Over Half Of US States Are Bleeding Cash And Going Broke

Over Half Of US States Are Bleeding Cash And Going Broke, Researchers Say — Here's Why And What It Means For You

Christy Bieber  Thu, November 28, 2024  Moneywise

Across the country, states aren't doing very well with their budgets. In fact, 27 U.S. states didn't have the money to pay their bills as of the end of fiscal year 2023, according to nonpartisan think tank Truth in Accounting. Connecticut, New Jersey, Illinois and Massachusetts faced the biggest shortfalls per taxpayer.

"There are certainly tremendous challenges going forward," Oliver Giesecke, a research fellow at the Hoover Institution at Stanford University, told CNBC in a report published Nov. 4.

There are several reasons why states might be struggling, but what it means for citizens is there's a very real risk of tax hikes and cuts to public services and benefits programs.

Here's what you need to know about the financial trouble states are finding themselves in — along with how this could impact you.

Federal Aid

Some states suffer from budgeting problems that were previously masked by federal assistance during the COVID-19 pandemic, according to The Pew Charitable Trusts.

During the pandemic, the federal government significantly stepped up the money it was giving to states, totaling $800-plus billion, per the organization. This made it affordable for states to cut taxes and increase spending for a time.

"What we're seeing is largely a return to Earth from those pandemic surpluses," Justin Theal, a senior officer with The Pew Charitable Trusts, told CNBC. "A huge looming question out there is around the long-term affordability of the tax cuts and spending increases that were enacted."

The federal funds will dry up in 2026, according to the broadcaster, as much of the country is being hit by a cost-of-living crisis. Some state leaders are considering tax relief for this reason, which means some government programs could face big cuts.

State Pensions

The largest contributor to state debt at the end of fiscal year 2023 was unfunded retirement liabilities, Truth in Accounting reports. Around 86% of state and local government workers had access to a pension plan as of March 2022, according to the Bureau of Labor Statistics.

TO READ MORE:  https://www.yahoo.com/finance/news/over-half-us-states-bleeding-114400264.html

The 10 Golden Rules Of Investing Everyone Should Follow

The 10 Golden Rules Of Investing Everyone Should Follow

James Royal, Ph.D.  Tue, November 26, 2024 Bankrate

Investing can often be broken down into a few simple rules that investors can follow to be successful. But success can be as much about what to do as it is what not to do. On top of that, our emotions throw a wrench into the whole process. While everyone knows you need to “buy low and sell high,” our temperament often leads us to selling low and buying high.

So it’s key to develop a set of “golden rules” to help guide you through the tough times. Anyone can make money when the market is rising. But when the market gets choppy, investors who succeed and thrive are those who have a long-term plan that works.

Here are 10 golden rules of investing to follow to make you a more successful — and hopefully wealthy — investor.

Rule No. 1 — Never lose money

Let’s kick it off with some timeless advice from legendary investor Warren Buffett, who said, “Rule No. 1 is never lose money. Rule No. 2 is never forget Rule No. 1.” The Oracle of Omaha’s advice stresses the importance of avoiding loss in your portfolio. When you have more money in your portfolio, you can make more money on it. So, a loss hurts your future earning power.

Of course, it’s easy to say not to lose money. What Buffett’s rule essentially means is don’t become enchanted with an investment’s potential gains, but also look for its downsides. If you don’t get enough upside for the risks you’re taking, the investment may not be worth it. Focus on the downside first, counsels Buffett.

Rule No. 2 — Think like an owner

“Think like an owner,” says Chris Graff, co-chief investment officer at RMB Capital. “Remember that you are investing in businesses, not just stocks.”

While many investors treat stocks like gambling, real businesses stand behind those stocks. Stocks are a fractional ownership interest in a business, and as the business performs well or poorly over time, the company’s stock is likely to follow the direction of its profitability.

“Be aware of your motivation when investing,” says Christopher Mizer, CEO of Vivaris Capital in La Jolla, California. “Are you investing or gambling? Investing involves an analysis of fundamentals, valuation, and an opinion about how the business will perform in the future.”

“Make sure the management team is strong and aligned with the interests of shareholders, and that the company is in a strong financial and competitive position,” says Graff.

Rule No. 3 — Stick to your process

Experts advise investors to develop an investing process that works for them in good times and bad and then stick to that process. If you’re an investor who wants to dig into the details and you have the time to do so, then use that strength. If you’d prefer to not worry about investing so much or don’t have the time, then index funds could be a great option and deliver attractive returns. Either way, stick close to a process that works for you.

One of the best strategies for investors: a long-term buy-and-hold approach. You can buy stock funds regularly in a 401(k), for example, and then hold on for decades. But it can be easy when the market gets volatile to deviate from your plan because you’re temporarily losing money. Don’t do it.

Rule No. 4 — Buy when everyone is fearful

When the market is down, investors often sell or simply quit paying attention to it. But that’s when the bargains are out in droves. It’s true: the stock market is the only market where the goods go on sale and everyone is too afraid to buy. As Buffett has famously said, “Be fearful when others are greedy, and greedy when others are fearful.”

TO READ MORE:  https://www.yahoo.com/finance/news/10-golden-rules-investing-everyone-221036688.html

Warren Buffett Issues A Warning Ahead Of The $84 Trillion Great Wealth Transfer

Warren Buffett Issues A Warning For All Parents Ahead Of The $84 Trillion Great Wealth Transfer

Chloe Berger  Updated Tue, November 26, 2024  Fortune

Planning your will could make or break your family after your death, warns Berkshire Hathaway CEO and legendary investor Warren Buffett.

"Father time always wins. But he can be fickle,” the 94-year-old billionaire noted in an unusually candid letter released on Monday.

Conversations addressing one’s own death can be a difficult subject to broach. The logistics of what happens to our money and belongings can be an equally dreaded task. But ahead of the $84 trillion Great Wealth Transfer, Buffett asserts that there’s no sense in delaying the uncomfortable and risking future conflicts down the line.

Buffett’s Advice For Parents

As one of the richest people in the world, Buffett is currently worth more than $151 billion. He has voiced his plans for his massive nest egg, pledging in 2010 (alongside Bill Gates and Melinda French Gates) to give at least half of his fortune to charity before his death.

That’s all to say, Buffett’s riches and ensuing estate planning probably seem outside the realm of possibility for most of us. But while Buffett chips away and distributes his massive wealth, he appears to have found advice that’s applicable to more than just billionaires.

“I have one further suggestion for all parents, whether they are of modest or staggering wealth. When your children are mature, have them read your will before you sign it,” he wrote.

Your will should be a dialogue, in the eyes of Buffett. He suggests that parents make sure their children understand “both the logic for your decisions and the responsibilities they will encounter upon your death.” Then a benefactor should answer said questions or concerns, “listen carefully, and adopt those found sensible.”

Buffett admits to doing as much with his kids over the years, and hearing their feedback and suggestions. “There is nothing wrong with my having to defend my thoughts. My dad did the same with me,” he explained.

Many Americans treat money as a taboo topic within their families, but they don’t feel better off for it. Most (56%) say their parents never spoke of money with them, though a striking 81% believe that they would have benefited from having financial education at an earlier age, according to the Fidelity Investments State of Wealth Mobility survey.

Plagued by financial insecurity, younger generations are eagerly awaiting a Great Wealth Transfer—or inheritance from their older relatives. The changing of the tides will likely take place by 2045 and be worth about $84 trillion, Boston-based market researcher Cerulli Associates projected in 2022.

But as boomers and the silent generation prepare to hand off assets and savings, wrinkles start to form. Expectations can be out of alignment, with Gen Z and millennial offspring anticipating to receive more than their elders say they expect to leave behind, according to Northwestern Mutual in ITS Harris Poll survey of more than 4,500 U.S. adults.

And most Americans (72%) report that they don’t feel they have enough financial confidence to manage a large influx of money by themselves, per a Citizens Bank survey of 1,500 U.S. adults. Millennials especially report feeling a lack of confidence in managing a potential future windfall. But a little bit of preparation beforehand could perhaps ease the minds of the privileged young beneficiaries of the Great Wealth Transfer.

When Wills Go Wrong

TO READ MORE:  https://www.yahoo.com/finance/news/warren-buffett-issues-warning-parents-174136443.html

The ‘Hermit’ Savings Rules: 8 Frugal Tips for Today’s Economy

The ‘Hermit’ Savings Rules: 8 Frugal Tips for Today’s Economy

Cindy Lamothe  Mon, November 25, 2024   GOBankingRates

When your personal finances combine with your personal space, your spending habits and savings account might be working a bit more harmoniously too. Consumer practices across the world have been altered significantly over the past few years — for obvious reasons and otherwise — in what economists have dubbed “the age of the hermit consumer.”

“For ‘hermit’ consumers, it can be really easy to make impulse purchases and overspend because of how easy and convenient shopping online is,” said Carter Seuthe, CEO of Credit Summit Consolidation. “Something that can be helpful to maintain a more frugal budget is just to define your expectations and priorities when it comes to the amenities you have.”

Whether it’s how you approach your visit to the grocery store or price-matching your favorite online retailers, the how, when and where you swipe your credit card has simply changed. If you embrace the hermit lifestyle and prefer your saving and spending to be done in a vacuum, below are some expert frugal living tips to thrive in today’s economy.

Embrace a DIY Mentality

“DIY is my new favorite hobby,” said Andrei Vasilescu, co-founder and CEO of DontPayFull. “It’s cost-effective, and YouTube is a great teacher. About 50% more people are getting into DIY now.”

Syed Lateef, business coach and CEO of SyedBNB, agrees. “We can all see it,” Lateef said. “The focus has shifted towards a more home-oriented lifestyle, and I can personally say that more people are embracing do-it-yourself (DIY) activities.”

He said this is a good thing because mastering basic skills for home and car repairs can lead to considerable savings. Simply put, it’s better to invest your time than a third of your paycheck every time you need some general maintenance or repairs done.

“Nowadays, the hundreds of online tutorials and resources makes it easier than ever to learn and perform these tasks ourselves,” he said, “reducing the need to hire professionals.”

Save Money by Cooking at Home

“The driving force behind the hermit economy isn’t entirely clear,” Lateef said. He said it could be due to the lingering hesitation for close-contact services, the increase in remote work or a shift in social values. Instead of dinner and a movie out, you can now meal-plan and binge on your favorite streaming service.

“What’s obvious, though,” he said, “is that consumers are now more inclined to spend on home-centric activities.”

As a result, he said, many followers of the FIRE (financial independence, retire early) movement have come to realize that frequent dining out can be quite costly. So, frugal individuals are embracing the art of cooking at home, experimenting with budget-friendly and nutritious meals.

He added, “Hermit consumers save money but also encourage healthier eating habits.”

Focus on Secondhand Finds

Repurposing secondhand or vintage items such as clothing or home decor is both economically and environmentally friendly. In the current economic climate, looking at secondhand alternatives before buying new is a wise strategy, Lateef suggested.

“I believe that the ‘hermit’ consumers are now placing more emphasis on sustainability because of the pandemic, so shops like thrift stores and online marketplaces are trending because of the treasure troves of affordable, yet quality items.”

In terms of frugality, he said, this not only helps save money but also aligns with sustainable practices by repurposing and recycling items.

TO READ MORE:  https://finance.yahoo.com/news/hermit-savings-rules-8-frugal-140043078.html

6 Valuable Everyday Items You Should Never Throw Away

6 Valuable Everyday Items You Should Never Throw Away

Justice Petersen  Sun, November 24, 2024 at 3:00 PM EST 3 min read

While it’s beneficial to declutter every once in a while, there are certain items around your home that, although they seem like everyday objects, can still hold significant value. Many seemingly worthless items may be better to sell, repurpose or recycle so you can help the environment, potentially make some extra money and use every item you’ve received to its fullest potential.

Listed below are six everyday items that you should never get rid of.

Empty Containers

Whether it’s glass jars, or stainless steel or tin cans, empty containers can last a long time and be used for various purposes besides their original use. These items can be repurposed as storage solutions for small household items, such as spices or craft supplies. They can also be reused for meal prep or storing leftovers. Additionally, certain containers can bring in a decent amount of money if you take them to a recycling program.

Unused Gift Cards

Many people stash away gift cards that have very little money on them. However, even these small balances can add up over time. By using these cards — or selling them on platforms that allow you to exchange or sell the unused balances on them — you can utilize these seemingly worthless items lying around your house.

Expired Coupons

Contrary to what one would expect, expired coupons may still hold value. Some retailers will honor an expired coupon within a limited timeframe or will offer similar discounts instead. Similar to unused gift cards, certain websites also allow the trading or selling of coupons, allowing financially savvy shoppers to get more use out of these items that would otherwise be thrown away.

Broken or Old Electronics

Though they may be broken or outdated, these electronics may be of some worth if you don’t throw them away. Some parts of old or broken electronics, such as circuit boards, batteries and certain metals, can be sold to electronics salvagers or people who enjoy fixing things up as a DIY hobby. Be sure to look into online marketplaces or recycling centers that will specifically buy electronics.

TO READ MORE:   https://finance.yahoo.com/news/10-valuable-everyday-items-never-130029354.html

19 "Don't Do It" Purchases

19 "Don't Do It" Purchases Older Adults Are Warning Millennials And Gen Z Not To Make

Alana Valko  Fri, November 22, 2024  BuzzFeed

We've all been let down by a purchase that didn't exactly meet our expectations.

And, in adulthood, buyer's remorse can sting a little harder — especially when those purchases become bigger and have more financial consequences.

Because none of us want to make the wrong bet, I asked older adults in the BuzzFeed Community to share the purchases they'd never recommend Gen Z'ers, Millennials, or any young adult make.

Here's everything they shared:

1."Don't buy extended warranties! Save your money. Over my 40 years of not buying them, there were only two times I might have been able to use one. Especially don't buy them on inexpensive items or on items like laptops where the technology changes so rapidly. Makes no sense."

2."Sort of a niche answer, but maybe someone will appreciate: Whole-life insurance is a rip-off. Super profitable for the company selling it. It's about 5x the cost of basic term life, and it comes with an investment account, but you can create the same setup yourself by buying the cheaper term life for 20% of the cost and putting the remaining 80% you saved yourself into your own investment account (retirement or whatever). You'll come out far ahead of where the whole-life policy would have gotten you."

3."Don't get hyped up by sales. They always tell you that it will end tomorrow, and it will, but the day after tomorrow, there will be another one. Pay when you're ready; prices will generally only go down (except for the new stuff). In some cases, be willing to go refurbished. You will often get something as good as the condition your new item would have been in after one month of usage."

Price tag showing a sale item originally priced at 179.00, now reduced to 129.00 at Manor. Includes barcodes and product codes

(Cont'd) "Fashion is idiotic. Looking trendy is expensive, and the only people you will lose as friends are the superficial ones (win-win). Everything trendy today will be out of fashion in 10 years or less, and this will rotate until the old fashions become the new ones again. Get clothing that is well made and comfortable for you, or at least the minimum needed for a work situation."

4."The latest tech device. Wait six months, and it will be cheaper. You may not even want it anymore, especially once the hype is over."

TO READ MORE:   https://www.yahoo.com/lifestyle/older-adults-sharing-purchases-dont-041603795.html

3 Brutal Money Lessons That No One Ever Told You About

3 Brutal Money Lessons That No One Ever Told You About

Heather Altamirano  Sat, November 23, 2024  GOBankingRates

Everyone has to manage bills, household expenses, taxes, and money, yet personal finance isn’t something most people are taught. Financial intelligence learned early can help avoid costly mistakes down the road, but according to Ramsey Solutions, only 26 states require high schoolers to take a course on personal finance to graduate.

Unless there’s someone giving guidance along the way, hard money lessons usually come from trial and error and are often learned too late.

Here are three brutal money lessons that are not talked about enough and how to avoid them.

Spiraling Debt

Americans are racking up more debt than ever. According to the Federal Reserve Bank of New York, consumers collectively owe $1.17 trillion in credit card debt, up 8.1% from last year. Spending can get out of control quickly, and too much debt prevents a comfortable retirement and a strong financial future.

“When you have more debt than you can handle, you often have to tap into your home equity or retirement IRAs to pay off the debt,” said Shelby Rothman, a financial advisor and founder of EnJoy Financial. “Some people are forced to lose their homes or go into bankruptcy, which can cause their credit scores to drop significantly.

 “I’ve seen many people with comfortable wages accrue debt larger than they can handle from buying expensive homes, luxury cars or motor homes. In addition to the debt these items create, they include extra expenses outside of the loan that the budget isn’t prepared for.”

To help avoid this pitfall, live within your means and create a realistic budget that isn’t credit card dependent.

“Understanding the full cost of ownership is the biggest way to prevent debt from mounting. Taking a loan out on an expensive motor home that comes with insurance, maintenance fees, and repairs can cripple your finances,” said Rothman. In addition, she believes it’s vital to plan for unexpected costs and mishaps by at least $1,000.

TO READ MORE:  https://www.yahoo.com/finance/news/3-brutal-money-lessons-no-170017457.html

4 Mistakes That Make You Feel Like You’re Living Paycheck to Paycheck

4 Mistakes That Make You Feel Like You’re Living Paycheck to Paycheck, According to Ramit Sethi

Marc Guberti  Fri, November 22, 2024  GOBankingRates

While it’s easy to come across statistics that show how many people are living paycheck to paycheck, Ramit Sethi provides various insights that suggest the opposite. It turns out people are doing better financially than what has been portrayed.

In a recent video, Sethi mentioned research that states 82% of individuals believe their finances are good or very good. Furthermore, the median American household has a $192,900 net worth and $8,000 stored in their checking and savings accounts.

Even with these optimistic data points, many people are still living paycheck to paycheck. Sethi presented common mistakes that make people feel like they have less than they really have. He also highlighted solutions that can help you feel better about your finances.

Lying To Yourself

Sethi started the video by mentioning the difference between not having enough money and making financial decisions. Some people who spend their entire paycheck each week allocate some of their cash toward tuition, a luxury car and other items.

Sethi went on to say that most people’s feelings about money do not match how they spend it. They may not feel like they have enough, but they are deploying their cash toward worthwhile expenses.

The “I Will Teach You To Be Rich” author provides an action step to address each mistake that makes you feel like you are living paycheck to paycheck. For this one, Sethi suggested creating a guilt-free spending account. After accounting for fixed costs, savings and investments, you can set aside some cash that you can spend as you wish.

This approach will allow more people to realize that they are using their hard-earned cash for discretionary expenses, which is a meaningful difference from living paycheck to paycheck.

You Don’t Have a ‘Financial Moat’

A financial moat offers a buffer of safety in case you lose your job. Sethi recommended setting up an emergency fund that covers three to six months of your expenses. For instance, if you spend $3,000 per month, you should build an emergency fund that has $9,000 to $18,000.

It’s important to keep this account separate from your checking and savings accounts. That way, you won’t mix up funds and can keep your finances more organized. Sethi’s action step for this common mistake is to gradually build your emergency savings. Even if you start at just $100 per month in your emergency savings account, it will grow over time. You can also capitalize on a high-yield savings account so your bank does some of the legwork for you.

TO READ MORE:  https://www.yahoo.com/finance/news/4-mistakes-feel-living-paycheck-170100438.html

8 Money Moves the Rich Make When Planning a Move

I’m a Financial Expert: 8 Money Moves the Rich Make When Planning a Move

Cindy Lamothe   Wed, November 20, 2024   GOBankingRates

When the wealthy plan a move, it’s not just about packing boxes — it’s a strategic financial event. According to experts, they often engage in meticulous planning to optimize their assets and liabilities during this transition.

GOBankingRates spoke with Dennis Shirshikov, head of growth at GoSummer and professor of finance at City University of New York, and Melanie Musson, finance expert with Insurance Providers, to discuss the money moves the rich make when planning a move.

“When wealthy people plan a move, they hire professional movers to package their items, pack them on a truck and unload them in their new house,” said Musson. “Wealthy people use their money to make updates and upgrades to their new house before they move in. They don’t have the financial constraint of needing to move in right away.”

Building Up Savings First

According to Musson, in advance of moving, wealthy people build their savings, so they can make a down payment and purchase a home without the contingency of selling their current house.

“Even though they’ll usually sell their old house, the need to do so won’t hinder their chances of getting their offer accepted for their new house,” she explained.

Purchasing Custom Furniture

“Wealthy people get custom furniture for their new house,” Musson said. “They don’t try to make their couch and chairs work in a new space.”

Instead, she said they purchase the right size and color to complement the new space.

Tax Optimization Strategies

One of the first steps, according to Shirshikov, is consulting with tax advisors to understand the implications of moving to a new state or country. For example, relocating from a high-tax state like New York to a no-income-tax state like Florida can result in significant savings.

“They might accelerate income or defer deductions to take advantage of more favorable tax rates post-move,” he added.

Reevaluating Investment Portfolios

“Wealthy individuals often reassess their investment portfolios to ensure they align with their new circumstances,” said Shirshikov.

He said this could involve liquidating certain assets or investing in local opportunities.

“I recall a client who, before moving abroad, diversified into international markets to hedge against currency fluctuations,” he said.

TO READ MORE:  https://finance.yahoo.com/news/m-financial-expert-8-money-140044746.html 

BEWARE: Lost Life Savings After Suspected Debit Card Scam

BEWARE: Lost Life Savings After Suspected Debit Card Scam

Danielle Antosz Tue, November 19, 2024  Moneywise

This Long Island man lost his life savings after suspected debit card scam — and got no reimbursement. Here’s why

While running errands in New York last year, Grant Holihan of Long Island received a call from Chase Bank asking him to confirm a recent purchase in Las Vegas. But Holihan, 27, claimed to have never been to Las Vegas. He suspected his debit account and PIN were skimmed at an ATM near his construction job site.

According to Holihan, Chase agreed to close the account — but then more charges followed. In just under an hour, more than $7,000 was drained from his bank account in separate transactions on the other side of the country. Ultimately, his entire life savings was stolen in less than a day.

Now, Holihan says Chase is still refusing to refund his money.

“I’ve never given my PIN out," Holihan told CBS New York. “They still deny my claim, and it's been over a year later, and I still haven't seen my money."

With no resolution in sight, it’s important to understand how this was able to happen and what can be done to avoid a similar financial loss.

How Does Debit Skimming Work?

In debit card skimming, fraudsters secretly install devices on ATMs or payment terminals to steal card details and PIN information. The skimmers capture data while a hidden camera or keypad overlay records the user’s PIN. In most cases, these devices are difficult for people to see because they look like legitimate card readers.

Holihan suspects that is exactly what happened to him.

"This customer's claim was denied because the charges were authorized with their PIN and verified via phone call," JPMorganChase told CBS News New York.

Unlike credit card skimming, where thieves steal credit card numbers, debit card fraud doesn't fall under the Truth in Lending Act, which offers more consumer protections. While speaking with CBS reporter Elle McLogan, National Consumer Law Center senior attorney Carla Sanchez-Adams shared how that impacts consumers.

https://news.yahoo.com/news/finance/news/long-island-man-lost-life-110300580.html

What’s up with Buffett and his $325 Billion Pile of Cash?

What’s up with Buffett and his $325 Billion Pile of Cash?

November 20, 2024 Notes From the Field By James Hickman (Simon Black)

Much has been written about Warren Buffett having sold a substantial amount of stocks. And his company, Berkshire Hathaway, is sitting on a record $325 billion cash pile as a result.

Buffett has often said that his preferred holding period for an investment is "forever". So the fact that he has sold so much stock has many observers proclaiming that "Buffett is predicting an imminent stock market crash."

Except that he's not. Buffett is a pretty transparent guy who has never been afraid to speak his mind. If he were predicting a crash, he'd probably say it.

Besides, Buffett has sold plenty of stocks in the past; this is not an anomaly. In 2022 and 2023, for example, he dumped shares of Chevron, Activision Blizzard, Taiwan Semiconductor, and HP.

This time around he sold off some shares in Apple and Bank of America. But he actually explained WHY-- especially with Apple. And I think his reasoning is worth mentioning.

Buffett explained to a reporter that "We don’t mind paying taxes at Berkshire. And we are paying a 21% federal rate,” which amounted to $5 billion last year.

But he continued, saying that the US federal corporate tax rate "was 35% not long ago, and it’s been 52% in the past. . . With the present fiscal policies, I think that something has to give, and I think that higher taxes are quite likely," i.e. that the government will take "a greater share of your income, or mine, or Berkshire's."

"So if I’m [selling Apple stock] at 21% [tax rates] this year, and we’re doing it at a lot higher percentage later on, I don’t think [shareholders] will actually mind that we sold a little Apple this year.”

This is a critical takeaway.

Nations with enormous debts and deficits can’t live beyond their means forever; Buffett isn't predicting a market crash-- he's predicting higher taxes... that, sooner or later, the federal government is going to have a take a much bigger bite out of people's paychecks.

As I've written before, there's a chance that Buffett's prediction might be wrong. It IS still possible for the US to get back on the right track-- a combination of government efficiency, spending cuts, de-regulation, and a technology (AI) fueled productivity boom could generate such an economic boom that the country COULD grow its way out of debt without having to resort to higher taxes (or inflation).

But the new administration will have to get moving immediately. Otherwise, Buffett will be proven right: higher taxes will be inevitable.

His decision to sell Bank of America stock is even more obvious and also bears mentioning. Quite simply, Bank of America is in deep trouble.

You probably recall how the Federal Reserve slashed interest rates all the way down to zero during the pandemic. It was ridiculous-- the US government was able to sell Ten Year notes with a yield of less than 0.4%.

Talk about a ******* deal. The largest debtor in the history of the world was selling bonds with such a pitiful yield that they didn't even keep up with inflation. Who would be such an idiot to buy such a terrible asset?

Bank of America, that's who. In fact, Bank of America invested hundreds of billions of dollars of their depositors' savings in these terrible assets.

Well, now that interest rates are literally more than 10x higher (from 0.4% to more than 4%), those same bonds that Bank of America bought back in 2020 and 2021 have lost a TON of money. BofA is sitting on more than $100 BILLION in unrealized losses from their bond portfolio.

Remember, this is the same reason that Silicon Valley Bank (among others) went bust last year-- the bonds they bought during the pandemic lost a ton of value, and the bank was wiped out. Bank of America is in a similar position now.

The key difference is that Bank of America has enough capital on its balance sheet to sustain those losses. So they might not be wiped out or fail. But the implications for shareholders are pretty bad.

Whenever a bank gets into trouble, the first thing that happens is the regulators step in and start making a bunch of demands. In this case, the FDIC and Fed will probably force Bank of America to raise more capital.

This will have the effect of severely diluting existing Bank of America shareholders... which most investors, especially Buffett, absolutely HATE.

The second thing that regulators always do with troubled banks is force them to suspend their dividend. And dividends are among the top reasons why Buffett likes to hold companies "forever". So given the likely prospect of zero dividends and heavily diluted shares, it looks like Buffett is getting out before regulators drop the hammer on Bank of America.

This is a big difference from "Buffett predicting a crash" as so many headlines across the Internet have been suggesting.

That said, the US stock market in general is definitely looking very expensive and near historically high valuations once again.

But there's at least one sector that's still cheap: real assets.

I've been writing for most of the past two years that real assets make a lot of sense to own, especially during inflationary times. Real assets were THE asset class to own during the 1970s stagflation.

The US is currently on the same path-- with its national debt constantly surging to new record highs (now $36 trillion), suggesting that another bout of nasty inflation could be in order down the road.

But, again, there's now a reasonable chance that the new administration is able to get the nation's finances on the right track... potentially forestalling an inflation spike and debt crisis.

So do real assets still make sense?

For now, yes. Natural gas is a great example-- as I've explained before, US natural gas is still incredibly cheap. And any American energy renaissance will depend heavily on natural gas. Prices could surge as a result, and natural gas producers could boom. Yet many companies' shares are still available for peanuts.

Bottom line, it still makes sense to consider fantastic real asset producers-- especially when they are profitable, low-debt, dividend-paying businesses that trade at absurdly low valuations.

To your freedom,   James Hickman  Co-Founder, Schiff Sovereign LLC

https://www.schiffsovereign.com/trends/whats-up-with-buffett-and-his-325-billion-pile-of-cash-151751/