The health care sector is critical to the health and well-being of the almost 330 million people who live in the U.S. And access to good medical care has contributed to the increase in the average American’s life expectancy over the last several decades. But this sector is also essential to the economy, employing millions of people and making up almost one-fifth of the total economic output of the U.S.

What is the health care sector?

In 2019, Americans spent a total of $3.8 trillion on health care, or $11,582 per person, an increase of 4.6% from the previous year. Health care spending accounts for 17.7% of the Gross Domestic Product (GDP) of the U.S. One of the biggest employers in the country, this sector employed 20.5 million people, culminating in a payroll of more than $1 trillion.

The health care sector in the U.S. includes many different industries and businesses that work together to provide medical care to people: 

• Companies that manufacture medical equipment— everything from scalpels to MRI machines—are part of this sector. The leading businesses in the medical equipment industry are Medtronic, with a revenue of $28.91 billion, Johnson & Johnson with $25.96 billion in revenue, and Abbott Laboratories with a revenue of $19.95 billion.
• The health care sector also includes pharmaceutical companies that make the prescription drugs needed to treat cancer, diabetes, depression, and more. Brand name pharmaceutical manufacturing is a $205 billion industry, led by AbbVie, Bristol-Myers Squibb, Johnson & Johnson, Merck & Co., Amgen, and Pfizer.
• There are hundreds of biotechnology companies in the U.S. that produce medicines, therapeutic treatments, and other medical products through the development of biological and chemical processes. Biotech firms are responsible for a great deal of the innovation in the health care industry, experimenting with new treatments for illnesses. Biotech companies such as Moderna, Novavax, and Gilead have been at the forefront of the development of vaccines and treatments against Covid-19. In the U.S., the biggest biotech companies by market capitalization are Moderna ($66 billion), Vertex Pharmaceuticals ($56.4 billion), and Regeneron Pharmaceuticals ($55 billion). 
• Health care facilities and professionals are critical to the health care sector. There are more than 6,000 hospitals throughout the U.S. and consumers spend more than $1.2 billion on those facilities annually. 

Regulation in the health care sector

Health insurers are also important to the health care sector in the U.S. The health insurance industry is a $1.1 trillion market, growing 5.1% on average per year between 2016 and 2021. Health insurance is intended to protect you from incurring massive, unplanned costs from your medical treatment. 

About half of Americans receive health care coverage from private insurers through their employer, according to a 2019 survey from Kaiser Family Foundation. (More than one-third self-purchase government insurance, and the remainder are uninsured. See graphic below.) The largest providers of medical insurance in the U.S. are UnitedHealth, Anthem, and Humana. For those people who don’t receive health care coverage through work, the 2010 Affordable Care Act was created to help make coverage more affordable and accessible.

*Source: Kaiser Family Foundation, 2019

Both state and federal agencies, including the Food and Drug Administration (FDA), the Centers for Disease Control and Prevention (CDC), the Department of Health and Human Services (HHS), and  the Centers for Medicare & Medicaid Services (CMS), regulate the industry to help maintain fair costs and good care for patients.

Since the late nineteenth century, there has been a push to create a public option for medical insurance subsidized by the federal government. Proponents of this movement support universal health care, which would aim to provide the same coverage to all Americans at the same cost. In recent years, politicians such as Senators Elizabeth Warren and Bernie Sanders have thrown their weight behind the movement for Medicare for All, which aims to expand the public option to include all Americans. Opponents of the movement have argued that Medicare for All could further complicate the health care system in the U.S., and prevent people from getting the care they are used to receiving.

Investing in the health care sector

You might decide to invest in the health care sector for a number of reasons. Health care is a necessity for everyone, and the demand for things like equipment and prescription drugs is consistent. Additionally, the health care sector is the second-largest one in the S&P 500.  Adding health care investments to your portfolio can help you diversify. 

Health care stocks tend to be defensive, meaning that they deliver consistent results regardless of how the economy is performing, since people always need health care. For example, as of April, 2020, the health care sector fell only 18% from February 19, 2020 as a result of the pandemic, while the rest of the S&P 500 dropped 27%. 

Still, all investing involves risk, and this sector is no exception. Because the health care industry is heavily regulated by the government, any changes to policy related to health care can affect the performance of those stocks.¹ Additionally, biotech stocks can be volatile, and therefore risky for investors. 

When investing, remember to follow the Stash Way® by investing small amounts of money regularly in a diversified portfolio. Diversifying your portfolio with investments across several different sectors can help protect you from taking on too much risk. With Stash, you can invest in single stocks of health care companies like Abbvie, UnitedHealth, Moderna, and more.² You can also invest in ETFs that include health care companies.

The post How the Health Care Sector Provides Essential Services, and Powers the Economy appeared first on Stash Learn.

Now the company is being sued by nearly 12,000 plaintiffs, who say the company’s baby powder caused ovarian and other cancers.

What’s going on with Johnson & Johnson and asbestos?

The lawsuits have compelled J&J to share hundreds of pages of documents, some stretching back to the 1970s.

The documents, which include internal memos and reports, allegedly show that the company knew its baby powder contained asbestos, a known cancer-causing substance.

Asbestos sometimes occurs naturally in the mines where talc is found. Talc is a primary ingredient in J&J’s baby powder.

News of the product deficiency hit the company stock, which tumbled 10% last week, wiping out $40 billion in market value.

Here are details regarding the Johnson & Johnson asbestos scandal:

• This summer, a jury awarded $4.7 billion to 22 women who claim they contracted ovarian cancer from J&J baby powder.
• J&J executives, doctors, and attorneys knew that the raw talc in its baby powder sometimes contained asbestos, according to reports.
• Company executives and other officials intentionally hid this information from the public, and misled investigators, according to lawyers suing the company
• J&J also reportedly pressured the Food and Drug Administration (FDA) into repressing reports of asbestos in its baby powder, and successfully lobbied against regulation of asbestos in talc products.
• J&J continues to claim its baby powder is free of asbestos and has appealed the legal decisions.

Ethics are important

The big lesson is that it’s probably a best practice for public companies to behave ethically, and they are vulnerable to news of investigations when they do not. Not only their stocks, but ultimately the value of the companies themselves, are determined by how responsible companies are to their customers and shareholders.

Further, the ethical values and actions of companies are something that investors might consider before making an investment.

How can you know if a company is doing the right thing?

It’s important to do research on any company you or fund in which you plan to invest.

One good place to start is the Securities and Exchange Commission (SEC), where you can read all of the public documents that companies file every quarter about their operations.

Companies can bow to pressure

Both private and public companies are frequently the subject of investigations, which can often prompt change for the better.

Walmart: In 2012 and 2013, fatalities from a factory fire and factory collapse at facilities that the giant retailer uses to manufacture garments in Bangladesh, put Walmart under the microscope for its safety standards overseas. (H&M and the Gap also used the factory that collapsed in Bangladesh.) Walmart refused to sign on to a legally binding agreement to improve standards, but set up an alliance to improve the safety of workers in that country.

Nike: In the 1990s, Nike was found to have maintained sweatshop working conditions in its overseas factories. News reports prompted improved conditions and now Nike is often viewed as a model for manufacturing standards in emerging markets.

Uber: After numerous scandals involving alleged sexual harassment, spying, false advertising, and other possible misdeeds, the ride-sharing company got rid of its chief executive officer and replaced him in 2017 with a new leader who hopes to rebuild relationships with customers and communities.

The post Johnson & Johnson’s Asbestos Problem: Do Companies Have Ethical Obligations? appeared first on Stash Learn.

Epidiolex, a medication developed to treat two forms of childhood epilepsy, contains a chemical compound found in the cannabis plant, called cannabidiol (commonly referred to as CBD).

It’s the first time the FDA has approved a drug that contains a substance derived from marijuana.

What you need to know:

• The Food and Drug Administration (FDA) approved Epidiolex to be sold in the U.S.
• The drug helps treat seizures generally associated with two of the rarer and most severe forms of epilepsy, Lennox-Gastaut syndrome, and Dravet syndrome.
• It’s the first time the FDA has approved a drug that contains a substance derived from marijuana.
• The drug is produced by U.K.-based GW Pharmaceuticals.
• Information regarding availability and pricing will be announced by the end of summer, according to the manufacturer.

What’s CBD?

CBD, the primary chemical component in Epidiolex, comes from the cannabis plant.

CBD has been found to have therapeutic and medical applications and does not have any associated psychoactive effects, unlike its chemical cousin, tetrahydrocannabinol (THC). THC is the psychoactive compound in the plant, which produces the trademark “high”.

In addition to seizures, CBD is used to treat conditions like multiple sclerosis, Parkinson’s disease, and rheumatoid arthritis.

A message from the FDA commissioner:

“This product approval demonstrates that advancing sound scientific research to investigate ingredients derived from marijuana can lead to important therapies,” FDA Commissioner Scott Gottlieb said in a statement.

“The FDA will continue to support rigorous scientific research on potential medical treatments using marijuana and its components that seek to be developed through the appropriate scientific channels,” he added.

What’s next for marijuana and medicine?

The FDA giving Epidiolex the go-ahead for U.S. sales could, however, open the door for other cannabis-derived drugs to also earn government approval. The approval marks a historic first for the U.S. government.

Read more: If Cannabis is Illegal Under Federal Law, How Is It Legal to Invest In It?

Also, the news comes on the heels of the Canadian government’s passage of legislation to legalize marijuana for recreational use nationwide. Several U.S. states have also legalized cannabis, though it’s still federally prohibited.

Want to learn more about companies leading the charge in the marijuana industry? Check out these investments on Stash.

The post Marijuana-Derived Epilepsy Drug Gets Green Light From FDA appeared first on Stash Learn.

At their current pace of spending, Medicare officials said the trust fund will be depleted by 2026, three years sooner than previously forecast.

Similarly, Social Security officials said the program’s expenses have already exceeded annual revenue, and for the first time since 1982, it has had to dip into a $3 trillion reserve fund to make payments. The Social Security Administration had previously forecast that it would not have to tap reserves until 2021.

At its current pace of spending, the Social Security fund will be out of money by 2034, according to the report.

The shortfalls alarmed experts, and highlight the need for individuals to save for their own retirements.

“The current trajectories in health spending are both unsustainable and unmatched by increases in quality,” Alex M. Azar II, the Secretary of Health and Human services and a trustee of Medicare and Social Security, told the New York Times on Tuesday.

What are Social Security and Medicare?

Medicare is the government-run health insurance program that covers 58.4 million people, primarily retired, for care ranging from hospitalization to prescription drugs. It’s financed through a payroll tax and premiums paid by recipients.

Social Security is a federal program that provides monthly income during retirement. The program sends checks to 62 million people each month. It’s funded primarily through payroll taxes. It currently has a reserve fund of about $3 trillion.

At its current pace of spending, the Social Security fund will be out of money by 2034

Why are the trust funds running out money?

Expenses for the programs are rising slightly, and tax revenues are lower than forecasts, according to reports.

The tax cut legislation approved last year will result in less revenue for government programs, and is expected to increase the annual deficit and the national debt.

A Savings Crisis

It’s important to start saving for your own retirement now.

Americans have a hard time saving, in general. Multiple reports suggest that the average family only has $1,000 in savings. And average retirement savings for all working families is about $95,000.

If you’re making about $40,000 a year now, you’d need to save about $1.18 million to have the same standard of living in retirement, according to AARP.

The average payout from Social Security is $16,464 annually, or about $1,372 per month, according to reports. For most people, that’s not nearly enough to fund a retirement. In fact, the average retired family, defined as a household headed by someone 65 year old and over, spends about $45,756 annually.

Meanwhile, the rising cost of healthcare is likely to take up half of Social Security income by 2030, according to a report from the Kaiser Family Foundation.

Here’s what you can do

People can save for their own retirements via a variety of accounts, including workplace plans such as 401(k)s, self-directed individual retirement accounts, or IRAs and Roth IRAs.

Ready to start thinking about your retirement? Get Stash Retire.   

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Americans pay $3.4 trillion per year for health care and related services, according to industry data. By 2025, health care spending will represent almost 20% of the entire U.S. economy.

And no one is exempt. The average American, who has an employer-sponsored health insurance plan, spends $6,690 annually for coverage, according to Kaiser Family Foundation. For a family, the average annual cost is $18,764.

Further, only around half of the U.S. population is covered by employer-backed plans. Which means that people are either going without coverage (9%), are using a government plan like Medicaid or Medicare (35%), or are on their own.

Insurance, too, is only one component of the massive and multi-faceted health care industry. It may be the component that most consumers are familiar with (along with doctor’s offices and hospitals), but the sector comprises many other pieces.

Scalpel, please! Inside the health care sector

From a consumer’s perspective, it may seem like the health care industry is nothing more than a gigantic money vacuum. But it is much more than that.

The sector is made up of public and private companies, non-profit organizations, and individuals that provide medical care and services (hospitals, etc.), produce and develop new medications and equipment (pharmaceutical and biotech companies, laboratory equipment manufacturers), offer insurance, and facilitate patient care.

Millions of people working in the sector also, in a variety of roles. While you may think immediately of insurance adjusters and nurses, occupations like dentists, yoga instructors, midwives, and acupuncturists are also employed under the health industry’s umbrella.

The sector’s key players include large insurance companies like UnitedHealth Group and Aetna, pharmaceutical companies like Merck and Johnson & Johnson, and many others, like medical distribution company McKesson, CVS Health, and pharmacy management company Express Scripts Holdings.

But the playing field is far from set. Many of the biggest companies in the sector have been merging, creating larger companies with a wider reach. CVS and health insurer Aetna, for example, announced their intent to merge late in 2017, which would marry one of the country’s largest insurers with one of the largest drugstore chains, which officially closed in November 2018. 

Other mergers are in the works, too, such as the proposed acquisition of another insurer, Humana, by Walmart.

Not willing to be left out in the cold, there are also companies on the outside who are looking to get in and disrupt the industry. Among them are Amazon, Berkshire Hathaway, and JPMorgan, which recently announced that they would team up to try and rattle the sector.

The sector’s economic gravity

Here’s the thing about health and medical care: Everybody needs it at one point or another. Which means there will probably always be customers, and money to make.

This is the primary reason the sector has such a massive amount of economic gravity. For proof, you really just need to dive into the numbers.

For one, the health care industry employs more people in the U.S. than any other. In 2017, the number of people working in health care surpassed the next two largest industries, manufacturing and retail.

The sector employs approximately 18 million people, according to the Centers for Disease Control, and 80% of them are women. It’s expected that the industry will continue to grow, too, with projections from the Bureau of Labor Statistics estimating that the health care industry will add 2.4 million new jobs by 2026.

These workers are paid relatively well, too, with median annual wages of nearly $65,000, nearly twice the national median income. But because the industry is largely subsidized by taxpayer funds–almost two-thirds of the industry receives taxpayer backing, worth approximately $2 trillion according to analysts–it eats up a lot of national resources.

The industry’s contributions

What type of benefits have Americans derived from all of that spending? For one, the average American’s life expectancy has increased considerably over the years. A child born today can expect to live to around 79, on average, according to the CDC.

For babies born in 1950, average life expectancy was only around 68. If you were born in 1900, it was around 47.

Improvements to sanitation, housing, and education have helped improved the quality of life worldwide. And most of the credit goes to the health care sector, which, in a variety of ways, has been the major contributor.

The health care industry is also one of the most innovative industries, and it would be difficult to list off all of the industry’s achievements and breakthroughs over the years. Those include the creation and discovery of vaccines, anesthetics, antibiotics, radiologic imaging, and more.

The (heart) beat goes on

Looking ahead, the industry’s set for massive growth according to industry analysts. America’s population is getting older, which is likely to translate into increased demand for health services, devices, and drugs.

In the near-term, unfortunately, health care costs aren’t expected to recede. Analysts are predicting that growing costs will outpace wage growth, tightening the financial vice on both households and the government. In 2018, PricewaterhouseCoopers projects medical costs to increase 6.5% over 2017.

A key issue facing the sector is uncertainty surrounding the law and regulations. That not only pertains to insurance companies grappling with regulations and rules under the current laws, but to pharmaceutical and biotech companies working on new drugs.

Despite those uncertainties, the industry’s biggest players can expect the profits to keep growing. Consumers, on the other hand, should probably plan to spend more on health care well into the future.

Want to learn more about investing in health care companies? Check out the themed funds and single stocks available on Stash.

The post A Look Inside the U.S. Health Care Industry appeared first on Stash Learn.

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We all know how important health insurance is. But why does it have to be so complicated? It’s bad enough that it’s one of the biggest bills we pay each month. But in today’s political climate, it’s hard to understand what’s going on. 

For most of us, we just want to be able to go to the doctor when we’re sick and not have to pay a fortune when the bills come. We all have different health issues that require different kinds of care.

In the U.S.,12.2% of adults are living without any kind of health insurance, according to recent data. And that number is rising.

If you don’t have health insurance or you’re about to kicked off your parents’ plan, this episode with Jennifer Fitzgerald, the CEO of Policygenius, is a must-listen episode.

Ready to start investing? Sign up for Stash and then enter the promo code PODCAST and you’ll get $5 to get started on your financial journey.

The post Podcast: Learn About Health Insurance with Jennifer Fitzgerald appeared first on Stash Learn.

In December, CVS announced a $69 billion merger deal that would combine the operations of the two companies. The deal has yet to be approved by regulators.

Nevertheless, the merger will require a lot of money, and in order to fund the acquisition, CVS will need to raise some cash.

This week, CVS said it will do that that by selling $44 billion in corporate bonds. It’s reportedly the largest corporate bond sale in two years, according to the Wall Street Journal.

What are bonds?

Bonds are one of the most important parts of how financial markets work. And the bond market is large and complex, nearly twice the size of the global equities market, worth about $92 trillion, according to recent industry research.

As interest rates increase, bond prices tend to fall.

Both governments and companies sell bonds when they want to raise money. Think of bonds like a loan you make a company, which then promises to repay what it has borrowed within a set period of time, while making interest payments.

When the U.S. government issues bonds, they’re called Treasuries, and these bonds typically mature in ten to 30 years. (The government also issues bonds with shorter maturities, called T-bills.) Maturity means the period after which the bond’s original amount must be paid back, including any interest payments.

What are corporate bonds?

When companies issue bonds, they’re called corporate debt. Companies of all kinds issue bonds, and they do it to fund their operations, to conduct research and development, or to make acquisitions, among other things.

Companies typically pay more interest than the U.S. government for their debt, for several different reasons. One is that the interest on corporate debt is taxed–so to make up for that, businesses have to increase the yield on their bonds.

Another reason is that corporate debt is also inherently more risky than government debt.

Think of it this way: a company doesn’t have the power or resources of the U.S. government to promise repayment. A greater variety of things can happen to companies, even the largest and most stable companies. They can have bad years, or even go out of business.

So investors–most of whom buy bonds through mutual funds and ETFs–expect a higher interest payment for the debt, to compensate for the extra risk.

Corporate bonds are rated

There are two kinds of corporate debt: investment grade, and something called “junk”, based on industry ratings.

There are three ratings companies that research bond debt and produce a grade for it. They are Standard & Poor’s, Fitch, and Moody’s. Each one has a slightly different way of rating bonds, but the top grade for investors for all three is what’s known as a triple A, or AAA, rating. Investment grade bonds are anything above a triple B, or BBB, rating.

Junk bonds

Some companies issue bonds that are not considered investment grade. Their bonds are referred to as junk bonds.

In order to get investors to pay for the bonds, companies often offer drastically higher interest rates, or yields. That makes the bonds more attractive to investors, but the investments can potentially have a higher rate of default, which means they may not pay back the loan.

As interest rates increase, bond prices tend to fall.

These bonds have low credit ratings, or no ratings at all, because the companies issuing them may be experiencing serious financial troubles.

Inflation, interest rates and the bond market

The bond market has been going through a transition lately. Interest rates are rising and there are fears about inflation. As interest rates increase, bond prices tend to fall.

Low interest rates are good for companies that issue debt. Think of it like your credit card. The higher the interest rate, the more expensive it is to carry debt. So it is with companies. If they can issue debt that investors buy at lower rates, it’s more affordable for them to pay it back.

In 2017, with global interest rates hovering below 2%, companies issued record numbers of new investment grade bonds, with global bond volumes reaching $3.3 trillion, according to reports.

But interest rates have ticked up half a percent in 2018, which has made it more expensive for companies to issue bonds.

CVS, which will issue up to nine sets of bonds with maturities ranging from two to 30 years, and could offer interest rates of 4% or more.

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Economy, Sector, and Industry are sort of like that. These terms are ways to break down the economy into pieces that investors can then analyze and understand.

When it comes to investing and the stock market, a sector refers to a large segment of the economy. Companies within a single sector have a common product or service.

There are 11 different sectors reflected in the U.S. Stock Market:

• Communications services
• Consumer Discretionary
• Consumer Staples
• Energy
• Financials
• Health Care
• Industrials
• Materials
• Technology
• Real Estate
• Utilities

Each sector then contains several industries. An industry is a narrower distinction that represents a specific group of companies. For instance, the materials sector can contain the chemicals and construction materials industries.

By way of example, Johnson & Johnson is part of the health care sector and the pharmaceutical industry, and Chevron is part of the energy sector and the oil & gas industry. One company can also have its feet in multiple sectors and industries.

General Electric, for example, is one company, but it’s in both the energy and industrials sectors.

An entire economy can be broken down into sectors, which, when combined, account for pretty much all the activity of the economy. Certain economies are even known for particularly successful sectors; think Saudi Arabia and energy, China and industrials, and the United States and technology—Apple, Microsoft, and Google ring any bells?

Often people choose to invest in particular sectors and industries in order to diversify their portfolios.

Often people choose to invest in particular sectors and industries in order to diversify their portfolios. Diversification is an investing technique that involves investing across varying sectors, geographies, and asset classes in order to weather the ups and downs of particular investments. Different sectors potentially behave differently in different economic environments.

This can be well illustrated by two sectors that sound similar, but are often behave individually: consumer staples and consumer discretionary. Consumer staples are the things you really need to survive, think food and beverages, household goods, and personal products. The consumer discretionary sector includes industries like retail, hotels and leisure, and clothing and apparel. During hard economic times, the consumer staples sector tends to thrive, as people continue to buy the things they need while cutting back on more discretionary purchases. During economic boom times, the consumer discretionary sector tends to benefit as people spend their extra income on travel, restaurants, and more leisure-oriented purchases.

Mutual funds and exchange-traded funds, or ETFs, often attempt to track indexes, which are groups of companies with something in common.  While some indexes, such as the Dow Jones Industrial Average are broad, others track entire sectors.

With that in mind, well-known exchanges like Nasdaq and the New York Stock Exchange (NYSE) have sector-specific indexes, such as the NASDAQ Telecommunications Index and the NYSE Health Care Index.

Fun Fact: the Dow Jones Industrials Average doesn’t only track industrials, though it used to! It was first calculated in the 1800s and made to represent the industrial sector. Now it tracks some of the largest companies in the United States like 3M, ExxonMobil, and Verizon.

As an investor, it can be important to be broadly diversified across sectors and industries. Putting all your money into one sector means that you will benefit when it is doing well, but you will feel the pangs of loss when that sector has a setback. Though even the most diversified portfolio can suffer losses as all investing involve risk, broad diversification across sectors and geographies can help to guard against loss when a particular sector suffers.

The post What’s a Sector? What’s an Industry? What’s the Difference? appeared first on Stash Learn.

Yes, we’re talking about the marijuana industry. In the last few years, perhaps no other sector except technology has generated so much–well, buzz.

In California, for example, which legalized recreational use of marijuana at the beginning of 2018, people are lining up for blocks to buy from pot dispensaries for the first time. People are also congregating at gatherings some have compared to modern-day tupperware parties to sample and exchange marijuana products in busy cities including Los Angeles and San Francisco.

And cannabis entrepreneurs are digging in for what’s expected to be a long, lucrative slog.

“The U.S. is  creating the first truly scalable cannabis industry, and the rest of the world is looking at what is taking place,” says David Rheins, the chief executive and co-founder of the Marijuana Business Association, a trade group based Las Vegas, devoted to the cannabis industry and cannabis business owners.

State Laws  vs. Federal Laws

While federal law still considers pot use and possession illegal, eight states and the District of Columbia have legalized cannabis for recreational purposes in recent years. Colorado was the first in 2014, but California is the the largest state allowing purely personal use of marijuana, with a market that’s expected to top close to $4 billion in 2018.

Cannabis entrepreneurs are digging in for what’s expected to be a long, lucrative slog.

There are now also 29 states that allow doctors to prescribe cannabis for medical purposes, which can include helping to alleviate nausea related to chemotherapy, stimulating appetite for people who are chronically ill, and curing insomnia.

Meanwhile, attitudes are changing. Nearly two thirds of Americans say marijuana should be legal, according to a 2017 Gallup poll. That’s up from 60% in 2016, and just 34% in 2002.

An economic boon?

And this is potentially just the beginning. The marijuana industry is expected to add 200,000 new jobs in the U.S. by 2020, according to New Frontier Data, which provides research on the cannabis market.

Growth is expected for a long list of businesses, such as the cultivators and packagers of the plants, dispensaries for medical and recreational weed, not to mention companies creating products that use cannabis byproducts called CBDs. CBDs are non-pyscho-active derivatives of cannabis, which can be used for a variety of purposes, including helping with inflammation, chronic pain, and depression.

Companies are also capitalizing on industrial uses for cannabis, including the production of hemp, which can be used to make fabrics and textiles, as well as being used as additives to health food and body care products.

And it all makes for big business. Total legal sales of cannabis were about $10 billion in 2017, and are expected to grow to $24.5 billion by 2021, according to reports.

The business of marijuana: The legal landscape

Certainly legal challenges remain for the cannabis industry. In January, for example, the U.S. Department of Justice reversed an earlier policy of non-interference toward states that have legalized pot. That could make things more complicated for growers and sellers in these states. Meanwhile, banks, which are federally regulated, can’t legally take deposits from cannabis businesses.

Nevertheless, lawmakers seem to be working slowly toward a resolution. The Congressional Cannabis Caucus, a bipartisan group of senators and representatives, hopes to resolve the conflict between federal laws banning marijuana use, and state laws that allow it.

And in January, attorneys general from 19 states including Hawaii, Alaska, and Colorado sent a joint letter to members of Congress, urging them to introduce legislation that would allow legal marijuana businesses to access banks and other financial services companies in the U.S.

And momentum seems to be with the industry, especially as it’s already providing important tax revenue to states–since legalizing marijuana, Colorado has pulled in $500 million in tax and related revenue, according to reports. And that could ultimately add billions to federal coffers too.

“There are millions of customers who are excited about legal cannabis,” Rheins says. “[The industry] is getting bigger and bigger and it’s not going to stop.”

The post The Marijuana Business: What You Need to Know appeared first on Stash Learn.

Driven largely by a major overhaul to tax laws in December, biotech stocks have been posting sizable increases this week, as companies in this industry have pursued high-profile mergers and acquisitions that investors seem to find promising.

What is biotech?

Biotech companies produce medicines, therapeutic treatments, and other medical products through the development of biological and chemical processes.

Companies in the industry include some pretty big names you’ve probably heard of, including Pfizer, Amgen, Gilead, and Merck.

What do tax laws have to do with the market?

The changes to tax law, which include a steep cut to the corporate tax rate and an incentive to move cash from overseas to the U.S., are two big reasons why the sector is heating up, according to some experts.

Here’s why:

• The updated tax law slashes the corporate tax rate by nearly in half, to 21% from a previous rate of 35%, meaning companies–including biotech firms–are likely to have more cash on hand in 2018 to buy other companies.
• U.S. companies hold a staggering $2.8 trillion of profit overseas. The two main industries collecting cash overseas are biotech and technology, including companies such as Apple, Microsoft, and Cisco, according to the New York Times.
• Many biotech companies have set up operations internationally to avoid paying high corporate taxes in the U.S., and now hold billions of dollars overseas. However, the new tax law will allow them to “repatriate” that cash at a very low tax rate. That means they can bring the cash back to the U.S., and pay taxes as low as 8%, according to reports.

So how much money are we talking about?

The following is an estimate of what some of the largest biotech companies have stashed overseas:

• Gilead: $29.3 billion
• Bristol-Meyers Squibb: $8.4 billion
• Celgene: $6.9 billion
• Biogen: $4.3 billion

Source: Bloomberg, June, 2017

With all that extra cash potentially coming back to the U.S., it makes sense that biotech companies might use some of it for mergers and acquisitions.

When a company acquires or merges with another company, it usually puts the combined businesses in a stronger position competitively. Companies buy other companies if they have something they need. That could be products, or services or even important research, which is the case in many pharmaceutical deals.

Fun fact: When people talk about M&A, they’re talking about mergers and acquisitions.

Deals in play

With that in mind, here’s a look at what biotech companies announced this week, subject to regulatory approval:

• Celgene announced it planned to acquired Juno Therapeutics for $9 billion.
• French company Sanofi said it would purchase U.S. drugmaker Bioverativ for $11.6 billion.
• Also this week, BioCryst Pharmaceuticals said it would merge with Idera Pharmaceuticals through an exchange of stock.

The M&A activity over the past few days follows a period of fewer acquisitions in the industry, according to reports. One exception is Gilead, which purchased Kite Pharma for close to $12 billion in September, 2017, in a bid to develop immunotherapy drugs. In October, the Food and Drug Administration gave the green light to Kite’s new cancer-fighting immunotherapy.

So what happened?

Here’s what happened to stocks and stock fund values after the mergers and acquisitions were announced:

Modern Meds (XBI), whose underlying fund is SPDR S&P Biotech ETF, surged 5% by Tuesday.*

Similarly, iShares Nasdaq Biotechnology ETF, also posted an increase of nearly 5%.*

Good to know: When one company announces it will buy another, it usually affects the share price of one or both companies. If investors favor the deal, generally speaking stock prices will move up. If they don’t, stock prices will move down.

For example: Celgene’s stock was up 3% on Tuesday, while Juno’s stock was down .06%.**

*Source: Yahoo Finance, January 23, 2018

**Source: MarketWatch, January 23, 2018

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The Senate passed the most sweeping changes to the U.S. tax code in a generation, voting in favor of a Republican plan early on Wednesday.

The bill, which passed by a vote of 51 to 48, is the first major legislative victory for Republicans and President Donald Trump in 2017. The president is expected to sign the bill into law by Christmas.

The plan revises nearly all parts of the tax code, according to analysis, but it provides the most significant tax cuts for business and the wealthy, while the middle class and poorer tax payers will see more modest tax savings. The average taxpayer is expected to save $1,600 in 2018, according to the Tax Policy Center.

The tax plan eliminates something called the individual mandate by 2019

Just as significantly, the plan will affect healthcare plans, as it junks a critical revenue stream for the Affordable Care Act. It is also expected to add up to $3.5 trillion to the federal deficit.

But how will it all affect you?

Here are the highlights of the tax plan*:

Changes for taxpayers

• The bill maintains seven tax brackets, but lowers rates for five of them and adjusts income thresholds, according to Bloomberg. (An earlier plan would have reduced the number of brackets to four, eliminating the bottom rate of 10%.) For example, the plan reduces the top tax rate for the wealthiest Americans to 37% from 39.6%, and increases to $500,000 from over $426,000 the earnings threshold at which the higher tax kicks in. It jumps to $600,000 for married couples, up from $480,050.

Source: Wall Street Journal

• The standard deduction–or amount of income free from taxes–for individuals and families, however, would nearly double to $12,000 and $24,000 respectively. However, the current personal exemption deduction of up to $4,150 for individuals and their dependents will be scrapped.
• The child tax credit doubles to $2,000 from $1,000.
• The interest deduction for mortgage debt drops to $750,000, from $1 million. An earlier House plan would have sliced the size of eligible mortgages in half.
• Deductions for state and local taxes will be replaced by a flat $10,000 deduction for property taxes. Representatives in high tax states including New York, New Jersey and California have objected loudly to this change, according to reports.
• Most of the tax reductions for individuals and families will expire by 2025.

Handouts for the very rich

• The estate tax of 40% would remain, but only for estates valued at $11.2 million or more, or double the current estate tax value. An earlier House plan would have eliminated the estate tax entirely by 2024.

Changes affecting healthcare costs and expenses

• The tax plan eliminates something called the individual mandate by 2019. The individual mandate is one of the primary underpinnings of the Affordable Care Act, known as Obamacare. It currently requires all taxpayers to purchase healthcare insurance or pay a tax penalty. Without the mandate, some experts predict massive disruption in health insurance markets, with more people losing access to health care.
• The annual deduction for medical expenses will increase, for amounts in excess of 7.5% of gross income. Under current law, taxpayers may deduct for expenses in excess of 10% of adjusted gross income. Health care groups and other lobbyists criticized an earlier House that would have eliminated the deduction.

Businesses get a big break

• The corporate tax rate will decrease to 21%, from a current rate of around 35%. An earlier bill would have lowered the rate to 20%.  Many business partnerships will get a standard income deduction of 20%.
• Small business owners will be able to write off up to $1 million in qualifying expenses annually, doubling their current deduction.

A popular student deduction stays

• A deduction for student loan interest of up to $2,500 annually will remain. Earlier bills had proposed getting rid of it.

The post What the Biggest Changes to Taxes in a Generation Mean for You appeared first on Stash Learn.

On Wednesday, the Food and Drug Administration (FDA) approved a new treatment for certain kinds of blood cancer. Called Yescarta, it’s the second “living drug” therapy for cancer approved this year.

What’s unique about the treatment is that it uses something known as gene therapy, which re-engineers the body’s immune system cells, called T cells, to target cancer specifically. The treatment, dubbed CAR-T in scientific lingo, prompts the body’s own protective cells to recognize and fight cancer.

About 80,000 people a year are diagnosed with blood cancers, which include leukemia and lymphoma

Kite Pharma, of Santa Monica, California, developed Yescarta. In September, drug maker Gilead purchased Kite for close to $12 billion. That was the largest acquisition that Gilead has ever made, and the purchase signaled to financial analysts that the pharmaceutical company planned to move into new forms of drug treatment.

Healthcare companies working toward new cancer treatments

About 80,000 people a year are diagnosed with blood cancers, which include leukemia and lymphoma. In tests of Yescarta, nearly three quarters of those treated reportedly saw reduction in blood cancer, and remained healthy 8 months later, according to the Associated Press.

In August, the FDA approved a similar therapy for blood cancer, called Kymriah, from drugmaker Novartis, of Switzerland.

The downside: The new treatments are expensive, currently costing between $370,000 and $500,000, according to reports. Yescarta and Kymriah can also have serious side effects, according to both companies. Yescarta has been approved for use in patients where at least two other cancer treatments have proven ineffective.

Kymriah is also approved for use on a restricted basis, according to Novartis.

Want to learn more companies that are making advances in healthcare? Check out Modern Meds and Doctor, Doctor, two funds available on Stash.

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Healthcare is a big expensive headache for most people. And that’s increasingly the case as more people find themselves with high-deductible health plans where they pay for more of their own medical costs. These plans typically have a lower monthly premium, they have increased in popularity in recent years: in 2016, 29 percent of workers were enrolled in a high-deductible health plans (HDHPs), according to the Kaiser Family Foundation.

But with some planning, there are ways to manage these higher medical costs of HDHPs. A health savings account (HSA) is a great way to set aside money for healthcare-related costs.

Best of all, it’s a tax break.

What is an HSA, anyway?

An HSA is a savings account you fund with pre-tax earnings, which is money you make before taxes get taken out of your paycheck.  One of the big benefits of your HSA contributions is they actually decrease your taxable income. You can use this money to pay for qualified medical expenses. These can include things like doctor or hospital visits and prescriptions. There’s a list of all the things that are covered by your HSA, so you can plan ahead of time as to what you may need to plan for.

Individuals can contribute up to $3,400 and families $6,750 annually, as long as your HDHP has a minimum annual deductible of at least $1,300 for individuals or $2,600 for families, as set forth by the Internal Revenue Service (IRS).

What can I use my HSA for?

Think beyond checkups and medication. You can use the money you save for things including glasses or dental work or chiropractic care.

New moms can use HSA funds for breast pumps and supplies, and the cost of lead-based paint removal in your home can also count as a medical expense. It pays to thoroughly review the IRS’s official list of medical expenses.

Think beyond checkups and medication. You can use the money you save for things including glasses or dental work or chiropractic care.

Are there rules and restrictions on an HSA?

There are plenty of stipulations regarding which expenses can and can’t be covered using your HSA.

For example, while lab expenses, home care, and surgery is covered, monthly gym dues or cosmetic procedures are not.

Why do I need a dedicated Health Savings Account (HSA)? Can’t I just save money in my regular savings account?

You could, but you’d miss out on a major tax break. Your HSA contributions are made from pre-tax earnings, which means they decrease your taxable income.

These accounts are “triple-tax advantaged.” That means, you can put money away pre-tax. Your earnings in the account are untaxed, and when it comes time to pay for a medical expense, the money you withdraw from an account to make a payment is also untaxed. The money is already there waiting for you.

What are the rules and restrictions on an HSA?

There are plenty of stipulations regarding which expenses can and can’t be covered using your HSA. For example, while lab expenses, home care, and surgery is covered,  monthly gym dues or cosmetic procedures are not. You’ll want to check  with the this list at IRS.gov to make sure.

You also may not be eligible to fund an HSA if you have received Veteran Administration benefits recently, or are covered by another health insurance plan that doesn’t have a high deductible. The IRS has additional criteria you should review to determine your eligibility.

Don’t have a job that offers an HSA?

If you’re enrolled in an HDHP,  you can open an HSA through your financial institution and start setting aside tax-deductible contributions. Local banks, credit unions and brokerages all offer HSAs, so you should shop around to find the right one for you.

Do I need to set up an HSA through an employer? What if I’m self-employed?

If you’re insured through an employer, they may offer to open an HSA account on your behalf. If not, you can open your own HSA through your bank or financial institution, as long as you’re currently enrolled in an HDHP. Some employers make it easy to contribute to an HSA through payroll deductions. If you’re self-employed, you can make post-tax contributions and claim the deduction at the end of the year on your tax return, which should result in money back.

As you contribute to your HSA, be mindful of the yearly cap on contributions. Some employers kick in contributions to their employees’ HSAs, which is a nice perk that also counts toward your yearly maximum.

For example, if you’re an individual, your contribution limit in 2017 is $3,400. If your employer contributed $700 to your HSA at the start of the year, your own contributions cannot exceed $2,700.

If you’re enrolled in an HDHP,  you can open an HSA through your financial institution and start setting aside tax-deductible contributions. Local banks, credit unions and some brokerages all offer HSAs, so you should shop around to find the right one for you.

Important note: Watch out for monthly maintenance fees and minimum balance requirements, which can quickly eat up your savings.

If I put money in an HSA, will that interfere with IRA or 401(k) contributions?

No. You can contribute the maximum amount to  both accounts each year.

What happens to my HSA if I leave my HDHP?

If you join a health care plan that doesn’t have a high deductible, you can no longer contribute to an HSA, although you may still use your existing one to pay for qualified medical expenses.

What are penalties (one or two) for using the HSA for non-medical expenses?

If you use HSA funds for non-medical expenses, you’ll be hit with a 20% IRS penalty for the expense, plus you’ll have to pay the income tax on the transaction amount.

Can I use my HSA money in retirement?

Yes. You can also treat your HSA as an investment account. Unlike your FSA, which you need to use by the end of a year, the money in your HSA rolls over year to year. By contributing the maximum amount to your HSA until retirement, you’ll build up a pot of money that won’t be taxed when you withdraw for medical expenses.

At age 65, you can also withdraw from your HSA for non-medical expenses, which means you can use the money in your account for your other living expenses. These withdrawals will be taxed just like normal withdrawals from an IRA or 401(k).

The post Hey, What’s an HSA? Making the Most of Your Health Savings Account appeared first on Stash Learn.

Tax reform was a signature plank of President Trump’s 2016 presidential campaign, and Republicans say it’s necessary to give a boost to the economy. Getting tax reform passed isn’t as easy as it sounds.

The last time our nation’s tax system was significantly overhauled was in 1986 under then President Ronald Reagan, when the top tax rate was reduced to 38.5% from 50%, and the number of tax brackets was consolidated. The overhaul also eliminated numerous tax loopholes and shelters. Passing it required enormous give and take from Republicans and Democrats alike.

Tax brackets have not received a major overhaul since the 1980s under President Reagan

In 2014, there was an attempt at bipartisan tax reform. But that effort was shelved by Congress because it lacked the necessary votes. Now that Republicans control Congress, experts are predicting that the odds may be stacked in favor of an overhaul.

Nevertheless, it will still take bipartisan cooperation to make President Trump’s tax plan a reality. Experts on both sides of the aisle have cautioned that the same divisions that derailed Republican plans to gut the Affordable Care Act (ACA) could play out with tax reform.

Here are highlights of the proposed changes to the tax code:

• For individuals, just three tax brackets instead of the current seven. The rates would be 12%, 25%, and 35%.
• The bottom tax rate of 10% would be eliminated, made up for by an increase in the standard deduction, which is the basic tax credit individuals and families receive if they don’t itemize their taxes.
• The standard deduction for an individual taxpayer would nearly double to $12,000, and $24,000 for families.
• Taxes would be eliminated for individuals making $12,000 a year or less, or families with income of $24,000 or less annually.
• The alternative minimum tax, an extra tax for high income earners to make sure they don’t abuse tax loopholes, would end.
• The corporate tax rate would be slashed to 20% from its current top rate around 35%. Many small businesses would see their top rate drop to 25%.
• Wealthy taxpayers would be eligible for a special break: the plan would eliminate the death tax for all estates. Currently there is a 40% federal tax on estates over $5.46 million.
• The plan would eliminate a state and local income tax deduction credit estimated to be worth $1.3 trillion over the next decade, which goes predominantly to residents of Democrat-leaning, high-tax states California, Connecticut, New York, and New Jersey.

Tax reform: A tough slog ahead

Details of this proposal for tax reform will need to be ironed out by both houses of Congress, with support from both Republicans and Democrats. This may not happen overnight. It took Reagan two years to get his tax reform through Congress in the 1980s. Expect current tax reform to take months, or longer, to hammer out.

Although Republicans say tax cuts will fuel economic growth, the plan would reportedly add more than $1 trillion to budget deficits over the next decade, according to reports.

Key takeaways

• The Trump Administration released its plan on Wednesday for a major tax overhaul.
• Among the proposals would be compressing tax brackets to three from the current seven.
• The standard deduction for an individual filer would double to $12,000, and for a family to $24,000. The tax rate would also be slashed to 20% for big corporations, and 25% for small businesses.
• Tax reform was a major election issue for Trump, as health care reform was. Health care reform ended in failure. Enacting tax reform will be a significant test of the Trump presidency.
• While most large corporations pay nowhere near the top tax rate, thanks to numerous loopholes, it is the highest in the developed world, and has led some of the biggest U.S. companies to set up headquarters overseas where taxes are lower.
• A lower corporate tax rate could mean more U.S. jobs, supporters of the tax cut say.
• Tax brackets have not received a major overhaul since the 1980s under President Reagan, when the top tax bracket was reduced to 38.5% from 50%, and many of the tax brackets were consolidated. The overhaul also eliminated numerous tax loopholes and shelters.

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