A Strategic Bet Amid Policy Shifts
Investing in European Defense Manufacturers In a seismic shift for Europe’s defense landscape, new fiscal policies and ambitious spending plans are positioning European defense manufacturers for long-term growth. The European Union recently announced a staggering expenditure of 870 billion US Dollars kroner earmarked for military modernization – a clear signal that defense will be at the forefront of the region’s economic agenda. It is important to note that, to date, there is no index available in the United States, for European defense manufacturers. You may see new names in your portfolio. These investments should be viewed as our attempt at making an unofficial index, not merely on an individual basis. We just don’t know which will potentially go up significantly or potentially down. Hence the approach of making an unofficial index. This historic investment comes as EU nations face renewed pressure to boost their defense spending relative to GDP. With member states required to increase the percentage of their GDP allocated to military budgets, the environment is set for sustained demand for cutting-edge defense technology and robust supply chains. Companies ranging from traditional military equipment, aerospace innovators, cyber defense firms are all now prime candidates for investment as governments scramble to meet these new spending targets. Moreover, the EU is rethinking its financial rules by easing restrictions on how much debt a country can incur. This policy change is designed to enable nations to fund their military build-ups without compromising economic stability or breaking EU budget rules. The shift signals a long-term commitment to defense preparedness, ensuring that European defense manufacturers have a stable flow of government contracts and strategic investments over the coming years. For investors, these developments offer a compelling case. The combination of unprecedented government backing, relaxed fiscal constraints, and a geopolitical environment that favors rearmament creates a fertile landscape for robust returns. With established players and nimble new entrants alike poised to benefit from this windfall, European defense stocks may offer an attractive hedge against broader market volatility and the uncertain dynamics of global security. The ongoing military build-up, supported by an EU willing to overhaul its fiscal rules, sets the stage for a new era in which defense contractors become not only strategic partners for governments but also lucrative opportunities on Wall Street. Remember money is Green. Not Red or Blue.
Why AI Companies Could See Massive Growth in the Future
Why AI Companies Could See Massive Growth in the Future Artificial Intelligence (AI) is not just a futuristic concept—it’s already changing the way we work, shop, drive, and even heal. From personal assistants like Alexa to self-driving cars, AI is rapidly becoming part of our daily lives. This technology has the potential to grow bigger than any invention we’ve seen, from the internet to smartphones. Here’s why AI-based companies could experience explosive growth moving forward: AI is Everywhere AI is being used in almost every industry. It powers personalized shopping recommendations on Amazon, automates repetitive tasks in offices, and helps doctors detect diseases early. As more companies adopt AI to save money and improve efficiency, the demand for AI products and services will only increase. Example: NVIDIA, a company that makes computer chips designed for AI, is seeing massive demand because its chips are the “brain” behind many AI systems. Source: NVIDIA’s Role in AI Growth – https://www.investors.com/news/sp-500-palantir-2024-stocks/ AI Saves Money and Time Businesses are turning to AI to automate jobs that are time-consuming and costly. For example, customer service chatbots can answer questions 24/7 without the need for human staff. Factories are using AI-powered robots to build products faster and more efficiently. This ability to save money makes AI technology very attractive to companies. Example: McKinsey predicts that AI could add $13 trillion to the global economy by 2030. Source: McKinsey Global Institute on AI’s Economic Impact – https://www.mckinsey.com/featured-insights/artificial-intelligence/the-future-of-ai/ AI is Still in Its Early Stages AI is like the internet in the 1990s—most of its potential hasn’t even been realized yet. Companies that invest in AI today are positioning themselves for long-term success. Just as companies like Amazon and Google became giants during the internet boom, today’s AI companies could see similar explosive growth. Example: The global AI market, worth $196 billion in 2023, is expected to grow to $1.8 trillion by 2030—a nearly tenfold increase! Source: Grand View Research on AI Market Growth – https://www.grandviewresearch.com/industry-analysis/artificial-intelligence-ai-market AI is a Game-Changer for Industries AI is transforming fields like healthcare, transportation, and finance. In healthcare, AI systems are helping detect cancer earlier than ever before. In transportation, self-driving cars could eliminate traffic accidents caused by human error. The more industries AI disrupts, the more opportunities there are for AI companies to grow. Example: AI-powered tools like ChatGPT (from OpenAI) are being adopted by companies to improve communication and content creation. Source: OpenAI’s Role in Business Adoption – https://www.openai.com Conclusion: The AI Revolution is Just Starting AI-based companies are at the forefront of a technological revolution that could be bigger than anything we’ve ever seen. By saving businesses money, creating new opportunities, and disrupting industries, AI has the potential to drive massive economic growth. For investors, AI companies represent a chance to be part of the next big wave in technology. We are looking at expanding investments into the AI space. We feel that being on the forefront front could potentially benefit you, our clients as an actually AI index has not been defined yet. Neither has an AI sector. This could lead to huge potential as AI will be everywhere. Investor’s Business Daily (https://www.investors.com/news/sp-500-palantir-2024-stocks/) Palantir Is 2024’s S&P 500 King. These 9 Stocks Also Had Huge Gains. Palantir Technologies has more than quadrupled this year. https://www.investors.com/news/sp-500-palantir-2024-stocks/
Effective Fraud Prevention Tips
To protect yourself from fraud and identity theft, it’s important to take preventive measures, such as freezing your credit file with the three major credit bureaus: Equifax, Experian, and TransUnion. Since a Credit Freeze has better legal protection than a Credit Lock, it would make sense to place a Credit Freeze on your accounts with the 3 major credit bureaus. Quite frankly it seems strange to have the Credit Lock option available as it essentially does the same as a Credit Freeze, but without the same legal protections under US law. Fraud and identity theft can be financially devastating, but there are several strategies to protect yourself: Monitor All Your Financial and Insurance Accounts Regularly check your bank, insurance, and credit card statements for suspicious activity. Setting up account alerts can help you detect any unusual transactions immediately. Use Strong Passwords Use a mix of letters, numbers, and special characters for online accounts, especially financial ones. Consider using a password manager to securely store and generate complex passwords. Do not use the same password all the time. Never use same password for your non-financial accounts as for your financial accounts. Enable Two-Factor Authentication (2FA) Many banks and financial institutions offer 2FA, which adds an extra layer of security by requiring a second form of identification (like a code sent to your phone or email) in addition to your password. Beware of Phishing Scams Fraudsters often use emails, text messages, or phone calls to trick people into providing personal information. Avoid clicking on links or providing sensitive information unless you are sure of the source. Emails, Emails, Emails… You may get emails stating it from your bank, but in reality, the email is from a fraudster. The email might say peter.parker@bankof@bankofamerica.com, but if you actually check the email address it might actually be 24525htid@hotmail.com . if you Right-Click” on any email you can see the actual email address. Regularly Check Your Credit Report Under U.S. law, you are entitled to one free credit report per year from each of the three major bureaus. Checking these reports regularly can help you spot unauthorized accounts or suspicious activity. Major Credit Bureaus You can free of charge set up accounts with the 3 major Credit Bureaus, Experian, Equifax, and Transunion. How to Lock or Freeze Your Credit with the Three Major Credit Bureaus Locking or freezing your credit file can prevent criminals from opening new accounts in your name, as lenders are unable to access your credit report unless you unlock it. Equifax Credit Freeze: Visit the Equifax website, log in or create an account, and follow the instructions to freeze your credit. You can also call Equifax at 1-800-685-1111 to request a credit freeze. Credit Lock: Equifax also offers a service called Lock & Alert, allowing you to lock and unlock your credit report in real time via an app or online. Website: www.equifax.com Experian Credit Freeze: Visit the Experian website, create an account, and follow the steps to freeze your credit. You can also request a freeze by calling 1-888-397-3742. Credit Lock: Experian offers a service called CreditLock, part of its paid services, which allows for easier control over access to your credit file. Website: www.experian.com TransUnion Credit Freeze: Go to the TransUnion website and sign up for a free account to freeze your credit online or call 1-888-909-8872. Credit Lock: TransUnion offers TrueIdentity, a free service that allows you to lock and unlock your credit report instantly. Website: www.service.transunion.com Key Differences Between a Credit Freeze and Credit Lock Credit Freeze: Free under U.S. federal law and offers strong protection. It can be lifted temporarily or permanently online or by phone. Credit Lock: Often part of a paid service that makes it easier and faster to lock or unlock your credit file, though it may not offer as much legal protection as a freeze. Steps to Freeze or Lock Your Credit Visit each bureau’s website or call their customer service line. Provide your personal information, including your Social Security Number. Follow their verification process, which may include identity-confirming questions. Set up an account to manage your credit freeze or lock. Once your credit is locked or frozen, you can unlock or lift the freeze temporarily whenever you need to apply for credit, such as when applying for a loan or credit card. Additional Measures Fraud Alerts: You can place a fraud alert on your credit file, notifying creditors to take extra steps to verify your identity before issuing credit in your name. Credit Monitoring Services: Consider using credit monitoring services that alert you to any significant changes in your credit report, such as new account openings or inquiries. Set up a separate email only for your financial websites. Do not use your personal email like you are doing right now TAP vs credit card Always tap when you can, so no one has your credit card info. When tapping the merchant does not receive your actual credit card number. Your card essentially is a seen as a one-time use credit card number for the purpose of the specific transaction. You can set up tapping in Apple Pay or Google pay in your phone. Online you can credit a virtual credit card through privacy.com as an example Unique usernames Create a unique username and unique password. That makes it a lot harder for a hacker. Do not use the same username for financial sites as you use for non-financial sites. Same for passwords. I know it is time-consuming to do this. But at least do it for new accounts going forward and do it for passwords. At Gmail, you can use a feature to make new emails without actually setting up an email: Example: myemail+netflix@gmail.com Use: deleteme Delete information about yourself Don’t use public WiFi unless you have to. Social media can wait. Instead, tether your mobile data. Most places in the US have decent coverage. Use a VPN whenever possible to access the internet on your phone. Disconnect Bluetooth and
Contributing to a Roth IRA
What is a Roth IRA? A Roth IRA is a retirement savings account that allows your money to grow tax-free. Unlike traditional IRAs, contributions to a Roth IRA are made with after-tax dollars, meaning you’ve already paid taxes on the money you contribute. The big benefit: no taxes on withdrawals in retirement! Who Can Contribute? Income Limits: Your ability to contribute depends on your Modified Adjusted Gross Income (MAGI). For 2024: Single filers: You can contribute the full amount if your income is below $161,000. Contributions start to phase out at $146,000. Married filing jointly: You can contribute fully if your combined income is below $240,000. Phase-out starts at $230,000. Please visit this Charles Schwab Link for a detailed Phase-Out Schedule: https://www.schwab.com/ira/roth-ira/contribution-limits (scroll down to the Tax Year 2024 Table) Age: There’s no age limit for contributing as long as you have earned income. Contribution Limits For 2024: The maximum contribution is $7,500 per year. If you’re 50 or older, you can make an additional catch-up contribution of $1,000, bringing your total to $8,000. When Can I Withdraw? Tax-Free Withdrawals: You can withdraw your contributions at any time without taxes or penalties. To withdraw earnings tax-free: You must be 59½ years old, and Your account must be at least 5 years old. Benefits of a Roth IRA? Tax-Free Growth: All earnings grow tax-free, meaning more money for you in retirement. No Required Minimum Distributions (RMDs): Unlike traditional IRAs, you’re not required to withdraw money starting at age 73. Flexibility: You can withdraw your contributions any time without penalties, providing extra financial flexibility. Backdoor Roth IRA If you’re above the income limits, consider a Backdoor Roth IRA: contribute to a Traditional IRA first, then convert it to a Roth IRA (consult a tax advisor as we cannot give tax advice). Hafnia Financial, Inc. is a registered investment adviser. Registration does not imply a certain level of skill or training. The information presented is for educational purposes only and is not intended to make an offer or solicitation for the sale or purchase of any specific securities, investments, or investment strategies. Investments involve risk and, unless otherwise stated, are not guaranteed. Be sure to consult with a qualified financial adviser and/or tax professional before implementing any strategy discussed herein. Past performance is not indicative of future performance. Insurance products and services are offered and sold through Jan Gleisner an individually licensed and appointed insurance agent. CA Ins Lic # 0D77385.
Comprehensive Overview of Retirement Plans for Small Businesses
Please bear in mind while we are following the laws, regulations, and taxation of each plan like all other investment advisory firms, we believe that we often have some advantages on plan cost, investment cost, and selection compared to other Investment Advisory firms. These advantages are typically found in reducing what we believe are unnecessary costs in the investments themselves, such as using Exchange-Trade Funds vs traditional mutual funds. See our article on EFTs vs mutual funds cost comparison. Also, we do our money management in-house, so you would only be paying one advisory fee. If the money management is outsourced you would typically pay an additional cost of the outside money management. We have cut out the middle-man so to speak. As always this is meant as educational information. Further, we do not give legal or tax advice. Please consult with a lawyer or a tax professional regarding legal and taxation matters. Let’s dive in. What type of Retirement Plan should you consider for your Small Business? Here are the different types: SEP IRA (Simplified Employee Pension) SIMPLE IRA (Savings Incentive Match Plan for Employees) Individual 401(k) Individual Roth 401(k) Traditional 401(k) Roth 401(k) Profit Sharing Plan Money Purchase Plan Defined Benefit Plan Deferred Compensation Plan This guide includes key features, costs, fees, and taxation details, along with illustrations to clarify the differences. SEP IRA (Simplified Employee Pension) Overview: A SEP IRA is designed for self-employed individuals and small business owners. Employers make all contributions on behalf of employees. Key Features: Contribution Limits: Up to 25% of each employee’s compensation, with a maximum of $66,000 for 2024. Flexibility: Employers can vary contributions each year. Eligibility: Employees must be at least 21 years old, have worked for the employer in 3 of the last 5 years, and have received at least $750 in compensation in the current year. Costs and Fees: Setup Fees: Generally low or $0 Annual Fees: Minimal or $0, usually lower than other plans. Investment Fees: usually lower than other plans as we use Stocks, bonds and ETFs Investment Advisory Fees: Defends on Asset Level Taxation: Tax Advantages for Employers: Tax-Deductible Contributions: Employers can make tax-deductible contributions to their employees’ SEP IRAs. These contributions are considered a business expense and can be deducted from the employer’s taxable income, reducing the overall tax liability. Flexibility in Contributions: Employers have the flexibility to decide how much to contribute to SEP IRAs each year. They can choose to contribute up to 25% of each employee’s compensation, up to a maximum contribution limit set by the IRS. This flexibility allows employers to adjust contributions based on business profits and cash flow. No Ongoing Contribution Requirement: Unlike some retirement plans that require annual contributions, SEP IRAs do not require ongoing contributions. Employers can choose whether or not to make contributions each year, depending on their financial circumstances. Tax Advantages for Employees: Tax-Deferred Growth: Contributions made to a SEP IRA grow tax-deferred until withdrawn. This means that investment earnings within the SEP IRA are not subject to annual taxation, allowing the account balance to grow more quickly over time. No Taxes on Contributions: Employees do not pay taxes on contributions made by their employer to their SEP IRA. These contributions are made with pre-tax dollars, reducing the employee’s current taxable income. Taxation: Tax Control in Retirement: During retirement, when withdrawals are made from the SEP IRA, the distributions are taxed as ordinary income. However, retirees may have more control over their tax situation, such as withdrawing funds during years with lower tax rates. Potential Lower Tax Bracket in Retirement: In retirement, individuals may find themselves in a lower tax bracket compared to their working years. This can result in paying less tax on SEP IRA withdrawals than they would have paid on contributions during their working years. Penalties Early withdrawal penalties apply before age 59½ (10% penalty). Pros and Cons: Pros Cons High contribution limits Employees cannot contribute directly Simple administration Only employers can contribute Flexible annual contributions The same contribution percentage for all SIMPLE IRA (Savings Incentive Match Plan for Employees) Overview: A SIMPLE IRA is suitable for businesses with 100 or fewer employees. Both employer and employee contributions are allowed. Key Features: Contribution Limits: Employees can contribute up to $15,500 annually ($19,000 if 50+). Employers must either match up to 3% of salary or make a 2% non-elective contribution. Eligibility: Employees who earned at least $5,000 in any two preceding years and are expected to earn at least $5,000 in the current year. Costs and Fees: Setup Fees: Generally low. Annual Fees: Typically minimal. Investment Fees: usually lower than other plans as we use Stocks, bonds and ETFs Investment Advisory Fees: Defends on Asset Level Taxation: Tax Advantages for Employers: Tax-Deductible Contributions: Employer contributions to employees’ SIMPLE IRAs are tax-deductible as a business expense. This deduction reduces the employer’s taxable income, resulting in lower tax liability. Tax Credit for Small Employers: Small employers may be eligible for a tax credit of up to $500 per year for the first three years after establishing a SIMPLE IRA plan. This credit helps offset the costs of setting up the plan. No Employer FICA Taxes: Employer contributions to SIMPLE IRAs are not subject to FICA (Federal Insurance Contributions Act) taxes, including Social Security and Medicare taxes. Tax Advantages for Employees: Pre-Tax Contributions: Employee contributions to a SIMPLE IRA are made with pre-tax dollars, reducing the employee’s current taxable income. This lowers the amount of income subject to federal income tax, resulting in immediate tax savings. Tax-Deferred Growth: Contributions and investment earnings within a SIMPLE IRA grow tax-deferred until withdrawn. This allows the account balance to grow more quickly over time, as taxes are not owed on investment gains each year. Lower Tax Bracket in Retirement: In retirement, individuals may be in a lower tax bracket compared to their working years. Withdrawals from a SIMPLE IRA during retirement are taxed as ordinary income, but retirees may pay less tax on these withdrawals
Interest Rates are Decreasing while Unemployment Rates are Increasing
Recent developments in the U.S. economy have heightened the potential of a recession, driven by a combination of decreasing interest rates and rising unemployment. The Federal Reserve’s July 2024 report indicated a spike in the unemployment rate to 4.3%, the highest since 2021. This has fueled concerns as employers added fewer jobs than expected. The Sahm Rule Recession Indicator, a tool that signals the onset of a recession when the unemployment rate increases by 0.5 percentage points or more over a short period, recently hit 0.53%, further reinforcing fears of an economic downturn. The situation is exacerbated by declining interest rates, which are often a response to slowing economic growth but can also signal an impending recession if coupled with rising unemployment. Adding to these concerns is the Buffett Indicator, which compares the total market capitalization of U.S. stocks to the nation’s GDP. Currently, this indicator suggests that the market is significantly overvalued, another potential red flag for investors worried about economic stability. The convergence of these factors—rising unemployment, falling interest rates, and the elevated Buffett Indicator—suggests that the U.S. economy may be on the brink of a recession, though it remains to be seen whether these indicators will fully materialize into a broader economic downturn. We have been working on and still are repositioning your portfolio as high growth is not to be expected in the near future. You will see a small mix of small/mid-cap being added as those companies typically borrow money. Since money is becoming cheaper to access they could potentially benefit. FYI, big companies such as Amazon, Google, etc. have so much money on hand that they typically have little concern about interest rates as they self-fund their projects. Hafnia Financial, Inc. is a registered investment adviser. Registration does not imply a certain level of skill or training. Information presented is for educational purposes only and is not intended to make an offer or solicitation for the sale or purchase of any specific securities, investments, or investment strategies. Investments involve risk and, unless otherwise stated, are not guaranteed. Be sure to first consult with a qualified financial adviser and/or tax professional before implementing any strategy discussed herein. Past performance is not indicative of future performance. Insurance products and services are offered and sold through Jan Gleisner an individually licensed and appointed insurance agent. CA Ins Lic # 0D77385.
Money is Green (Not Red or Blue)
Money Is Green (Not Red or Blue) In the whirlwind of election campaigns, it’s easy to get swept away by the flood of promises made by politicians. Each candidate paints a picture of the future in vivid hues, promising prosperity, job growth, and economic stability. However, as investors, we must remember that money is green—not blue or red. While political rhetoric may capture headlines and shape public sentiment, it should not dictate your investment strategy. Political campaigns are filled with noise. Candidates from both sides make bold claims about how their policies will either rescue or ruin the economy. This noise can be particularly distracting for investors trying to make sense of their portfolios in a volatile environment. But history has shown us time and again that the stock market is more resilient and less tied to political outcomes than we might think. The economy, influenced by global events, technological advancements, and consumer behavior, does not always move in lockstep with the promises or actions of politicians. The economy and the stock market are two different entities. While economic indicators like GDP growth, unemployment rates, and inflation are important, they do not always correlate directly with stock market returns. The market is forward-looking, often pricing in future expectations rather than current realities. A booming economy does not guarantee soaring stock prices, just as a sluggish economy does not always lead to a market downturn. Therefore, we focus on what makes sense for your money, not what the economy or politicians dictate. Your investment strategy should be guided by your financial goals, risk tolerance, and time horizon, not the latest political headlines. Diversification, long-term planning, and disciplined investing are the cornerstones of a successful portfolio—regardless of who holds office. While staying informed about potential policy changes that could impact specific industries or sectors is important, reacting impulsively to political developments can lead to costly mistakes. In conclusion, while politicians may color their promises in shades of blue or red, your money remains green. The noise of political campaigns should not overshadow the fundamentals of sound investing. By focusing on what truly matters—your financial well-being and long-term goals—we are here to help you navigate the ups and downs of the market with confidence, no matter who is in power. Remember, in the world of investing, it’s not about choosing sides; it’s about making informed decisions that align with your financial objectives. Hafnia Financial, Inc. is a registered investment adviser. Registration does not imply a certain level of skill or training. Information presented is for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any specific securities, investments, or investment strategies. Investments involve risk and, unless otherwise stated, are not guaranteed. Be sure to first consult with a qualified financial adviser and/or tax professional before implementing any strategy discussed herein. Past performance is not indicative of future performance. Insurance products and services are offered and sold through Jan Gleisner an individually licensed and appointed insurance agent. CA Ins Lic # 0D77385.
