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Friday Financial Five – March 27th, 2015

Friday, March 27, 2015


CBO updates budget projections through 2025

If a household examined projected cash flow for the next ten years and forecast a deficit every year, it might be disconcerting. The recent revisions for the Congressional Budget Office do show a slightly lower deficit as a percentage of GDP this year, thanks to increased output for the country. However, if taxation laws remain in place, the nation is still looking at a nearly $500 billion deficit for the year. The country hasn’t run a surplus since the beginning of the century, and the CBO estimates a continued deficit through 2025 thanks to increased expenditures for Medicare and Medicaid.

Head of SEC backs fiduciary standard

There is continued momentum behind implementing the fiduciary standard across the landscape of financial advice. The latest to weigh in is Mary Jo White, chairwoman of the Securities and Exchange Commission. The White House has pushed for the standard’s application when advice is provided on retirement accounts and the head of the SEC agrees. It’s possible Ms. White won’t still be chairwoman when legislative action finally comes to fruition, but as she stated, the SEC should “implement a uniform fiduciary duty for broker-dealers and investment advisers where the standard is to act in the best interest of the investor.”

Different indicators in the housing market

It was a matter of time, but Bloomberg reports there are signs that the rising cost of renting is pushing young people into buying a home. One of the impediments to the Fed raising rates has been a desire to keep the housing market afloat. For first time home buyers, the market is making it economically sensible to put rental dollars toward a purchase. On the other hand, new home builder confidence took at dip in March. Wealthier, more experienced buyers tend to build new homes, and this may be in indication that new construction purchases will limp into the spring.

The Gini coefficient measures income inequality

Income inequality dominates news and political chatter, with statistics and explanations available to “prove” both sides of the debate. What might not be as publicized is that there is a unit of measurement to compare the phenomenon across countries. The “Gini coefficient” was developed and published by Italian sociologist Corrado Gini in 1912. Zero represents perfect equality while a value of one represents maximal inequality. Developed countries approaching or above a level of 0.50 are considered to have high inequality, and several groups claim the United States is close to that mark before taxes or transfers. The World Bank’s latest calculation is 0.41 as of 2010, with the country’s highest level of inequality occurring in the District of Columbia. 

More Madoff money

Settlements related to the Bernie Madoff debacle have topped $10 billion, according to Reuters. The latest amount was a $93 million settlement from a “feeder fund” that funneled client money to the firm. That brings the total recovery by trustee, Irving Picard, to roughly sixty percent of the over $17 billion in lost principal for Madoff clients.

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]. 


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