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The Ricks Report – October 30, 2017

The Ricks Report

October 30, 2017

Numbers of $ignificance

  •  START SAVING NOWA child born in 2017 that begins kindergarten in the fall of 2022 would attend college between the years of 2035 and 2039. If that child attended an average public in-state 4-year college and if the annual price increases for public colleges experienced over the last 30 years (+5.47% per year) continued into the future, the aggregate 4-year cost of the child’s college education (including tuition, fees, room & board) would be $235,264 or $58,816 per year (source: College Board).

 

  •  DOUBLE-DOUBLE – From total government spending of $246 billion during fiscal year 1973, total government outlays doubled over 6 years (to $504 billion in fiscal year 1979), doubled again over 8 years (to $1.004 trillion in fiscal year 1987), doubled again over 15 years (to $2.011 trillion in fiscal year 2002), and then finally doubled once again over the next 15 years (to $3.980 trillion in fiscal year 2017) (source: OMB).

 

Winning at Life with Gregory Ricks

Tune in 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. This week’s guest will be Dwell NOLA Realty, a member of the Total Wealth Authority. Remember, you can listen from any smartphone or computer through iHeartRadio.

 

The Markets

The last full week of October was a box full of surprises.

First, U.S. economic growth exceeded expectations. The devastation wrought by Hurricanes Harvey, Irma, and Maria was widely expected to stifle U.S. quarterly growth, according to NPR.[1] The Atlanta Federal Reserve[2] predicted 2.5 percent gross domestic product (GDP)* growth for third quarter, down from 3.1 percent the previous quarter. Instead, U.S. GDP grew by 3.0 percent.

In fact, productivity has been flourishing around the globe. The Financial Times[3] reported:

“…activity has again broken upwards in recent weeks, with growth in the advanced economies close to the highest rates seen since before the Great Financial Crash (GFC), apart from in the immediate recovery phase in 2010. Furthermore, world trade volume has now joined the recovery, and corporate expenditure on jobs and machinery is picking up. Overall, it seems that some of the symptoms of “secular stagnation” are beginning to fade…”

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[1] U.S. GDP Beats Expectations, Growing At 3 Percent Bill Chappell – http://www.npr.org/sections/thetwo-way/2017/10/27/560403221/u-s-gdp-beats-expectations-growing-at-3-percent
[2] GDPNow – https://www.frbatlanta.org/cqer/research/gdpnow.aspx
[3] Subscribe to read – https://www.ft.com/content/fef37a88-69b3-334a-a48b-c8e691c53a8e

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Tech companies were a sensation last week, too. Several of the biggest firms beat earnings estimates by wide margins, pushing share values higher, reported CNBC.[4] Despite tech’s strong performance, the Standard & Poor’s 500 Index (S&P 500) has delivered third quarter earnings growth of 4.7 percent with more than half of companies reporting.

Earnings are lower than they would have been without the hurricanes, according to FactSet.[5] With insurance industry earnings excluded, the S&P 500’s earnings growth pops from 4.7 percent to 7.4 percent.

The final surprise for the week was the doldrums. October is supposed to be the most volatile month of the year, according to Barron’s.[6] Instead, we’ve experienced the calmest October since 1928.

The S&P 500 and the NASDAQ both finished last week at new all-time highs.

*GDP is the value of all goods and services produced in a region.

Data as of 10/27/17 1-Week Y-T-D 1-Year 3-Year 5-Year 10-Year
Standard & Poor’s 500 (Domestic Stocks) 0.2% 15.3% 21.0% 9.6% 12.8% 5.3%
Dow Jones Global ex-U.S. -0.2 20.5 20.2 4.4 5.2 -1.2
10-year Treasury Note (Yield Only) 2.4 NA 1.8 2.3 1.7 4.4
Gold (per ounce) -1.2 9.3 0.0 1.0 -5.8 4.9
Bloomberg Commodity Index 0.7 -1.9 -0.4 -9.8 -9.6 -7.2
DJ Equity All REIT Total Return Index -1.4 5.8 9.8 7.5 10.0 6.2

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.

And the leader in biometric identification is India! Remembering passwords, especially if you follow best practices and have unique 12-15-character passwords for each account, can be challenging.[7]

Even when you follow best practices, which many people do not, passwords are vulnerable to data breaches. The Harvard Business[8] Review recently reported password insecurity is one reason businesses have been opting for biometric technology such as:

  • Fingerprint readers
  • Eye scanners
  • Voice recognition systems
  • Hand geometry

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[4] Nasdaq and S&P 500 rip to record close after blowout tech earnings; Amazon tops $1,100 Fred Imbert – https://www.cnbc.com/2017/10/27/tech-stocks-leaping-higher-after-blowout-earnings-from-amazon-alphabet-and-microsoft.html
[5]https://insight.factset.com/hubfs/Resources%20Section/Research%20Desk/Earnings%20Insight/EarningsInsight_102717.pdf
[6] Stocks Surge to Highs as Tech Roars Again – Ben Levisohn – http://www.barrons.com/articles/stocks-surge-to-highs-as-tech-roars-again-1509158124
[7] 7 Password Experts on How to Lock Down Your Online Security Brian Barrett https://www.wired.com/2016/05/password-tips-experts/
[8] Passwords Are Terrible, but Will Biometrics Be Any Better? Anthony Jacco – https://hbr.org/2017/05/passwords-are-terrible-but-will-biometrics-be-any-better

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For instance, in Hangzhou, China, a “health-food concept restaurant” belonging to an American fast food chain, relies on facial recognition software to allow diners to pay with a smile, according to c|net.com.[9] It’s a lot to digest.

India is a leader in the new technology. Ninety-nine percent of adults in the country have been enrolled in Aadhaar, a biometric identification program that has collected the fingerprints and iris scans of more than a billion people since 2010, according to The Economist.[10]

When given permission, Indian government bodies and private businesses can match the fingerprints or irises of individuals to their unique 12-digit numbers, facilitating purchases, payments, and other processes. The system has some glitches, though:

“Unlike reading an ID card, checking someone’s identity through Aadhaar requires an internet connection and, often, electricity. Ration-shop owners in out-of-the-way places are known to march their customers to the top of a hill, roof, or tree – wherever a phone signal can be found – to check their identity. Even then, samples seem to show that roughly a third of authentications come back negative, an extraordinarily high failure rate for a technology that people rely on for necessities.”

Regardless, Morgan Stanley[11] believes “digitizing its predominantly cash-based economy and reforming its archaic tax system” will help put India on the economic fast track. “The country was already on a strong trajectory, but digitization puts India’s nominal GDP growth on track to compound annually by more than 10 percent in U.S. dollar terms over the coming decade.”

Weekly Focus – Think About It

“There is probably no pleasure equal to the pleasure of climbing a dangerous Alp; but it is a pleasure which is confined strictly to people who can find pleasure in it.”–Mark Twain, American novelist[12]

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[9] Smile! You just paid for that meal with your face – Michelle Meyers – https://www.cnet.com/news/smile-to-pay-kfc-facial-recognition-payments-alipay-ant/?part=propeller&%3Bsubj=news&%3Btag=link
[10] India’s ID system is reshaping ties between state and citizens – https://www.economist.com/news/asia/21720609-long-they-have-mobile-signal-indias-id-system-reshaping-ties-between-state-and-citizens
[11] India’s Digital Future – http://www.morganstanley.com/ideas/digital-india?subscribed=true&et_mid=26620&et_mkid=05dcda3fc149857c3a3cc45c1c6dc98b
[12] Famous inspirational climbing quotes about mountaineering, rock climbing, mountains and also funny quotes 🙂 Damian Granowski – http://winterclimb.com/articles/item/1-climbing-quotes/

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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 email with their email address.

 

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.

 

* 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.npr.org/sections/thetwo-way/2017/10/27/560403221/u-s-gdp-beats-expectations-growing-at-3-percent
https://www.frbatlanta.org/cqer/research/gdpnow.aspx
https://www.ft.com/content/fef37a88-69b3-334a-a48b-c8e691c53a8e (or go to https://s3-us-west-2.amazonaws.com/peakcontent/+Peak+Commentary/10-30-17_FinancialTimes-World_Economy_may_be_Healthier_than_the_IMF_Thinks-Footnote_3.pdf)
https://www.cnbc.com/2017/10/27/tech-stocks-leaping-higher-after-blowout-earnings-from-amazon-alphabet-and-microsoft.html
https://insight.factset.com/hubfs/Resources%20Section/Research%20Desk/Earnings%20Insight/EarningsInsight_102717.pdf
http://www.barrons.com/articles/stocks-surge-to-highs-as-tech-roars-again-1509158124 (or go to https://s3-us-west-2.amazonaws.com/peakcontent/+Peak+Commentary/10-30-17_Barrons-Stocks_Surge_to_Highs_as_Tech_Roars_Again-Footnote_6.pdf)
https://www.economist.com/news/asia/21720609-long-they-have-mobile-signal-indias-id-system-reshaping-ties-between-state-and-citizens (or go to https://s3-us-west-2.amazonaws.com/peakcontent/+Peak+Commentary/10-30-17_TheEconomist-Indias_ID_System_is_Reshaping_Ties_Between_State_and_Citizens-Footnote_7.pdf)
https://www.wired.com/2016/05/password-tips-experts/
https://hbr.org/2017/05/passwords-are-terrible-but-will-biometrics-be-any-better
https://www.cnet.com/news/smile-to-pay-kfc-facial-recognition-payments-alipay-ant/?part=propeller&subj=news&tag=link
http://www.morganstanley.com/ideas/digital-india?subscribed=true&et_mid=26620&et_mkid=05dcda3fc149857c3a3cc45c1c6dc98b
http://winterclimb.com/articles/item/1-climbing-quotes/

[1] U.S. GDP Beats Expectations, Growing At 3 Percent Bill Chappell – http://www.npr.org/sections/thetwo-way/2017/10/27/560403221/u-s-gdp-beats-expectations-growing-at-3-percent
[2] GDPNow – https://www.frbatlanta.org/cqer/research/gdpnow.aspx
[3] Subscribe to read – https://www.ft.com/content/fef37a88-69b3-334a-a48b-c8e691c53a8e
[4] Nasdaq and S&P 500 rip to record close after blowout tech earnings; Amazon tops $1,100 Fred Imbert – https://www.cnbc.com/2017/10/27/tech-stocks-leaping-higher-after-blowout-earnings-from-amazon-alphabet-and-microsoft.html
[5]https://insight.factset.com/hubfs/Resources%20Section/Research%20Desk/Earnings%20Insight/EarningsInsight_102717.pdf
[6] Stocks Surge to Highs as Tech Roars Again – Ben Levisohn – http://www.barrons.com/articles/stocks-surge-to-highs-as-tech-roars-again-1509158124
[7] 7 Password Experts on How to Lock Down Your Online Security Brian Barrett https://www.wired.com/2016/05/password-tips-experts/
[8] Passwords Are Terrible, but Will Biometrics Be Any Better? Anthony Jacco – https://hbr.org/2017/05/passwords-are-terrible-but-will-biometrics-be-any-better
[9] Smile! You just paid for that meal with your face – Michelle Meyers – https://www.cnet.com/news/smile-to-pay-kfc-facial-recognition-payments-alipay-ant/?part=propeller&%3Bsubj=news&%3Btag=link
[10] India’s ID system is reshaping ties between state and citizens – https://www.economist.com/news/asia/21720609-long-they-have-mobile-signal-indias-id-system-reshaping-ties-between-state-and-citizens
[11] India’s Digital Future – http://www.morganstanley.com/ideas/digital-india?subscribed=true&et_mid=26620&et_mkid=05dcda3fc149857c3a3cc45c1c6dc98b
[12] Famous inspirational climbing quotes about mountaineering, rock climbing, mountains and also funny quotes 🙂 Damian Granowski – http://winterclimb.com/articles/item/1-climbing-quotes/