By: Brien L. Smith, CFP and Brian Prescott, Financial Analyst Intern/TWA
For the last decade the United States stock market has experienced unparalleled levels of calmness. That was until the early days of February when that peace was disrupted. This disruption can largely be attributed to a surprise increase in inflation and Federal Reserve interest rate increases. Nonetheless, financial markets quickly absorbed the new information and prices stabilized. However, as 2018 has progressed two problematic topics have dominated headlines, the US-China Trade War and the Yield Curve.
The stock and bond markets hate many things, however, the thing hated above all is uncertainty. They hate uncertainty in future prices, future policy, and future economic conditions. It is this uncertainty that can cause prices to fluctuate drastically. This brings us to the US-China Trade War which economists nationwide predominately agree; is not good. The biggest reason is that it will not only produce uncertainty in future policy, but also in future prices. Investors in the market do not know the extent that companies will be affected or how long the trade war will last. To date the price fluctuations associated with our trade war news has been minor but notable. However, if the trade war fully escalates then greater price fluctuations should be expected. Fortunately, that is a big if. But, should it come to fruition the prevailing expectation is that nobody will win the trade war, and American consumers will be the most damaged.
Additionally, another persistent headline this year has been the tightening of the interest rate yield curve. In other words, the interest rates between short-term and long-term bonds are almost equal. This is of great importance since historically when long-term interest rates are less than short-term rates a recession usually follows. However, just because the rates are almost equal does not mean that a recession is impending immediately. During the late 1960’s, late 1980’s and late 1990’s the economy saw interest rates tighten but then stay at those levels for many years of growth. This tightening is merely a signal that the economy is shifting but not that the expansion is over. Moreover, all recessions are not created equal and even if long-term interest rates drop below short-term rates it does not mean the next Great Recession will be upon us.
It is evident that the financial markets and economy have shifted into a mid-late expansion phase, possibly even a pure late expansion phase. Historically, surges in technology stock returns have implied a complete shift into the late expansion phase. At the time of this newsletter Facebook, Apple, Amazon, Netflix, Google, and Microsoft stock returns accounted for 4.31% of the S&P 500’s 4.97% return. In other words, six technology companies are carrying the S&P 500 index. Additionally, another good predictor of our current expansion phase is the unemployment rate. Which given our current incredibly low rate of 4% further implies a shift into the pure late expansion phase.
Therefore, we can infer that perhaps the markets are in a pure late expansion phase. Does this mean the we are about to hit a recession? The short answer is, not necessarily. Just because our expansion has lasted a long time does not imply that an immediate recession is more probable. Recessions do not happen on their own, they need a spark. It is true that the spark could be a trade war or interest rates. However, it is equally true that these could be minor bumps on the road to continued years of strong growth. Thus, recession predictions should be taken with a grain of salt and examined carefully.
By Ricardo Alonzo-Zaldivar and Andrew Taylor AP BCS EAGLE Wednesday , June 6, 2018.
Medicare will run out of money sooner than expected, and Social Security's financial problems can't be ignored either, the government said Tuesday in a sobering check upon the programs vital to the middle class.
The report from the program trustees says Medicare will become insolvent in 2026--three years earlier than previously forecast. It's giant trust fund for inpatient care wont be able to fully co
ver projected medical bills starting at that point.
The report says Social Security will become insolvent in 2034--no change from the projection last year.
The warning serves as a reminder of the major issue to languish while Washington plunges deeper into partisan strife. Because of the deterioration in Medicare's finances, official said the Trump administration will be required by law to send Congress a plan next year to address the problems, after the president's budget is submitted.
Treasury Secretary Steven Mnuchin said in a statement that there is time to fix the problems. "The programs remain secure," Mnuchin said, Medicare "is on track to meet it obligations to beneficiaries well into the next decade."
"However, certain long-term issues persist," the statement added. "Lack luster economic growth in previous years coupled with an aging population, has contributed to the projected shortages for both Social Security and Medicare."
Social Security recipients are likely to see a cost of living increase of about 2.4% next year, said government number crunchers who produced this report. That works out to be about $31. a month.
At the same time, the monthly Medicare "Part B" premium for out-patient care paid by most beneficiaries is projected to rise by about $1.50-$135.50.
Both the cost-of-living increase and the Medicare outpatient premium are not determined until later in the year, and the initial projections can change.
More than 62 million retirees, disabled workers, spouses and surviving children receive Social Security benefits. The average monthly payment is $1,294 for all the beneficiaries Medicare provides health insurance for about 60 million, most of whom are age 65 and older. Together the two programs have been credited with dramatically reducing poverty among older people and extending life expectancy for Americans. Financed with payroll taxes collected from workers of employed, Social Security and Medicare account for about 40 percent of the government spending, excluding interest on the federal debt. But demands on both programs are increasing as America ages.
Unless lawmakers act, both programs face the prospect of being unable to cover the full cost of the promised benefits. With Social Security that could mean sharply reduced payments on tight budgets. The report says that the total annual cost of Social Security is projected to exceed total annual income for the first time since the Reagan era, meaning the program will have to tap into reserves.
For Medicare, insolvency would mean the hospitals, nursing homes and other provides of medical care would be paid only a part of their agreed upon fees.
Medicare is widely seen as a more difficult problem that goes beyond the growing number of baby boomers retiring. It is also unpredictability of health care costs which can be jolted by high priced breakthrough cures, and which regularly outpace the overall rate of economic growth.
Family CFO embraces – and encourages clients to acquire – a financial planning philosophy that was stated in part by George S. Clason, author of The Richest Man in Babylon. In the chapter "Seven Cures for a Lean Purse," Clason describes the seven habits of financially astute people:
A blog post from Traditions Wealth Advisors
(Raymond James, 4/11/18) the US U.S. equity markets soared to record highs at the end of January only to reverse course into a freefall over the next several days. The remainder of the first quarter was choppy as investors grappled with increased uncertainty following an extended period of steady gains against a quiet market backdrop. But, in fact, individual investors remained relatively calm throughout the quarter as lingering memories of the 2008 financial crisis and subsequent recovery had them thinking twice about hastily exiting the market. Backed by a healthy global economy and increasing revenues and earnings expectations for U.S. companies, the noise of the headlines seemed to be just that. Noise.
(Pimco 4/12/18) Volatility: Back to the Future
Volatility is back and capturing headlines in 2018. But is it a sea of change or simply a return to normalcy after years of relative market calm and a particularly tranquil 2017? In March, a combination of risks around rising inflation fears and a global trade war contributed to another bout of equity market swings: The VIX, a measure of U.S. equity market implied volatility, has hovered above 15 on all but one day since February 1, well above last year’s average level of 11. However, looking at volatility from a different perspective – daily returns – the chart shows that volatility in the first quarter of 2018 is closely aligned with that experienced over the past 20 years. It appears 2017 is the anomaly and 1Q 2018 much more the norm.
By Anastasia Megdanis
No matter who you are, where you are from, or what you believe, one thing is for certain, the time to start saving and financially planning was yesterday.
Brien Smith, CFP®, certified financial planner and owner/founder of Traditions Wealth Advisors in College Station took the time to explain why financial planning is so important and how anyone can start to take action in a positive direction.
“Savings is at an all-time low while at the same time, the only fall back for people that don’t save for retirement is social security, and that is also at an all-time low and is predicted to go bankrupt in 10 to 20 years,” says Smith.
Smith explains that there are not enough people contributing to social security as there are receiving its benefits. “The numbers used to be 17 or 18 contributors to social security for every one retiree; now it’s only about two contributors per retiree so the math is not working out at all,” he says.
At Traditions Wealth Advisors, because of Smith’s Certified Financial Planning qualification and the fact that his firm is fee-only and independent, he can offer his clients a wide range of services. Smith is able to advise clients of any net worth, but specializes in high net worth clients, on the best course of action for their financial future.
While services for retirement, estate, investment, business, college, or divorce planning and much more can be offered by a CFP, Smith notes retirement planning as the most popular concern among clients.
“If most people these days don’t have about a million dollars saved up in an account, even with social security on top, it’s going to be very difficult for them not to run out of money,” says Smith. “This is because healthcare is the number one expense and it’s huge, especially later in life.”
Even if such numbers are not realistic for many, the urgency to save and plan your financial future is still there. This is why Smith founded the nonprofit organization, Spirit Stewardship Ministries — to provide financial planning services for free and/or at a discounted rate to those who need it.
Smith emphasizes that it is never too early to start saving. “It seems like, unfortunately, the people that need our help most at the firm don’t come to us, and the people that need our help least have already started saving and are already doing a lot of the right things,” he says. “They come to us to confirm that what they are already doing is the right thing.”
If you start saving as early as possible, you will relieve your future self of stress down the line, because the extra time allows for smaller monthly or yearly savings needed. The younger generation, especially college students who will be entering the job market soon, are advised to start thinking about plans to start saving. Even without a full-time income yet, there are positive steps students can take towards a stable financial future and it starts while they are in school.
Even if you think it is too late or that social security will be enough down the line, there is no harm in being prepared. By saving, you are helping yourself and those around you in a very significant way. It may not seem necessary to some or they may choose to allocate their funds elsewhere, but the best investment someone can make is in themselves. There are many uncertainties in life, but your ability to sustain it should not be one of them.
Three habits you should get into according to Smith
Traditions Wealth Advisors
Christian Roberts/Financial Research Intern
August 17, 2017
North Korea’s sabre rattling is causing political and economic concern across the world. The DJIA is down .59% and the S&P 500 is down .93%, and a lot of that is a result of North Korea threatening to attack Guam and Trump’s threats to the isolated dictatorship. The fear is apparent in the stock market, but that fear is probably causing a temporary decline in the market.
The 7-year old poster above my desk in the office reads at the top “Which will you believe: today’s news or 85 years of performance?” The accompanying chart shows how the stock market has always appreciated in value, even in the wake of recessions from 1926 to 2010.
The impact of geopolitics on the market are almost impossible to predict. Every situation has different market conditions, but one constant thing connects them, and that is the recovery of the markets. The markets will recover, but the economic conditions dictate how long it takes for that to happen.
Figure 1, generated from data by Crossing Wall Street, shows how the S&P 500 has responded to significant historical events ranging from market crashes to war, with different reactions for each. Most of these events triggered a sell-off in the markets, which is to be expected with any shock, but what differed dramatically was their recovery.
Shocks to the market, especially when they are geopolitical, do not tend to last very long. The 9/11 attacks took less than two months to return to September 10 levels. JFK’s assassination was not the biggest issue in the market on the day that it occurred, either. The Cuban Missile crisis caused the market to fall only 1% for the week, and it quickly shot up 3.5% when tensions calmed. While these events certainly hurt the market, their impact is usually not as bad as the fear makes it out to be.
The 1973 oil embargo/Nixon resignation, the Cole bombing/September 11 attacks, and Bear Stearns/Lehman Brothers are important outliers to talk about. The United States was in the midst of a recession in 1973 that was caused by the collapse of the Bretton Woods monetary system and 1973 oil embargo. Stagflation (high inflation and unemployment) made the economy even worse, and Nixon’s resignation triggered a sell-off in the market. His resignation came at the tail end of the recession, and less than a year later the economy was recovering.
The inclusion of 9/11 on this list appears contradictory to what I said earlier, but I mentioned these two events because the economy had declined at the 250-day mark after these events happened. That’s because the economy was in a recession after the Dot-com bubble collapse, and the recession occurred before, during, and after these two events. Their 20-day recovery is encouraging, and their 250-day decline should not be discouraging because it was the result of other events not related to the terror attacks.
The Bear Stearns/Lehman Brothers collapse was a during a sharp decline and sharp recovery period for the economy, and both have negative 250 day returns because they occurred at the beginning of the financial crisis.
These three situations show that the events that took place during these times were not the cause of poor recovery. The poor recovery is the result of other factors. The Dot-com and housing bubbles were disastrous in the 2000s, and any embargo is going to cause economic headaches, but the notable historical events that happened had little impact on the market.
So, what does this mean for the current North Korean situation? The fear of any attack is going to cause more of an impact on the market. In this day and age, we have access to more press and news, so the rhetoric from both sides is seen by everyone. Despite the fear, the chances of a nuclear war with North Korea appear to be very low. An attack on Guam would be suicidal for the regime, and the empty threats can leverage aid for the starving country. There does not seem to be any substance to the fear that the situation is causing. In fact, the Dow’s fall has had more to do with Disney’s disappointing earnings report than North Korea. That’s right, Mickey Mouse is hurting the Dow more than Kim Jong-Un.
The Cuban Missile Crisis saw 3.5% returns in one week in the wake of the crisis, and the market could react similarly in this case. Warren Buffet took advantage of this in 1963 when the vegetable oil scandal and JFK assassination caused American Express stock to sink, which prompted him to buy 5% of the company for $20 million. That same 5% is now worth almost $1 billion. Bonds can also yield returns. Investors tend to flock towards safe investments like Treasury Bonds and Gold. Gold is approaching its highest price for the year, and Treasury Bonds were up as well. These are safe havens that investors flock to in times of uncertainty, but money could rush out of them once the panic subsides.
Which will you believe: today’s news or 92 years of performance?
Sleep Like a Superstar
Have you ever wondered how successful people get it all done? Apparently, they don’t stint on their sleep in order to find extra hours in the day. But they do seem to get up earlier than the rest of us, giving some credence to Ben Franklin’s saying: Early to bed and early to rise makes a man healthy, wealthy and wise.
Forbes magazine looked at the sleep habits of 21 people that most of us would consider successful—including Franklin himself, who routinely went to bed at 10:00 PM and awoke promptly at 5:00 AM. The word “routinely” is important; virtually everyone on the list was consistent about bedtime and awakening time. Some sleep seven hours like Franklin, including Winston Churchill (3:00 AM to 8:00 AM), Bill Gates (midnight to 7:00 AM), Apple CEO Tim Cook (9:30 PM to 4:30 AM), Huffington Post founder Arianna Huffington (10:00 PM to 5:00 AM), Twitter co-founder Jack Dorsey (10:30 PM to 5:30 AM), and Amazon.com founder Jeff Bezos (10:00 PM to 5:00 AM).
People who sleep six hours a night include U.S. President Barack Obama (1:00 AM to 7:00 AM), Yahoo! President Marissa Mayer (midnight to 6:00 AM, but sometimes up by 4:00 AM), AOL CEO Tim Armstrong (11:00 PM to 5:00 AM), Newton Investment Management CEO Helena Morrissey (11:00 PM to 5:00 AM), and Tesla Motors CEO Elon Musk (1:00 AM to 7:00 AM).
Others sleep or slept only five hours, among them Richard Branson (midnight to 5:00 AM), PepsiCo CEO Indra Nooyi (11:00 PM to 4:00 AM), and inventor Thomas Edison (11:00 PM to 4:00 AM).
If you sleep eight hours a night, you’re still in good company. That list includes Virgin Money CEO Jayne-Anne Gadhia (10:30 PM to 6:30 AM), MediaCom UK CEO Karen Blacklett (11:30 PM to 7:30 AM), software-as-a-service company Mor founder Rand Fishkin (1:00 AM to 9:00 AM), digital networking guru Neil Patel (11:00 PM to 7:00 AM); Ellen DeGeneres (11:00 PM to 7:00 AM) and Buffer Software co-founder Leo Widrich (1:00 AM to 9:00 AM).
With a handful of exceptions, few of these successful people are staying up late to catch the Late Show, Saturday Night Live or the end of the NFL Monday Night Football game on the East Coast. And few are sleeping past the delivery of the morning paper—which means they’re getting a jump on the rest of the world.
9 Simple Ways to Slash Your Grocery Bill
Dec 4, 2015 / By Kristin Colella
Print Save AAA
TheStreet: A reminder on such things as shop with a list, don’t shop hungry, take advantage of coupons, buy in season, and five more shopping disciplines that will save you money.
Do you feel like those weekly grocery store visits are sucking your wallet dry? If you’re like many Americans, you might be overspending every time you go to the checkout counter. While it’s important to enjoy fresh, healthy meals each week, you’re probably loading up your cart with a lot of things you really don’t need, or overpaying on items you could have gotten for a cheaper price.
Thankfully, there are simple ways to slash your next grocery bill—all it takes is some planning and self-discipline. Here are nine ideas to get you started.
1. Check your pantry and fridge firstHave you ever purchased a new jar of mayo or bag of pretzels at the grocery store, only to return home and discover that you already bought the item on a previous shopping trip? To avoid purchasing duplicate items that may be hiding in your kitchen, be sure to check your pantry, fridge, and freezer before doing your grocery shopping each week. (Tip: It’s easier to keep track of what you have by keeping these areas neat and organized.)
Taking inventory of the food that’s already in your home can also help spark meal ideas for the coming week and eliminate the need to load up your fridge with too many extra items.
“Use the groceries you already have as a basis for a few meals and you’ll spend less at the grocery store by default,” says Holly Johnson, contributing editor and frugality expert at The Simple Dollar. “You don’t have to buy what you don’t need. And sometimes, knowing what you have already is half the battle.”
If you’re looking for meal ideas, the website www.Supercook.com allows you to type in ingredients you already have in your kitchen, then suggests recipes that you can whip up with those items.
2. Shop with a listIt’s a common story: You walk into a grocery store intending to only buy a few items, then wind up leaving with a cartload of food. Splurging on impulse purchases can really add up, so it’s a good idea to exercise some discipline when you shop. One way to help you stay focused is by jotting down the food you need to buy before leaving your house.
“Make a list and stick to it—don’t be tempted by in-store marketing,” says Julie Ritten, founder of Ritten Financial in Southfield, Mich. “They will try to entice you to buy something you really don’t need or want; it just looks good for that moment.”
3. Don’t shop hungryWhen your stomach is growling, surrounding yourself with aisles upon aisles of tasty food is a recipe for disaster.
“Don’t shop hungry—go shopping after you eat,” says Ritten. “Not only will you not be tempted to buy twice as much food, you’ll burn your meal off by walking and not plopping yourself down on the couch.”
4. Buy local and seasonal foods“One of the best ways to save money at the supermarket is to buy in-season produce and local items that have fewer production costs involved, which means less expense passed onto you,” says Allison Stowell, registered dietitian for Guiding Stars. “Not only is this practice good for your wallet, it supports your local economy and is great for the environment too.”
For a list of which produce is currently in-season, check out this guide on theUSDA website.
5. Don’t snub store brandsWhile some shoppers might immediately write off store brands as being inferior to the national brands, this isn’t always the case. From crackers to ketchup to ice cream, some store brand items taste just as good as the big brands (if not better) and often come with a cheaper price tag.
Part of the reason national brands typically cost more than store brands is simply because “national brands have to build in advertising or promotional costs to the final price,” says Andrew K. Johnson, communications manager for GreenPath Debt Solutions. “A store brand may have the exact same ingredients as a national brand—it’s all up to the consumer to try store versus national and see which passes the test in the kitchen and at the dining room table.”
6. Check the weekly circularYou can save big by checking out your grocery store’s weekly circular, which will tell you which items are on sale. One caveat: “Don’t be tempted by seeing great deals and buying what you don’t really need,” says Andrew K. Johnson.
If you don’t feel like flipping through printed circulars, the free location-based app Flipp allows you to browse hundreds of local weekly circulars right from your smartphone. You can also easily search for a specific item, brand, or store.
7. Use your phone for coupons and cash backIt’s a no-brainer that coupons can help you get many of the products you need for a whole lot less, but if coupon clipping sounds tedious and old-fashioned, you can use your smartphone to access great coupons on your favorite products.
Some coupon apps to try include Coupon Sherpa and Coupons.com. You might also want to consider downloading an app that allows you to earn cash back on your grocery purchases, such as Ibotta, Checkout 51, and SavingStar.
8. Cut, shred, and wash at homeWhen your schedule gets hectic, you might be tempted to buy bagged lettuce, precut fruits and veggies, and shredded cheese out of sheer convenience. The truth is, though, that these prepared items often come at a higher cost, and going the do-it-yourself route really won’t take you that much longer.
“It only takes a few extra minutes to rinse lettuce and tear it by hand or to shred a block of cheese,” says Kevin Gallegos, vice president of sales and Phoenix operations for Freedom Financial Network. “Skip the more expensive, single-serving packages and instead buy the bigger size and dole out smaller portions into sandwich bags or smaller reusable containers.”
9. Join your store’s rewards programGrocery store rewards programs are a great way to pay less at the register by offering you discounts, special deals, and coupons. Some rewards cards even offer you discounts on gas, such as Safeway’s Club Card. For every $100 you spend on groceries at Safeway, you’ll get a 10-cents-per-gallon reward if you fill up at a Safeway gas station or participating Chevron or Texaco station.
For more in-depth analysis and commentary, please check out RealMoney.com, TheStreet.com's subscription site.
Kristin Colella joined MainStreet in September 2011. She previously worked as associate editor for fashion, health, and lifestyle areas for Wainscot Media
by Matt Oechsl
Many so-called experts are giving their 2016 predictions. Brace yourself for volatility – be prepared for a downturn – and so on – all focused on the short-term. However two financial gurus, Larry Fink and Warren Buffett, are long-term thinkers (read the interview with BlackRock CEO Larry Fink in HBR November 2015). Fink is “on a crusade against short-term thinking” which he refers to as short-termism.
Kudos to Mr. Fink for providing HBR with an extremely insightful interview; which was the inspiration for this article. Using hockey great Wayne Gretzky’s alleged response when asked what made him great, “I skate to where the puck is going to be.” Not that we should put our heads in the sand regarding the short-term, but financial advisors would be well served by paying more attention to where the “financial advisory puck” is going to be long-term, or at least three to five years from now.
I’m not pretending to have a crystal ball, but we have a decade of research on affluent consumers and elite financial advisors. After thoroughly reviewing our findings, studying the trends, confusing myself - ha, and then finally breaking through to the fresh air of simplicity, I’ve broken this long-term approach into the three components, to borrow a geometric shape; vertices of an equilateral triangle.
I could add a fourth, embracing excellence – but excellence is a constant running through all three vertices.