Bob’s Journal for 2/1

What You Can Learn From Jay Leno’s Estate Planning Problems

Former “Tonight Show” host Jay Leno recently petitioned a court for conservatorship of his wife’s estate.

Multiple news reports said the petition stated that Mavis Leno was diagnosed with dementia and is unable to make decisions about her estate and other matters. The court action and accompanying publicity probably could have been avoided by timely action in the past.

The petition, according to media reports, said Leno has handled the couple’s finances throughout their 43-year marriage. He wants the conservatorship so he can set up a revocable trust for his wife and complete her estate plan.

Mavis Leno apparently never had a financial power of attorney prepared that gave authority to her husband or someone else in case she is unable to handle her affairs. A power of attorney would have given her husband the authority requested in the petition for a conservatorship.

It is unknown if Mrs. Leno has the other essential estate planning document, an advance medical directive, because that wasn’t mentioned in the media reports. But the details of the court petition imply she never had any basic estate planning documents prepared.

My guess is that since Jay Leno earned the family’s income and managed the finances, neither he nor his wife thought Mrs. Leno needed an estate plan.

Everyone, no matter their age, net worth, or level of income, should execute a financial power of attorney and advance medical directive that designates who will make financial and medical decisions should they be unable to do so. Everyone also needs at least a basic will and probably a simple living trust.

If Mrs. Leno had those documents, Jay Leno would have been able to take the actions he now wants without having to ask a court to establish a conservatorship. The cost and publicity of the action would have been avoided. The Lenos could have put their business affairs in order privately and efficiently.

Know the Details Behind the Stock Index All-Time Highs

After a sluggish start to 2024, the major stock indexes resumed moving upward. By Jan. 19, the S&P 500 and Dow Jones Industrial Average established new record highs.

The S&P 500 continued to gain in five of the next six trading sessions.

But the broad stock market isn’t doing as well as the major indexes.

The technology sector is moving higher and bringing the indexes with it. But it is the only sector doing well.

The other 10 sectors in the S&P 500 are an average of about 15% below their all-time highs, and none of the non-tech sectors established a new record in January.

A few large company stocks outside the tech sector also are doing well, but it is the tech sector that accounts for most of the gains in the indexes.

The S&P 500 is capitalization-weighted, giving the companies with the largest capitalizations greater weight in the index than other stocks.

To show the imbalance in returns across the market, a version of the S&P 500 that gives equal weight to each stock has a negative 0.3% return so far in 2024.

A small-company stock index, the Russell 2000, is about 20% below its all-time high set in November 2021.

As in the days leading up to the tech stock bubble in 2000, a few big stocks in one sector of the market are moving the indexes higher.

Relatively small declines in those few stocks would cause a significant decline in the market indexes, unless the other stocks rose at the same time.

The narrow foundation of the recent record highs doesn’t guarantee that the indexes are setting up for a decline similar to the one that began in 2000.

The “Magnificent Seven” stocks have done well for investors. Those seven stocks might continue doing well as long as investors are confident enough to keep their money in popular index funds.

But investors need to be careful.

Many popular technical indicators are in neutral or negative territory, though some remain positive. And money market funds still yield 5% with little or no risk, providing competition for stocks.

There’s a lot of optimism that interest rate cuts by the Fed are imminent and that inflation has been tamed without a recession. Stocks are trading at high valuations.

It won’t take a big disappointment or surprise to cause investors to move some money out of stocks.

Medicare Advantage Plans Might Make Big Changes for 2025

In 2024, Medicare Advantage plans have more beneficiaries than original Medicare for the first time ever, according to the Kaiser Family Foundation. But some factors that propelled the popularity of Advantage plans might be changing.

Humana, a major provider of Medicare Advantage plans, delivered some cautionary words during the conference call following its recent earnings report.

The company’s executives said they believe some competitors priced their Advantage plans at unsustainable low levels to boost enrollment. They also said health care claims under the plans have been higher than projected. Plus, new regulations are driving up the cost of offering the plans.

Humana said it already is rethinking the terms of its Advantage plans for 2025. The company might withdraw from some markets or types of plans. The executives said the company is likely to increase the prices for its plans in 2025, and they expect many in the industry will do the same.

In related news, Cigna sold its Medicare business to Health Care Service Corp. The sale included Medicare Advantage, Part D prescription drug and Medicare supplement insurance. The Medicare Advantage plans have about 600,000 members.

Cigna’s Chief Executive said, “Our Medicare businesses require sustained investment, focus and dedicated resources disproportionate to their size.”

Any changes in Medicare Advantage plans won’t take effect until January 1, 2025. Beneficiaries will learn about the changes when providers issue details about their 2025 plans that usually would occur on or before Oct. 15.

Full details will be available during the open enrollment period, which runs from Oct. 15 through Dec. 7.

Medicare Advantage participants and their advisors should be ready to respond in case there are significant changes to their plans for 2025. Set aside time after Oct. 15 to study the changes in your current plan and be prepared to review the alternatives in case the changes are unpalatable.

The Data

The Consumer Confidence Index from The Conference Board increased to 114.8 in January from 108.0 in December. The January reading is the highest since December 2021 and the third straight monthly increase.

Both the Present Situation Index and Expectations Index rose, but the Present Situation Index increased much more. Inflation expectations fell to a three-year low.

Personal income increased 0.3% in December, down a little from a 0.4% increase in November. Wages and salaries increased 0.4% in December, while personal interest income increased 0.8%.

Personal consumption expenditures (PCE) increased 0.7% in December after rising 0.4% in November.

After adjusting for inflation, real PCE increased 0.5% in both December and November.

The PCE Price Index increased 0.2% in December after falling 0.1% in November. Over 12 months, the PCE Price Index increased 2.6% through both December and November.

The Fed’s preferred measure of inflation, the core PCE Price Index (which excludes food and energy prices), increased 0.2% in December and 0.1% in November.

Over 12 months, the core PCE Price Index was up 2.9% through December and 3.2% through November.

The Kansas City Fed Manufacturing Index tumbled to negative 17 in January from negative 4 in December.

The Dallas Fed General Business Activity index was negative 27.4 in January, worsening from negative 10.4 in December. The January number is the lowest in eight months.

The Production Index, a widely followed measure of manufacturing activity in Texas, declined to negative 15.4 in January, its lowest level since mid-2020.

Durable goods orders were unchanged in December after increasing 5.5% in November.

After excluding defense and transportation orders, which is considered a good measure of business investment, durable goods orders increased 0.3% in December after rising 1.0% in November.

House prices declined 0.2% in November, according to the S&P Corelogic Case-Shiller Home Price Index, after rising 0.1% in October. November was the first decline in the index since January 2023. The largest price declines for November were in Seattle and San Francisco.

Over 12 months, home prices increased 5.4% through November, according to the index, after rising 4.9% through October. The 12-month increase through November is the highest in 11 months.

The FHFA House Price Index rose 0.3% in both December and November. Through 12 months, the index is up 6.6% through November after rising 6.3% through October.

New home sales increased by 8% in December after falling 9% in November. During calendar year 2023, new home sales increased 4.2%.

Selling prices of new homes declined over the last 12 months. The median price in December was $413,200, down from $479,500 the previous December. The average selling price was $487,300 in December compared to $568,700 12 months earlier.

Pending home sales surged 8.3% in December after falling 0.3% in November. December had the highest monthly increase since June 2020 and the first rise in three months.

December’s pending home sales were 1.3% higher than in December a year earlier.

The private sector created 107,000 new jobs in January, according to the ADP Employment Report. That compares with 158,000 jobs created in December.

Gross domestic product (GDP) grew at an annualized rate of 3.3% in the fourth quarter of 2023. That’s down from a 4.9% rate in the third quarter but higher than economists’ expectations of a 2% increase.

Consumer spending increased at a 2.8% rate in the fourth quarter with spending on goods increasing faster than spending on services did.

The number of job openings increased by 101,000 in December, according to the JOLTS (Job Openings and Labor Turnover Survey) report, to 9.026 million. That’s the highest number of openings in three months.

But the number of job quits declined by 132,000 in December to 3.392 million. That’s the lowest number of quits since January 2021.

Economists believe a high number of quits indicates the labor market is robust and workers confidently quit jobs to find better ones. A declining number of quits indicates workers are less optimistic about their chances to find new jobs.

New unemployment claims increased by 25,000 to 214,000 in the latest week.

Continuing claims, which lag a week behind new claims, increased to 1.833 million from 1.806 million.

The Markets

The S&P 500 rose 1.24% for the week ended with Tuesday’s close. The Dow Jones Industrial Average gained 1.44%. The Russell 2000 increased 0.89%. The All-Country World Index (excluding U.S. stocks) added 1.57%. Emerging market equities advanced 0.57%.

Long-term treasuries gained 1.94% for the week. Investment-grade bonds increased 0.92%. Treasury Inflation-Protected Securities (TIPS) added 0.40%. High-yield bonds gained 0.73%.

On the currency front, the U.S. dollar declined 0.07%.

Energy-based commodities increased 2.96%. Broader-based commodities rose 1.55%. Gold gained 0.31%.

Bob’s News & Updates

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If you’re interested in my books, check my amazon.com author’s page.

I’m a senior contributor to the Forbes.com blog. You can view my contributor page here.