Day: May 31, 2019

Personal Finance Daily: Kombucha now comes in the form of a vodka and The Mega Millions and Powerball jackpots are actually much smaller than you think

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Happy Friday, MarketWatchers. Don’t miss these top stories:

Kombucha now comes in the form of a vodka

The fermented beverage has become trendy in recent years.

The Mega Millions and Powerball jackpots are actually much smaller than you think

Inflation, time and taxes exact a large sum, explains Brett Arends.

JPMorgan Chase to pay $5 million to male employees in parental-leave discrimination settlement

Other companies could be watching the record-breaking settlement and thinking about their paid-leave policies.

Did you have heart surgery? Doctors have this piece of advice to help you live longer

A recent paper looks at how to improve the outcome of patients with coronary heart disease.

At Disneyland’s new ‘Star Wars’ attraction, brace yourself for $200 lightsabers, $42 cocktails and 4 a.m. lines

If you stay longer than your four-hour reservation window, Disney employees dressed as stormtroopers will escort you out.

Even in a strong economy, millions of hardworking Americans are being left behind

Not everyone is experiencing the benefits of record-low unemployment and a decade-long bull market.

Amazon is grappling with the same problem that plagues Facebook: fake news

The internet giant recently pulled ‘autism cure’ books from its marketplace.

Elsewhere on MarketWatch:
Hidden Realtor commissions could be next housing-market domino to topple as government probes MLS

How much information do Realtors keep among themselves, and what should be made transparent to housing market buyers and sellers?

How Mexico tariffs could hurt $600 billion in cross-border trade — and the U.S. economy

The stuttering U.S. economy might suffer a crushing blow, business leaders and other critics contend, if President Trump acts on his threat to shut the border with Mexico to block a rising tide of immigrants.

Mortgage rates sink below 4% as the trade war slaps markets

Rates for home loans fell again, taking the most popular loan product below a psychological threshold, but Americans’ confidence may be too fragile to take advantage of it.

Weekend Sip: Kombucha now comes in the form of a vodka

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The bottle: Aqua Vodka, $29.95

The back story: In recent years, Americans have discovered kombucha, a fermented beverage made from tea that has been especially embraced by the youthful, hipster set. U.S. sales in 2018 alone surged by 22%, reaching $728.8 million, according to one report.

So what’s next? A kombucha vodka, of course.

Aqua Vodka, a product developed by Aqua ViTea, a Vermont-based kombucha company, is the spirit in question. It came about when Aqua ViTea was looking for ways to eliminate the alcohol that’s present in kombucha. Yes, the drink itself is naturally boozy — there’s usually just a small amount of alcohol in it, but it’s enough to worry some consumers.

When Aqua ViTea found a solution — think an alcohol-removing gizmo called a spinning cone column — it was left with another challenge. Namely, what to do with the booze that was spun off. “Rather than letting it go to waste we decided to upcycle it,” says Peter White, a brand manager behind the vodka.

Thus, AquaViTea partnered with the Appalachian Gap Distillery, a Vermont-based spirits company, on making Aqua Vodka, which was first released in late 2017.

The Aqua ViTea team admits the spirit doesn’t taste like kombucha per se. After all, the distillation process involved in making vodka is about removing much of the flavor. Still, the spirit is finding its way into many a kombucha-loving locale, from San Francisco to Brooklyn, N.Y.

What we think about it: This is a solidly made vodka that has a clean taste and a fuller-bodied mouthfeel. It is indeed not kombucha-flavored, which we find something of a disappointment, since the brand behind it is all about kombucha. Still, White, the brand manager, says it has a “nuanced taste profile from the aromatics of the green and black tea in the base brew.”

How to enjoy it: Try this neat or on ice to best appreciate it, says White. But the vodka also works in many a cocktail — say, a kombucha vodka martini.

More Weekend Sip

Brett Arends's ROI: The Mega Millions and Powerball jackpots are actually much smaller than you think

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Do you know that the Mega Millions has a “$444 million” jackpot coming up this weekend, and the Powerball “$350 million”?

Well, sorry — they don’t.

Many criticisms are levied at state lotteries, but one that often gets missed is that headline jackpot figures come incredibly close to being … big, fat lies.

The Mega Millions jackpot is not really $444 million, despite what the organizers say. That notional figure is so ridiculously misleading that if a private enterprise tried to pull something similar, it would be buried 10-feet deep in lawsuits.

The actual number in real money is $177 million. If you buy a Mega Millions ticket, and you win the jackpot, and you are the only winner, that’s what you’ll actually get.

You’d want compensation for waiting 30 years to get your money back. Unless you’re calculating the headline figure for a lottery jackpot.

Yes, $177 million is plenty of dough. But it’s not $444 million. It’s 60% less.

And if you buy a Powerball ticket and you win the jackpot, you won’t get $350 million. You’ll get $139 million. That’s also 60% less.

You see a pattern here?

Where are the regulators?

Anyone else who promised you $1 and gave you 40 cents would probably get in trouble. The two lotteries are run by consortia of state lotteries. So they are in effect public bodies.

We’re supposed to have a federal Consumer Finance Protection Bureau. Yes, the current administration has confined it to bed and is keeping it heavily sedated. But under no administration, apparently, is anyone going to stop this completely bogus false advertising. It’s just too lucrative for the state governments involved.

Both lotteries offer the same justification, or defense, for these wildly inflated figures.

The headline number, they say, is truthful because it is how much a jackpot winner will receive in total payouts, over 30 years, if they agree to take their winnings over time.

Sure. Nominally, they’re correct.

Why you’re not getting the full amount

But their argument ignores three crucial things that totally change the picture when it comes to money: Inflation, time and … oh, yeah, taxes.

Take inflation. It means that one dollar 30 years from now will be worth a lot less than a dollar today. In 1989 you could buy a new American home, at the median price, for $120,000. Today: $340,000.

Even if inflation stays down around 2%, a dollar will lose 45% of its purchasing power over the next 30 years. So it’s preposterous to call a dollar to be paid out in 2049 the same as a dollar to be paid out tomorrow.

Then there’s the issue of time. Most people think of the so-called “time value of money” in terms of interest. Even if there’s no inflation, I wouldn’t hand you a dollar today in the expectation of getting a dollar back 30 years from now. I’d want compensation for going without a dollar for 30 years. A lot of compensation.

Just tossing that money into the stock market, at an average real return of 5% a year, should turn my buck into about $4 by 2049 … and I’m talking in terms of actual purchasing power. The gains due to price inflation would be on top of that.

But even if you don’t set the bar that high, you’d want at least some compensation for waiting 30 years to get your money back.

Unless, apparently, you are calculating the headline figure for a lottery jackpot.

‘Cash value’

Even worse: The lotteries deliberately backload the payouts, so that they’ll be worth even less than you might expect. Mega Millions admits that someone who wins “$444 million” this weekend won’t receive the final $200 million until the 2040s.

No kidding.

What a chisel this is. I’ve received better offers from credit-card companies.

The more honest figure for each jackpot is the so-called “cash value.” You can see it printed underneath the headline figure — in small print.

The word “cash” is the giveaway. The headline number isn’t paid in soybeans, but it’s not real money either.

The “cash value” is what you’d get if you took your entire winnings straightaway. The “$444 million” Mega Millions jackpot has a “cash” value of $281 million. The “$350 million” Powerball has a cash value of $221 million. That’s the actual jackpot in real money today.

And then, of course, there are taxes. A winner is going to pay the top rate, and right now at the federal level that’s 37%. (Any state taxes would be extra.)

So the net amount you could actually pocket free and clear comes to $177 million, for the Mega Millions, and $139 million, for the Powerball.

Like I said, it’s a lot of dough. No one who wins is going to be complaining. But it’s not the figure you may have expected.

The defense

The organizers defended their use of the headline figures when we contacted them.

“Mega Millions and Powerball have always advertised the annuity values of their jackpots, and it is quite clear to our players and the media that the cash option is available,” says a spokeswoman. “In fact, the cash payout amount is always issued along with the annuity value, ensuring that our players have complete jackpot information. Taxes, of course, vary depending on where the winner lives, so there is no way to predict that amount.”

Meanwhile, Mega Millions says the odds of a ticket winning the jackpot is one in 303 million. For Powerball it’s one in 292 million.

By this math, the real net value today of the jackpots comes to 58 cents per Mega Millions ticket and 48 cents per Powerball ticket.

The cost of the tickets? Two bucks.

Brett Arends is a MarketWatch columnist.

Retirement Weekly: The inflation bet you’re making—even if you don’t know it

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How worried should retirees be about future inflation?

By way of an answer, ask yourself another question: Would you be interested in an annuity that pays you 3% less each year, with the result that your annuity income in 24 years would be half what it is today? Put that way, of course, your probable answer is “of course not.”

Yet this situation I describe is not hypothetical. It is “real,” as in inflation-adjusted. If upon retiring at age 66 you purchase an immediate annuity, and inflation averages 3%, the guaranteed income stream you will be receiving at age 90 will be worth half as much.

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Retirement Weekly: Want a pension? Here’s how to create one

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Remember the good old days, when workers retired with a gold watch and a pension? They’re long gone, of course.

Only 15% of private sector workers now participate in a traditional defined-benefit pension plan (three out of every four government workers do), according to the Pension Rights Center. And yet nearly two out of every three Americans polled earlier this year think a traditional pension plan does a better job of ensuring retirement security than do defined-contribution plans like 401(k) plans or IRAs.

I mean who would rather try to pick winning stocks, outguess Wall Street and the Federal Reserve, and keep up with changing tax laws for the “freedom” of managing their own retirement? Only actors in TV ads for brokerage firms, that’s who. The rest of us would rather get that nice monthly retirement check in our bank accounts and let the professionals handle everything else.

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More from MarketWatch Retirement

Retirement Weekly: How can my money do the most good once I’m gone?

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Q.: I have no spouse or kids but I do have local organizations I’d like to benefit. I see that I cannot make an IRA donation to a donor-advised fund. Does that mean I can’t leave the IRA to one either?

A.: You are correct that qualified charitable distributions (QCD) to a donor-advised fund while you are alive are not permitted. A QCD is a direct distribution by an IRA owner over age 70½ to a qualified charity. The check is made payable to the charity not you. The amount donated counts toward the required minimum distribution (RMD) from the IRA but is completely nontaxable. It is in effect a 100% deductible even if you do not itemize.

To donate IRA money to a donor-advised fund (DAF) while alive, you must first take a distribution then cut a personal check to the charity. That donation is not going to be fully deductible unless, exclusive of the donation, you have enough deductions to itemize.

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

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From MarketWatch:

The House passed a bill that would allow more annuities in 401(k) plans — is that actually a good thing?: Annuities get a bad reputation, but they don’t have to be harmful to your retirement assets. Still, the best advice may be to act with caution.

Most Americans have financial regrets, but some don’t intend to do anything about it: A recent survey found many Americans regret something about their finances — like not saving enough for retirement, for instance. It’s usually not too late, but some people might not think so.

Here are the Best New Ideas in Retirement: MarketWatch editors, reporters and columnists are proud to present to you a series of the newest, most innovation ways to look at retirement. It isn’t just about saving — although that’s extremely important — it’s about everything around you, including your health, the climate, Social Security and government affairs and the workforce as we know it.

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Hidden Realtor commissions could be next housing-market domino to topple as government probes MLS

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MarketWatch photo illustration/Zillow

Another potential blow has been struck against the longstanding way in which real-estate agents get paid.

In April, the Department of Justice wrote to CoreLogic, a real-estate software provider, demanding that the company turn over information on how it works with Multiple Listing Services, the locally owned and operated compilations of real estate data.

The “civil investigative demand” concerned potential antitrust law violations, Justice said, specifically “practices that may unreasonably restrain competition in the provision of residential real-estate brokerages services in local markets in the United States.”

It’s not the first time that Justice has taken an interest in how competition gets stifled in the residential real estate market. And the April demand joins another high-profile legal case: a lawsuit filed in March which charges that real-estate brokerages and their industry group conspire to keep agent commissions artificially high.

In the American way of transacting real estate, buyers never have any reason to demand a higher level of service or a lower fee from their own broker since the seller is essentially paying the tab for both sides. And often, when sellers try to offer fees lower than the 3% that’s standard across most of the country, brokers tend to steer buyer clients away from those listings even if the house was a good fit.

Related: The lawyers who took on Big Tobacco are aiming at Realtors and their 6% fee

Against that backdrop, in an industry that has resisted change and operated with an “I’ll-scratch-your-back…” ethos, an overhaul of the MLS, the information infrastructure of the industry, might be the ultimate example of a revolution underway.

“I think everyone smells change in the air,” said Glenn Kelman, CEO of Redfin, a discount real estate brokerage, one of the earliest disruptors to try to take on the established way of brokering residential real estate. “Certainly everyone in the industry either acknowledges [change] or embraces it,” he said.

Read: Redfin CEO: Technology is finally ready to change how you buy and sell your house

The MLS is often referred to as a singular entity, but there are hundreds of iterations. Each aggregates information on properties available for sale in its local area. The National Association of Realtors describes it this way, playing up its benefits as a pool of listings: “The MLS is a tool to help listing brokers find cooperative brokers working with buyers to help sell their clients’ homes. Without the collaborative incentive of the existing MLS, brokers would create their own separate systems of cooperation, fragmenting rather than consolidating property information.”

The Justice Department has long been interested in how the various MLS operate. As MarketWatch was one of the first publications to report, last year a decade-long consent decree against NAR was lifted. That agreement was reached in 2008 after local real estate associations and listing services spent years refusing to allow listing access to upstarts like Redfin, which can tend to undermine an agent’s role in the process and engage the consumer in the house hunt.

See also: Realtors will soon be free of 10-year-old Justice Department decree — what happens to housing now?

But a decade on, things have changed, thanks in large part to technology companies like Redfin RDFN, -2.93%  , Zillow ZG, -1.23%  , and even Realtor.com, a venture owned and operated by News Corp., the owner of MarketWatch.

As Rob Hahn, founder and managing partner of 7DS Associates, a real estate consultancy, put it, “the cartel has been broken when it comes to listings. Zillow has all the buyers. The moat today is the hidden information, the sold data, off-market data and agent commission.”

Agent commission is clearly what’s of interest to Justice now. The very first item on the list of demands sent to CoreLogic CLGX, -1.85%  was “all documents relating to any MLS member’s search of, or ability to search, MLS listings on any of the company’s multiple listing platforms, based on (i) the amount of compensation offered by listing brokers to buyer brokers; or (ii) the type of compensation, such as a flat fee, offered by listing brokers to buyer brokers.”

The information in question is typically available on the MLS but not third-party industry sites like Zillow or Redfin. But even if such information is not displayed on the MLS, it may be searchable or downloadable, which is why Hahn thinks DoJ is focusing on “any MLS member’s search of, or ability to search, MLS listings.”

Read: Meet the tech-savvy upstarts who think they can finally give Realtors a run for their money

In U.S. residential real estate transactions, agents representing both the buyer and the seller are paid from the proceeds of the sale. That means that technically the seller pays the commission of both his own agent and the agent representing the buyer. Of course, anyone in the industry, or anyone who’s bought and sold real estate often enough is keenly aware that’s not entirely true.

“Ultimately the buyer is paying for it,” said Daren Blomquist, vice president of market economics at Auction.com. “It’s baked into the price of the property. How the gatekeeper of the transaction is paid is something a lot of folks don’t completely understand and that’s what’s at the heart of some of these legal actions.”

It is important to note that while there is evidence that real-estate agents steer clients away from listings offering lower commissions and for-sale-by-owner transactions, as noted in earlier reporting, the precise impact of such actions haven’t been well-quantified. As Hahn notes, more research could determine whether those properties linger on the market longer, sell for less, some combination of those two, or something else altogether.

See: Sell your home with a Realtor or an algorithm? Maybe both.

Making it easier for consumers to understand transactions may be at the heart of the legal actions, but making it more enjoyable — or at least less painful — to do the deal is core to many of the new ideas and billions of dollars flooding into the housing market recently.

“Consumers are pissed off,” Hahn said. “There’s more and more sentiment from consumers that Realtors don’t earn their pay.”

Entrepreneurs, including from tech clusters like Silicon Valley where the disrupters may have little actual real estate experience, smell opportunity. “There’s money involved, is the bottom line,” Blomquist said. “Housing is really a multi-trillion dollar industry and that translates into tens of billions in commissions to the gatekeepers of those transactions. As we’ve seen some of these start-ups come out of the woodwork over the last few years, trying to disrupt the industry, that’s code for ‘we want to take a piece of the pie.’”

Read: ‘So remarkably inefficient’: Venture capital takes on the housing market

Blomquist has spent several decades working for real estate data providers. MLS data is “a great complement” to public records data like deed transfers, and there may be privacy concerns about how much data should be made widely available, but generally, it was a “protectionist” industry trying to guard its information that makes MLS data off limits to private companies, Blomquist said.

Now, industry participants like Glenn Kelman say the DoJ’s interest is a good thing. “The two sides were dug in a decade ago over who could have access to the listing data,” Kelman told MarketWatch. “In comparison I think this is a much more tractable problem to solve and I’m excited about it.”

Related: You’re being watched — home sellers are using spycams to monitor buyer traffic

Coinbase Announces Support for EOS: Growing List of Crypto Assets

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EOS

Coinbase has announced that from today, EOS will be supported by its custodial wallet. Coinbase users can now buy, sell, receive, convert, and store crypto on the platform as well as exchange it against fiat currencies that are supported. EOS is currently among the top cryptocurrencies, and it is ranked fifth largest in terms of circulation.

EOS Now Available on Coinbase Wallet

Coinbase tweeted that it is launching EOS on its website as well as in the Android and iOS Coinbase apps, so users will need to update their apps for them to be able to buy, send, sell, receive, convert, and store EOS. The American exchange consumer platform has indicated that more updates will be available once EOS is fully live.

According to Coinbase, EOS will be available in most jurisdictions where the exchange operates, except for the state of New York and the United Kingdom with the former having reportedly been strict towards crypto assets of all kinds. The firm has indicated that additional jurisdictions are likely to be added soon.

>> Is Nobody Spending Bitcoin? Chainalysis New Data Reflects Rally

Coinbase Follows Customer Requests

According to the exchange, its customers have been requesting the company increase its offering and give customers more options for buying and selling various cryptocurrencies. It appears that the exchange that was initially against cryptos not linked to Bitcoin is finally agreeing to its customers’ needs, especially now that its profits are expected to decline in FY2019.

Until the start of the fourth quarter of 2018, the exchange had a strict listing policy, having added only five cryptocurrencies since its inception. However, Coinbase reviewed its Digital Assets Framework to enable it to expand on the number of crypto assets offered.

The support of Coinbase for EOS comes just before the June 1 announcement by Block.one, which is the company behind the EOS protocol.

Featured image: DepositPhotos © ilolab

Is Nobody Spending Bitcoin? Chainalysis New Data Reflects Rally

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Chainalysis

Bitcoin is closing out the month near $8,500 USD. Surging more than 60% since the beginning of the month, its revival has caused a global stir. However, in the midst of the excitement, blockchain researcher Chainalysis is discovering a problem that perhaps most of us already know: hardly anyone is actually spending it.

Chainalysis Inc Chimes In

Data from New York-based Chainalysis is showing that “only 1.3% of economic transactions came from the first four months of 2019, little changed over the boom and bust cycles of the prior two years.”

Further, that “hardly anyone is using the world’s largest cryptocurrency for anything beyond speculation.”

Services that allow customers to pay for goods and services with Bitcoin are out there, but very few merchants actually want to use them. The reason remains the same as before—price volatility. A digital asset’s price may surge another 50% in a matter of weeks, and no one is ever sure of its true “value” because of this.

This is a double-edged problem that Bitcoin has always faced. It needs to gain mass appeal and so needs the hype; however, in doing so, it has “developed a culture of “hodlers” who advocate accumulation rather than spending.”

Yes, there are millions of dollars worth of Bitcoin out there, but it’s staying put on exchanges it seems.

Chainalysis Analysts

Kim Grauer, a senior economist at Chainalysis, said the following to Bloomberg:

“Bitcoin economic activity continues to be dominated by exchange trading […] This suggests Bitcoin’s top use case remains speculative, and the mainstream use of Bitcoin for everyday purchases is not yet a reality.”

>> Ripple (XRP) Records 5-Month High: Trading Volumes Continue Increasing

One example of this is Chainalysis’ tracking of service provider BitPay Inc. The crypto transaction processor processed $1 billion worth of Bitcoin in both 2017 and 2018. However, this figure is minute when compared to Visa. By comparison, Visa processed almost half a billion transactions every day last year. Further, the total transactions it handled in 2018 amounted to a whopping $11.2 trillion.

Bitcoin’s $1 billion expenditure, by comparison, is tiny.

What are your thoughts on this? Were you expecting Bitcoin spending to be so diminutive?

Featured Image: DepositPhotos © sasapanchenko.gmail.com