The Ricks Report
December 4, 2017
NUMBERS OF $IGNIFICANCE
$ BACK TO BOOM LEVELS – The median sales price of existing homes sold nationally in October 2017 is 108% of the median sales price of existing homes sold nationally in June 2007, the latter date being the peak of the real estate boom. Sale prices in the Northeast have not completely bounced back. The October 2017 median sales price in the Northeast is just 93% of its June 2007 median sales price (source: National Association of Realtors).
$ LONG-TERM GUESS – When President Franklin D. Roosevelt proposed the Social Security retirement program in 1935, FDR’s financial people projected that total Social Security expenditures would reach $1.3 billion in 1980 or 45 years into the future. Actual outlays in 1980 were $149 billion. Thus, the analysts’ 1935 estimate represented less than 1% of actual 1980 Social Security expenditures (source: Social Security).
$ SEE A TREND? – The US economy grew by +4.2% per year over the 24 years from 1950 through 1973, a period of worldwide economic expansion. The US economy grew by +3.2% per year over the 27 years from 1974 through 2000. The US economy has grown by +1.8% per year over the last 16 years from 2001 through 2016 (source: Commerce Department).
$ COSTLY – Auburn fans who rushed the field following its upset of # 1 ranked Alabama on 11/25/17 cost the school $250,000. The SEC implemented a policy in 2004 that levies fines when spectators leave the stands and enter the playing field after a game. Auburn has been fined 3 times since 2013 (source: SEC).
$ WINNING AT LIFE WITH GREGORY RICKS $
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What will it take to shake investors’ confidence?
From the perspective of unsettling events, last week was jam-packed. North Korea claimed to have the capability to strike the United States with a nuclear missile, tax reform continued to travel a controversial path through the House and Senate, and former national security adviser Michael Flynn pled guilty to lying to the FBI about conversations with Russia’s ambassador.
U.S. stock markets weren’t immune to these events and some lost value. However, the Dow Jones Industrial Average and the Standard & Poor’s 500 Index didn’t stay down for long. Both indices finished the week higher.
Barron’s reported black-box trading may have been the reason “…the Dow shed 400 points from peak to trough in a matter of minutes. The drop happened so quickly that some opined that humans couldn’t have been responsible for the tumble. ‘No way real traders were moving that fast,’ says Andrew Brenner, head of international fixed income securities at NatAlliance Securities. ‘Clearly, it was algorithms taking over.’”
Investor sentiment remained largely undented. The AAII Sentiment Survey showed slightly more investors were bullish near week’s end than had been the previous week. Bearishness was also up, gaining 2.6 percent. Fewer investors were neutral about markets. Despite an increase in bullish sentiment, the level was below the historic average for bullishness for the 39th time in 2017. (The AAII survey runs from Thursday to Thursday, so it did not reflect any changes in sentiment that may have occurred after reports of Michael Flynn’s indictment and cooperation with special investigators.)
The CNN/Money Fear & Greed Index is an investor sentiment gauge that relies on seven market indicators – stock price momentum, strength, and breadth, put and call options, junk bond demand, market volatility, and safe haven demand – to measure whether fear or greed is driving the market. Last week, the needle was in the Greed range, as it has been for some time.
 https://www.barrons.com/articles/washington-whipsaws-the-market-1512186612 (or go to https://s3-us-west-2.amazonaws.com/peakcontent/+Peak+Commentary/12-04-17_Barrons-Washington_Whipsaws_the_Market-Footnote_4.pdf)
Data as of 1/26/18 1-Wk Y-T-D 1-Yr 3-Yr 5-Yr 10-Yr Standard & Poor's 500 (Domestic Stocks) 2.6% 2.6% 20.9% 10.7% 13.4% 6.8% Dow Jones Global ex-U.S. 2.8 2.8 25.4 7.8 5.0 0.4 10-year Treasury Note (Yield Only) 2.5 N/A 2.4 2.0 1.9 3.8 Gold (per ounce) 1.6 1.6 11.9 3.2 -4.4 4.4 Bloomberg Commodity Index -0.3 -0.3 0.5 -5.4 -8.6 -7.3 DJ Equity All REIT Total Return Index -2.1 -2.1 4.2 5.4 9.0 8.3
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.
For a number of years, policymakers have been focused on finding ways to help Americans become better financially prepared for retirement. Studies have found having access to payroll-deduction retirement savings plans at work makes it 15 times more likely Americans will save for the future. Consequently, policymakers have focused their attention on smaller companies. About 36 percent of Americans work for companies with fewer than 100 employees, and many of these businesses do not offer retirement plans.
Last July, Oregon launched OregonSaves, the state’s auto-IRA program. Companies that don’t have workplace retirement plans are required to facilitate the program by:
- Providing information to set up Roth IRA accounts for employees
- Making payroll deductions to the Roth accounts
- Delivering updated employee information
California, Connecticut, Illinois, Maryland, and Massachusetts are working on similar programs.
Some business owners have embraced the auto-IRA opportunity, while others object to having the government involved. A Pew Charitable Trusts survey of 1,600 small and mid-sized business owners found 51 percent would prefer to sponsor their own retirement plans rather than participate in a state-run plan.
Many employers who participated in focus groups were not aware low-cost retirement plan options are available in the marketplace. Pew researchers noted:
“Most [small and medium-sized employers] did not have a full understanding of how 401(k) plans work, and few were familiar with plans or incentives designed for small businesses, such as the Simplified Employee Pension (SEP) Plan, the Savings Incentive Match Plan for Employees (SIMPLE), or the small employer tax credit for retirement plan startup costs.”
If you’re interested in learning more about retirement plan options for small businesses, sole proprietorships, or freelancers, contact your financial professional.
WEEKLY FOCUS – THINK ABOUT IT
“Humanity is a lot like me. It’s an aging movie star, grappling with all the newness around it, wondering whether it got it right in the first place and still trying to find a way to keep on shining regardless.”
–Shah Rukh Khan, Indian film actor
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Investment advisory services offered through Global Financial Private Capital, LLC, an SEC Registered Investment Adviser. SEC registration does not imply any level of skill or training. 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.
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* This newsletter was prepared by Carson Group Coaching. Carson Group Coaching is not affiliated with the named broker/dealer.
* Government bonds and Treasury Bills are guaranteed by the U.S. government as to the timely payment of principal and interest and, if held to maturity, offer a fixed rate of return and fixed principal value. However, the value of fund shares is not guaranteed and will fluctuate.
* Corporate bonds are considered higher risk than government bonds but normally offer a higher yield and are subject to market, interest rate and credit risk as well as additional risks based on the quality of issuer coupon rate, price, yield, maturity, and redemption features.
* The Standard & Poor’s 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general. You cannot invest directly in this index.
* All indexes referenced are unmanaged. Unmanaged index returns do not reflect fees, expenses, or sales charges. Index performance is not indicative of the performance of any investment.
* The Dow Jones Global ex-U.S. Index covers approximately 95% of the market capitalization of the 45 developed and emerging countries included in the Index.
* 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.
* Gold represents the afternoon gold price as reported by the London Bullion Market Association. The gold price is set twice daily by the London Gold Fixing Company at 10:30 and 15:00 and is expressed in U.S. dollars per fine troy ounce.
* The Bloomberg Commodity Index is designed to be a highly liquid and diversified benchmark for the commodity futures market. The Index is composed of futures contracts on 19 physical commodities and was launched on July 14, 1998.
* The DJ Equity All REIT Total Return Index measures the total return performance of the equity subcategory of the Real Estate Investment Trust (REIT) industry as calculated by Dow Jones.
* Yahoo! Finance is the source for any reference to the performance of an index between two specific periods.
* Opinions expressed are subject to change without notice and are not intended as investment advice or to predict future performance.
* Economic forecasts set forth may not develop as predicted and there can be no guarantee that strategies promoted will be successful.
* Past performance does not guarantee future results. Investing involves risk, including loss of principal.
* You cannot invest directly in an index.
* Stock investing involves risk including loss of principal.
* Consult your financial professional before making any investment decision.
https://www.barrons.com/articles/washington-whipsaws-the-market-1512186612 (or go to https://s3-us-west-2.amazonaws.com/peakcontent/+Peak+Commentary/12-04-17_Barrons-Washington_Whipsaws_the_Market-Footnote_4.pdf)