Friday Financial Five – September 4, 2015

Friday, September 04, 2015

Dan Forbes, GoLocalWorcester Contributor

Solid economic data amidst a market whirlwind

Investments suffered over the last month as big, small, real estate, international and, especially, emerging market holdings have all been hit hard. While the problems in China and the impending U.S. rate hike take center stage, positive economic news keeps rolling in domestically. Jobless claims are still at historically low levels with the most recent number coming in at just over 280,000. GDP numbers were strong in the second quarter and income is rising, however modestly. Interest rates remain low, while there is some evidence of a pullback in home sales. There remains a disconnect between economic and market forces and all will be taken into account at the FOMC’s September meeting.

Almost all states vulnerable in terms of retirement security

The National Institute on Retirement Security’s most recent scorecard rates each state in terms of retirement readiness for future retirees. The analysis includes state residents’ projected retirement balances, marginal tax rates, and availability of employment for older workers. According to the report, California, Florida, and South Carolina are least prepared to handle the economic needs of those heading for retirement. Best prepared to handle retirement include Wyoming, Alaska, Minnesota and North Dakota. The state by state scorecard can be found here.

The Trump “wealth tax”

The wealth tax discussion that comes up from time to time may be part of the Donald Trump presidential agenda. Years ago, Trump supported a one-time 14.25% tax on holdings over $10 million. This was in accordance with wiping out the national debt and wholly funding Social Security. While Trump hasn’t made it a prominent part of his current platform, he hasn’t completely dismissed it. At this point, taking this action would only address a portion of the debt.

Deflategate’s economic impact

On top of the complete waste of time for all those involved and those who meticulously followed the Deflategate scandal, there were some economic impacts to keep in mind. The Patriots paid $1 million in fines for a scandal that apparently never took place. The NFL, while staying in the news all off-season, severely damaged its brand and billion dollar revenue stream by attacking one of the all-time greats of the sport, who has consequently seen a dramatic rise in jersey sales. Brady gets to keep four games worth of paychecks, so everyone can sleep at night knowing he won’t go hungry. Like a bitter divorce, there’s an unnecessary spending of millions attributable to the investigation and legal fees. And the billion dollar gambling industry must now discern other inventive ways players might try to give their teams an unfair advantage.

A Ponzi scheme to pay back Ponzi scheme victims

In what might be a first, a scam artist convicted of running a Ponzi scheme concocted a new Ponzi scheme to pay off the victims of his first ploy. The SEC announced a final judgement this week for an individual whose original scheme in 2000 landed him in jail. He went to prison for three years and emerged as a self-help guru. Between 2006 and 2010, he and others sold promissory notes to more than 140 investors, sometimes guaranteeing a 33 percent return. Those funds were then used to pay back victims of the initial fraud, while also buying cars, jewelry, and trips. In the court’s final judgement, the perpetrators were ordered to pay nearly $20 million in restitution and penalties.

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.