Bob’s Journal for 1/20/22

Another Pandemic Boom: Fraud and Abuse Against Elders

The number of elder-fraud victims increased 55% from 2019 to 2020, according to an FBI report.

Compared to previous years, there was an 83.6% increase in abuse against older people in early 2020 when all or most states had stay-at-home orders, according to a study by Yale University researchers.

Other data on the increase in abuse and fraud against older Americans during the pandemic is available here.

There were several causes of the increase, the most likely being that pandemic restrictions increased the isolation of many older Americans and decreased their access to people and resources who could help them.

But incidents were increasing before the pandemic, partly because of the increase in the number of older Americans. Another key factor is the lack of trained and licensed caregivers.

It is important to put systems in place to prevent fraud and abuse before you have a need for such systems.

Determine who will help with or handle your finances when you might need assistance. Have a good power of attorney executed and put it in the hands of your designated agent as well as your financial services firms.

You also need a team or network to protect you. Get to know people at your bank and other financial services companies to the extent you can. Be sure to name a “trusted person” in the records of all financial companies. They can call the trusted person any time suspicious activities are spotted in your accounts.

Don’t let yourself become socially isolated. Develop a reliable group of friends and relatives with whom you can stay in touch. Be sure they know to notify authorities if you become isolated.

Regulators Likely to Focus on Retirement Plans, Advice in 2022

The Securities and Exchange Commission (SEC) and Department of Labor plan major regulatory pushes in 2022 focused on IRAs and other retirement plans.

The SEC issued new rules a couple of years ago, known as Regulation Best Interest (BI). Strict enforcement of the rule was delayed until the agency and financial advisors could get used to it. Real enforcement begins in 2022.

Regulation BI covers what advisors can say and must disclose to clients any time they render advice, especially on retirement accounts.

Financial advisors have to provide each client with Form CRS, which was new in 2020. Late last year, the SEC said a large percentage of the forms it reviewed were poorly written and that firms must rewrite them to avoid penalties.

In addition, when providing a recommendation to clients, advisors now have to provide certain information about alternative actions or investments available. They also have to identify potential conflicts of interest to the client. Firms now can be penalized for having insufficient policies and procedures in place, even if the SEC doesn’t identify specific improper or problematic transactions.

In addition, the Employee Benefits Security Administration (EBSA) of the Department of Labor is writing a new “fiduciary rule” to cover advisors to retirement accounts.

In the meantime, EBSA is starting to enforce a set of rules issued a couple of years ago. The rules are directed at limiting certain types of retirement account transactions and requiring additional disclosure by advisors. The agency said it mostly is concerned about rollovers of retirement accounts into annuities and life insurance, but the rules are much broader.

Investment advisors can avoid the limits by providing only education to clients instead of recommendations. But it’s easy for an education presentation to become a recommendation under the rules.

A result of these rules is some financial advisors are declining to give advice on rollovers and other retirement account transactions. Those who continue to give advice will have to provide significantly more information and documentation to clients.

SEC Plans Aggressive Agenda for Markets

Late in 2021, Securities and Exchange Commission (SEC) Chairman Gary Gensler laid out an aggressive agenda for new rules and enforcement by the agency.

Gensler said his top priority in 2022 is to impose new climate change disclosure requirements on all publicly traded companies. The firms then would be liable for any misstatements in the documents.

Related to that, the agency seems likely to impose new rules on investment advisors in an area known as ESG (environment, social, and governance). Advisors are likely to have to establish policies on how those factors are weighed in investment decisions, disclose those policies to clients and then follow the policies.

The SEC also is likely to impose several rules affecting meme stock investing and the relatively new trading apps.

One rule is likely to put restrictions on a practice known as “gamification” in which the financial firms use the trading apps to make investing more interesting and entertaining. In other words, they make investing more like a game.

Another potential change could affect no-fee stock trading. Often, financial firms are able to provide stock trading without fees or commissions because they direct trades to certain brokers. The brokers pay to receive these trades, known as payment for order flow. Some brokers are able to make their own trades before executing the clients’ trades.

A change here could end or curtail commission-free stock trading.

We also might see fewer and fewer China-based companies listed on U.S. stock exchanges.

Federal law requires U.S. regulators to be able to review financial details of companies that are based in China and listed on U.S. exchanges. Companies that don’t provide sufficient information can be de-listed from U.S. exchanges.

China has been reluctant to allow companies to provide foreign regulators and investors all the details required by the law.

The SEC still is writing the regulations. But it halted new listings of China-based firms in July 2021, and some firms voluntarily removed their listings in the United States.

The new regulations are likely to be issued in the first half of 2022 and could lead to the removal of more China-based companies from U.S. exchanges.

The agency also plans to issue new rules on digital currencies and special purpose acquisition companies (SPACs).

Those are just a few of the areas the agency plans to address in 2022 and the following years.

The Data

New unemployment claims increased by 23,000 to 230,000 in the latest week. But continuing claims declined by 194,000 to fewer than 1.6 million. That’s the lowest level of continuing claims since June 1973.

The Producer Price Index (PPI) increased by only 0.2% in December, though November’s increase was revised higher to 1%. Over 12 months, the PPI was up 9.7%.

Excluding food and energy, the PPI increase was 0.5%, compared to a 0.9% increase in November. Over 12 months, this measure is up 8.3%.

Retail sales declined 1.9% in December, and November’s increase was revised downward to 0.2%. In December, online sales were 8.7% lower than in November.

It’s best to look at retail sales over several months, since one month’s number can be influenced by non-economic factors such as the weather. Retail sales hit a record in October on the strength of a 1.8% increase from September, then hit another record in November after a 0.2% gain.

It appears that households might have done their holiday shopping early because of reports of potential shortages and price increases.

Retail sales in December were 16.9% higher than 12 months earlier.

Keep in mind that the retail sales reports aren’t adjusted for inflation, so part of the sales numbers reflect higher prices, not higher volumes of sales.

Home builders remain optimistic about the new home market. The Housing Market Index from National Association of Home Builders (NAHB) declined only one point in January to 83 from December’s 84.

That’s the first decline for the index in four months. The index is at the same level it was 12 months earlier. Builders are concerned about the cost and reduced availability of building materials.

Housing starts in December were 1.4% higher than in November, though November’s starts were revised to a lower number. December’s housing starts were 2.5% higher than 12 months earlier.

Single-family home starts in December were 2.3% lower than in November and 10.9% lower than 12 months earlier.

Total housing starts in 2021 were 15.6% higher than in 2020.

The Empire State Manufacturing Index plunged to negative 0.7 in January from 31.9 in December.

While that’s a significant decline, the change means only that manufacturing activity went from strong growth to little change from the previous month. This was the first negative reading for the index in 18 months.

The survey respondents remained optimistic about the outlook for the next six months.

Industrial Production declined 0.1% in December, the first decline since September. Manufacturing declined by 0.3% during the month.

The declines were due to a combination of lower vehicle production and lower utility output caused by the warmer-than-usual weather in December.

Consumer Sentiment, as measured by the University of Michigan, declined to 68.8 in mid-January from 70.6 at the end of December.

The mid-January level was the second-lowest in a decade. Inflation was the main concern in the survey.

The Markets

The S&P 500 lost 2.82% for the week ended with Tuesday’s close. The Dow Jones Industrial Average declined 2.40%. The Russell 2000 fell 4.49%. The All-Country World Index (excluding U.S. stocks) retreated 1.39%. Emerging market equities were down 1.60%.

Long-term treasuries lost 2.41% for the week. Investment-grade bonds fell 1.58%. Treasury Inflation-Protected Securities (TIPS) declined 1.54%. High-yield bonds retreated 0.78%.

In the currency arena, the U.S. dollar rose 0.20%.

Energy-based commodities increased 3.00%. Broader-based commodities rose 1.61%. Gold declined 0.52%.

Bob’s News & Updates

My latest book is “Where’s My Money: Secrets to Getting the Most out of Your Social Security.” It tells you clearly what your benefit options are in different situations and how to determine the best choice for you. You can find it on Amazon.com or Regnery.com.

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