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My Favorite Rx

"?!! So glad you mentioned that I didn’t even know it was an option. I’m looking forward to trying it next tax season. Sort of."
- Michael1
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$3 Trillion S&P 500 Gatecrashers

HAVE YOU GIVEN any thought to what's about to happen to your S&P 500 tracker? Three enormous IPOs are expected later this year: SpaceX, OpenAI, and Anthropic. Based on their most recent private transactions, SpaceX appears to be valued at around $1.25 trillion, OpenAI at roughly $800 billion, and Anthropic at approximately $380 billion. Combined, we could be looking at close to $3 trillion in private market value that wants to go public. To put that in perspective, the entire S&P 500 is worth roughly $60 trillion. That's not a routine year for markets. That could be a very large event indeed. I suspect the vast majority of people with money sitting in a tracker fund have absolutely no idea it's coming. Those that do might have read some of the more sensational claims I've seen about immediate, disruptive wholesale change to the S&P 500. I think those articles are getting ahead of themselves. These companies might not automatically land in your S&P 500 tracker the day they list. The index has hard rules, and two of them seem particularly relevant. A company generally needs to have been profitable for four consecutive quarters before it qualifies. OpenAI and Anthropic are both, as far as we can tell, burning through enormous amounts of capital. They may well not meet that bar at IPO. There's also a float requirement, where roughly half of a company's outstanding shares typically need to be publicly tradeable. These businesses will almost certainly debut with tiny floats, possibly somewhere between 5% and 10% of shares in public hands. That could disqualify them from day one. SpaceX is possibly the closest to profitability of the three, but the float issue likely applies across the board. One area of uncertainty is the selection committee. This has some discretion around the inclusion of larger IPOs. They could choose to move faster than the rules imply. So the story might not be your tracker being immediately and dramatically restructured. The story could be more drawn out than that, and perhaps more interesting for it. What does this mean in the short term? I can only offer informed speculation. To my mind, volatility seems likely around the listings themselves. Not necessarily because of forced index rebalancing, but because the float issue creates its own kind of pressure. Enormous companies carrying enormous implied valuations, but only a sliver of shares in circulation. Limited supply, near-unlimited institutional demand, and a market full of retail investors who've been reading about these companies for years and finally get their shot. I would guess we should expect wild price swings during those early trading days, though I could be wrong about the scale of it. Rotation risk is worth watching too, I think. Investors might pull money out of existing AI bets, the likes of Nvidia and Microsoft, and move it directly into OpenAI and Anthropic the moment they're publicly available. If that happens, the stocks that have driven your tracker's returns for the last three years could face sustained selling pressure, not because anything's wrong with those businesses, but simply because a shinier, newer version of the same trade has just arrived. A throwaway thought for anyone holding individual shares rather than trackers. The companies most at risk of ejection are those sitting at the bottom of the index. When a business loses its S&P 500 membership, every passive fund becomes an automatic seller. That can hit the share price hard, nothing wrong with the company, just forced selling as a side effect of something big happening at the very top. Worth knowing if any of those smaller names are in your portfolio. Medium term it could get more interesting still. If and when these companies do meet the profitability and float requirements, which could, I think, be years after their IPOs rather than months, every S&P 500 tracker on the planet becomes an automatic buyer. Hundreds of billions flowing into SpaceX, OpenAI and Anthropic whether fund managers want it or not. The mechanics of passive investing would turn every tracker holder into an investor in these three companies with absolutely no say in the matter. That's the bit people rarely stop to think about. Passive investing isn't neutral. It just means someone else is making your decisions for you. Then I come to the big question: do these businesses actually deserve these valuations? It's worth noting that every major IPO of recent years has tended to trade down from its private valuation once the public gets a proper look at the books. The venture capital guys who set those private prices aren't always right, and public markets have a habit of finding that out fairly quickly. If the same happens here, your tracker should hopefully be buying them at a fair price by the time they filter into the realm of inclusion within that tracker. It has to be said, that's not guaranteed. I'm not trying to be alarmist. These aren't penny stocks being hyped and I think that matters. OpenAI's revenue had already surpassed $20 billion by the end of 2025. SpaceX is targeting what could be the largest public offering in history. Anthropic has BlackRock, Blackstone, Microsoft and Nvidia on its books. These are real businesses generating real money with the biggest and most sophisticated names in global finance and technology behind them. That doesn't make them cheap at these prices, but it does make them a very different proposition from the usual IPO hype cycle. The bottom line for the average investor? We probably don't need to do anything dramatic. But it doesn't hurt to understand that the passive, set-and-forget vehicle you own may look quite different over the next few years, not necessarily in a single sudden lurch, but gradually, as these companies either earn their way into the index or don't. The index you bought into always changes but the next few years will definitely see bigger changes than normal. If nothing else, it'll be interesting to see what happens going forward…Eyes open.
Mark Crothers is a retired small business owner from the UK with a keen interest in personal finance and simple living. Married to his high school sweetheart, with daughters and grandchildren, he knows the importance of building a secure financial future. With an aversion to social media, he prefers to spend his time on his main passions: reading, scratch cooking, racket sports, and hiking.
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AI, Bubbles, and Markets

IN AN INTERVIEW a little while back, the technology investor Peter Thiel drew an uncomfortable comparison. Today’s frenzy around artificial intelligence, he said, parallels the tech stock bubble of the 1990s. To illustrate his point, Thiel pointed to Amazon. By any measure, it’s been an extraordinary success. But, Thiel points out, it hasn’t been a straight line. At one point early on, Amazon shares lost more than 90% of their value. “My suspicion is that that’s roughly where we are in AI. It’s correct as a technology, but extremely bubbly and crazed…” Thiel explained that he doesn’t doubt the importance of artificial intelligence as a technology. What he’s questioning is how these technologies are being financed. Of particular concern are financing deals in the AI ecosystem that are seemingly circular. Nvidia, for example, has invested as much as $100 billion into ChatGPT maker OpenAI, at the same time that OpenAI has committed to spending billions on Nvidia’s chips. Similarly, OpenAI signed an agreement with AMD, another chip maker, to buy tens of billions of dollars of its chips while also buying a stake in the company. Transactions like this call into question whether these companies can continue to generate earnings at the same rapid pace. Compounding this concern, market valuations are elevated. On a price-to-earnings (P/E) basis, the S&P 500 is trading at 21 times estimated earnings. That’s quite a bit above the long-term average of 16 and thus represents a risk. If investors cool on AI, both earnings estimates and P/E multiples would likely drop at the same time, causing share prices to take two steps down.  How unusual is this situation, and how concerned should we be about it? It turns out these are questions economists have been studying—and struggling with—for years. Probably the most well known research on the topic dates to the 1970s, when economist Hyman Minsky developed what he called the Financial Instability Hypothesis.  This is how Minsky described it: “A fundamental characteristic of our economy is that the financial system swings between robustness and fragility and these swings are an integral part of the process that generates business cycles.” Booms and busts, in other words, are inevitable. Why? Paradoxically, Minsky said, financial stability causes financial instability. That’s because periods of financial stability lead people to become overconfident and to assume that the good times will last forever. But that overconfidence leads to complacence and to a lack of financial discipline, especially among lenders. That then causes debt levels to rise. What happens next? Writing in Manias, Panics and Crashes, Charles Kindleberger explains that there’s typically a canary in the coal mine that causes investor sentiment to shift. Often, it’s the unexpected failure of a bank or other institution. That’s why it caught people’s attention in February when Blue Owl Capital, which operates private credit funds and has helped finance AI data centers, announced that it was halting redemptions from one of its funds. Looking at more recent research, economist Bill Janeway agrees with Minsky on the causes of bubbles but argues that they’re not all bad. He talks about “productive bubbles.” As an example, he points to the market bubbles surrounding the development of the British railway system in the 1830s and 1840s. Much like the 1990s tech bubble in the United States, investors piled into railway stocks, causing prices to spike to irrational levels. Overbuilding ensued, and that led to a number of bankruptcies. Despite the financial losses, Janeway believes the railway bubble was productive. That’s for the simple reason that, at the end of the day, the tracks were laid. Yes, there were excesses, but Janeway sees no alternative. Investor enthusiasm acts as a sort of subsidy for early-stage, uncertain technologies that the market wouldn’t otherwise finance. The evidence certainly supports Janeway’s argument. The market does a very poor job picking winners. Janeway notes that essentially the same thing happened in the 1920s, when investors piled into companies working to build out the electricity grid in the U.S. There was massive over-investment, which led to bankruptcies. But in the end, electrification projects were completed much more quickly than they might have been otherwise. The key lesson: When market bubbles roll around, we shouldn’t be surprised. They’re inevitable. And over the long term, they’re arguably a good thing, enabling technology to move forward. Nevertheless, when bubbles burst, it’s unnerving. And indeed, in Janeway’s view, the same thing will likely happen with AI stocks. If Janeway is right, how can you prepare? The solution, in my view, is straightforward: Instead of trying to guess when the AI—or any other—bubble might burst, investors should take the view that the market could drop at any time. Then structure your portfolio accordingly.  There’s more than one way to approach this, but in my view, it’s a simple two-step process: First, make sure you’re diversified at the asset class level, with enough stowed in short-term bonds or cash to carry you through a multi-year market downturn. Then go one level deeper, auditing your stock holdings for individual stocks or funds overly exposed to any one corner of the market. And if you’re in a private fund—especially a private credit fund—I’d identify the nearest exit.   Adam M. Grossman is the founder of Mayport, a fixed-fee wealth management firm. Sign up for Adam's Daily Ideas email, follow him on X @AdamMGrossman and check out his earlier articles.
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America Doesn’t Just Do Layoffs. It’s Fallen in Love With Them

"Jeff, indeed I think the suicide counseling is very rare. I believe I know what you're referring to about the questionnaire from the medical office. I see it on my annual Medicare Wellness Visit. Some companies are not very tactful when having to let go of a group of employees. I recall hearing about a meeting with a group of engineers when it was announced which of those would be let go as they went around the table...right in front of everyone including those not losing their job. A real class act from upper management."
- Olin
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Forget the 4% rule.

"A few years ago I concluded I was under withdrawing. I begin with the RMD calculations but shifted to a modified guardrails approach. I evaluated just about every approach Christine Benz writes about at Morningstar. I ran a few scenarios and decided the MGA was best for me.  I have both traditional and Roth IRAs. My largest single annual withdrawal was 10% of the total value of these accounts. However, these accounts recovered and currently indicate a peak value. That’s been generally true on December 31 of each year. Because of circumstances we haven’t spent all of our withdrawal in recent years. That’s likely to be so in 2026. We are fortunate and don’t have to exercise caution with our spending. We’ve increased our charitable giving and G is currently on the east coast caring for an elderly relative. We have no concerns about the cost of her trips, which number 3-4 each year.  I’ll probably take a larger withdrawal this year. It is really more about tax management at this point. I’m allowing our taxed accounts to increase in value although I want to avoid going up a bracket with withdrawals. I have no intention of taking additional withdrawals from the Roth IRA in the foreseeable future."
- normr60189
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When Luck Rises, Be Ready to Dig

"One of my favorite Jimmy Buffett-isms, "yesterday is over my shoulder, so I can't look back for too long...""
- Dan Smith
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Retirement in America is not a pretty picture…and not getting better.

"Yet there are HD Forum posts active right now that speak of layoffs, the state of retirement in America, and the influence of luck (or lack of same). There are times when it's not because of a choice, but rather situations with outcomes that negatively impact random folks. As has been said here on HD before, we exist in rarified air. For the most part we've grabbed the brass ring and are reaping the benefits. Everyone else (90%? 95%?) is breaking even or struggling. In times like these I like to think of the Golden Rule and wish it was more uniformly applied."
- Jeff Bond
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What happens to Medicare Supplement coverage when moving to a different state?

"Very helpful, James. I took everyone's advice and looked up Boomer Benefits, and I am impressed."
- Carl C Trovall
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Medicaid Asset Protection Trusts (MAPTs)

"My parent did pay for a portion of his care- all of his monthly income including SS, Pension and RMD paid for his care, before Medicaid paid their portion to the NH. We were only utilizing government benefits to the extent allowed by the program. In my parent's case, his monthly obligation probably paid for about 75% of the actual NH billing. The SNT allowed us to provide additional resources to my parent such as a private room and additional agency help. I don't feel you should necessarily judge the use of a government program without fully knowing the details of the family situation- each one is quite different."
- Bill C
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Tax Smart Retirement

A POPULAR JOKE about retirement is that it can be hard work. That’s because financial planning is like a jigsaw puzzle, and retirement often means rearranging the pieces. In the past, I’ve discussed two key pieces of that puzzle: how to determine a sustainable portfolio withdrawal rate and how to decide on an effective asset allocation. But there’s one more piece of the puzzle to contend with: taxes. Especially if you’re planning to retire on the earlier side, it’s important to have a tax plan. When it comes to tax planning for retirement, there’s one key principle I see as most important, and that’s the idea that in retirement, the goal is to minimize your total lifetime tax bill. That’s important because a fundamental shift occurs the day that retirement arrives: In contrast to our working years, when taxes are, to a large degree, out of our control, in retirement, taxes are much more within our control. By choosing which investments to sell and which accounts to withdraw from, retirees have the ability to dial their income—and thus their tax rate—up or down in any given year. The challenge, though, is that tax planning can be like the game Whac-A-Mole. Choose a low-tax strategy in one year, and that might cause taxes to run higher in a future year. That’s why—dull as the topic might seem—careful tax planning is important. To get started, I recommend this three-part formula: Step 1 The first step is to arrange your assets for tax-efficiency. This is often referred to as “asset location.” Here’s an example: Suppose you’ve decided on an asset allocation of 60% stocks and 40% bonds. That might be a sensible mix, but that doesn't mean every one of your accounts needs to be invested according to that same 60/40 mix. Instead, to help manage the growth of your pre-tax accounts, and thus the size of future required minimum distributions, pre-tax accounts should be invested as conservatively as possible. On the other hand, if you have Roth assets, you’d want those invested as aggressively as possible. Your taxable assets might carry an allocation that’s somewhere in between. If you can make this change without incurring a tax bill, it’s something I’d do even before you enter retirement. Step 2 How can you avoid the Whac-A-Mole problem referenced above? If you’re approaching retirement, a key goal is to target a specific tax bracket. Then structure things so your taxable income falls into that same bracket more or less every year. By smoothing out your income in this way from year to year, the goal is to avoid ever falling into a very high tax bracket. To determine what tax rate to target, I suggest this process: Look ahead to a year in your late-70s, when your income will include both Social Security and required minimum distributions from your pre-tax retirement accounts. Estimate what your income might be in that future year and see what marginal tax bracket that income would translate to. In doing this exercise, don’t forget other potential income sources. That might include part-time work, a pension, an annuity or a rental property. And if you have significant taxable investment accounts, be sure to include interest from bonds. Then, for simplicity, subtract the standard deduction to estimate your future taxable income. Suppose that totaled up to $175,000. Using this year’s tax brackets, that would put your income in either the 24% marginal bracket (for single taxpayers) or 22% (married filing jointly). You would then use this as your target tax bracket. Step 3 With your target tax bracket in hand, the next step would be to make an income plan for each year. The idea here is to identify which accounts you’ll withdraw from to meet your household spending needs while also adhering to your target tax bracket. This isn’t something you’d map out more than one year in advance. Instead, it’s an exercise you’d repeat at the beginning of each year, using that year’s numbers. What might this look like in practice? Suppose you’re age 65, retired and not yet collecting Social Security. In this case, your income—and thus your tax bracket—might be quite low. To get started, you’d want to withdraw enough from your tax-deferred accounts to meet your spending needs but without exceeding your target tax bracket. This would then bring you to a decision. If you’ve taken enough out of your tax-deferred accounts to meet your spending needs and still haven’t hit your target tax rate, then the next step would be to distribute an additional amount from your pre-tax accounts. But with this additional amount, you’d complete a Roth conversion, moving those dollars into a Roth IRA to grow tax-free from that point forward. How much should you convert? The answer here involves a little bit of judgment but is mostly straightforward: You’d convert just enough to bring your marginal tax bracket up into the target range. Some people prefer to go all the way to the top of their target bracket, while others prefer to back off a bit. The most important thing is just to get into the right neighborhood. What if, on the other hand, you’ve taken enough from your pre-tax accounts to reach your target tax rate, but that still isn’t enough to meet your spending needs? In that case, you wouldn’t take any more from your pre-tax accounts, and you wouldn’t complete any Roth conversions. Instead, you’d turn to your taxable accounts, where the applicable tax brackets will almost certainly be lower. Capital gains brackets currently top out at just 20%. Thus, for the remainder of your spending needs, the most tax-efficient source of funds will be your taxable account. What if you aren’t yet age 59½? Would that upend a plan like this? A common misconception is that withdrawals from pre-tax accounts entail a punitive 10% penalty. While that’s true, it isn’t always true, and there’s more than one way around it. One exception allows withdrawals from a workplace retirement plan like a 401(k) as long as you leave that employer at age 55 or later. In that case, as long as you don’t roll over the account to an IRA, you’d be free to take withdrawals without penalty. If you’re retiring before age 55, you’ll want to learn about Rule 72(t). This allows for withdrawals from pre-tax accounts at any age, as long as you agree to what the IRS refers to as substantially equal periodic payments (SEPP) from your pre-tax assets. The SEPP approach definitely carries restrictions, but if you’re pursuing early retirement, and the bulk of your assets are in pre-tax accounts, this might be just the right solution.   Adam M. Grossman is the founder of Mayport, a fixed-fee wealth management firm. Sign up for Adam's Daily Ideas email, follow him on X @AdamMGrossman and check out his earlier articles.
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Well That’s A Bummer!

"I doubt I will be doing a manual backcheck to validate the findings, I wouldn't finish before my funeral! I guess I could duplicate the on a different AI platform but will that be any more accurate, and if different which one is correct? During the back testing process I did have Gemini provide tables showing values for each of the 20 years, balance for stocks and bonds, % growth, number of transactions, days between transactions etc. Big picture nothing looked out if line and the activity expected during the GFC, Covid, 2022 seemed to be aligned. I did observe that AI was making assumptions, for example in one scenario the bonds dropped to $250k to buy stocks during the GFC drawdown, hence the additional prompts and guard rails put in place in subsequent scenarios. As the prompts became more restrictive the end balances reduced. There were some scenarios which had higher returns but also had higher risk. The results seemed proportionate. On the drone counts. Professionally the company I work for has been using technology to count vehicles from CCTV and LiDAR backed with AI to track passenger volumes, movements and throughput at ticketing/security in airports. These products work very well and are reliable......... assuming reliable products were being used it must have been the large group of stoned visitors 😊☘️🍺"
- Grant Clifford
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My Favorite Rx

"?!! So glad you mentioned that I didn’t even know it was an option. I’m looking forward to trying it next tax season. Sort of."
- Michael1
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$3 Trillion S&P 500 Gatecrashers

HAVE YOU GIVEN any thought to what's about to happen to your S&P 500 tracker? Three enormous IPOs are expected later this year: SpaceX, OpenAI, and Anthropic. Based on their most recent private transactions, SpaceX appears to be valued at around $1.25 trillion, OpenAI at roughly $800 billion, and Anthropic at approximately $380 billion. Combined, we could be looking at close to $3 trillion in private market value that wants to go public. To put that in perspective, the entire S&P 500 is worth roughly $60 trillion. That's not a routine year for markets. That could be a very large event indeed. I suspect the vast majority of people with money sitting in a tracker fund have absolutely no idea it's coming. Those that do might have read some of the more sensational claims I've seen about immediate, disruptive wholesale change to the S&P 500. I think those articles are getting ahead of themselves. These companies might not automatically land in your S&P 500 tracker the day they list. The index has hard rules, and two of them seem particularly relevant. A company generally needs to have been profitable for four consecutive quarters before it qualifies. OpenAI and Anthropic are both, as far as we can tell, burning through enormous amounts of capital. They may well not meet that bar at IPO. There's also a float requirement, where roughly half of a company's outstanding shares typically need to be publicly tradeable. These businesses will almost certainly debut with tiny floats, possibly somewhere between 5% and 10% of shares in public hands. That could disqualify them from day one. SpaceX is possibly the closest to profitability of the three, but the float issue likely applies across the board. One area of uncertainty is the selection committee. This has some discretion around the inclusion of larger IPOs. They could choose to move faster than the rules imply. So the story might not be your tracker being immediately and dramatically restructured. The story could be more drawn out than that, and perhaps more interesting for it. What does this mean in the short term? I can only offer informed speculation. To my mind, volatility seems likely around the listings themselves. Not necessarily because of forced index rebalancing, but because the float issue creates its own kind of pressure. Enormous companies carrying enormous implied valuations, but only a sliver of shares in circulation. Limited supply, near-unlimited institutional demand, and a market full of retail investors who've been reading about these companies for years and finally get their shot. I would guess we should expect wild price swings during those early trading days, though I could be wrong about the scale of it. Rotation risk is worth watching too, I think. Investors might pull money out of existing AI bets, the likes of Nvidia and Microsoft, and move it directly into OpenAI and Anthropic the moment they're publicly available. If that happens, the stocks that have driven your tracker's returns for the last three years could face sustained selling pressure, not because anything's wrong with those businesses, but simply because a shinier, newer version of the same trade has just arrived. A throwaway thought for anyone holding individual shares rather than trackers. The companies most at risk of ejection are those sitting at the bottom of the index. When a business loses its S&P 500 membership, every passive fund becomes an automatic seller. That can hit the share price hard, nothing wrong with the company, just forced selling as a side effect of something big happening at the very top. Worth knowing if any of those smaller names are in your portfolio. Medium term it could get more interesting still. If and when these companies do meet the profitability and float requirements, which could, I think, be years after their IPOs rather than months, every S&P 500 tracker on the planet becomes an automatic buyer. Hundreds of billions flowing into SpaceX, OpenAI and Anthropic whether fund managers want it or not. The mechanics of passive investing would turn every tracker holder into an investor in these three companies with absolutely no say in the matter. That's the bit people rarely stop to think about. Passive investing isn't neutral. It just means someone else is making your decisions for you. Then I come to the big question: do these businesses actually deserve these valuations? It's worth noting that every major IPO of recent years has tended to trade down from its private valuation once the public gets a proper look at the books. The venture capital guys who set those private prices aren't always right, and public markets have a habit of finding that out fairly quickly. If the same happens here, your tracker should hopefully be buying them at a fair price by the time they filter into the realm of inclusion within that tracker. It has to be said, that's not guaranteed. I'm not trying to be alarmist. These aren't penny stocks being hyped and I think that matters. OpenAI's revenue had already surpassed $20 billion by the end of 2025. SpaceX is targeting what could be the largest public offering in history. Anthropic has BlackRock, Blackstone, Microsoft and Nvidia on its books. These are real businesses generating real money with the biggest and most sophisticated names in global finance and technology behind them. That doesn't make them cheap at these prices, but it does make them a very different proposition from the usual IPO hype cycle. The bottom line for the average investor? We probably don't need to do anything dramatic. But it doesn't hurt to understand that the passive, set-and-forget vehicle you own may look quite different over the next few years, not necessarily in a single sudden lurch, but gradually, as these companies either earn their way into the index or don't. The index you bought into always changes but the next few years will definitely see bigger changes than normal. If nothing else, it'll be interesting to see what happens going forward…Eyes open.
Mark Crothers is a retired small business owner from the UK with a keen interest in personal finance and simple living. Married to his high school sweetheart, with daughters and grandchildren, he knows the importance of building a secure financial future. With an aversion to social media, he prefers to spend his time on his main passions: reading, scratch cooking, racket sports, and hiking.
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AI, Bubbles, and Markets

IN AN INTERVIEW a little while back, the technology investor Peter Thiel drew an uncomfortable comparison. Today’s frenzy around artificial intelligence, he said, parallels the tech stock bubble of the 1990s. To illustrate his point, Thiel pointed to Amazon. By any measure, it’s been an extraordinary success. But, Thiel points out, it hasn’t been a straight line. At one point early on, Amazon shares lost more than 90% of their value. “My suspicion is that that’s roughly where we are in AI. It’s correct as a technology, but extremely bubbly and crazed…” Thiel explained that he doesn’t doubt the importance of artificial intelligence as a technology. What he’s questioning is how these technologies are being financed. Of particular concern are financing deals in the AI ecosystem that are seemingly circular. Nvidia, for example, has invested as much as $100 billion into ChatGPT maker OpenAI, at the same time that OpenAI has committed to spending billions on Nvidia’s chips. Similarly, OpenAI signed an agreement with AMD, another chip maker, to buy tens of billions of dollars of its chips while also buying a stake in the company. Transactions like this call into question whether these companies can continue to generate earnings at the same rapid pace. Compounding this concern, market valuations are elevated. On a price-to-earnings (P/E) basis, the S&P 500 is trading at 21 times estimated earnings. That’s quite a bit above the long-term average of 16 and thus represents a risk. If investors cool on AI, both earnings estimates and P/E multiples would likely drop at the same time, causing share prices to take two steps down.  How unusual is this situation, and how concerned should we be about it? It turns out these are questions economists have been studying—and struggling with—for years. Probably the most well known research on the topic dates to the 1970s, when economist Hyman Minsky developed what he called the Financial Instability Hypothesis.  This is how Minsky described it: “A fundamental characteristic of our economy is that the financial system swings between robustness and fragility and these swings are an integral part of the process that generates business cycles.” Booms and busts, in other words, are inevitable. Why? Paradoxically, Minsky said, financial stability causes financial instability. That’s because periods of financial stability lead people to become overconfident and to assume that the good times will last forever. But that overconfidence leads to complacence and to a lack of financial discipline, especially among lenders. That then causes debt levels to rise. What happens next? Writing in Manias, Panics and Crashes, Charles Kindleberger explains that there’s typically a canary in the coal mine that causes investor sentiment to shift. Often, it’s the unexpected failure of a bank or other institution. That’s why it caught people’s attention in February when Blue Owl Capital, which operates private credit funds and has helped finance AI data centers, announced that it was halting redemptions from one of its funds. Looking at more recent research, economist Bill Janeway agrees with Minsky on the causes of bubbles but argues that they’re not all bad. He talks about “productive bubbles.” As an example, he points to the market bubbles surrounding the development of the British railway system in the 1830s and 1840s. Much like the 1990s tech bubble in the United States, investors piled into railway stocks, causing prices to spike to irrational levels. Overbuilding ensued, and that led to a number of bankruptcies. Despite the financial losses, Janeway believes the railway bubble was productive. That’s for the simple reason that, at the end of the day, the tracks were laid. Yes, there were excesses, but Janeway sees no alternative. Investor enthusiasm acts as a sort of subsidy for early-stage, uncertain technologies that the market wouldn’t otherwise finance. The evidence certainly supports Janeway’s argument. The market does a very poor job picking winners. Janeway notes that essentially the same thing happened in the 1920s, when investors piled into companies working to build out the electricity grid in the U.S. There was massive over-investment, which led to bankruptcies. But in the end, electrification projects were completed much more quickly than they might have been otherwise. The key lesson: When market bubbles roll around, we shouldn’t be surprised. They’re inevitable. And over the long term, they’re arguably a good thing, enabling technology to move forward. Nevertheless, when bubbles burst, it’s unnerving. And indeed, in Janeway’s view, the same thing will likely happen with AI stocks. If Janeway is right, how can you prepare? The solution, in my view, is straightforward: Instead of trying to guess when the AI—or any other—bubble might burst, investors should take the view that the market could drop at any time. Then structure your portfolio accordingly.  There’s more than one way to approach this, but in my view, it’s a simple two-step process: First, make sure you’re diversified at the asset class level, with enough stowed in short-term bonds or cash to carry you through a multi-year market downturn. Then go one level deeper, auditing your stock holdings for individual stocks or funds overly exposed to any one corner of the market. And if you’re in a private fund—especially a private credit fund—I’d identify the nearest exit.   Adam M. Grossman is the founder of Mayport, a fixed-fee wealth management firm. Sign up for Adam's Daily Ideas email, follow him on X @AdamMGrossman and check out his earlier articles.
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America Doesn’t Just Do Layoffs. It’s Fallen in Love With Them

"Jeff, indeed I think the suicide counseling is very rare. I believe I know what you're referring to about the questionnaire from the medical office. I see it on my annual Medicare Wellness Visit. Some companies are not very tactful when having to let go of a group of employees. I recall hearing about a meeting with a group of engineers when it was announced which of those would be let go as they went around the table...right in front of everyone including those not losing their job. A real class act from upper management."
- Olin
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Forget the 4% rule.

"A few years ago I concluded I was under withdrawing. I begin with the RMD calculations but shifted to a modified guardrails approach. I evaluated just about every approach Christine Benz writes about at Morningstar. I ran a few scenarios and decided the MGA was best for me.  I have both traditional and Roth IRAs. My largest single annual withdrawal was 10% of the total value of these accounts. However, these accounts recovered and currently indicate a peak value. That’s been generally true on December 31 of each year. Because of circumstances we haven’t spent all of our withdrawal in recent years. That’s likely to be so in 2026. We are fortunate and don’t have to exercise caution with our spending. We’ve increased our charitable giving and G is currently on the east coast caring for an elderly relative. We have no concerns about the cost of her trips, which number 3-4 each year.  I’ll probably take a larger withdrawal this year. It is really more about tax management at this point. I’m allowing our taxed accounts to increase in value although I want to avoid going up a bracket with withdrawals. I have no intention of taking additional withdrawals from the Roth IRA in the foreseeable future."
- normr60189
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When Luck Rises, Be Ready to Dig

"One of my favorite Jimmy Buffett-isms, "yesterday is over my shoulder, so I can't look back for too long...""
- Dan Smith
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Retirement in America is not a pretty picture…and not getting better.

"Yet there are HD Forum posts active right now that speak of layoffs, the state of retirement in America, and the influence of luck (or lack of same). There are times when it's not because of a choice, but rather situations with outcomes that negatively impact random folks. As has been said here on HD before, we exist in rarified air. For the most part we've grabbed the brass ring and are reaping the benefits. Everyone else (90%? 95%?) is breaking even or struggling. In times like these I like to think of the Golden Rule and wish it was more uniformly applied."
- Jeff Bond
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What happens to Medicare Supplement coverage when moving to a different state?

"Very helpful, James. I took everyone's advice and looked up Boomer Benefits, and I am impressed."
- Carl C Trovall
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Get Educated

Manifesto

NO. 23: IF WE DON’T have much money, we should compensate with time—by starting to save when we’re young, holding stocks for decades and encouraging our children to do the same.

act

CHECK YOUR portfolio percentages. Each year often brings sharply different results for stocks and bonds, U.S. and overseas shares, growth and value stocks, and large- and small-company shares. This can push your portfolio away from your target mix—and you may need to rebalance. This is best done within a retirement account to avoid triggering big tax bills.

Truths

NO. 10: WALL STREET always strives to look its best. To ensure mutual fund expenses and advisory fees appear small, they’re expressed as a percent of the dollars we invest, not as a percent of our likely gain. To make their results appear more impressive, money managers pick their benchmark indexes carefully and use cumulative return “mountain” charts.

think

LONGEVITY RISK. Spending down a retirement portfolio is tricky: You don’t know how long you will live—and hence there’s a risk you’ll run out of money before you run out of breath. To fend off that risk, limit annual portfolio withdrawals to 4% or 5%, delay Social Security to get a larger check and consider an immediate annuity that pays lifetime income.

How to think about money

Manifesto

NO. 23: IF WE DON’T have much money, we should compensate with time—by starting to save when we’re young, holding stocks for decades and encouraging our children to do the same.

Spotlight: Borrowing

Credit Card Debt.

American credit card debt just broke the trillion dollar level.  Taking on  debt, “ bad” debt, credit cards , auto loans and similar, is a like attending a raucous party ,  taking in too much alcohol , etc.
The aftermath , paying off high interest loans, is like the worst hangover, ever. It can take decades to recover from it.
Often,  too much alcohol can kill you, quickly or long term, * alas , debt can kill you,

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Winning the Debt Game

Our earliest days as independent fledgling adults, working our first job, living in our own place, are hard to forget. I still recall my first apartments in surprising detail. As I now watch my daughter live through her own such experiences, these memories are flooding back.
Mine are mostly happy, as I lived and worked through the first part of my lifetime happiness smile curve. There were a few rare exceptions. Buying my first car was one of them.

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Know the Score

IF YOU’RE IN THE market for a home and a mortgage, this is a tough time, with shrinking inventory, lofty home prices and interest rates that feel overwhelming. I know all about this—because I’m a mortgage broker.
For many, today’s housing and mortgage market mean putting their homebuying dreams on hold. What if you go ahead, despite 30-year fixed-rate mortgages above 7%? I advocate controlling what you can. One of the variables that you can influence—and which can help save a tremendous amount of money—is your credit score.

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$88,000 Nightmare

THE YEAR 2011 WAS horrifying. I learned my mom had a life-threatening disease. She passed away six months later.
That forced me to confront the $88,000 of debt I had accumulated during college, including $51,000 in credit card debt. I was in grief, I had no idea what to do about the debt and my mom wasn’t there to advise me.
My friend John told me to seek professional help. A debt settlement company helped me get rid of $16,000 of higher-interest credit card debt,

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Refi or Not?

MY WIFE AND I BOUGHT our first home in the mid-1980s. We were thrilled to get an 8% mortgage, though we had to pay three points—an upfront fee equal to 3% of the loan amount—to get that rate. Many of our friends had bought a few years earlier and were paying 14%, a common occurrence back then, according to Freddie Mac data.
We kept our eyes open for opportunities to refinance our high rate.

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Smarter But Homeless

SOARING STUDENT DEBT is putting the kibosh on another major financial goal: buying a home. According to a study by researchers at the Federal Reserve Bank of Cleveland, 40% of those age 18 to 30 have student debt, up from 27% in 2005. For these borrowers, the debt burden is staggering, with student loan payments estimated to devour more than 20% of their income in 2015.
With so much of their income devoted to servicing student loans,

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Spotlight: Sayler

Motivated by Money

"WE BEHAVE BETTER when we know others are watching—so be sure to tell friends if you’re aiming to exercise more, lose weight or save more." I love the pithy sayings that appear each day at the top of HumbleDollar’s homepage. This statement appeared Oct. 19. A few years ago, when I was still working fulltime, some colleagues and I adopted this philosophy. Suppose one of us had a goal, such as losing five pounds by the end of the month. We could have simply told our coworkers the goal. But being type-A personalities, we took it to an extreme. We decided it was more effective if we backed our intentions with money. “If I don’t lose five pounds by the end of the month, I’ll give you $20.” None of us really wanted to take a colleague’s money, so we soon changed this to, “If I don’t reach my goal, I’ll give $20 to a charity of your choice.” This led to some interesting discussions. If we were of the same political party, had the same views on abortion or shared the same religion, the penalty for not meeting the goal was to give a contribution to an organization we both supported. That wasn’t much of a penalty. Someone pointed out it would be more motivating if the loser had to make a financial contribution to an organization with which he or she disagreed. If we were a staunch member of one political party and we lost our bet, we had to give $100 to the other major party. Now, that was motivating. Maybe we were exceedingly cheap, but the person always met his or her goal. I don’t recall anyone ever paying a penalty. Of course, we were on the honor system. The person making the contract simply self-reported…
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True to Form

IS THE IRS NO LONGER able to provide basic services to the public? When my father passed away, he left his financial assets in a trust for my siblings and me. A trust is a good estate planning tool, but there are some disadvantages. Among them: A trust has to file its own income tax forms. My mother is the trustee. She uses a local CPA to prepare the tax returns for the trust. My mother recently received a letter from the IRS. “Thank you for your inquiry dated Aug. 06, 2020. We have processed the adjustment indicated on your amended Form 1041 and applied the payment of $108.00, which we received on Aug. 14, 2020, to the Form 1041 account tax period ending Dec. 31, 2019. The above referenced tax period is paid in full at this time.” That's not a typographical error: The IRS is informing my mother that it received a check she sent nearly two years ago. In August 2020, my mother sent the IRS an amended Form 1041, which is the tax return for trusts, along with a check for $108. Three months later, in November 2020, the check finally cleared the bank. Yes, it took the IRS three months to open the mail and deposit her check. My mother’s CPA tells me that the letter is simply an acknowledgment from the IRS that it has now processed and accepted the amended return. End of story? A few weeks later, my mother received a second letter about the Form 1041 from the IRS. It states, “We are required by law to charge interest when you do not pay your liability on time.” It informs her that the interest charge is 27 cents. But then it says, in bold, “Amount due: $0.00.” I assume that means…
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The Magic Number

WHEN SHOULD YOU start drawing Social Security? If folks want to maximize their lifetime benefit, I think the answer is fairly straightforward. Maximizing lifetime Social Security income isn’t always the goal, of course. Some people need Social Security to meet basic needs. These people usually claim benefits as soon as they reach age 62, the earliest possible age. Others view Social Security as longevity insurance. They want as much monthly income as possible in the event they or their spouse live a long time. These people typically wait until 70, the latest possible age, to start Social Security. But for many people, the goal is to maximize the amount they’re likely to receive during their lifetime. Financial nerds often toss around terms like “breakeven” or “cross-over.” More sophisticated analysts consider present values and appropriate discount rates. I like simple. Want to maximize lifetime income? I believe the decision rule is fairly simple. If I am likely to die early in retirement, I should start Social Security as soon as possible. If I know I am going to die at age 65 and I don’t have a spouse who will receive survivor benefits, I had better start Social Security at 62. It makes no sense to wait. On the other hand, if I am going to live a long time—perhaps to age 90 or even 100—I want the largest monthly check possible for all those years. I achieve that by waiting until 70 to start Social Security. If I have no reason to think I will either die early or live a very long life, it makes sense to start Social Security sometime between age 62 and 70. One might choose age 66, the midpoint between 62 and 70. Others might choose their Social Security full retirement age. For those born…
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Two Dollars to Win

PEOPLE WHO INVEST in the stock market and people who bet on horses both hope to win. I expected the efficiency and behavioral finance factors that rule the stock market to have similar effects on horse betting. Instead, I found just the opposite. The story begins 40 years ago. A few years after we were married, I suggested to my wife that we spend a day at the fabled Saratoga Race Course in Upstate New York and watch the thoroughbreds run. At the time, we were living in nearby Schenectady. My wife was fine until I suggested we bet on each race. She was appalled, declaring, “Neither of us knows anything about horses.” There were going to be eight races that day. I said I would put $32 in my right pocket. That would be enough for each of us to place a $2 bet on all eight races. Our bets would be simple—$2 on a single horse to win. We would put any winnings in my left pocket. Racetracks keep about 20% of what is bet and pay out 80%. If we bet $32 randomly, at the end of the day we should have $25 or $26 in my left pocket. If we had a bad day, we might have $23. If we had a good day, it could be closer to $28. My wife asked how she should select a horse. Though I wasn’t able to clearly articulate it at the time, I believed horse betting was “efficient.” Therefore, I said it doesn’t matter—she might select based on a horse’s name or the color of the jockey’s garb, she might pick the horse with the best odds or she might opt for the long shot. It truly didn’t matter. Each race, we dutifully placed our $2 bets. That…
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When Debt Is Left

WHAT HAPPENS WHEN a person dies without a will and there isn’t enough money to pay all of his or her debts? Who gets paid and who gets shorted? I’d always heard that funeral expenses were the first priority, and then unsecured creditors got everything else. I’ve recently learned from personal experience that the rules are more complex—and more generous to widows and widowers. A 60-year-old friend of mine recently died. He hadn’t written a will. I’m helping his widow sort through bills and decide who gets paid. My friend was secretive and shared no financial information with his wife. She had no idea who was owed money and how much. It turns out my friend was drowning in debt. We’ve determined that he owed at least $60,000 on various credit cards and personal loans. The couple’s income was $2,500 a month, and nearly half of that was spent servicing debts. The silver lining is that all of this debt was in his name only, so his wife isn’t responsible for repaying it. He made the minimum payments on time, so his credit score was a pristine 750. Periodically, he would find a firm that would extend him another personal loan, which he would use to help keep current on his other obligations. His few assets included four cars in various states of disrepair, all with high mileage and at least 10 years old. He also had a joint checking account with his wife with about $1,000 in it. His personal possessions, mainly clothes and a few books, have no monetary value. It was easy for his widow to close their joint bank account and transfer the money to a new account in her name only. Extracting value from the four cars is going to be harder. One car was…
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Get What’s Yours

AFTER THEY MARRY, some people discover their spouse has hidden debt. We had the opposite situation. Several years after we were married and while living in Illinois, my wife got a letter from the New York Secretary of State saying she may be the owner of an unclaimed savings account in the town where she was raised. This was before the internet. We had no idea how New York found her. Neither my wife nor her parents remembered the account. My wife filled out some paperwork and a few weeks later she received a check for a few hundred dollars. Apparently, it’s common for people to forget about things like bank accounts, retirement accounts and utility deposits. Because states don’t want financial institutions and other companies sitting on this money, with no incentive to track down the owner, they require that unclaimed assets be turned over to the state. As a result, states hold billions of dollars in unclaimed property. Today, thanks to the internet, searching for unclaimed assets is easy. Recently, I spent an evening checking for unclaimed assets in the six states in which my wife and I have lived. Using Google, I typed in the name of a state and “unclaimed property.” One of the first suggestions was always the official secretary of state site for unclaimed property. Most sites—though not all—had a “.gov” suffix, indicating it’s an official government website. Alternatively, you can locate official state sites by going to Unclaimed.org. The sites varied slightly, but usually I could simply type in a name and then hit “search.” I used only my surname. If you also enter a first name, you may not find assets where the first name is listed only as an initial. I never knew there were so many folks called Sayler. It…
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