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The Ricks Report – April 10, 2017

­­­­­­The Ricks Report

April 10, 2017

Numbers of $ignificance

  • WHAT’S IMPORTANT – 54% of 4,200 American workers surveyed would switch jobs for a better retirement plan (source: Transamerica Center for Retirement Studies).
  • REMOVES AN INCENTIVE FOR BANKS TO LEND – The +1% that the Federal Reserve currently pays to banks on the $2.185 trillion of excess reserves the banks hold at the 12 regional Fed banks (as of 3/29/17) is equal to $59.9 million in daily interest. The Fed began paying ¼ of 1% on excess reserves as of 10/06/08, increased the rate paid to ½ of 1% as of 12/17/15, increased again to ¾ of 1% as of 12/15/16, and finally to +1% as of 3/16/17 (source: Federal Reserve).     

Winning at Life with Gregory Ricks

Tune in to every weeknight from 7:00 pm to 8:00 pm and every Saturday from 10:00 am to 1:00 pm!  We are now on News Talk 99.5 WRNO and News Talk 104.9 WBUV, as well as Facebook LIVE, Periscope (GregoryRicks) and the iHeart app.  Gregory Ricks and James Parker will be live in studio talking about some great current events and financial solutions.

The Markets

U.S. stock markets are sending mixed signals.

If you look at the performance of the CBOE Volatility Index (a.k.a. the VIX or fear gauge), which is a measure of market expectations for volatility in the near future, it appears all is well and investors expect no unexpected events. Barron’s explained:

“…which brings us back to a central fact: the absence of volatility. The first quarter was historic for the CBOE Volatility Index…It ranged from 10.6 to 13.1, and its average level was 11.69, the lowest in an initial quarter since the VIX was born in 1990 and the second-lowest quarterly average since the 11.3 of 2006’s final three months…”

The VIX remained stubbornly low last week, too, despite weaker than expected employment news, wage news, and generally flat economic data.

If you turn your eyes to the number of companies whose shares have reached new highs, you might form a different opinion about the steadiness of stock markets. Barron’s wrote:

“…the squadron of stocks pushing 52-week highs at the New York Stock Exchange has shrunk from 338 on March 1 to 72 late last week…But, if the planet really is enjoying a synchronized economic recovery, why are we lunging at these stocks as if they were the only game in town?”

It’s difficult to know how to factor in last week’s air strikes against Syria, which registered as a tiny blip on the U.S. stock market radar. Some analysts say that’s as it should be. The real drivers of market performance in 2017 will be tax reform and global monetary policy. Others are concerned involvement in Syria could lead to a reshuffling of political priorities and delay progress on domestic legislation.

In times like these, diversification is critical.

 

Data as of 4/7/17 1-Week Y-T-D 1-Year 3-Year 5-Year 10-Year
Standard & Poor’s 500 (Domestic Stocks) -0.3% 5.2% 15.4% 8.5% 11.3% 5.0%
Dow Jones Global ex-U.S. -0.4 7.0 13.2 -1.4 2.8 -1.2
10-year Treasury Note (Yield Only) 2.4 NA 1.7 2.7 2.0 4.7
Gold (per ounce) 1.7 9.3 2.0 -0.8 -5.1 6.5
Bloomberg Commodity Index 0.6 -1.9 10.8 -13.9 -9.5 -6.7
DJ Equity All REIT Total Return Index 0.9 3.5 7.3 10.7 11.0 4.9

S&P 500, Dow Jones Global ex-US, Gold, Bloomberg Commodity Index returns exclude reinvested dividends (gold does not pay a dividend) and the three-, five-, and 10-year returns are annualized; the DJ Equity All REIT Total Return Index does include reinvested dividends and the three-, five-, and 10-year returns are annualized; and the 10-year Treasury Note is simply the yield at the close of the day on each of the historical time periods.

Sources: Yahoo! Finance, Barron’s, djindexes.com, London Bullion Market Association.

Past performance is no guarantee of future results. Indices are unmanaged and cannot be invested into directly. N/A means not applicable.

 

Pulling ink out of the air. Air pollution is one of the biggest environmental and human health threats in the world, according to a 2016 World Health Organization report:

“To date, air pollution – both ambient (outdoor) and household (indoor) – is the biggest environmental risk to health, carrying responsibility for about one in every nine deaths annually. Ambient (outdoor) air pollution alone kills around 3 million people each year…Air pollution continues to rise at an alarming rate and affects economies and people’s quality of life; it is a public health emergency.”

Engineer Anirudh Sharma was familiar with the problem. The MIT Media Lab student was walking down a street in Mumbai, reported MSN.com, when he noticed that diesel exhaust from passing buses and cars was staining his clothes black.

The experience sparked an idea: Was it possible to recycle air pollution and use it to make something useful? Like ink?

During the past few years, Sharma has developed technology to create the world’s first line of art supplies derived from air pollution. He and his team have built an exhaust filter that captures carbon soot as it is emitted from cars, generators, and ferries. Once pollution has been gathered, impurities are removed. The remaining soot is ground into pigment and mixed with vegetable oil to create inks, markers, and paints.

One artist commented, “I don’t know if it’s the pollution, but the quality of the ink is really special…It’s pitch black, really thick and dries incredibly quickly.”

Last month, the first Clean Air Gallery opened in London. It features work by artists from London, Glasgow, Leeds, Southampton, and Nottingham – some of the most polluted cities in the United Kingdom – using Sharma’s ink. Other exhibitions are expected to open in Berlin, Singapore, and New York.

Weekly Focus – Think About It

“A mind which really lays hold of a subject is not easily detached from it.”

–Ida Tarbell, Investigative journalism pioneer

 

Best regards,

Gregory Ricks

 

P.S.  Please feel free to forward this commentary to family, friends, or colleagues. If you would like us to add them to the list, please reply to this e-mail with their e-mail address.

Gregory Ricks & Associates is a Registered Investment Advisor which offers services and charges fees as set forth in Form ADV, a copy of which you should obtain prior to investment. Information presented is for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any specific securities, investments, or investment strategies.  Investments involve risk and unless otherwise stated, are not guaranteed.  Be sure to first consult with a qualified financial advisor and/or tax professional before implementing any strategy discussed herein.                        

* The Standard & Poor’s 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general.

* The 10-year Treasury Note represents debt owed by the United States Treasury to the public. Since the U.S. Government is seen as a risk-free borrower, investors use the 10-year Treasury Note as a benchmark for the long-term bond market.

* Opinions expressed are subject to change without notice and are not intended as investment advice or to predict future performance.

* Past performance does not guarantee future results.

* You cannot invest directly in an index

Sources:

http://www.cboe.com/micro/vix/pdf/cboe30c7-volindex_qrg.pdf

http://www.barrons.com/articles/low-vix-may-mask-stock-risks-1491625249?mod=BOL_hp_we_columns (or go to https://s3-us-west-2.amazonaws.com/peakcontent/+Peak+Commentary/04-10-17_Barrons-Low_VIX_may_Mask_Stock_Risks-Footnote_2.pdf)

http://www.barrons.com/mdc/public/page/9_3063-economicCalendar.html

(click on U.S. & Intl Recaps and select “The job madness of March”) (or go to https://s3-us-west-2.amazonaws.com/peakcontent/+Peak+Commentary/04-10-17_Barrons-The_Job_Madness_of_March-Footnote_3.pdf)

http://www.barrons.com/articles/are-stocks-finally-topping-out-1491627050?mod=BOL_hp_we_columns (or go to https://s3-us-west-2.amazonaws.com/peakcontent/+Peak+Commentary/04-10-17_Barrons-Are_Stocks_Finally_Topping_Out-Footnote_4.pdf)

http://www.barrons.com/articles/do-airstrikes-signal-new-priorities-for-trump-1491627084?mod=BOL_hp_we_columns (or go to https://s3-us-west-2.amazonaws.com/peakcontent/+Peak+Commentary/04-10-17_Barrons-Do_Airstrikes_Signal_New_Priorities_for_Trump-Footnote_5.pdf)

http://apps.who.int/iris/bitstream/10665/250141/1/9789241511353-eng.pdf?ua=1 (or go to https://s3-us-west-2.amazonaws.com/peakcontent/+Peak+Commentary/04-10-17_WorldHealthOrganization-Report-Ambient_Air_Pollution-Footnote_6.pdf)

https://www.msn.com/en-ca/news/offbeat/magic-black-air-ink-the-art-supplies-made-from-vehicle-pollution/ar-BBzuyky

https://press.economist.com/stories/10701-the-worlds-first-clean-air-gallery-opens-in-london

http://www.famousquotesandauthors.com/authors/ida_tarbell_quotes.html