Day: May 17, 2019

Bitcoin Plunges Hardly a Day After Hitting Over $8,000

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Bitcoin Price

After trading above $8,000 less than a day, Bitcoin (BTC) price plunged on May 17 and it was trading at around $7,200 which is a 10% drop within a day.

Other cryptocurrencies have also experienced a price drop. Ethereum dropped 7.97% to around $240 while XRP lost 15.4% and it’s trading at $0.399. The cryptocurrency industry market capitalization fell by 8% which result in about $21 billion being wiped out in 24 hours.

Bitcoin Price Drop Triggered by Huge Bitcoin Sell Order

The sudden decline in Bitcoin price was prompted by the placement of a huge sell order on Bitstamp as well as other cryptocurrency exchanges which caused contracts on margin trading exchanges such as BitMEX to be liquidated.

Someone placed a huge sell order of 5,000 bitcoin on Bitstamp that BitMEX uses for about 50% of its feed and it seems like it triggered some kind of algorithm that impacted on BitMEX. Gnosis Developer Eric Conner said that the manipulation of the cryptocurrency market by a single sell order may actually hurt the possibility of the exchange-traded fund getting approval in future.

The 5,000 BTC Bitstamp sell resulted in a sell-off on Ethereum and Bitcoin on BitMEX which resulted in a drop in the valuation of the cryptocurrency market by almost $30 billon. In the past week, Bitcoin price jumped 26% from $6,200 to around $8,300.

Crypto Assets Far From Being Viable Currency Options

Analysts such as Alex Kruger of Global markets believe that the overnight 10% decline of cryptocurrencies indicates how the narrative of crypto assets being a viable option to global financial instability is far from being true.

Despite the short-term drop in bitcoin price and other crypto assets there is still hope that the market will pick an upward momentum in coming months.  Although the drop is seen as a minor setback it nonetheless caught most investors by surprise.

If cryptocurrency markets were regulated with trusted platforms then it could have been difficult to manipulated prices of crypto assets and the market like what happened.

Featured Image: Sinenkiy

Personal Finance Daily: Why there’s no excuse for not maxing out your 401(k) and what couples need to know about money before marriage

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Happy Friday, MarketWatchers! Here are some of Friday’s top stories to read over the weekend.

Personal Finance
Nearly half of women who have abortions live below the federal poverty level

As Missouri, Georgia and Alabama move to restrict abortion access, the cost can vary by state, trimester, procedure and other factors.

Student-loan borrowers are using their vacation days to pay off their debt

This new employee benefit lets workers trade in their paid time off.

My grandson’s live-in girlfriend hates me and doesn’t want me to stay at their home — should I still leave him all my money?

This woman is upset that she’s been shunned by her grandson’s partner.

Trump wants to quiz immigrants on civics — but many natural born Americans lack basic knowledge of government

Just under half of people knew that Justice John Roberts was the Chief Justice of the U.S. Supreme Court, a recent survey showed.

SAT adds ‘adversity score’ amid concerns that wealthy students have an unfair advantage

The measure will be based on a variety of indicators about their neighborhood, family and high school environments.

Millennials are coping with death on $600 ‘grief retreats’ where they dance, meditate and swim in lakes

‘Dead to Me’ on Netflix is making grief less taboo, and so are these social outlets that help millennials cope with loss.

Elizabeth Warren calls Navient ‘scammers’ after student loan giant celebrates making the Fortune 500

The company is facing multiple lawsuits from the CFPB and states attorneys general.

Arianna Huffington: ‘I’m a risk-taker in every part of my life — except my finances’

Huffington spoke with MarketWatch about her work, her passions, and the stock she regrets not buying in 1980.

Something blue, something green: what couples need to know about money before marriage

5 steps to a financial happily ever after.

When it comes down to it, there’s no excuse for not maxing out your 401(k)

The U.S. government gives out few freebies, and this is one of the best ones.

Elsewhere on MarketWatch
Trump tariffs: How the trade wars are affecting manufacturing jobs and pay

Data shows manufacturing jobs are up, but pay increases lag nationwide gains.

Abortion bans are spurring donations to Planned Parenthood, the National Organization for Women, and more

Pro-choice groups have seen their base energized after restrictive abortion laws were passed in Alabama and Missouri.

Economic expansion poised to become longest in U.S. history, leading indicators show

An index that compiles various leading economic indicators rose for the third-straight month even as economists are increasingly aware that the current business cycle is about to become the longest on record.

Jeff Bezos praises his dad’s ‘grit and determination’ in immigrating to America as a teen

Mike Bezos emigrated from Castro’s Cuba at 16 without knowing any English.

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Retirement Weekly: Why your retirement portfolio is too heavily invested in equities

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No matter how young you are, chances are that you are too heavily invested in equities.

I say this not because I think a bear market is imminent—though, of course, a major decline could begin at any time. Instead, I base this declaration on new research that takes a fresh look at the so-called glide path—the gradual reduction in equity exposure as you approach retirement and then live in retirement.

The new research finds that, in some cases, workers as young as 35 should have no more than 70% in equities. That’s a lot lower than previously thought; the target-date retirement funds at both Fidelity and Vanguard that cater to investors this young currently have 90% or more currently allocated to equities.

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Retirement Weekly: What will my tax hit be if I sell mutual funds?

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Q.: I have some mutual funds which my husband is against. He fears any risk. My daughter’s name is on them with me. I am 73 and wondering about withdrawing them before I get too old. If they are withdrawn, they will go into a regular bank account. If I die before I withdraw them, how would they affect my daughter tax wise?

— JB

A.: JB, There is no such thing as a risk-free holding but the risks that apply can vary so some investments are more appropriate than others. I’ll leave that discussion for another time and just focus on the tax consequences of getting out of mutual funds or inheriting the funds.

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Retirement Weekly: Forced to retire? Here’s what to do

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All your best laid plans for retirement can crumble in an instant. A job loss, family health issue or other crisis can bring an abrupt end to your working life.

A sudden, unscheduled retirement poses myriad challenges. First, there’s the financial crunch of losing an income stream that you expected to last into the near future.

Add the emotional stress of coping with this unwanted change of plans, along with the newfound uncertainty of what lies ahead, and it’s no wonder that forced retirement can leave lasting scars.

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Revolution Investing: Revolution Investing stocks update: Tesla, Facebook and more

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Here’s some updated analysis for some of the Revolution Investing stocks I’ve written about before. I’ve listed the stocks in order of highest-rated to lowest-rated. Those ratings go from 1 to 10, 1 being “Get out of this position now!” and 10 being “Sell the farm, I’ve found a perfect investment.” The stocks that are bolded are those that I consider to be “core” holdings and am unlikely ever to sell out of them entirely.

Tesla TSLA, -6.33%  (9) — Binary set-up here. Over the next three to five years, TSLA is likely either to drop by half from here or go up 10-fold. I think the odds favor it going higher as the company rolls out semi trucks, pickup trucks and continues rolling out full autonomous driving to the masses. The company plans to compete against Uber UBER, -1.01%  in robotaxis too.

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Retirement Weekly: News and analysis for those planning for or living in retirement

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From MarketWatch:

Congress gets serious about retirement saving: Lawmakers across the country are proposing ways to help Americans save more for retirement, including increasing catch up contributions, allowing small businesses to work together to create retirement programs and matching student loan repayments with retirement contributions.

These 16 money wasters are why so many Americans can’t save for retirement: Sometimes, people spend just to spend, and that can take away from how much they have in retirement savings later on. This 75-year-old shares what he believes is unnecessary spending, including the lottery, tattoos and tchotchkes.

It’s time to stop judging people for drinking lattes and getting regular haircuts: What some people may consider superfluous spending, however, could be what another person values most in their lives, such as lattes or manicures. Those expenses don’t have to mean sacrificing a comfortable retirement.

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Love & Money: Something blue, something green: what couples need to know about money before marriage

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Love & Money is a MarketWatch series looking at how our relationship with money impacts our relationships with significant others, friends and family.

First comes love. Then comes marriage. Then come…financial responsibilities.

We’re approaching wedding season, and amid the talk of cake and flowers should be some frank talk about money, not just the cost per plate on the big day, but the short- and long-term financial implications of bringing two people together in one household.

Even in first marriages, people are tying the knot later in life now than ever before. In 2018, the median age at first marriage was nearly 30 for men and nearly 28 for women. Thirty years ago, it was 26 and 23½, respectively. That means people are coming into these partnerships with several more years of personal financial history under their belts that must be considered and reconciled.

Waiting until each partner has achieved a certain level of financial stability may play a large role in when couples decide to get married, especially given changing social and economic factors like extended stints in higher education and the accompanying debt. But once a couple has made that decision, there are some key “money vows” they should take to ensure they’re on the same page.

First, talk openly about financial values. We all go through life with a set of ethics and goals related to our money. Beyond major life choices such as having children and owning a home, it’s important for soon-to-be spouses to know if charitable giving, international travel or other large expenses are part of one partner’s personal and financial identity. It’s a worthwhile exercise for both of them to write down their priorities separately, then compare lists and discuss where they overlap and where compromise is necessary.

Many marriages don’t survive the wealth-planning and building phases because only one, or neither, of the spouses is totally committed to a shared wealth plan, so being clear about goals and values upfront can alleviate a lot of tension.

Next, take a hard look at each partner’s individual financial situation. Before combining their assets, it’s important for each spouse to have their own house in order. A financial inventory should include everything from personal monthly income to savings to credit card balances to student loan debt. It should also account for monthly expenses and how they will change post-marriage. With young couples getting married later, decisions about ownership and titling of prenuptial assets should also be considered.

At this stage, it helps to decide whether outstanding obligations will become “couples’ debt” or if each partner will continue to take ownership of their liabilities. This can be a tough negotiation if there is a large disparity between the partners’ situations, but hashing it out before the big day can head off surprises and arguments down the line.

Be honest. The foundation of a strong relationship is trust, and this is especially true when it comes to money. Before coming together in marriage, both partners must be willing to open the books and be honest about any past financial troubles or debts that may come to bear during the marriage.

This is not a one-and-done conversation. My colleague, wealth strategist Malia Haskins, suggests that couples should schedule a regular “money date” to talk about finances once or twice a month.

Make a savings plan — together. In this instant-gratification age, it takes a lot of discipline to set funds aside for the future. When couples are relatively young and thus have the luxury of time on their side, they should aim to save at least 10% of every dollar they earn in a long-term, “untouchable” account, like a workplace 401(k) plan, IRA or Roth account. The particulars can be discussed with the help of a financial professional, but the commitment to saving for the long haul needs to be enthusiastically taken up by both halves of the couple.

Have the tough conversations. Two of the most financially devastating life events are divorce and the unexpected death of a spouse. Even when a couple is first starting out, it’s important to think about how they’ll protect their assets in light of an unfortunate event.

A lot of people put up a mental block about the possibility of such events, so they avoid talking about them. But drawing up a will or trust, or establishing a prenuptial agreement, can make a life-changing difference in a devastating scenario. Prenups don’t carry the same taboo as they once did, and they can offer important protections, especially if one or both partners is coming to the marriage with significant personal assets, and/or if there are former spouses or children from previous relationships in the mix.

Wedding planning can be stressful, but a wedding is only one day; a marriage is, in theory, a lifetime. For that reason, couples shouldn’t give short shrift to the topic of money, which will realistically impact most of the decisions they make together. Having an honest, open dialogue and coming together to plan around the financial aspect of an impending union can make all the difference in the success of a marriage.

Angie O’Leary is head of wealth planning for RBC Wealth Management – U.S.

RBC Wealth Management does not provide tax or legal advice. All decisions regarding the tax or legal implications of your investments should be made in connection with your independent tax or legal adviser. Investment and insurance products offered through RBC Wealth Management are not insured by the FDIC or any other federal government agency, are not deposits or other obligations of, or guaranteed by, a bank or any bank affiliate, and are subject to investment risks, including possible loss of the principal amount invested. RBC Wealth Management, a division of RBC Capital Markets, LLC, Member NYSE/FINRA/SIPC.

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Elizabeth Warren calls Navient ‘scammers’ after student loan giant celebrates making the Fortune 500

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Student loan giant Navient NAVI, +0.15%  celebrated a corporate milestone on social media this week and it didn’t take long for the internet to clap back.

Navient announced via Twitter TWTR, -1.64%   on Thursday that the company had made the Fortune 500 list, an annual ranking by the magazine of the most valuable companies. For some, like Sen. Elizabeth Warren, a Democrat of Massachusetts and 2020 presidential candidate, it didn’t seem like an achievement the company should be celebrating.

“I didn’t know they had a special section for scammers,” Warren, whose been a prominent critic of the student loan industry for years, tweeted, in part.

Pennsylvania Attorney General Josh Shapiro, who is suing Navient over claims the company misled borrowers, offered a similar sentiment, calling the company’s tweet “Shameful.” The replies to Warren’s tweet also included borrowers complaining about their experience with the company.

In addition to Shapiro’s suit, Navient is facing allegations from several other states and the Consumer Financial Protection Bureau that the firm steered borrowers towards costly repayment plans, making it more difficult to pay off their loans, among other claims.

Navient was not able to comment immediately, but the company has denied the claims in the various suits. The company’s chief executive officer, Jack Remondi, has also argued that the bulk of complaints against the company have to do with the complicated nature of federal student loan law, not servicer error.

Companies like Navient, known as student loan servicers, are hired by the government to manage the federal student loan portfolio. They’re typically a borrower’s main point of contact when repaying their debt, which means the guidance they provide to borrowers is crucial in managing their loans. Advocates have complained for years that the companies don’t provide enough or the right information to borrowers, making it difficult for them to access protections — like repayment plans tied to income or forgiveness programs — guaranteed to them by law.

In addition, advocates have said that the federal government, particularly under the Trump administration, hasn’t been doing enough to oversee the companies. Over the past few years, state lawmakers and attorneys general have pitched and in some cases, passed, laws regulating student loan companies and filed lawsuits against them.

The Department of Education has argued that states don’t have oversight of these federal contractors, a sentiment the companies have used to try and get the suits tossed out of court. The battle could wind up in the U.S. Supreme Court.

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What should you expect from the market?

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When we’re faced with the task of financial planning, one of the hard parts is projecting a reasonably probable future return for our investments.

We have tons of information about the past, but we can’t know the future. So what can we count on, anyway?

Like lots of other things in life, the future of investment returns must remain somewhat a mystery.

Still, I believe the past contains valuable lessons of what’s reasonable to expect. The world’s climate may be evolving, but you still know that at least for the foreseeable future, the tropics will be hotter than Northern Canada and that summer will be warmer than winter.

Similarly, if you think about the people you know, really good souls are likely to remain so, and jerks are not likely to quickly become nice people.

These things let us plan our lives around probability instead of leaving our comfort and our friendships entirely to chance.

Likewise, I believe some long-established investment patterns are likely to persist, for the same reasons they have persisted so far.

I believe investors can use these patterns to significantly improve their returns, without taking much additional risk or straying far beyond their current comfort levels.

Small changes…think of the trim tab on the rudder of a ship…can produce big results. Without getting into the mechanics of trim tabs, which are used in aircraft and boats of all sizes, I want to quote Buckminister Fuller from an article he wrote in the February 1972 issue of Playboy magazine.

“Think of the Queen Mary—the whole ship goes by and then comes the rudder. And there’s a tiny thing at the edge of the rudder called a trim tab.

“It’s a miniature rudder. Just moving the little trim tab builds a low pressure that pulls the rudder around. Takes almost no effort at all.”

Fuller used the metaphor to argue that just one person can make a huge difference by being a trim tab. I’ll use the trim tab metaphor to argue that even a small change in investment return can make a huge difference over a lifetime.

Imagine this simple scenario: Starting at age 25, you and your twin sister each invest $5,000 and continue doing so once a year for 40 years. Your out-of-pocket savings total $200,000 apiece.

When you’re 65, you each start withdrawing 4% of your portfolio value at the start of each year, and you continue that for 30 years.

Now imagine that you achieve a compound return of 8% a year up to age 65 and a return of 6% after that. Your sister, however, has a pre-65 return of 8.5% and an after-65 return of 6.5%.

The difference is a “mere” one-half of 1%. In any given year, you and your sister would barely notice the difference.

But on your joint 65th birthday, you would have $1.4 million and your sister $1.6 million. Hmmm. That difference is equal to the total of all the money each of you put into your savings.

And that’s just the start of it.

Over the next 30 years, your total withdrawals (your retirement income from this modest $5,000 yearly investment) will be $2.2 million. She, on the other hand, will take out $2.7 million.

When you celebrate your joint 95th birthday together, your portfolio will be worth about $2.4 million; hers will be worth about $3.1 million.

I’ve rounded some of these numbers, but the bottom line is this: Her extra one-half-of-one-percent return…which seems like a “trim tab” on a portfolio…brought her a total of about $1.27 million more than you got.

So the question is: how can an investor get an extra half-percentage point return?

I can’t tell you what will be true in the future, but here are some figures from stock indexes, based on returns over the 20 calendar years that ended in December 2018:

•The Russell 1000 Value Index earned 6.2%; the Russell 1000 Growth Index earned 5.1%.

•The Russell 2000 Value Index earned 8.2%, vs. 6.1% for the Russell 2000 Growth Index.

•The DFA Large-Cap Value Index earned 7.3%, vs. 6.5% for the DFA Large-Cap Growth Index.

•The DFA Small-Cap Value Index earned 11.3%, vs. 9.3% for the DFA Small-Cap Growth Index.

•The DFA Emerging Markets Value Index earned 13%, vs. 10.9% for the DFA Emerging Markets Growth Index.

•The DFA International Large-Cap Value Index earned 6.3%, vs. 4.5% for the DFA International Large-Cap Growth Index.

•The DFA International Small-Cap Value Index earned 10.1%, vs. 7.8% for the DFA Small-Cap Growth Index.

It doesn’t take the brains of Buckminister Fuller to see a couple of patterns in those numbers. Time after time, value outperformed growth. And in category after category, small-cap outperformed large-cap.

These are facts, but the question is what to do with them. I have a few thoughts on this.

First, I think we should believe in the premiums from smaller companies and from value companies. This 20-year period is not an outlier. The same patterns emerge time after time when researchers track comparative returns over the past 90 years.

Second, I don’t think we should bet our entire futures on these patterns. It would be a big mistake to invest exclusively in smaller companies and value companies.

But if you’re looking for a trim tab to earn an extra 0.5% a year, you could do a lot worse than to nudge your portfolio in the direction of value stocks and small-cap stocks.

This is exactly what I have done for many years in the Ultimate Buy and Hold Portfolio.

•In order to nudge toward small-cap stocks, I recommend investing in an equal mix of small-cap funds and blend funds, those that invest in both large and small.

•In order to nudge toward value stocks, I recommend investing in an equal mix of value funds and blend funds, those that invest in both growth and value.

I have carefully studied the results of this approach and found that it adds very little extra risk, but very significant extra returns, to a stock portfolio.

I can’t tell you the returns of the future. But I am quite certain that small-cap funds and value funds will continue to help investors earn better returns.

For more on projecting future returns, check my latest podcast, “Performance: What should you plan on for the future?”

Richard Buck contributed to this article.