You probably know that the U.S. national debt is exploding, but if you don’t, try looking at the U.S. debt clock ( which shows how high our national debt is every second (currently $23.2 trillion and counting).  Our federal budget deficit will exceed $1 trillion this year.  The clock says that the federal debt per individual taxpayer is $187,632—and rising.  (The clock also calculates interest paid, debt per citizen, debt per family, mortgage debt, gross domestic product and a lot of other interesting things.)

Sooner or later, our federal debt will have to be paid back—or, at least, we will have to reduce the annual deficit to more manageable numbers.  The question is: how?  A recent article looked at different options that politicians will eventually have to consider.

One is a new inheritance tax.  You probably know that the first $11.58 million of a deceased person’s wealth is now exempt from federal estate taxes, which means that very few people will pay any estate taxes at all—today.  The article says that if we moved the exemption threshold down to $2.5 million, the government would raise an estimated $34 billion more a year.  At a lower threshold of $1 million, taxes collected would go up by $92 billion.

The article considers the wealth tax, which is favored by Democratic presidential candidates Bernie Sanders and Elizabeth Warren.  The Hamilton Project has proposed four types of wealth taxes, which would tax people with wealth ranging from a low of $8.25 million to taxes that would start at a net worth of $25 million.  Each of the wealth tax options would raise approximately $300 billion a year.

Another possibility is a value-added tax—a tax levied at various levels of production for goods and services.  This, of course, is popular in most developed nations, and it causes prices to rise for consumers.  A 10% VAT would raise around $1 trillion a year—which might conceivably reduce our annual debt to $0.

A final possibility is a financial transaction tax, which would put a 0.1% fee on all trades of stocks, bonds and derivatives.  This would raise costs for investors, but it might, if implemented, raise government revenues by $60 billion a year.

The article also talks about raising corporate taxes, but the problem there is that you would have to get tax havens like Ireland and Luxembourg to go along.  Otherwise, companies would set up shop in those lower-tax countries (many have already) and avoid the higher U.S. rates.  It might be possible to raise the highest corporate tax rate from 21% (today) to 25% or 28% and not cause corporations to create offshore tax solutions.  This would raise an additional $110 billion per year, and might also boost economic growth and stimulate investment.

The point of the article is that some form of additional taxation is coming.  What the article doesn’t say is that raising today’s personal income tax rates (particularly on the higher end) will probably be the first thing our next President and Congress consider.


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The following article is courtesy of The Wall Street Journal

The findings from the field of behavioral economics apply to everyone. Especially you.

By Jason Zweig

As much as all of us investors wish we were perfectly logical calculating machines, we are human: emotional, distractible, impatient, inconsistent. Behavioral economics is the study of how real human beings—not the walking, talking spreadsheets that traditional economists pretend we are—make financial decisions. Unfortunately, it’s all too easy to persuade yourself that the findings of behavioral economics apply to everyone else but you. After more than 20 years of studying research in that field, here’s how I think most investors interpret it. How many of these sound like you? I know many of them sound like me.

  • Behavioral economics teaches that people are overconfident: They believe they know more than they do, or they assume their knowledge is more precise than it is.

I’m 100% certain that’s true for everybody else, but there’s no way that applies to me.

  • Behavioral economists say that confirmation bias leads most people to seek out evidence supporting what they already believe or to ignore data that might disprove their beliefs.

That’s so ridiculous I’m not even going to waste my time refuting it.

  • Behavioral economics says investors are myopic: Short-term losses or costs can blind them to the pursuit of longer-term rewards.

I could explain all that to you, but I gotta run.

  • Behavioral economists say you should inform your decisions with the base rate, or the best available historical evidence of how likely an outcome is.

Why would I do that when my gut feelings give me the right answer, like, pretty much almost all the time?

  • Extensive research documents unconscious biases, or factors that shape our behavior below the level of awareness.

Are you kidding me? I’m not aware a single decision of mine that could possibly have been affected by unconscious bias.

  • Most people tend to be unrealistically optimistic, overestimating how likely they are to have good fortune and underestimating how many bad things will happen to them.

Ha! Just you wait until Facebook buys my great new scratch-n-sniff app for $10 billion!

  • The disposition effectleads investors to sell their winning stocks too soon and hold onto their money-losing positions too long.

Well, I sure don’t suffer from that. I don’t have any losers!

  • The sunk-cost fallacyleads many people to keep trying to justify a past decision even after it’s become obvious that it was a mistake.

That’s nonsense, and I’ll prove it to you after I finish checking the price on this stock I bought five years ago. [Pause.] I’ve only lost 85%, so I’ll be back to break-even in no time.

  • Research in dozens of countries around the world shows that investors almost everywhere keep most of their stock portfolios in shares of local companies instead of spreading their bets worldwide. This “home bias” leaves them underexposed to the benefits of global diversification.

I’m not surprised people in backward countries would do something dumb like that. I’ve got at least 10% of my assets outside the U.S.!

  • Research shows that many people are prone to “status-quo bias” or investing inertia, preferring to leave their current portfolio in place even when they might be better off switching to other choices.

But all my investments are already perfect. Why would I want to change?

Well, sure, but haven’t these scientists ever noticed somebody wins Powerball almost every week? The jackpot’s up to $459 million, so excuse me while I go buy 25 tickets.

  • Many people exhibit what’s called the bias blind spot, or the tendency to see clearly that other people’s behavior isn’t optimal while remaining oblivious to our own shortcomings.

The more I think about it, the more I can see how that might apply to people like you.

  • Experiments in behavioral economics show that most people are prone to anchoring. People who compare prices to the last digits of their Social Security number, for instance, are willing to pay more for something if their final digits are high.

People are so irrational! Hey, can you believe this guy on CNBC? He just said Apple stock’s going to $300 a share. There’s no way it’s worth more than, like, $285.

Without even thinking about it, I can come up with three people who would never do that: me, myself and I.


The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. Past performance is no guarantee of future results. Global investing involves special risks such as currency fluctuation and political instability and may not be suitable for all investors.

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That’s why I wanted to share with you the news that LPL and its affiliated advisors, including Cornerstone Wealth Management, were recently ranked No. 1 in customer loyalty among 21 leading financial distributor firms. It means a great deal for us to be part of a network that’s a recognized industry leader in providing quality personal service—and it’s an even greater honor that LPL has risen in these rankings in each of the past three years.

The rankings were among the findings in Investor Brand BuilderTM, a Cogent ReportsTM study released by Market Strategies International, in which 4,408 affluent investors nationwide were surveyed.*

The study explored the key aspects of client experience that drive investor loyalty. On each of the top 5 drivers of investor loyalty, LPL earned No. 1 rankings by exceeding client expectations in the following areas:

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As an advisors affiliated with LPL Financial, I we are proud of this recognition by investors of the value of the objective financial advice we offer to help clients pursue their goals, and of the innovative products and services our affiliation with LPL allows us to provide access to.

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This letter was prepared by LPL Financial LLC. This is not a recommendation to purchase, or an endorsement of, LPL Financial stock. LPL Financial and Cogent are unaffiliated entities.

*Market Strategies International, Cogent Wealth Reports, “Investor Brand Builder™: Maximize Purchase Intent Among Investors and Expand Client Relationships,” November 2017.

ABOUT THE REPORT: Market Strategies International’s Cogent Wealth Reports: Investor Brand Builder™ provides a holistic view of key trends affecting the affluent investor marketplace. The November 2017 report is based on a web survey of over 4,000 affluent investors, who hold $100,000 or more in investable assets. A total of n=82 LPL advisor clients were represented in the study. Customer Loyalty is based on how likely the participant would recommend each of their investment account companies to friends, family, or colleagues. Participants also evaluate their investment account companies using a 5-point rating scale across 10 aspects of client experience.