3 Things 4-17

Thing One Divide The Pie Differently Or Bake A Bigger One? Paul Singer, the founder of Elliot Management, one of the world’s most successful hedge-funds, thinks the latter is the better choice. He doesn’t use those words exactly but that is the essence of what he says when asked about the solution to the problems he points out during a Wall Street Journal interview. According to the interviewer, before the 2008 financial crisis, Mr. Singer “tried to alert investors and public officials about the dangers of subprime mortgages and in the 15 years since, he’s repeatedly warned that the landmark Dodd-Frank Act of 2010, and the expansive monetary policies along the way, were inviting disaster”. Recent events in the banking industry would suggest Singer might have been right a second time. Now, according to the WSJ, Mr. Singer is ringing the alarm again. He says, “There’s a significant chance of recession. We see the possibility of a lengthy period of low returns in financial assets, low returns in real estate, corporate profits, unemployment rates higher than exist now and lots of inflation in the next round.” As to what he sees as the road back to prosperity, Mr. Singer says that “would entail pro-growth reforms across the board, including tax reductions, entitlement reforms, regulatory streamlining, encouraging energy development including hydrocarbons . . . cutting federal spending, selling the asset holdings on central bank balance sheets.” In layman’s terms, Singer is suggesting that economic growth (growing the pie) as opposed to dividing the pie differently through taxes and onerous regulation is the way to go. We tend to agree but ideas like those he proposed are typically politicized and used to divide us into haves and have nots who vote and apply political pressure accordingly. And since, as a good friend once put it, “a politician really only has one job and that is to get elected”, we’ll likely go through more economic pain as a country than we otherwise would if our leaders were as concerned about our economic well-being as they would have us believe. But we shouldn’t fear what seems inevitable. We should incorporate it into our various plans and be either unsurprised and undeterred when things go as predicted or happy if things aren’t as doomy and gloomy as we had planned. Either way we’re better off for having thought it through.

Thing Two Is Your Employer-Provided Coverage Enough? Spoiler: It’s probably not enough Employer-sponsored policies typically offer coverage that is about 1-2X your annual salary. However, financial experts recommend having coverage that is about 10X your salary. That can result in a large gap in protection if you’re solely relying on your policy through work. Think about all of your family’s expenses (mortgage payments, childcare, college tuition, living expenses), and ask yourself: Would my coverage through work be enough to take care of my family if I passed away? If not, you may want to consider buying a policy to supplement the coverage you have through work. And remember that whether you change jobs, retire, or are laid off, when you leave the company, you may have the option to take your employer-sponsored policy with you. However, you’ll likely lose the pricing benefits provided by the employer, leaving you overpaying for insufficient coverage. That’s why in most cases, it’s advantageous to forget your employer-sponsored policy and apply for individual coverage.

Thing Three Just A Thought "It is not wisdom but Authority that makes a law." - Thomas Hobbes