Permanent Value

Week in Review – 5/26/15

Bruce Doole
May 26th, 2015

New College Grads Finally Get Job Market on Upswing
It can be difficult to find a job after graduating from college, but this year’s class will have an easier time than recent graduates.

“The labor market for college graduates is improving,” according to a new report from the Federal Reserve Bank of New York.

The unemployment rate among college graduates continues to fall — it’s just over 5%, according to the New York Fed — but more important, their underemployment rate — which measures the share of graduates working in jobs that typically don’t require a college degree — is falling as well, reversing an earlier trend. Between mid-2011 and mid-2014, the underemployment rate for college graduates rose while the unemployment rate for college graduates fell.

“While successfully navigating the job market will likely remain a challenge, it appears that finding a good job has become just a little bit easier for the class of 2015,” write authors Jaison Abel and Richard Deitz.

That’s good news for all college graduates but especially for those burdened by college loans. Their average debt load at graduation is near $30,000, and most will have to begin making payments within six months of graduation, if not before.

In their latest report, the New York Fed economists studied the Help Wanted Online database of the Conference Board to gauge the demand for jobs requiring a college degree and those that did not. It found that demand for both types of jobs has been rising recently, but demand for college jobs, which had leveled off in 2013 and fell slightly through mid-2014, turned around last summer and is up 10% year-to-date.

– Source: Bernice Napach, ThinkAdvisor

 

THIS WEEK’S ECONOMIC DATA

  • U.S. Consumer Price Index rose just 0.1%, however core prices (excluding food and energy) rose 0.3%, which is outside the high-end forecast and the highest increase since January 2013.
  • U.S. Housing Starts recorded one of the strongest periods in recent years, surging 20% in April to an annual rate of 1.14 million.
  • U.S. Jobless Claims remained extremely low for the week of May 16 at 274,000.
  • U.S. Existing Home Sales were down 3.3% in April to a 50.4 million annual rate.
  • Japan GDP rose 0.6% on the quarter following 0.4% growth last quarter.
  • China Consumer Price Index rose 0.4% in April, in line with expectations but not enough to prevent the annual inflation rate to dip a tick to 0.1%.
  • France PMI Composite reflected sluggish economic growth to 51.0 for May, only one point higher than the growth threshold of 50.
  • Germany PMI Composite read 52.8 in May, its weakest level in 2015.
  • European Union PMI Composite reflected Eurozone economic activity slowed faster than expected in May with a reading of 53.4, down 0.5 from its final April reading.
  • Great Britain Retail Sales rebounded in April, rising 1.2%, its best performance since November 2014.
  • Italy Retail Sales fell in March by 0.1%, the third decline in the last four months.
  • Canada Consumer Price Index edged down 0.1% in April after a robust rise of 0.7% in March.

– Ivy Fund

Week in Review – 5/18/15

Bruce Doole
May 18th, 2015

Pros & Cons of ETF Investing

Exchange traded funds — ETFs — are popular securities as both an investment or for active trading. ETFs take some of the features of mutual funds and some features of market traded securities and combine them, providing a unique class of investment products. The benefits or negatives for you as an investor depend on your investment goals, techniques and experience.

Low Costs and Efficiency
Exchange traded funds have low expenses, which means very little of an investor’s money goes to manage one of these funds. Each ETF will match the securities holdings of a specific stock or bond index or match the value changes of a particular commodity. An ETF provides an investor with a low-cost way to invest in a selected index. ETFs are also efficient because of the fact that shares trade on the exchanges. As the value of the tracked index changes, the share value of an ETF will immediately reflect the changes. The value of ETF shares will closely match changes in the overall market or selected sector. This is in contrast to individual stocks, which might move in one direction while the market or similar stocks move in the opposite direction.

Investing or Trading
Investors can use ETF shares for long-term investing, short-term trading or both. The low expenses and diverse offerings make ETFs good choices with which to build a long-term investment portfolio. An investor can build a portfolio with just a couple of funds or select funds from a wider range of market sectors. Because ETF shares trade on the stock exchanges and share values update continuously while the markets are open, the funds are also appropriate vehicles for short-term trading. ETFs can be used for day trading or longer term swing or trend trading. ETFs allow a trader to trade the market without the unpredictability of individual stocks.

Diverse and Unique Investment Choices
The wide range of available ETFs allow an investor to include investments in different asset classes in a single brokerage account. Besides stock funds covering broad market indexes and narrowly focused stock market sectors, ETFs are available to invest in bonds, international stocks and commodities such as gold, silver and crude oil. Other ETF choices allow a trader to generate profits when investment categories are declining in value. This is probably the biggest advantage of ETF investing — the ability to select funds which can profit from gains or even down markets in every class and type of investment.

Cons of ETFs
Exchange traded funds are very useful investment securities. The negatives associated with ETFs fall into the category of inappropriate use. Stock brokerage commissions apply to the purchase and sale of ETF shares as well. Therefore, an investor who wants to invest small amounts of money will be better served by investing in a no-load mutual fund and not pay any commissions.
– Source: Tim Plaehn, Budgeting Money – The Nest digital magazine

 
THIS WEEK’S ECONOMIC DATA

  • U.S. Retail Sales were unchanged in April, missing expectations for a 0.2% gain.
  • U.S. JOLTS (Job Openings and Labor Turnover) increased in March to 5.158 million job openings from 5.133 million in February.
  • U.S. Jobless Claims fell 1,000 in the May 9 week to 264,000, the third week in a row that initial claims were in the low 260,000 range.
  • U.S. Producer Price Index for total final demand fell 0.4% in April, far below the estimate of a -0.1% change.
  • U.S. Industrial Production fell 0.3% in April, its 5th straight monthly contraction.
  • Great Britain Industrial Production rose 0.5% in March after a 0.1% increase in February.
  • China Industrial Production improved to 5.9% in April from 5.6% in March but missed forecasts for a 6% increase.
  • Italy GDP increased 0.3% for the quarter, lifting annual growth from -0.5% to 0.0%.
  • France GDP increased 0.6% for the quarter, its best period since second quarter 2013.

– Ivy Fund

Week in Review – 5/15/15

Bruce Doole
May 15th, 2015

Estate Planning an Essential Step for Every Retiree

A proper estate plan can maximize the assets heirs receive, and it can drastically reduce the hassles, heartaches and expenses inherent in the wealth transfer process. Despite the importance of estate planning, however, only about half of American parents have a living trust document or will, according to a Caring.com survey, and only 40 percent of those who do have wills have updated them within the last five years.

Between minimizing taxes, avoiding court fees and preventing family feuds, there’s a long list of reasons why the average retiree should be sitting down with a well-qualified estate planner.

The possibility of probate is at the top of that list. Probate costs vary by state and among law firms, but the combination of fees for courts, attorneys, accounting and appraisals can run the gamut from three to ten percent.

How can the costly and time-consuming probate process be avoided? The most important step is to not rely on a regular will—which still exposes them to probate—or a rights of survivorship deed, which simply delays probate until the surviving spouse dies. “A will is putting the fox in charge of the chicken coop,” said Piershale. “A lawyer who recommends a will without a trust to go along with it is usually the same lawyer who will take the family through probate and collect a large portion of the probate fee.”

Instead of, or in addition to, a will, many other advisors recommend revocable living trusts. Both documents allow signers to name beneficiaries, leave property to minors and make revisions as their circumstances and priorities change. Unlike wills, however, trusts avoid probate, keep plans out of the public record and allow clients to plan for incapacitation and mental disability. Still, wills can address matters trusts cannot—naming children’s guardians, assigning property managers to minors and leaving instructions for paying taxes and debts, just to name a few.

Also important for high-income couples is the possible change from separate trusts to a joint trust. It was once common practice for high earners to set up separate trusts, so that the combination of the two wouldn’t trigger the estate tax. In 2010, the estate tax threshold was risen considerably from $3.5 million to $5 million, however, and separation now causes unnecessary hassles for clients with assets less than that. (The limit, adjusted annually for inflatio, is $5.43 million for tax year 2015). According to Piershale, separate trusts require that a certain amount of money stay in the deceased’s trust, triggering higher tax brackets. Survivors will also have to deal with the trust tax for the rest of their lives, and they won’t be able to spend more than a specified amount from that trust per year. Fortunately, currently separated trusts can be joined to avoid these costs and hassles – as long as both spouses are still living.

Ultimately, the importance of estate planning makes it a critical issue for any retirement-minded advisor to learn and address. Lawyers craft the actual documents that spell out a client’s wishes, but those clients need solid advice on how to carry out those wishes with as few costs and headaches as possible.

– Source: David LaMartina, Think Advisor

 

THIS WEEK’S ECONOMIC DATA

  • France PMI Manufacturing contracted at a slightly faster pace than originally thought last month. The final PMI weighed in at 48.0, 0.8 points below its March reading.
  • Germany PMI Manufacturing finished at 52.1, 0.2 points higher than expected, but still 0.7 points short of its March level.
  • U.S. International Trade deficit for March was a much higher-than-expected $51.4 billion, the largest since October 2008.
  • China PMI Composite slowed to a three-month low with a reading of 51.3, down from 51.8 in March.
  • France PMI Compositegrew slightly faster than expected at 51.4.
  • Germany PMI Composite was slightly softer than expected. At 54.0 it was 1.4 points down from March and a three-month low.
  • EMU PMI Composite was slightly stronger than originally thought, with a final reading of 53.9.
  • U.S. Jobless Claims came in at a much lower-than-expected 265,000.
  • U.S. Employment Situation was mixed with a substantial downward revision for March numbers, though unemployment numbers were favorable for April, ticking down to 5.4%.
  • Canada Labour Force Survey revealed a downward revision for March, and an unemployment rate unchanged from 6.8%.

– Ivy Fund