Ponderings For the Week of August 5 to 11, 2019

Trump Tariff Threat Sinks Stocks

Stocks worldwide declined as a result of the President’s threat to extend tariffs to essentially all Chinese imports. The Standard & Poor’s 500 Index and the Nasdaq Composite Index suffered their worst weeks of the year. Both U.S. and overseas stocks declined around 3%. Investors are still waiting for some breakthrough in the standoff with China, but so far there’s no inkling of one. Chinese authorities seem content to stand pat and wait for the effect of the tariffs to really hurt the U.S. economy. Despite attestations to the contrary emanating for Washington, it is the U.S. consumer who bears the brunt of the tariffs. 

The trade tiff caused investors to seek safe havens in government bonds and gold. For a brief period, the yield at all maturities on German government bonds was below zero. This means investors were willing to pay interest to the government to invest in its bonds rather than receive interest. Could this happen in the U.S.? It’s unlikely, but if the Fed continues to lower rates, a subsequent economic crisis could compel it to reduce them further, even to a negative level.

 
  

 

Defending Against Data Breaches

Nicolé Keane

You may be aware of the latest data breach affecting millions of consumers. Capital One has said that they will alert affected customers if their data was part of the breach – though they have not yet specified just how they will do this. Already there have been reports of spam calls from those purporting to be from Capital One. Unlike the Equifax breach, there is no online database to check this (and the Equifax $125 payment option is already being reduced, based on the number of claims – some say to as low as $4).

  1. Freeze your credit: this protects against new accounts being opened in your name. You will need to request this with each of the three reporting companies: Equifax, Experian and TransUnion. No loans, new credit accounts or services will be provided without your permission. Equifax, 800-685-1111; TransUnion, 888-909-8872; Experian, 888-397-3742.
  2. Sign up for a credit monitoring service: LifeLock charges $10 – $30/month but Credit Karma is free and will alert you to any credit activity or changes to your credit score. Capital One has also said that they will provide free credit monitoring to all those affected by the breach.
  3. Establish a fraud alert: if you suspect that fraud has occurred, place a fraud alert on your accounts with each of the three credit reporting companies. This will alert banks and credit cards that fraud has taken place in your accounts. It does not affect your credit rating and you will be contacted before all new credit uses.
  4. Remove third-party storage of credit card or bank account details: online accounts often ask to store your payment details for “convenience” if you make frequent purchases (or payments) from their websites. Storing your banking, credit card or ATM card details may be convenient but this can put you at risk if there is a breach – especially if these sites allow passwords to be reset by email alone, without offering two-factor authentication (email and text).
  5. Monitor credit reports and bank/credit card/investment statements for unusual activity: while a credit freeze and credit monitoring will alert you to new credit threats, the majority of all fraud arises in current bank accounts and credit cards. Taking the time to monitor your account activity, in a timely fashion, could minimize your loss. Federal law and “zero liability” credit cards require unsanctioned activity to be reported within 60 days of receiving your statement. If not? You could be liable for the full amount of the fraud.

While these steps will help you avoid having important data fall into the wrong hands, they may periodically make using your own credit a bit inconvenient. That’s not necessarily a bad thing. We view anything that slows down the pace of credit card usage to be efficacious. 

  

Smart Money Tips

 

  • Speak with your spouse or significant other about family money matters. Usually, one partner in the relationship pretty much controls the family finances. This is not necessarily a problem, but it is important for the other spouse or partner to know what’s going on and where important documents are kept. This is essential in the event the spouse who controls the family purse suddenly becomes unable to do so. But it is also important for both to be involved so that concern or resentment doesn’t build up in the less-involved partner.
  • Buy used cars.  Most cars will serve their owners well for many years.  If you really need to replace your iron and plastic master, consider a used car.  Cars depreciate in value substantially in just the first couple of years, as do the insurance premiums. According to a car ownership study I conducted several years ago, the most cost effective way to own a reliable car is to buy a 4-year old car and keep it for 4 years or more.

 

 

 

 

 

 

 

 

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