Permanent Value

Week-in-Review 7/27/15

Bruce Doole
July 27th, 2015

Mid-Year Outlook: Global Economy Likely to Withstand China, Greece

The global markets and economy should be able to move higher for the remainder of the year, with accommodative monetary policy and well-contained inflation providing tailwinds. The U.S. looks set to extend its not-too-hot, not-too-cold recovery, while Japan is benefiting from stimulus and pro-market reforms. Although economic conditions in Europe remain fragile and uneven, growth looks to be accelerating overall, and we believe the European Union has the tools to prevent a broader Europe contagion should the Greek bailout resolution fall apart. Meanwhile, economic reforms and policy shifts in many emerging markets are contributing to improved growth prospects and investment opportunities, but these transitions are long term and challenging, calling for a selective and risk-managed approach. While China has been the focus of recent scrutiny, we believe a hard landing is a less likely scenario, given the arsenal of stimulative tools that could be deployed by the Chinese government. As we look to the second half of the year, we expect the markets to continue to move away from the risk-on, risk-off tendencies and to shift toward growth. We expect the Federal Reserve to begin its long-telegraphed rate rise by year end.  Markets are likely to remain volatile due to continued political turbulence in the euro zone and uncertainty surrounding China.


Consensus estimates for global economic growth for 2015 have come down, and we share the view that the pace of acceleration is likely to slow. Still, we expect the global economy will continue to expand during the second half of the year, albeit at a subdued pace. The most significant potential risks to our outlook for growth include: the Federal Reserve making a policy mistake by raising rates too aggressively and not being able to backtrack if deflationary forces persist, a hard landing for China, and a failure of quantitative easing in Europe to boost GDP and stem deflationary pressures.

– Source: John P. Calamos, Calamos Investments


• Australia Consumer Price Index June quarter consumer prices were up 0.7% after increasing 0.2% in the March quarter. The increase was slightly below expectations of a 0.8% quarterly increase.
• U.S. existing home sales were very strong in June, up 3.2% to a higher-than-expected annual rate of 5.49 million, which is the highest since the bubble days of Feb. 2007. The gain is on top of May’s revised 4.5% jump.
• Japanese Merchandise Trade exports were up slightly less than expected at 9.5% while imports dropped less than expected to 2.9%.
• U.S. jobless claims fell 26,000 in the week ended July 18 to 255,000, the fewest since Nov. 1973.
• Great Britain Retail Sales showed that a 0.2% monthly decline offset much of a marginally firmer revised 0.3% gain in May to reduce annual sales growth from 4.7% to 4.0%, its slowest pace since Sept. 2014.
• U.S. new home sales were up 0.9% in June to a 0.550 million rate versus May’s 0.546 rate.

-Ivy Fund

Week in Review – 7/21/15

Bruce Doole
July 22nd, 2015
American families spent 16% more on college this yearAmericans say they spent 16% more on college expenses during the 2014-15 school year than the year before, according to Sallie Mae’s annual “How Americans pay for college” report.

Families shelled out an average of $24,164 to cover college costs during the 2014-15 school year, compared to $20,882 the year prior. It’s the first time in five years that families have increased college spending year over year, according to Sallie Mae.

The rising cost of college is certainly one factor that could be contributing to this significant bump, but it doesn’t tell the whole story. The average cost of college tuition and fees rose by just 2% for the 2014-15 school year, according to the College Board, which tracks college costs nationwide. Sallie Mae’s numbers are likely to be different because its report, which surveyed 1,600 participants, asks about overall spending, including transportation and additional expenses beyond tuition, room and board.

Parents are likely spending more these days because they feel they feel like they can spend more. Compared to last year’s report, fewer parents this year said they were worried they would lose their job (17% vs. 23%) or that the value of their homes would decline (6% vs. 12%). Parents were more optimistic about their children’s future job prospects, too — only 13% said they were worried their child wouldn’t find a job after they graduated, compared to 27% last year.

This year, parental income and savings went toward covering one-third of college costs, surpassing scholarships and grants as the largest funding source for the first time since 2010.

Kids are chipping in, too. Nearly three-quarters of college students are working at least part-time to help cover their college costs, according to the report. Student income and savings contributed 11%, up 5% from the year prior.

Who’s really paying more?

While spending across all income levels went up last year, those families with high incomes drove the increase in out-of-pocket parent spending overall. High-income households — defined as those earning more than $100,000 a year — spent $33,260 on college expenses this year, $12,000 more than middle-income ($21,375) and low-income ($21,036) families. In high-income families surveyed, 45% of college expenses came from parents’ income and savings, which made college students from high-income families less likely to take on student debt (see chart above).

High-income families pay more out of pocket partly because they can afford to and also because they are less likely to qualify for need-based grants and scholarships.

For example, nearly 40% of college funding for low-income families (those who earn less than $35,000 a year) came from grants and scholarships, compared to 25% for high-income families and 30% for middle-income families.

On the downside, however, limited income and savings meant low-income families were less likely to have enough cash on hand to close funding gaps. As a result, they were more likely to rely on student loans than any other income group
– Source: Mandy Woodruff, Yahoo Finance 


  • Japan Tertiary Index fell to a seasonally adjusted -0.7% from -0.2% in the preceding month.
  • Great Britain Producer Price Index for June remained at an unchanged level versus May. Year-over-year price levels declined 1.5%.
  • U.S. retail sales came in below expectations at -0.3% for the month of June.
  • China GDP for the second quarter was up 7.0% on the year, slightly higher than the consensus estimate of 6.9%.
  • Great Britain Labour Market Report showed claimant count unemployment rose 7,000 for the month of June, its first increase since October 2012.
  • U.S. jobless claims fell 15,000 in the July 11 week to 281,000.
  • U.S. Consumer Price Index was up an as-expected 0.3% in June.
  • U.S. housing starts were up 9.8% in June at a 1.174 million annual rate.

-Ivy Fund


Week in Review – 7/13/15

Bruce Doole
July 14th, 2015

Is College Still a Good Investment?
As costs rise and standards sink, helping families get their educational money’s worth is a growing challenge

In a wink, kids zip from sporting booties and onesies to caps and grad gowns. But as college costs continue to soar, are parents saving efficiently for their children’s higher education?

Regrettably, many are not. And ultimately, often the only alternative is parents’ raiding their retirement savings to raise four years of college tuition.

College tuition rates are climbing an average 8% per year—much higher than the general inflation rate.

“The total number of kids in all higher-education is lower this academic year than three years ago. Enrollments are in a slow decline, and expensive liberal arts colleges with so-so reputations are fighting to get students. This is forcing colleges to obtain extra revenue.” says Richard K. Vedder, Ohio University economics professor and director of the Center for College Affordability and Productivity in Washington, D.C.

Embedded in most parents’ American dream is providing a college education for their children. But it is mistaken to assume that they must bear the entire expense themselves.

“For most people, college costs need to be funded from a variety of sources: 30% to 40% from parental savings; 20% to 30% from financial aid and scholarships; and the remainder from the student’s working or taking out loans on their own,” says Richard Polimeni, director of education savings, Bank of America Merrill Lynch.

Still, parents want to know how to reduce college costs, and advisors can shed light. Financial aid, of course is a major help.

In most situations, it’s smart to apply for aid, even if it seems unlikely that funds will come through. “A lot of the time, families think they won’t qualify, that they’re beyond the level of being able to get aid,” says Cliff Goldstein, personal finance analyst at NerdWallet.

In helping parents fill out the lengthy Free Application for Federal Student Aid (FAFSA), “an advisor can calculate the ‘Expected Family Contribution’,” Goldstein notes. “Even if the EFC is fairly high, it always makes sense for a family to apply to at least give themselves the opportunity to receive aid. And even when the EFC is greater than the cost of attendance, they should still apply for aid from the college itself. You don’t want to leave any opportunities uncovered.”

Last academic year, more than $2.9 billion in available federal Pell Grant money was “left on the table” simply because families neglected to submit applications to receive aid. Unlike student loans, grants require no repayment.

Merit scholarships are also available. High school students working for college credit is another way to get ahead of costs, generally chopping off a year of college attendance.

One option growing in popularity is to attend community college—or even certain in-state public or private schools—for the first two years, then enrolling in a four-year college for the remaining two years to obtain a degree. Tuition at a community college can run a third to 50% less than at a four-year institution. Plus, with room-and-board costs rising dramatically, living at or near home the first years will save money too.

Surveys say that students today spend only 27.6 hours a week on academics—including classes, studying and exams—compared to 40 hours per week. Certainly, some of current students’ free hours could be devoted to part-time work. However, some studies have found that many working part-time perform less well academically than those without jobs and that this leads to their quitting school.

College Planning

A 529 college savings plan (officially, a Qualified Tuition Program), created by Congress in 1996 and specifically designed for education savings, is considered the most effective vehicle compared to other education savings accounts. 529s cover tuition, room and board, books and computers. Their chief benefit is tax efficiency.

In 2014, money in 529s grew by $20.8 billion for a record $247.9 billion, according to the College Savings Plans Network. Had more folks been familiar with 529s, that figure would even be substantially higher: 28% of parents said they didn’t know what a 529 was when responding to a 2014 T. Rowe Price survey.

A 529 surely beats borrowing against a 401(k) retirement plan or an insurance policy. Further, they’re far better for college funding than Roth IRAs, which are designed for retirement saving.

Also, newer 529 plans and some older ones offer more investment choices. Parents can change investments not just once a year, as previously, but up to four times annually with certain plans, according to Colleen Schon, senior vice president-investments, Anthem Advisors of Raymond James & Associates, in Clarkson, Michigan, who works with many parent and grandparent on 529 plans.

The main message is: It’s never too soon to begin saving for college. “You really need to start early and plan ahead because if you wait till the kids are 12 or 13, there aren’t enough years to put the money aside,” Schon says.

– Source: Jane Wollman Rusoff, ThinkAdvisor 


  • Germany Manufacturers’ Orders fell a slightly shallower-than-expected 0.2% on the month in May.
  • France Merchandise Trade rose to 4.0 billion euros in May, the second largest deficit of 2015.
  • Great Britain Industrial Production unexpectedly rose 0.4% in May, primarily due to an increase in the volatile oil and gas sector. That said, manufacturing output surprisingly contracted for a second consecutive month.
  • U.S. International Trade came in near expectations in May at $41.9 billion.
  • Japan Machine Orders were up 0.6% on the month, advancing for a third consecutive month.
  • China Producer Price Index deflated for a 40th consecutive month, dropping 4.6% in May.
  • Germany Merchandise Trade rose to a slightly larger than expected 22.8 billion euros surplus in May.
  • U.S. Weekly Jobless Claims rose to 297,000 last week, up 15,000 from the previous week.
  • France Industrial Production rose 0.4% on the month in May.
  • Great Britain Merchandise Trade unexpectedly narrowed in May, totaling Stg8.0 billion.

-Ivy Fund