Author Archives: Tony Kendzior - Financial Planner

About Tony Kendzior - Financial Planner

I've lived happily, raised a family, and enjoyed a professional life in Gainesville for over 50 years. The next several years are full of promise. My goal is to find new clients, new friends and somehow share the wisdom I've accumulated over these many years. And when I have time, play a little golf and travel with my family. Cheers!

The Death of Social Security Has Been Greatly Exaggerated

My Comments: Wow! A monthly payment every month for the rest of your life! How good is that?

Despite the caustic rhetoric filling the air waves, causing turmoil and worry, I very much doubt there’s going to be any drastic changes to Social Security. Some loud voices want it to be abolished, but there are more loud voices saying it will stay.

The demographic pressures now putting a strain on the system by the baby boomers will diminish as we die. There will be a gap until our baby boom children start reaching the system. It happened before and was more or less fixed in 1983. I suspect there will be another fix like the last one.

Yes, this was written almost two years ago but the analysis is still valid.

Dan Caplinger | Feb 10, 2017

Social Security has provided much-needed benefits to generations of Americans, both when they’ve become disabled and when they retire. Demographic shifts have put financial strain on the program, and well-publicized outlooks for Social Security show key sources of funding running out within the next 15 to 20 years. It’s therefore not surprising to hear many people talk about the death of Social Security as imminent.

It’s true that Social Security faces financial challenges and that lawmakers need to look closely at the consequences of making no changes to the current system. However, the alarmist notion that Social Security will go away entirely isn’t supported by the facts. That won’t necessary make the transition any more comfortable for those affected by it, but it’s important to avoid hyperbole and fully understand the current condition of Social Security and where it’s headed in the years to come.

Where Social Security stands now

The 2016 Social Security Trustees Report last summer gave a snapshot of how the Social Security system’s finances were at the end of 2015, and the status of the program was better than many people realized. When you look at the combined balances of the trust funds for Social Security retirement, survivor, and disability benefits, the amount available was $2.81 trillion. Moreover, when you consider all of the income sources that the program has, Social Security’s trust funds actually brought in more than they paid out for benefits. As a result, the total balance of the trust funds rose by $23 billion for the year.

However, the Trustees Report did show signs of the steady deterioration of the program’s annual surplus. The trust funds relied on more than $93 billion in interest payments from the U.S. Treasury to cover all of its benefit expenses. Payroll tax contributions left a shortfall of more than $90 billion, and the $32 billion that the IRS collected by taxing some Social Security recipients’ benefits couldn’t close the gap by itself.

The more troubling trend has come from the rise in benefit payments. Total expenditures rose at a 4.4% annual rate in 2015, and that exceeded the 4.1% rate at which revenue for the program grew. That 0.3 percentage point difference might not seem like much, but when you’re talking about amounts in the $800 billion to $900 billion range for revenue and outlays, even small percentages add up to big dollar amounts.

Preliminary figures for 2016 showed the trends continuing. Revenue of $957 billion exceeded payouts of $922 billion, but it took $88 billion in interest to keep the trust funds balance moving higher, reaching nearly $2.85 trillion for 2016.

What’s coming down the road for Social Security?

Given the current demographic trends, you can project how Social Security’s trust fund balance is likely to change in the coming years. Based on current projections, the trust funds should keep moving higher until 2019. After that, even the interest on the trust fund balance won’t be enough cover the shortfall between revenue and benefit payments. Over time, that shortfall will increase further, and the full depletion of the trust funds will likely happen in 2034.

Yet there are two reasons not to panic about Social Security. First, the consequences of failing to address the depletion of the Social Security trust funds don’t include the complete shutdown of the system. The Social Security Trustees estimate that in 2034, there will be enough revenue from payroll taxes and other sources to pay 79% of projected benefit obligations based on current law. Granted, a one-fifth cut in benefits will be painful for many Social Security recipients, but it won’t be the catastrophic disappearance of monthly checks that many seem to see happening.

More importantly, there are fixes that can help Social Security dig its way out of its current difficulties. The bipartisan Committee for a Responsible Federal Budget recently created an interactive tool letting people explore different ways to reduce the costs of the Social Security system going forward, weighing their likely influence on the program’s long-term shortfall.

Among those fixes are measures that would increase revenue or reduce benefit expenses. Proposals for reducing benefits include the means-testing of benefits for wealthier retirees, raising the retirement age, or modifying the way that retirees get inflation adjustments to their benefits. Revenue-enhancing measures include increasing the amount of wages subject to payroll taxes or making more Social Security benefits subject to income tax. In addition, the potential for investing trust fund assets in ways other than through special fixed-income Treasury bonds could also potentially produce more money for Social Security — albeit at greater risk.

Each individual solution only does a portion of the work necessary to close the Social Security shortfall. Taken all together, however, these solutions could leave Social Security in a better position to maintain a healthier level of benefits for current and future recipients.

Don’t panic!

Social Security’s future financial status is uncertain, and action is necessary to address its current situation. However, don’t leap to the conclusion that Social Security is on life support. With worst-case scenarios that aren’t as bad as some fear, and that should make people more confident that with relatively modest changes to the program, Social Security can be preserved for generations to come.

Source: https://g.foolcdn.com/editorial/images/432940/social-security-key-gettyimages-480456745_large.jpg

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Social Security and the U.S. deficit: Separating fact from fiction

My Comments: As someone who depends on payments from the Social Security Administration to maintain my standard of living, the idea that people in Congress are considering reducing those payments is concerning.

We have to hope that elected representatives find a reasonable solution that will allow the program to remain viable. It’s become an integral part of our economic destiny. Keeping it viable for the forseable future with structured changes over time is essential and doable without chaos.

Unfortunately, there is also a effort to promote chaos as a governing mantra.

by Mark Miller \ November 1, 2018

CHICAGO (Reuters) – For decades, some of our most prominent U.S. politicians have been sounding the alarm that Social Security is an important driver of the federal budget deficit. But is that really true?

U.S. Senate Majority Leader Mitch McConnell, a Republican, recently pointed to “entitlements” as the key cause of rising federal deficits, and blamed Democrats for refusing to go along with proposals to cut spending by Medicare, Medicaid and Social Security.

McConnell was responding to a report from the U.S. Department of the Treasury last month that the budget deficit grew to $779 billion in fiscal 2018, the highest in six years. Treasury attributed the increase to the tax cuts contained in the Tax Cuts and Jobs Act (TCJA), higher spending and rising interest payments. (Full Story) (reut.rs/2CNjSBm).

The call for cuts to our very popular entitlement programs just before an election makes for surprising politics – and it is not selling well with the public; a poll this week by NPR, PBS NewsHour and Marist (bit.ly/2zewazj) found that 60 percent of Americans would prefer to reverse the tax cuts than cut spending on Social Security, Medicare and Medicaid.

But is there substance to McConnell’s argument?

You can make a case that rising spending on Medicare and Medicaid contribute to deficits, since both depend partially on federal general revenue. I would counter that the rising cost of these programs reflects a general problem with rising healthcare costs that affects not just government, but employers who insure workers and individuals buying their own insurance.

But it is quite a stretch to argue that Social Security drives deficits.

By law, Social Security cannot contribute to the federal deficit, because it is required to pay benefits only from its trust funds. Those, in turn, are funded through a dedicated payroll tax of 12.4 percent of income, split evenly between employees and employers, levied on income (this year) up to $128,400.

The program’s revenue and expenses are accounted for through two federal trust funds that have operated with large and growing surpluses in recent years, and they finished fiscal 2018 with an estimated $2.89 trillion. By law, Social Security must invest these surplus funds only in special-issue U.S. Treasury notes, which have the same full faith and credit guarantee as any other federal bond.

LONG-RANGE OUTLOOK

Going forward, the trust fund surplus will be drawn down as an aging population claims benefits, and as the U.S. fertility rate continues to decline, which means fewer workers are coming along to pay taxes into the system.

That already is starting to happen. In fiscal 2018, expenditures exceeded revenue (including interest on investments) for the first time since 1982. Social Security took in $912 billion in fiscal 2018 and spent $991 billion. The difference – $79 billion – came from repayment of interest on those Treasury notes. Some conservative policy analysts point to that payment as evidence that Social Security is a cause of deficits, since the $79 billion payment came from general revenue.

“We can call that $79 billion an interest payment on past borrowing – fine,” said Brian Riedl, senior fellow at the Manhattan Institute, a conservative think tank. “Social Security in the past ran annual surpluses and lent that surplus money to the Treasury. In those years, the existence of Social Security reduced the federal budget deficit. Today, it is relying on a cash infusion from the Treasury to pay full benefits.”

 

Riedl’s point is technically correct. But in this sense, Social Security is no more a cause of the deficit than any other holder of U.S. Treasuries, be it Wall Street or the Chinese government. “Government needs to raise a certain amount of money unless it balances its general fund,” said Nancy Altman, president of Social Security Works, an advocacy group.

“If it doesn’t do that, it issues bonds – the only question is, who buys them?” said Altman.

A second argument that Social Security contributes to deficits is related to the longer-run outlook for the program. The trust funds are projected to be exhausted in 2034; at that point, incoming revenue would be sufficient to continue paying only about 75 percent of promised benefits.

We might or might not reach that point – we could eliminate much of this long-range shortfall by gradually increasing payroll taxes and raising the cap on covered income. Or we could reduce benefits by further increasing the full retirement age, or craft some combination of tax increases and benefit cuts.

Other creative options could include permitting the Social Security trustees to invest a modest portion of reserve funds in equities, or to levy a tax on financial services. From where I sit, the smart move is to bolster the program with higher revenue to close the shortfall and expand benefits.

But deficit hawks point to the 2034 exhaustion date to argue that the government would have to make up any shortfall and continue paying full benefits. The argument here is that Congress would never allow a huge cut to Social Security benefits in light of the program’s popularity and the importance of benefits; if the trust fund were to run dry, lawmakers would simply make up the difference out of general revenue.

But the assertion that we will reach the 2034 benefit cuts is speculative. Congress may craft a solution ahead of that date, or it may not.

Even more speculative is the question whether general revenue would be tapped if we do reach the 2034 exhaustion doomsday scenario. The long-range budget forecast by the Congressional Budget Office assumes this would happen – but not because the nonpartisan congressional budget scorekeeper has an opinion one way or the other. Federal law requires the CBO to assume that payments for some mandatory programs would continue to be fully funded in this situation.

What would the Social Security Administration actually do if the trust fund were exhausted? The answer is not clear, according to recent analysis by the Congressional Research Service. It could continue paying benefits on a delayed schedule or cut payments. And beneficiaries might take legal action to claim full benefits, since Social Security is a legal entitlement.

One hopes that these questions will never be answered, because exhaustion would be a real mess. But we can get the answer to the question of whether Social Security drives the deficit right now: No.

Source: https://www.reuters.com/article/us-column-miller-socialsecurity/social-security-and-the-u-s-deficit-separating-fact-from-fiction-idUSKCN1N64GR

The 6 Best Vanguard Funds to Own in a Bear Market

My Comments: Much of my retirement money is at Vanguard. At some point I’m going to decide we’ve hit bottom and move it back into Vanguard growth funds or ETFs.

But right now, if you have the courage of your convictions, here are five low cost funds that you can use. If you are still a few years away from retirement, all the more reason to try and avoid significant losses since I don’t think we’re at the bottom of the current correction.

by Steven Goldberg \ Kiplinger \ November 19, 2018

If you’ve built a solid portfolio of funds, the last thing you want to do is tear it apart and build a new one simply because the stock market is doing one of its periodic swan dives.

But that doesn’t mean you shouldn’t tinker around the edges in a market that acts like it wants to go down. You might cut, say, 5% of your stock allocation and put the proceeds into a low-risk bond fund.

If you think your investments need more rearranging, you might take your most volatile fund and replace it with a lower-risk offering.

Where to look for a replacement? Vanguard funds include a fistful of first-rate defensive offerings that, while they’ll still likely lose money in a bear market, they should still hold up better than most other funds.

Vanguard Wellesley Income (VWINX , $26.12) is a fund that even the most nervous investor will find easy to hold onto – no matter how badly the stock market behaves. Over the past three years, Wellesley, which is run by Wellington Management, has been a little more than half as volatile as Standard & Poor’s 500-stock index. Roughly 61% of the fund is in bonds, and the remainder is in blue-chip stocks.

John Keogh, the bond manager, sticks largely to issues rated single-A and above. Less than 20% is in Baa bonds, which are still investment-grade. Most of the bond portfolio is in corporates and governments, along with a smattering of asset-backed bonds. Keogh does own some long-term bonds. VWINX’s portfolio has a duration of 6.3 years, meaning that portion of the fund should fall 6.3 percentage points in price when rates tick up one percentage point.

Michael Reckmeyer, the chief stockpicker, buys mainly mega-caps. He hunts for stocks that pay relatively generous dividends and can keep raising those payouts. He’s careful to buy stocks only when they’re fairly cheap, which gives the fund a distinct value tilt. Its biggest sectors are health care (18.4% of stocks), financial services (14.5%) and consumer staples (13.3%), with JPMorgan Chase (JPM), Verizon (VZ) and Johnson & Johnson (JNJ) the top three holdings at the moment.

Despite its conservative nature, the fund has returned an annualized 8.8% over the past 10 years. That includes a loss of 1% so far this year. VWINX yields 3.4%.

Vanguard Wellington (VWELX, $41.62) is much more aggressive than Wellesley, but it’s still a relatively tame beast. With 65% of the fund in stocks and the remainder in bonds, it’s a classic balanced fund – with the same allocation between stocks and bonds that many investment advisors recommend for the majority of their clients. It’s about two-thirds as volatile as the Russell 1000 Value Index.

The bond portfolio is virtually a carbon copy of Wellesley’s, as well it should be given that John Keogh manages the bond portion of both funds. As with Wellesley, he sticks largely to single-A bonds and above with less than 20% in Baa-rated debt. The duration is 6.3 years, identical to Wellesley’s. The fund yields a little less, though, at 2.7%.

Edward Bousa, the equity manager, is slightly more aggressive than Wellesley’s Reckmeyer. He’s willing to buy growth stocks after they’ve been knocked down in price. For instance, he bought Alphabet (GOOGL) when its price was depressed toward the end of 2014, and it continues to be a top-10 holding.

But the fund still leans toward value. Bousa, like Reckmeyer, looks for solid dividend payers. As far as sectors, he currently likes financials (22.7% of stocks), health care (15.5%) and technology (12.1%).

Wellington is the better pick for most investors, except for those in the later years of retirement or others who may need to spend their money relatively soon. Over the past 10 years, the fund has returned an annualized 11.04%.

Vanguard Short-Term Corporate Bond ETF (VCSH, $77.74) is a low-risk index bond exchange-traded fund that offers investors a healthy yield of 3.6%.

The fund, which tracks the Barclays US 1-5 Year Corporate index, takes little credit risk. All its holdings are investment-grade bonds from the likes of Anheuser-Busch InBev (BUD), CVS Health (CVS) and Bank of America (BAC), although 40% are rated only Baa or below. Duration is just 2.7 years – almost a full percentage point less than the yield. That means VCSH should make money on a total return basis even if rates rise one percentage point.

A small risk: More than 40% of the fund’s assets are in financial-sector debt.

Also note that this is available as an Admiral class mutual fund (VSCSX).

Want safer still? Consider the index ETF’s near-clone, Vanguard Short-Term Investment-Grade Fund (VFSTX, $10.40).

Using the same benchmark, this fund is actively managed by Vanguard’s Samuel Martinez and Daniel Shaykevich. It’s a little safer than the ETF because it owns not only corporates, but some Treasuries. Also, only 21% of its assets are Baa or below, and it doesn’t have nearly as much in financials.

But VFSTX is a very similar fund. It yields a bit less at 3.27% and has a slightly shorter duration of 2.6 years. It is a bit more expensive, though, at 0.20% in fees.

Vanguard Global Minimum Volatility (VMVFX, $14.00) is a fascinating, if complicated, fund that could be just the ticket for investors who want to dial down risk.

Run in-house by Antonio Picca, it takes a quantitative approach to delivering lower risk-adjusted returns than its benchmark, the FTSE Global All Cap Index. It invests roughly half its assets in foreign stocks, and the other half in U.S. stocks. It hedges away all foreign currency risk.

The fund takes several steps designed to limit volatility. It tilts toward stocks with historically low volatility and stocks that have low correlations with one another. The manager keeps sector weights within five percentage points of their FTSE index weightings, but he overweights defensive sectors, such as consumer staples and health care, which together account for a quarter of assets.

The FTSE index lost 12.1% from June 2015 through February 2016, but the Vanguard fund lost just 4.6%, according to Morningstar.

If you buy this fund, remember: It will almost sure lag during bull markets. From January 2014 through July 2018, the fund captured 40% of the market’s declines but only 77% of its advance, Morningstar says.

Over the past three years, the fund has been about halfway between Wellington and Wellesley in terms of volatility. It has been less volatile than Wellington but more volatile than Wellesley. Since inception, the fund, which was launched in late 2013, has returned an annualized 10%.

Just keep in mind that VMVFX is relatively new and hasn’t been tested in a bear market, while Wellington and Wellesley have been.

Vanguard Limited-Term Tax-Exempt (VMLTX, $10.79) is a plain vanilla, short-term municipal bond fund. It yields 2.2% and its duration is 2.6 years, meaning it should just lose only a little bit should rates rise by one percentage point.

Run in-house by Adam Ferguson, the fund tracks Barclays 1-5 Year Municipal Bond Index. Ferguson and the rest of Vanguard’s fixed-income team make big-picture judgments, which they use to adjust the duration and credit quality of the fund. The vast majority of VLTMX’s bonds are single-A or above, with just about 11% below.

The trick to this fund is hiding in plain sight: Its low expense ratio. Ferguson doesn’t have to do anything fancy to beat most of his peers – he just has to avoiding making big bets that turn sour. So he doesn’t make big bets. Over the past 10 years, the fund has returned an annualized 2.0%, almost exactly equaling the index.

Buy the Admiral shares (VMLUX) if you can handle the minimum initial investment of $50,000. They charge just 0.09%.

Source URL: https://www.kiplinger.com/slideshow/investing/T041-S001-the-6-best-vanguard-funds-to-own-in-a-bear-market/index.html

Trump’s ties to the Russian mafia go back 3 decades

My Comments: In a political context, my initial reaction to having Trump in the White House was that it was a healthy step in the evolution of these United States.

We’ve been a formidable leader on the world stage for the past 80 plus years. From time to time, it is useful for the status quo to be upended. It gives everyone a chance to re-evaluate the steps we’ve taken to get us where we are and the values we express to have real meaning.

Though I disliked him personally as a person, I decided I could live with the disruption and existential threat he posed if it meant we’d come out the other side stronger and fully committed to moving forward as a society. I still believe that.

But that doesn’t mean I can ignore the chaos and what it all means to us as a nation. My role in the re-evaluation process means I get to have a blog post and express my thoughts as I deem appropriate. This is one of those times…

by Sean Illing \ November 19, 2018

On November 9, 2016, just a few minutes after Donald Trump was elected president of the United States, a man named Vyacheslav Nikonov approached a microphone in the Russian State Duma (their equivalent of the US House of Representatives) and made a very unusual statement.

“Dear friends, respected colleagues!” Nikonov said. “Three minutes ago, Hillary Clinton admitted her defeat in US presidential elections, and a second ago Trump started his speech as an elected president of the United States of America, and I congratulate you on this.”

Nikonov is a leader in the pro-Putin United Russia Party and, incidentally, the grandson of Vyacheslav Molotov — after whom the “Molotov cocktail” was named. His announcement that day was a clear signal that Trump’s victory was, in fact, a victory for Putin’s Russia.

Longtime journalist Craig Unger opens his new book, House of Trump, House of Putin, with this anecdote. The book is an impressive attempt to gather up all the evidence we have of Trump’s numerous connections to the Russian mafia and government and lay it all out in a clear, comprehensive narrative.

The book claims to unpack an “untold story,” but it’s not entirely clear how much of it is new. One of the hardest things to accept about the Trump-Russia saga is how transparent it is. So much of the evidence is hiding in plain sight, and somehow that has made it harder to accept.

But make no mistake: Trump’s ties to shady Russian figures stretch back decades, and Unger diligently pieces them together in one place. Although Unger doesn’t provide any evidence that Trump gave the Russians anything concrete in return for their help, the case he makes for how much potential leverage the Russians had over Trump is pretty damning.

I spoke to Unger about what he learned, how he learned it, and why he thinks Russia’s use of Trump constitutes “one of the greatest intelligence operations in history,” as he puts it in the book.

A lightly edited transcript of our conversation follows.

Sean Illing

I’ll ask you straightforwardly: Do you believe the Russian government successfully targeted and compromised Trump?

Craig Unger

Yes, absolutely. But let’s go back in time, because I think all of this began as a money-laundering operation with the Russian mafia. It’s well known that Trump likes doing business with gangsters, in part because they pay top dollar and loan money when traditional banks won’t, so it was a win-win for both sides.

The key point I want to get across in the book is that the Russian mafia is different than the American mafia, and I think a lot of Americans don’t understand this. In Russia, the mafia is essentially a state actor. When I interviewed Gen. Oleg Kalugin, who is a former head of counterintelligence in the KGB and had been Vladimir Putin’s boss at one point, I asked him about the mafia. He said, “Oh, it’s part of the KGB. It’s part of the Russian government.”

And that’s essential to the whole premise of the book. Trump was working with the Russian mafia for more than 30 years. He was profiting from them. They rescued him. They bailed him out. They took him from being $4 billion in debt to becoming a multibillionaire again, and they fueled his political ambitions, starting more than 30 years ago. This means Trump was in bed with the Kremlin as well, whether he knew it or not.

Sean Illing

Let’s dig into this a bit. You claimed just now, as you do in the book, that the Russian mafia has been using Trump-branded real estate to launder money for over three decades. What evidence do you have to back this up?

Craig Unger

You really have to go back 20 or 30 years to understand who the key Russians were, what role they played in the Russian mafia, and how they related to Trump.

The very first episode that’s been documented, to my knowledge, was in 1984 when David Bogatin — who is a Russian mobster, convicted gasoline bootlegger, and close ally of Semion Mogilevich, a major Russian mob boss — met with Trump in Trump Tower right after it opened. Bogatin came to that meeting prepared to spend $6 million, which is equivalent to about $15 million today.

Bogatin bought five condos from Trump at that meeting. Those condos were later seized by the government, which claimed they were used to launder money for the Russian mob.

“One thing Vladimir Putin got right was his insistence that American democracy is also corrupt, and I think he’s showing us exactly how corrupt it is”

Sean Illing

Okay, to play devil’s advocate, can we say definitively that Trump knew who he was dealing with or what he was getting into? Or did he just naively have his hands out?

Craig Unger

Look, I can’t prove what was in Trump’s head, or what he knew or when he knew it. But I document something like 1,300 transactions of this kind with Russian mobsters. By that, I mean real estate transactions that were all cash purchases made by anonymous shell companies that were quite obviously fronts for criminal money-laundering operations. And this represents a huge chunk of Trump’s real estate activity in the United States, so it’s quite hard to argue that he had no idea what was going on.

Sean Illing

How did Trump first become a “person of interest” to the Russians? Why would they target this fringe celebrity character 30 years ago, long before his ascent to the presidency was even fathomable?

Craig Unger

First of all, the Russians have always wanted to align with certain powerful businessmen, and they have a history going back to the American businessman Armand Hammer in the 1970s and ’80s, whom the Russians allegedly turned into an asset. But it’s not as though they zeroed in on Trump 30 years ago, and only Trump.

Russia had hundreds of agents and assets in the US, and Gen. Kalugin, the former head of KGB operations in Russia, told me that America was a paradise for Russian spies and that they had recruited roughly 300 assets and agents in the United States, and Trump was one of them.

But it’s not just the money laundering. There was a parallel effort to seduce Trump. Sometime in 1986, Russia’s ambassador to the US, Yuri Dubinin, visited Trump in Trump Tower and told him that his building was “fabulous” and that he should build one in Moscow, and they arranged for a trip to Moscow.

According to Gen. Kalugin, that was likely the first step in the process to recruit and compromise Trump. Kalugin told me he would not be surprised in the least if the Russians have compromising materials on Trump’s activities in Moscow, something they were quite good at acquiring.

Sean Illing

But we still don’t have any evidence that such compromising material exists, right? Did you talk to anyone who has seen it or is sure of its existence?

Craig Unger

No, and I won’t say that I’m 100 percent certain that it exists. I spoke to several people who assured me that it exists, but I could not corroborate those accounts. I have no idea if they’re right or if any tapes will ever emerge. But in a way, all of that is beside the point. The real evidence of compromise is already out there, and we’re talking about it now.

Sean Illing

Speaking of which, tell me about Bayrock Group, a real estate company that operated in Trump Tower.

Craig Unger

Bayrock was a real estate development company located on the 24th floor of Trump Tower. The founder was a guy named Tevfik Arif and the managing director was Felix Sater, a man with numerous ties to Russian oligarchs and Russian intelligence. Bayrock proceeded to partner with Trump in 2005 and helped him develop a new business model, which he desperately needed.

Recall that Trump was $4 billion in debt after his Atlantic City casinos went bankrupt. He couldn’t get a bank loan from anywhere in the West, and Bayrock comes in and Trump partners with other people as well, but Bayrock essentially has a new model that says, “You don’t have to raise any money. You don’t have to do any of the real estate development. We just want to franchise your name, we’ll give you 18 to 25 percent royalties, and we’ll effectively do all the work. And if the Trump Organization gets involved in the management of these buildings, they’ll get extra fees for that.”

It was a fabulously lucrative deal for Trump, and the Bayrock associates — Sater in particular — were operating out of Trump Tower and constantly flying back and forth to Russia. And in the book, I detail several channels through which various people at Bayrock have close ties to the Kremlin, and I talk about Sater flying back and forth to Moscow even as late as 2016, hoping to build the Trump Tower there.

Sean Illing

I don’t think you say this explicitly in the book, so I’ll ask you now: Is there any evidence at all that Trump actively sought out Russian money by making clear that his businesses could be used to hide ill-gotten gains?

Craig Unger

That’s a difficult question. I’m not sure he made this crystal clear, and I don’t know that he had to. I mean, just look at how these transactions take place. Trump doesn’t have to say anything. Trump’s organization was desperate for money, they knew the caliber of people they were dealing with, and they were either okay with this or deliberately chose not to do their due diligence.

You might say this is something other real estate developers do as well, and maybe that’s true, but those developers don’t become president of the United States.

Sean Illing

A few minutes ago you referred to Trump as a Russian “asset,” and this circles back to the question of whether Trump was actively working with the Russians or whether he may have just been a useful idiot who didn’t know he’d been potentially compromised.

Craig Unger

In the book, I use this term “asset,” and the difference between an “asset” and an “agent” to me is whether or not the person is knowledgeable. And from my point of view, it’s impossible to prove what was in Trump’s mind. I can’t prove that he was actually knowledgeable. At the same time, if he did this kind of money laundering 1,300 times, it’s reasonable to surmise that he was aware of what was happening.

Sean Illing

Part of what’s so puzzling to me is trying to figure out how money and ideology intersect in all this, if they intersect at all. In other words, Trump seems much more motivated by money than political ideology, but I keep wondering if his drift into politics was in any way influenced by his financial entanglements.

Craig Unger

It’s an important question, and it’s not clear what the answer is. One weird anecdote that jumped out to me was this story about Ivana Trump, whom Donald married in 1977. It turns out the Czech secret police were following her and her family, and there’s a fascinating file I quote in the book that says they started tracking her in the late 1980s, and one of the Czech secret police files says that Trump was being pressured to run for president.

But what does that mean? Who was pressuring him? How were they applying the pressure, and why? And did it have anything to do with potentially compromising materials the Russians had on Trump from his 1987 trip to Russia?

What we do know is that Trump returns from that first trip to Moscow and he takes out full-page ads in the Washington Post, New York Times, and Boston Globe — and it’s fascinating because the ads essentially pushed the same foreign policies that he’s pushing today. They were anti-European, anti-NATO — basically they were aligned with the Soviet plan to destroy the Western alliance. And Trump takes out full-page ads in major American newspapers affirming this view. Maybe that’s just what he always believed. In any case, it’s worth noting.

“Trump was working with the Russian mafia for more than 30 years. He was profiting from them. They rescued him. They bailed him out.”

Sean Illing

I’m curious about how you collected all of this evidence. Did you go to Russia? Did you interview most — or any — of the people directly involved in these transactions? Did you compile this information yourself or rely on other sources?

Craig Unger

It’s stunning what you can find out through public sources. I did not go to Russia. I had a source who tipped me off to the name Semion Mogilevich, one of the highest-ranking bosses in the Russian mob, whom I had never heard of before, and that led me to a database online that revealed ownership of homes in the state of New York — purchases and sales.

And so I went to Trump properties, and every time I found a Russian name, I would research it, and it was stunning. I’d often take their name, put in Mogilevich in Google, and it was like hitting the jackpot on a slot machine, time after time after time.

There were countless people who were indicted for money laundering, or they were gunned down on Sixth Avenue, and there was just a huge percentage who seemed to have criminal histories, and that sort of got me started. I also had a wonderful research assistant who speaks Russian and she grew up in Brooklyn, and she was a terrific asset and helped break the language barrier for me.

Sean Illing

The subtitle of your book is “The Untold Story of Donald Trump and the Russian Mafia,” but it’s not clear to me which part of the story is new. What did you uncover here that wasn’t previously known?

Craig Unger

The insights I gained from Gen. Kalugin are completely new, but honestly, a lot of what I did was simply compile all this disparate stuff that was out there but had never been pieced together neatly in one place.

For example, a lot of the Russian-connected stories were published in the crime pages of the New York Post or the New York Daily News, but they were always just straight-ahead crime stories you could see in a tabloid. There was no sense that this had any geopolitical implications or forces behind it.

So part of what I tried to do was assemble all of this in a coherent narrative that laid it all out in a comprehensive way. We have all these seemingly random crime episodes that appeared in tabloids again and again, but it turns out that much of it was connected to a much larger operation, one that ended up ensnaring Trump and the people around him.

Sean Illing

Trump is obviously the focus here, but as you mentioned earlier, he’s not the only asset targeted by the Russians. What do we know about Russian efforts to compromise other prominent American figures?

Craig Unger

One of the things I hope this book shows is that there’s a new kind of war going on. It’s a global war without bombs or bullets or boots on the ground, and the weapons are information and data and social media and financial institutions. The Russian mafia is one weapon in this global conflict, and they’ve been fighting it smartly since the fall of the Soviet Union.

The Russians start businesses and front companies and commodities firms that appear legitimate but essentially work to advance the interests of the Russian state. They’re very good at getting people entangled financially and then using that as leverage to get what they want. This appears to be what they’ve done with Trump, and now he’s president of the United States.

Sean Illing

Maybe the most troubling part of all this is that the Russians simply exploited our own corrupt system. They studied America’s pay-for-play culture, found its weak spots, and very carefully manipulated it. As long as our system remains unchanged, we should expect this kind of exploitation.

Craig Unger

Absolutely. There’s an old saying that sometimes the worst part of the scandal is what’s legal, and the Russians, to their credit, studied our system and campaign finance laws and they exploited it masterfully. They’ve used pharmaceutical companies and energy companies and financial institutions to pour money into our politics, and we really have no idea the extent of their influence.

One thing Vladimir Putin got right was his insistence that American democracy is also corrupt, and I think he’s showing us exactly how corrupt it is. Trump is just the most glaring example, but surely there are others, most of which we know nothing about.

Sean Illing

The case you lay out is pretty damning, but I’m left wondering if any of it really matters. As you said, most of this stuff is hiding in plain sight, and although the special counsel investigation is underway, there’s a subset of the country for whom no amount of evidence is enough to persuade them that something wrong has occurred, and Congress has demonstrated its uselessness pretty clearly. So how do you see all this playing out?

Craig Unger

It’s hard to say. I think we’re on a collision course that will either end in impeachment or with Trump reverting to unconstitutional measures to stay in office. That is simply my opinion. However this plays out, it’s clear that we’re in uncharted territory here, and it’s hard to see how this ends well for anyone.

This article was originally published on 9/12/2018. https://www.vox.com/world/2018/9/12/17764132/trump-russia-business-ties-mafia-putin-craig-unger

 

5 Facts You Didn’t Know About Retirement

My Comments: Though written two years ago, the message here is increasingly relevant.

Social Security is under attack by the Republican leadership in the Senate. Reasonable solutions to keep it viable and properly funded are readily available provided there is a political will to make that happen.

My experience over the past 40 years in the insurance industry reflects an annual increase in the cost of health insurance of over 10%. I’ve written in the past about how without remedies to correct this, the health care costs would exceed the entire gross national product of the US. That is obviously not sustainable.

A simple step to allow Medicare and Medicaid to negotiate lower drug prices would have a huge impact, but again, Congress doesn’t have the will power to move in that direction. Money from drug companies to help pay for elections make sure of that.

by Jason Hall \ October 2, 2016

If you want to have the best retirement possible, it’s important to take steps to prepare for the things that could affect you the most. Here’s a closer look at five retirement facts that could have a huge impact on your retirement plans, and there’s a good chance you may not even know about them.

Whether you’re a few years or still a few decades from retirement, these five facts are important. Let’s take a closer look at how they could affect you.

1. You’ll probably need long-term care (and have to pay for it)

According to the U.S. Department of Health and Human Services, 70% of people who live past 65 will need long-term care. If you’re married, there’s a 90% likelihood either you or your spouse will need long-term care.In other words, if you live to retirement age, the odds are good that you’ll end up needing some sort of long-term care.

And since long-term care is not always covered by health insurance or Medicare, retirees need to have a plan to provide for it. Here is how the majority of non-medical long-term care — what Medicare doesn’t pay for — is provided for:

  • Long-term care insurance
  • Increased retirement savings to cover this cost
  • Unpaid care provided by family members (usually a spouse or adult children)

2. Social Security Full Retirement Age will increase soon

Full Retirement Age — that is, the age you qualify to receive 100% of your Social Security retirement benefit — is 66 for retirees in 2016, and is set to remain age 66 through 2020. But for a six-year period starting in 2021, Full Retirement Age will be pushed by two months — meaning 66 and 2 months for those born in 1955, 66 and 4 months for those born in 1956, etc., until the full retirement age reaches 67 in 2027.

In other words, anyone born after 1954 will either have to delay retiring a little longer to get their full benefit, or elect to get a smaller check each month if they retire at 66 or sooner. If you’re planning to retire anytime between now and 2027, it’s a good idea to make sure you know when your Full Retirement Age is, since the amount of your monthly benefit is predicated on that number.

3. Average retirement savings will generate less than $500 per month

According to Vanguard, which manages millions of retirement savings accounts, the median balance in defined contribution plans (think 401(k) plans) it manages for people 55 and over was less than $72,000 in 2015. For context, that would only generate about $240 per month in retirement income. This only covers a small selection of total retirement savings, but even as a small sample size it’s concerning.

The numbers below explain why many retirees end up back at work. Image source: Getty Images.

The U.S. Government Accountability Office offers up a bigger picture look, but it’s still concerning. According to the GAO, the median age 55-64 household has $104,000 in retirement savings, while the median age 65-74 household has $148,000 saved. Sure, that’s a lot more than Vanguard’s data, but in terms of dependable retirement income, it’s only worth $347 to $493 per month in retirement income. Paired with an average Social Security benefit of less than $1,500 per month, that’s not a lot of money to live on in retirement.

For millions of older Americans, there’s an even bigger concern. The GAO found that 29% of households age 55 and over don’t haveanydefined benefit (such as a pension) or retirement savings at all.

4. You’ll still pay (some) income tax in retirement

Whether it’s Social Security, distributions from a 401(k) or IRA, or a pension you’ll almost certainly pay federal income tax. Since these kinds of retirement income sources are generally considered regular income, you’ll pay federal income tax on your total earnings based on your adjusted gross income (after deductions) at your marginal tax rate.

There are some exceptions to this, including distributions from a Roth IRA or Roth 401(k), which are not taxed, but by and large, retirement doesn’t mean the end of federal income tax.

However, many states don’t have income taxes at all, while others give income tax breaks to retirees. Since the laws vary from state to state, it’s good to learn about income tax in your state (or the state you plan to retire to). Furthermore, if a state doesn’t have an income tax, it’s important to understand how it makes up that revenue, whether in higher sales tax, property tax, or some other way, and how that could impact you in retirement.

5. Homeownership rates in retirement are trending down (but mortgage debt is increasing)

Over the past decade, the percentage of older Americans who own their home has fallen. According to a Harvard University study in 2014, the percentage of Americans aged 50-79 who owned a home fell between 2005 and 2013. The biggest percentage decline was in the younger group, with those 50-64 owning home falling from over 80% in 2005 to below 76% in 2013.

Homeownership rates are trending the wrong way for retirees. Image source: Getty Images.

At the same time, more homeowners are carrying mortgages later in life. According to the same Harvard study, the percentage of homeowners 65 and over with a mortgage doubled from below 20% to 40% from 1992 to 2010, while the 50-64 age group saw the rate increase from more than 60% to more than 70% over the same period.

The rising number of retirees who don’t own a home will likely face higher housing costs over time compared to homeowners. At the same time, older homeowners still paying a mortgage may be forced to delay retirement longer than expected to cover their expenses.For both groups, the burden of expensive housing costs leads to less spending on food, healthcare, and other areas that are important to higher quality of life for retirees.

Furthermore, home equity often provides a critical safety net for many older retirees, and can be tapped to pay for care later in life. Carrying a mortgage into retirement diminishes this shield, while not owning a home eliminates it entirely.

Source: https://www.foxbusiness.com/markets/5-facts-you-didnt-know-about-retirement

How Donald Trump Is Shaping The Next Global Economic Recession

My Comments: My observations and memories of economic and financial forces over the past five decades has led me to fundamentally distrust the moves made by those who profess to Make America Great Again.

My instincts told me they were pushing us in the opposite direction, ie Make America Irrelevant. It started with us withdrawing officially from any effort to participate in what was the Trans-Pacific Partnership. That told me the Trump Administration was willing to cede global economic supremacy to China.

And so it continues… Forbes Magazine is not known as a liberal rag. All of us need to pay attention.

by Yuwa Hedrick-Wong \ Forbes Magazine \ November 4, 2018

American presidents’ economic policies tend to take time, often a decade or more, to feed into and affect the business cycle. Lyndon Johnson’s decision to debt finance the Vietnam war to avoid unpopular tax increase led to stagflation a decade later. The impact of Ronald Reagan’s supply side revolution was felt most strongly in the investment surge in the late 1990s that ended only with the dot-com bust. Donald Trump’s impact on the economy, however, will prove to be much more immediate. His policies have both raised the risks of a new global recession while seriously weakening the government’s ability to deal with it when it comes.

The current recovery is the longest on record, but also one of the weakest. And as in the nature of the business cycle, the longer its expansion, the closer it is to the next downturn. Over the 2017 to 2018 period, the economy charged ahead on a sugar rush fueled by Trump’s corporate tax cut, a massive stimulus just as the economy was running close to full capacity. Wall Street loved it and stock indexes reached new heights.

In the meantime, the U.S. Federal Reserve started to raise interest rates. In the coming 12 to 18 months, the sugar rush will wear off and attention will gradually shift back to economic fundamentals, which are far less robust than what the frothy equity markets may suggest. The risk of a recession will rise.

The risk may be higher than we think thanks to Trump’s continuous assault on multilateralism and his administration’s erratic policies, which has seriously deepened uncertainty in the global economy. When the herd instinct switches from risk-on to risk-off under conditions of uncertainty, any numbers of confluence of unanticipated events could easily trigger the next recession.

Apart from raising the risk of a recession, Trump has also made it much harder for the American government to deal with it when it happens. Trump’s fiscal spending, especially the tax cut, is on track to raise America’s fiscal deficit from 4.5% of GDP in 2018 to over 6% by 2020, even if no new tax cuts are enacted. This is a shockingly rapid increase and it means the government will have no fiscal power left to jump start the economy when the next recession hits.

Source: https://www.forbes.com/sites/yuwahedrickwong/2018/11/04/how-donald-trump-is-shaping-the-next-global-economic-recession/#14e76b2657e1

4 Reasons You Can’t Live on Social Security

My Comments: Well, duh! This headline seems like a no-brainer to me.

Social Security was created as a safety net program 80 plus years ago. This implies you MUST have additional funds so you can pay your bills. With 80 years of expectations now built into the system, it has become ‘normal’ to view it as something more than just a safety net.

These four reasons help paint a stark picture for someone not fully prepared to retire. For those of you just now getting serious about your financial future, please check out my online courses under Successful Retirement Secrets.

by Christy Bieber \ October 24, 2017

Social Security is supposed to take care of seniors in their old age, but it cannot do it alone. If you’re counting on Social Security benefits to be your sole source of income as a senior, you’re almost assuredly going to find yourself in a dire financial situation.

The average monthly Social Security benefit is about $1,368 per month at the moment, and while some seniors receive a higher benefit if they paid more into the system, others receive much less. 

Average monthly income from Social Security alone puts most seniors very close to the federal 2017 individual poverty level of $12,060. Even the maximum benefit — which is very difficult to obtain — nets an annual income of $42,456, which is far below the cost of comfortable living in many larger cities. 

Seniors need much more than a poverty-level income, and most older people even need more than the maximum Social Security benefit. In fact, there are four key reasons why seniors cannot live on Social Security alone, and should make sure they save enough for retirement so they don’t have to.

1. A single unexpected expense could lead to disaster

When factoring in routine expenses like healthcare, food, and housing, the average American senior spends around $3,700 monthly, or $44,600 annually. If you want to live a routine middle-class lifestyle, your entire Social Security check will be eaten up — and then some — even if you earn the maximum in benefits.

If your income from Social Security is just average, your spending will be even more bare-bones. As a result, you’ll need to live in a low-cost-of-living area. Otherwise your entire check could be spent just to pay the your monthly rent. The median monthly rent for a single-bedroom apartment in the top 50 major U.S. cities is roughly $1,234. 

With Social Security either insufficient, or barely sufficient, to cover basic routine costs, saving money for emergencies is difficult or impossible. Close to half of all seniors currently have nothing set aside for an emergency, and you’ll likely fall into this group if you’re trying to live on Social Security alone. Unfortunately, emergencies happen. If your car needs costly repairs, your fridge goes on the fritz, or you have any unexpected expense, you could wind up in debt, unable to pay your bills, and with no savings to fall back on. 

2. Affording healthcare costs could be almost impossible

Seniors living at the poverty level or on a limited Social Security income could face a harder time than young people, because many pensioners have costly medical needs. Unfortunately, contrary to popular belief, Medicare does not make seniors’ medical care free, and older people still need to be prepared for treatment expenditures — particularly for prescription drugs.

Seniors account for 34% of all healthcare spending, and a 2012 analysis estimated senior spending on healthcare at nearly $19,000 per person. The government pays for around 65% of medical expenses for the elderly, and seniors are left to pay for Medigap or Medicare Advantage policies to cover additional costs.

Even with supplementary policies, coverage is not that comprehensive. The Bureau of Labor Statistics reported mean healthcare spending of $5,994 annually among those aged 65 and over in 2016, but seniors with high prescription drug needs could end up spending far more.

If you receive only the average Social Security benefit, then $5,994 per year in medical spending would eat up 37% of your entire annual income. You’d be left with about $10,000 to pay for rent and all of your other expenses. This is nowhere near enough, even if you don’t suffer a serious medical emergency such as a stroke or heart attack.

3. Other costs rise faster than COLA 

Social Security beneficiaries are eligible for an annual cost-of-living adjustment (COLA), which is a small boost in benefits intended to protect their purchasing power from inflation. Unfortunately, COLAs for seniors aren’t actually very effective at making sure that Social Security benefits keep pace with actual costs of living. 

In 2017, seniors received a 0.3% cost of living adjustment. This was actually an improvement compared to 2016, when the adjustment was 0%. In fact, since 2010, there have been three years when Social Security retirement beneficiaries received no raise at all.

While Social Security benefits either rise slightly or not at all — i.e., they can never decrease — COLA increases have not kept pace with the rate of medical inflation in 33 of the past 35 years. Food and housing cost increases have also outpaced Social Security’s meager COLA adjustments. Since prices increase faster than income from Social Security, the spending power your Social Security benefits provide is reduced each year — making living on your benefits even harder as you age.

4. The future of Social Security is uncertain

Social Security benefits are clearly insufficient to live on under the current system — but things could actually get worse. Social Security’s trust fund reserves are expected to be depleted by 2034, and if no steps are taken to fix funding shortfalls, Social Security will only be able to pay 77% of expected benefits. 

Proposals to fix funding shortfalls include raising the retirement age and changing the formula by which cost-of-living increases are calculated to give seniors even smaller raises. Either option would reduce lifetime benefits, even as seniors struggle to make ends meet. This means if you want to achieve financial independence some day, it’s even more important you make a retirement savings plan so you’ll have plenty of cash to supplement Social Security.  

Source: https://www.fool.com/investing/2017/10/24/4-reasons-you-cant-live-on-social-security.aspx