Permanent Value

Week in Review 6/29/15

Bruce Doole
June 30th, 2015

The fourth of July is fast approaching. A great show can usually be seen in three different directions with colored flares, loud pops, and an occasional dud.

The Fed is keeping interest rates at bay, and the fireworks keep popping and looking beautiful in la la land. The latest firework show and the previous drop in the markets are keeping folks guessing if it will be an “ahhh” or “wow” or just another dud, and makes it difficult for them to focus on the long-term with the day to day gyrations. However, the game plan is still intact. We have been looking for the market to move higher, and then to burn out after the fourth of July and become muted until the end of the year.

Why are we saying this now?

First, bond yields have been rising, which usually drives prices lower in REITS, utilities, and anything that is interest rate sensitive. Second, the Advance/Decline line is weakening. The number of stocks hitting new 52 week highs has shrunk since January, and some areas like transports and utilities appear to be in official correction territory. Third, the number of stocks we track with rising estimates and trading below their 5 year average has been cut in half.

However, if this year mimics other July-Sept patterns, we may see a 5-9% correction come the second to third week of July and then bounce back as we get closer to year-end. Note, I did not say 10% (they seem so hard to get these days!). The contrarian in me says we should.

I can hear the Lee Greenwood song queing in the background “God Bless the USA.” One of my personal favorites.

-Troy C. Patton

This Week’s Economic Data

  • U.S. existing home sales rose 5.1% in May, the fastest since November 2009.
  • U.S. new home sales rose 2.2% in May to the highest level since February 2008.
  • China’s manufacturing activity was slow again in June, although better than May.
  • Eurozone business activity grew in June at its fastest pace in four years, based on composite PMI data.
  • U.S. gross domestic product fell 0.2% in the first quarter, revised from the original 0.7% decline.
  • U.S. consumer spending rose 0.9% in May, showing growing momentum in the economy.
  • U.S. jobless claims rose only slightly in the week ended June 20.

-Ivy Fund

Week in Review – 6/22/15

Bruce Doole
June 22nd, 2015

5 Timeless Financial Lessons for Father’s Day
If you’re in doubt about what kind of gift to get for Father’s Day, think about the gifts your father imparted to you.

Not your first bike or baseball glove, but the nontangible gifts that did the most to get you to where you are today.

The healthy dose of No’s that accompanied the Yeses of your youth; the boundary-setting and risk taking you learned from Dad.

The ideas that set you on a path to financial security as well as shaped your character and gave your life meaning may suggest that you forsake the necktie and golf clubs in favor of an extra measure of respect and sincere expression of gratitude.

Here are five life-changing lessons our fathers transmitted to their children:

1. Discipline
Fathers teach their children rules through game playing. The squeals of delight in a drawn-out pillow fight aren’t only recreational but educational.

The roughhousing taught us to set boundaries — that this far you can go but no farther.
Studies show that children lacking this formative education act more aggressively.

In the financial sphere, the beginning of wisdom is that investors should not behave so aggressively that they can lose it all.

The rules may vary, depending on specific needs, but financially astute people know they must follow a disciplined rules-based path toward building wealth.

2. Setting Goals
Fathers are keen on challenging their children. Whether through educational or athletic pursuits or career ambitions, their message to us is that if the goal is worthwhile, we should pursue it regardless of the short-term pain.

Work hard, get out of your comfort zone, overcome obstacles — whatever it takes — but stay focused on your goals.

In the financial realm, the surest path to wealth comes from setting achievable goals and investing small amounts regularly.

3. Taking Risks
The skinned knee we got from falling off the bike may have hurt a bit.

But in allowing it to happen, our fathers understood the benefits of internalizing the lesson that we could get right back up again and resume our pedaling.

Our fathers gave us the secure base from which to explore and take risks.

That gift is a necessary component of building character and a likewise essential part of building a portfolio.

4. Controlling Emotions
A toddler who falls down may wail if he sees alarm on a parent’s face, but fathers who demonstrate restraint thereby teach their children self-control.

Fathers similarly teach their older kids not to overreact to their favorite toy breaking, losing a game or getting a bad grade.

Markets frequently deliver setbacks to investors, but the most emotionally secure among them understand the virtue of remaining calm, readjusting their plans and getting back up again.

5. Purpose
A good father teaches his children that there’s more to life than mere toys to play with. Sharing what you have is more fulfilling than hording what’s yours.

When fathers teach that character development takes precedence over material accumulation, their children grow up to use their wealth to support serious commitments to their family, community and ideals.

Source: Gil Weinreich, ThinkAdvisor



  • U.S. industrial production fell 0.2% in May after a 0.5% drop in April.
  • U.K. Consumer Price Index rose 0.1% in May from a year ago, offsetting a 0.1% drop in April.
  • U.S. housing starts fell 11.1% in May, but are still up 6% year-to-date.
  • Eurozone inflation rose 0.2% in May. Prices had been flat in April.
  • New Zealand’s GDP rose 0.2% in the first quarter, the weakest growth in two years.
  • U.K. unemployment fell to 5.5% in the three months leading up to April 2015, the lowest level since mid-2008.
  • U.S. consumer prices rose 0.4% in May, the largest jump since 2013.

– Ivy Fund

Week-in-Review – 6/15/15

Bruce Doole
June 15th, 2015

When Should I Take My IRA RMD?
Taking it early or late in the year both have pros and cons.

The RMD can be taken any time from Jan. 1 through Dec. 31 of the “distribution year.” (For the age-70 1/2-year’s RMD only, make that “Jan. 1 of the distribution year through April 1 of the following year.”)

So what is the best time to take it within this time frame?

Monthly? Some retirees set up their IRAs to provide distributions throughout the distribution year, typically in the form of automatic monthly transfers directly from the IRA into the owner’s bank account. The sum of the 12 payments will equal the RMD. This conveniently provides a regular income while also taking care of the RMD.

This method can cause problems in the year of the participant’s death, however. For one thing, the automatic transfers may continue for a while after death has occurred, because the IRA provider does not learn instantly about the participant’s death. This creates problems if the post-death payments go into a bank account that does not belong the participant’s beneficiary.

Another headache for the beneficiary is that he or she is required to take the balance of the RMD for that year of death to the extent it was not distributed to the participant during his or her life.

Early in the year? Taking the RMD early in the year has the great advantage of getting the thing over with, so the obligation is not hanging over your head all year. It’s also thoughtful for your beneficiaries. And needless to say, if you have an immediate good use for the money, such as making estate-reducing gifts or paying down debt, distribute sooner rather than later.

Early-in-the-year is also recommended for someone who is looking for ways to “shrink” the IRA in order to minimize future RMDs. Getting money out of that account earlier rather than later allows the net proceeds to be reinvested sooner in long-term gain-producing investments that will get a stepped-up basis at death, as opposed to helping to swell the IRA and its ever-increasing stream of taxable RMDs.

Late in the year? The retiree who takes the RMD late in the year is seeking some or all of the following advantages:

  1. The gross income generated by the distribution is not taxable until as late as possible. This is useful if you pay estimated taxes based on each quarter’s actual income. Your first three estimated payments for the year would be relatively lower, with a spike in income in the final quarter (and a larger estimated tax payment due the following January).
  2. The longer the RMD stays in the IRA, the more tax-deferred income it can generate. Once the distribution comes out, future investment growth will be taxable as it is realized.
  3. If your benefits will pass at your death to a tax-exempt charity, and you do not need the RMD money for your personal purposes, it makes sense to delay as long as possible. If death occurs, the RMD will pass, along with the rest of the account, income tax-free to the charity, instead of being distributed to you and subjected to income tax.
  4. You can use the late-in-the-year RMD to actually pay your estimated taxes: Using Form W-4P, request the IRA provider to send most or all of the RMD amount directly to the IRS as withheld income taxes. This technique saves the IRA owner a few dollars in the form of the interest he can earn on the money he otherwise would have sent to the IRS in April, June, and September to pay his estimated taxes.

The downsides of waiting until later in the year are, first, the nagging obligation, like an unpaid bill, that may or may not prey on your mind.

The second drawback affects only your beneficiaries, not you. The beneficiary must take the RMD for the year of your death to the extent it was not distributed during your lifetime. If your death occurs late in the year, and you have not yet taken the RMD, the beneficiary may have a very short period of time in which to figure out that he or she has inherited this IRA from you, that an RMD was required for the year of death, how much it is, and that you didn’t yet take it. The beneficiary must then race over to the IRA provider to get that distribution out by year-end to avoid penalties. Presumably the beneficiary could get the IRS to waive the penalty if the death was really late in the year, but either way the beneficiary is paying for his inheritance with a bit of stress.

Source: Natalie Choate, Morning Star



  • U.S. job openings rose to a record high of 5.38 million in April, up 22% from a year ago.
  • U.S. wholesale inventories rose 0.4% in April, above the expected 0.2% increase.
  • U.S. retail sales rose 1.2% in May, climbing slightly less than expected.
  • U.S. weekly jobless claims rose slightly to 279,000 in the first week of June.
  • British manufacturing output decreased by 0.4% in April, falling below forecasts.
  • Greek consumer prices fell 2.1% in May from a year ago, due largely to a drop in housing prices.
  • Italy’s industrial output slipped 0.3% in April. It was the biggest decline since January.
  • China’s retail sales were up 10.1% in May versus a year ago.

– Ivy Fund