Municipal bonds, liquidity traps, and the fiscal cliff, advice from Steve Sexton

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“Winning In Life” radio show airs every Sunday morning at 9:00 on KBCQ 1170 AM. The show is hosted by the Entertainer’s very own financial expert, Steve Sexton. Steve is President of Sexton Advisory Group and Director of the Financial Knowledge Institute. Not only does he provide his listeners with the best advice in financial planning, but he also introduces guest speakers from time to time to talk about other popular life topics such as health, charity, traveling, and much more.

Steve opens this segment by talking about Child Help, a foster family adoption agency in Riverside County. Child Help is having a specialty toy drive for their kids between the age of one month and 17 years old. These are all kids who haven’t been picked up and Steve wants everyone to help  out and make a kid’s dream come true by getting a child one toy. Steve is looking to collect about 60 toys and you can find a list of toys for each age at the end of this page. If you would like to donate, call Sexton Advisory Group at 800-560-2611 and ask for Brittany. They’re accepting donations until December 22, 2012.

This week, Steve has many business updates for his listeners: the Prime minster of Italy has officially resigned, resulting in higher stock prices. ObamaCare faces an unexpected expense of $63 dollars extra per head. HBSC is fined 1.9 billion dollars for helping terrorists and drug cartels launder money. In Michigan, government workers are no longer tied to their union. This eliminates the power and authority of the unions.

Onto other important issues, Steve discussed the Fed meeting on Wednesday. The Fed has decided to continue buying more bonds, up to 40 billion a month. This expansive policy will expand the fed balance sheet to 3 trillion dollars (an additional 2.2 trillion in debt). The question here is: How will they be able to shrink the balance back to normal without causing a collapse of the economy? Steve explains the effect that this has on municipal bonds. Municipal bonds are federally and state tax free. They are a safe zone for when the economy gets “murky.” Steve tells us an example that shows that you are losing return when you are trying to be too safe with municipal bonds. Always look closely at the bonds you are buying because there’s always risk even with the municipal bonds.

A liquidity trap is when people keep their money in CDs because they think they are getting good interest rates that will still rise, but they don’t. The truth is, CDs only outpace inflation by a small amount. The problem with this is there are people who don’t plan out their income and don’t anticipate future expenses. They don’t think far ahead into the future and think maybe they might have to pay for long term care facilities for their families. Because of this, they leave their money in savings accounts that have horrible interest rates and don’t have enough financial security for the future.

Steve explained the fiscal cliff which basically asks “Who would pay how much?” The average tax increase for an income range of $20,000 or lower is $412 which is 20%. The average tax increase for an income range of $40,000-,$60,o00 is $2,000. The fiscal cliff is about negotiations of recalculating how the CPI is measured based off a basket of goods. In 1975, the cost of living adjustment was added to social security and the CPI was the basis of calculating inflation. Many people, however, believe this is over stated because it doesn’t account for substitutions. For example: If the price of beef goes up, you might eat more chicken instead, which means your cost of living stays the same. It’s important to understand everything that is going on and find out how this fiscal cliff could affect you.

To listen to the full in-depth discussion, visit If you have any additional questions, submit them at Winning In Life Radio and Steve may answer them live on the show.


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