There’s a spate of coverage for the 100 year anniversary of the fire at New York’s Triangle shirtwaist factory. The tragedy led to the death of 146 workers and a national discussion about workplace safety rules and labor rights. Various news organizations have coverage, some of the more interesting articles are:
The fire is being remembered as a seminal moment in the history of labor rights in the USA. It should also remind entrepreneurs and businesses of the value in a common set of effective standards and regulations. Everyone who engages in commercial activity knows that there are a hundred things competing for your attention every day. It is not always possible for a small concern to draft and apply safety rules for every operation it conducts. It is also difficult to operate a commercially viable enterprise if competitors can undercut prices by playing fast and loose with safety and standards.
Perceptive business owners (a category that includes investors) know that their capital can be permanently impaired by lax safety standards. This is sometimes true even if the lax standards are a competitors, since in the eyes of the consumer there is guilt by association. Owners and investors who are interested in creating long-term value (and exhibit some level of common decency) should advocate for the fair treatment of workers, clear and uniformly applied safety standards, and independent regulators. This is true whether you are invested in a bank, a coal mining firm, or a company making blouses.
We held a webinar earlier this month on municipal bonds. We provided a basic overview of the municipal bond market and discussed recent events. We’ve now posted a replay on youtube, the links are below:
We always recommend national portfolios when managing a substantial allocation to municipal bonds. Clients often ask about losing the state tax income benefits by buying out of state municipal bonds. Our answer has always been that we believe it is crucial to control geographic risk and concentration, particularly since these can be idiosyncratic, tail-event type risks.
In past discussions with clients, we’ve focused on how certain states and municipalities can have an over-reliance on one or two industries and be impacted by a cyclical or secular downturn. We’ve also pointed out that certain natural disasters can impact a geographic area so severely that a short-term recovery becomes difficult or even impractical. Many disasters can erode the tax base and asset values to such an extent that creditors may suffer substantial losses in default.
For instance, environmental devastation during the dust-bowl era wreaked immense damage on agricultural production in many states and this impacted state and local finances significantly. The tragic events unfolding at present in Japan should remind investors that natural and environment disasters can devastate communities for extended periods of time. When these disasters come in the form of a dam failure or nuclear accident, they can make a large area inhabitable.
Such events are inherently unpredictable, and highlight the need for geographic diversification in investment portfolios of all types. Humans are fallible creatures, in investing as in many other things. Geographic diversification is a way to limit the impact of that fallibility.
For many people, Roth IRAs are attractive since distributions during retirement from Roth IRAs are not taxed. Distributions or withdrawals from traditional IRAs or retirement plans are subject to income tax in most instances.
In effect, you are saving more with a Roth IRA since you’re paying the taxes up-front. A $100 saved in a Roth IRA may mean lower income today than a $100 saved in a traditional IRA, but when it comes time to use the money, you will have more available since you pay no income taxes on regular withdrawals.
Here are five things people often don’t realize about Roth IRAs:
Income limits that govern who can contribute to a Roth IRA have risen slowly over the past few years, the 2010 limits are here.
Virtually anyone who has a traditional IRA can convert it to a Roth IRA (this started in 2010). The $100,000 income limit has been removed. You may have to pay taxes on part of the converted amount (typically contributions you claimed a deduction against and earnings).
Unlike traditional IRAs, there are no required minimum distribution rules for Roth RIAs, so you could leave your Roth IRA savings undisturbed after you turn 70 and a half.