liabilities that pressure financial solvency.

Financial industry fighting fiduciary standard

It seems sensible that anyone claiming to be a financial professional should act in the best interest of clients, making the implementation of a reasonable fiduciary standard a no-brainer. Many associations in the financial industry have other ideas. Investment News highlights the amount of money being spent to fight such a common sense approach to financial services. The proposed rule by the Department of Labor faced millions of dollars in lobbyist spending in the first quarter from groups trying to neuter the law. Conversely, the Financial Planning Coalition, a group that favors the fiduciary standard, spent ten thousand dollars. Clients must ask their financial professional – do you favor a fiduciary standard or not?

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.