Although growth is estimated to slow in the second quarter of this year, improvements in the labor market and retail sales foreshadow continuing recovery. “We’re still definitely on the recovery path. We expect that this is going to be a very long and gradual recovery,” said Scott Brown, chief economist at Raymond James in St. Petersburg, Florida. “Most economists are looking for stronger growth in the second half of the year and into next year.”

Consumer sentiment rose from 76.4 to 83.7 in April, its highest level since July 2007, exceeding economist’s expectations. In addition, Americans reported a favorable view of their personal finances, especially households in the upper third income levels. Upper income households reported having less debt and higher asset values, but did not estimate a higher income within the next year.

Households with investments are reaping the benefits of the stock market rally, which caused the market to reach record highs this year. Following the expiration of the payroll tax holiday, consumers are finding the rise in stocks offsets the additional tax. “For (upper income) people, the payroll tax and gasoline prices didn’t really matter much, but stock prices and home prices rising, that’s a big, big plus,” said Brown.

Currently, economic conditions are improving, consumer expectations are positive, and buying attitudes are optimistic. A report from Conference Board showed its Leading Economic Index increased 0.6 percent to 95.0 last month, the highest level since June 2008. “Changes in confidence don’t always filter through into changes in spending, but the omens are good,” said Amna Asaf, economist at Capital Economics.
Source: Yahoo Finance

Cincinnati, Cleveland and Dayton, Ohio

According to the U.S. Bureau of Labor Statistics, since November 2007 Cleveland has lost approximately 5% of its labor force (59,200 workers), while since May 2009, Cincinnati lost 4% of its labor force (39,000 workers). Job growth has dwindled in Ohio’s main industry-manufacturing. Amy Hanauer, executive director of Policy Matters Ohio, believes this is happening because people are getting discouraged and leaving the labor market. Since the financial crisis, only one fifth of the 388,000 jobs lost in Ohio have been regained.

Phoenix and Tucson, Arizona

The effects of the housing bust still linger in Arizona. In the crisis the construction sector cut over half of its jobs, and as a result progress is down to a trickle. However, there are other factors beside construction that play a role in the decline-although Nevada was the epicenter of the housing bust, their labor force was not hit as hard as Arizona’s.
The crisis caused Phoenix to lose 3% of its labor force (64,000 workers), and cause Tucson to lost 6% of its labor force (29,000 workers). The decline has hit men ages 25-34 and women ages 45-59 the hardest. In addition, stricter immigration laws have cause the Latino labor force to decline.

Hartford, Bridgeport and New Haven, Connecticut

According to Alissa DeJonge, director of research at the Connecticut Economic Resource center, as the recession ended and the stock market began improving, the number of retiring Baby Boomers began rising. Meanwhile, the unemployment rate among young minorities has increased in Connecticut’s urban centers. Orlando Rodriguez, senior policy fellow at Connecticut Voices for Children believes that this is happening because the younger minority workers are waiting until the state’s economy improves before they attempt to reenter the labor force.
Detroit and Kalamazoo, Michigan and Milwaukee, Wisconsin

Michigan’s population was declining even before the recession because of the auto industry’s relocation of jobs. Three years ago, Detroit’s population fell to its lowest level since 1920, according to the U.S. Census.
Manufacturing cities in the Midwest are also facing declines. For example, Milwaukee lost 2% of its labor force (16,000 workers) since June 2009, while Kalamazoo lost 10% of its labor force (17,500 workers) since January 2007.

Source: CNN Money

First Quarter 2013: Review

The United State’s economic growth and market performance was fostered by the ongoing housing recovery, pliant consumption, and strong earnings growth.

• January and February 2013 equity flows were 20% higher than the first two months of 2012, 2011 and 2010

• The U.S. GDP grew at a 0.4% annualized pace in the fourth quarter, thus increasing from an earlier prediction of 0.1%

• Unemployment rates fell to 7.6% in March while inflation stood at 2.0% at the end of February

• Public sector jobs decreased by 7,000 after an increase of 14,000 in the month before

• Retail sales decreased in March by 0.4%-the lowest since June 2012

WHAT IS AN INVESTMENT?

This is actually an important question to answer because the range of “investments” available today goes far beyond traditional stocks and bonds. Understanding the unique characteristics of these “alternative investments” may help you avoid a negative surprise sometime down the road.

According to Investopedia, an investment is defined as “An asset or item that is purchased with the hope that it will generate income or appreciate in the future.” Sounds simple enough yet, ironically, investment professionals don’t necessarily agree on what constitutes an investment. For example, some disagree on whether gold and other commodities should be considered an investment.

On one side, some pros argue gold is an investment because it has been traded for thousands of years and has an established market where it can be bought and sold. On the other side, some say gold is not an investment because it does not generate cash flow, has no “earnings” that can be valued, and has little economic use.

Let’s contrast gold with stocks. Stocks represent a claim on a company’s assets and earnings. Using established norms of financial analysis, investment pros can place a value on those assets and earnings and come up with an estimated “fair value” for the stock (which may or may not be close to its actual trading price). However, with gold, there’s no underlying productive asset to value or earnings to capitalize so determining “fair value” is really not even possible.

Where does this leave us?

Successful investors need to know the difference between a traditional investment that consists of underlying assets and potential earnings versus an alternative investment like gold that may look like an investment, but is difficult to value using traditional financial analysis. This doesn’t mean these non-traditional “investments” are a bad idea. It means they bear close monitoring… which we try to do.

WEEKLY FOCUS – THINK ABOUT IT WHAT ARE BABY BOOMERS’ LATEST THOUGHTS ABOUT RETIREMENT? Here are some highlights from a survey released by MFS Investment Management®: •59% of non-retired Boomers agree with the statement, “I’m more concerned than ever about being able to retire when I thought I would.” •50% agreed that they have lowered their expectations about what life would be like in retirement. •30% of Boomers reported a net decrease in the risk they were willing to take to achieve higher returns over the last 12 months; only 12% reported a net increase. •Boomers are approximately evenly split when describing their primary investing goal: 34% reported it to be growing assets/increasing portfolio value as much as possible while 33% reported protecting principal/not losing money as their primary goal. •Nearly four times as many Boomers would describe themselves as protective investors (37%) vs. opportunistic investors (10%). •Only 13% of Boomers surveyed reported having $1 million or more in median household investable assets, while, on average, retirement was within 10 years. If you’re a Baby Boomer, do these survey results surprise you?

]]> http://permanentvalue.com/2013/week-in-review-2413/feed/ 0 http://permanentvalue.com/2013/week-in-review-jan-28th/ http://permanentvalue.com/2013/week-in-review-jan-28th/#comments Mon, 28 Jan 2013 19:04:19 +0000 Bruce Doole http://permanentvalue.com/?p=2013 THE MARKETS

THE WEATHER AND THE STOCK MARKET HAVE A LOT IN COMMON!

They’re both very unpredictable! The stock market has a habit of surprising investors with its ability to rise or fall dramatically in short periods of time. For example, remember the “Flash Crash?” On May 6, 2010, the U.S. stock market plunged for no apparent reason and briefly erased $862 billion from stock values in less than 20 minutes, according to Bloomberg. It then quickly rebounded.

As it relates to weather, we always know what season we’re in. One look at the calendar tells us whether its winter, spring, summer, or fall. And, depending on where you live, you have a pretty good idea – based on history – of what to expect for each day’s temperature. But, just like the Northeast experienced, you can have an “out of season” experience that messes up your best-laid plans.

The stock market doesn’t have four seasons, but it does have bull and bear markets, which are further divided into secular and cyclical. Market analysts have some general criteria that they use to categorize the markets into these buckets. Yet, like the weather, you could be in a bull market, but still have a nasty market drop that temporarily derails the path of the bull.

Bottom line, just like weather forecasters, market analysts may have a sense for general conditions in the market, but surprises still happen.

Over the past two weeks you have probably seen a lot of information in the news regarding the “Fiscal Cliff.”  This was term coined by the Federal Reserve Chairman, Ben Bernanke, to describe the laws affecting tax rates and government spending going into effect at the beginning of 2013. The resulting laws to avert the “Cliff” were passed as a result of the negotiation between Congress and the Administration on New Year’s Eve a week or so ago.  

The original Fiscal Cliff resulted from negotiations between Congress and the Administration in 2011 regarding raising the debt ceiling when a newly elected Congress with a House Republican majority was looking to cut spending to prevent ballooning deficits. The debt ceiling needs to be re-negotiated again this year. The compromise addressed taxes and the expiring Bush Tax Cuts, but not spending cuts. The compromise bill extended the pending spending cuts by two months to give Congress more time to negotiate and avoid sequestration, the process where Congress holds back money appropriated by the Treasury to Federal Agencies. Below we have detailed some of the key points of this deal.

A Few High-lights

• The Fiscal Cliff bill indexes the alternative minimum tax to inflation, which is geared to help millions of middle-class taxpayers avoid being hit with a higher tax bill averaging to be roughly $3,000.

• College tuition has a five-year extension on up to a $2,500 tax credit while earned income and child tax credits will also be carried-out for five years.

• Families with taxable earnings under $450,000 have an extended tax rate.

• Tax-free distributions from an IRA account to a charity fund, consisting of $100,000 or less, is being extended. Some featured provisions include that individuals may use their December 2012 IRA distributions for a charity and appropriate it as a charity distribution, and that individuals are allowed to create a tax-free charitable IRA distribution during January of 2013 and treat it as if it was prepared in 2012.

Low-lights

• Race track owners, including NASCAR, will receive approximately $78 million in tax breaks.

• Lower payroll tax rates have been extended.

• Reduce government spending.

Investor Advice

• Spend more focus on buy-and-hold investment strategies and on your harvesting losses.

• Consider tax-advantaged investment strategies.

• Pay down mortgage.

• Consider investing in annuities and life insurance.

We hope you and your families have enjoyed your holidays and we look forward to seeing you and discussing your goals for the New Year with you.

Sincerely,

Bruce W. Doole, President

Though you may have already made up your mind about who you are voting for on November 6th, the debates and political ads will continue to increase in urgency and frequency. This election will affect this country economically for years to come so we thought it might be helpful to give a rundown of the economic issues you will be deciding on:

Barack Obama:
• Focus on key areas in rural communities to help businesses access capital and expand rural job search and training
• Double exports to foster job creation
• Provide tax cuts for middle class and working class Americans
• Set and enforce clear, consistent rules for the financial marketplace to protect American families from manipulation
• Support bipartisan plan to reduce national debt

Mitt Romney:
• Ensure the long-term solvency of Social Security without raising taxes and encourage individuals to create private accounts
• Return fiscal power to states and the people
• Expand the tax deduction to also include those who buy their own health insurance to empower individuals to purchase their own health insurance, 
• Make American businesses competitive in the global economy
• Cut federal spending and bring reforms to entitlement programs
• Balance the budget by reducing the size and reach of the federal government.
• Open markets abroad, on fair terms, for American goods and services

Whether you are Republican or Democrat, we hope you and your families are enjoying the autumn season and we look forward to seeing and talking to you as we review your 2012 budgets and plans for 2013.
 
Sincerely,
Bruce W. Doole, President

Though you may have already made up your mind about who you are voting for on November 6th, the debates and political ads will continue to increase in urgency and frequency. This election will affect this country economically for years to come so we thought it might be helpful to give a rundown of the economic issues you will be deciding on:

Barack Obama:
• Focus on key areas in rural communities to help businesses access capital and expand rural job search and training
• Double exports to foster job creation
• Provide tax cuts for middle class and working class Americans
• Set and enforce clear, consistent rules for the financial marketplace to protect American families from manipulation
• Support bipartisan plan to reduce national debt

Mitt Romney:
• Ensure the long-term solvency of Social Security without raising taxes and encourage individuals to create private accounts
• Return fiscal power to states and the people
• Expand the tax deduction to also include those who buy their own health insurance to empower individuals to purchase their own health insurance, 
• Make American businesses competitive in the global economy
• Cut federal spending and bring reforms to entitlement programs
• Balance the budget by reducing the size and reach of the federal government.
• Open markets abroad, on fair terms, for American goods and services

Whether you are Republican or Democrat, we hope you and your families are enjoying the autumn season and we look forward to seeing and talking to you as we review your 2012 budgets and plans for 2013.
 
Sincerely,
Bruce W. Doole, President

Recently, the Supreme Court upheld most of the Affordable Care Act with Chief Justice John Roberts  writing  the 5-4 decision for the majority. This means the Act will go into effect over the next few years. The individual mandate will not be enforced under the Constitution’s Commerce Clause, but will be upheld as a tax, according to the majority opinion. The Supreme Court disagreed with the government’s argument that it has the authority, due to its role in regulating interstate commerce to penalize taxpayers for failing to buy health insurance. However, the Court upheld the individual mandate by reframing it as a tax, rather than a penalty. Those purchasing health insurance under the new law but who choose not to, must begin paying the new tax in 2014. The health care law also required states to expand Medicaid, facing the loss of federal funds for the program as a penalty for declining.  The federal government may still penalize states for failing to expand Medicaid under the Act, but may only withhold new funds, rather than all federal funds for Medicaid. The mandate will impact about 26 million Americans, according to a recent study by the Urban Institute and an independent analysis by MIT economist Jonathan Gruber.

WHAT’S DRIVING HEALTHCARE COST INCREASES?

There are numerous reasons why healthcare premiums have been increasing; most are related to the additional costs of medical care.   So why do premiums seem to rise every year? The reason is the hidden costs health plans are required to pay to health care providers. For example, in 2011, hospital expenses were responsible for 48% of America’s medical costs, yet hospitals demand double-digit increases. When insurance companies negotiate with hospitals, they seek to balance making care affordable, yet preserving access to quality hospitals. Pharmaceutical costs comprise 15% of healthcare costs and went up along with hospital costs over 7%.

Healthcare costs can make-up a significant part of your budget which is why we encourage a review your budget on a regular basis. We hope you and your families had a Happy Fourth of July and look forward to seeing and talking to you as we review your 2012 budgets and plans for the year.
 
Sincerely,

Bruce W. Doole, President   

As in any Presidential election year, politics dominate the headlines and especially which nominee will eventually face the President in November. As of the second week of April, the top two Republican candidates have been narrowed down to one and it is becoming clear who America’s choices will be in November. The main question that voters have been asking themselves is “am I better off economically than I was four years ago?” The second question is “what has this Administration and Congress done to improve the economy?” The third question would be “is there someone out there who can do a better job?” While these questions garner all the headlines, we believe it is each individual’s responsibility, along with the advice of their financial advisor, to improve their economic position regardless of who is in the White House, what party controls Congress, or what the economy is doing.

So what can be done now to improve our personal economic situation based on the opportunities that are available? We know that interest rates are at a historical low and real estate prices are down significantly over the past five years. We know that US companies are profitable yet not enough to be hiring at a rate that would lower the unemployment rate more than marginally. We know the government is deeply in debt and the debt has almost tripled in the past ten years. Thus, we know that the government will do everything possible to keeps rates low in order to avoid overwhelming interest rates on the debt. So how do these facts help us?

UPDATE REAL ESTATE…

Refinancing your current real estate and looking to add it should be one of your highest financial priorities. All the factors mentioned above, from low interest rates, inventories, and prices to increasing rents and population lead to this conclusion. Where to start is sometimes a tough question since most people buy based on where they want to live or the aesthetics of the house rather than the numbers of how it will significantly increase their financial position. This is where we as your advisor come in because we can take an objective look at your current situation and see how your current and future real estate holdings fit into your goals and lifestyle. We will be contacting you and by applying this philosophy we hope to accelerate the timeframe by which you will reach your goals. Factors such as current cash holdings, mortgage/s held and future income needs will all be evaluated to determine how suitable an accelerated real estate asset strategy is for you. Even Warren Buffett recently said in an interview on CNBC that he would buy “millions” of single family homes if it was logistically feasible for him to do so. This being said, it is certainly possible for a small investor to buy a few investment properties to achieve early financial independence if shown how and when the long-term conditions and prices are right.

We hope you and your families all had a very Happy Easter and Passover and look forward to seeing and talking to you as we review your 2012 budgets and plans ahead for the year.