Friday, September 29, 2017

The Latest Employee Benefit

The fallout from the Equifax breach has led a lot of people to wonder just how secure their persona financial information is. As a result of that and an economy nearing full employment, one of the benefits more employers are offering to their employees is identity theft protection, according to IdentityForce’s 2017 Progressive Benefits Survey.

The survey found that more than two-thirds (68 percent) of HR professionals consider identity theft protection an increasingly important employee benefit. But only half currently offer identity theft protection to their employees.

When asked what their organization would expect to gain by offering identity theft protection in addition to offering more attractive benefits, they said they would provide an extra layer of protection in case of a data breach or cyber attack (56 percent); reduce stress and distractions in the workplace (37 percent); improve recruiting and retention efforts (22 percent) and attract millennials, (22 percent). Just over a tenth (12 percent) say they have no plans and no expectations around this.

Thursday, September 28, 2017

The Potential Generosity of Millennials

The idealism of the millennial generation shines brightly in Personal Capital’s latest survey of affluent families. The online survey of just over 1,000 affluent investors, 18 or older with assets of $500,000 or more, found that millennials with children plan to spend more on their children’s college education and home purchases than older generations.

They’re three times as likely to say they will cover the entire cost of their kid’s home purchase, and twice as likely to contribute a full down payment compared with parents overall. Moreover, 70 percent say they would prioritize saving for their kid’s education over saving for their own retirement. In comparison, just under 50 percent of parents overall say they would adopt that strategy.

The survey also found that among all affluent parents, close to one-fifth plan to support their children into their 30s, 12 percent plan to continue that into their 40s and 97 percent plan to leave an inheritance to their children. Just over 90 percent plan on leaving $100,000 or more to their heirs.

Wednesday, September 27, 2017

The Top Ten of... Next Year?

Most investors would love to know which companies are going to have the strongest earnings next year. Goldman Sachs has made its projections, and sees the following as the top ten earnings growers for 2018:

  1. Oil and gas production company EQT Corp., projected up  74 percent
  2. Chemical company FMC Corp., up 63 percent
  3. Retailer Coach Inc., up 31 percent
  4. Facebook, up 30 percent
  5. Aerospace and defense company Rockwell Collins, up 28 percent
  6. Software firm Autodesk, up 25 percent
  7., up 23 percent
  8. Oil and gas production company Concho Resources, up 23 percent
  9. Netflix, up 22 percent
  10. Electronic production equipment company Lam Research Corp., up 22 percent

Tuesday, September 26, 2017

The Lure of Bond Funds

Here's a paradox: The bond market has squeezed out only a 3 percent return so far this year, while U.S. stocks are up more than 13 percent. But in August, more than 90 percent of the $30 billion that flowed into all mutual funds and exchange-traded funds went into taxable-bond funds, according to research firm Morningstar.

One issue in play here: Many investors are rebalancing their portfolios after the recent runup in equities. U.S. stocks have more than tripled since the financial crisis. So an investor who had 60 percent in stocks and 40 percent in bonds then would have more than 75 percent in stocks now.

But this has been happening at a time when bonds have been seriously underperforming. Over the past 12 months, long-term Treasury bonds have lost more than 4 percent, and the overall bond market has delivered a gain of less than 1 percent, counting interest payments.

Monday, September 25, 2017

The High Costs of Flying

Have you flown lately? If you checked a bag, you may want to know that the airlines collected nearly $1.2 billion in baggage fees during the second quarter of 2017. That's a new record for a quarter and the fifth consecutive quarter that bag fees exceeded the billion-dollar threshold. Airlines collected another $737 million in reservation change and cancellation fees during the second quarter.

Airlines have collected more than $2.2 billion in bag fees and almost $1.5 billion in reservation change and cancellation fees through the first half of 2017. That's an average of more than $20 million per day in combined ancillary fees.

Airlines charged a record $4.2 billion in bag fees and $2.9 billion in ticket fees in 2016, a total of $7.1 billion. Since 2008, airlines have charged flyers almost $56 billion in bag and ticket change fees.

Friday, September 22, 2017

Who's Moving?

The share of Americans who moved to a different residence last year fell to its lowest point in the past decade, according to new estimates from the Census Bureau’s American Community Survey. But the degree of movement isn't the same for every generation.

This all-time low only holds when you include people under age 29, many of whom fall in the millennial generation. The number of people aged 20 to 24 who move has dropped by 6 percentage points in the last decade.

At the other end of the scale, older workers and those at or approaching retirement age are actually moving a bit more than they used to. U.S. residents ages 65 and over stopped moving as often in the wake of the recession, but in 2016 they actually moved at a faster rate than before the recession began.

Thursday, September 21, 2017

The Wild World of Consumer Stocks

Retail-sector blowups have driven the correlation between stocks in the S&P 500′s consumer discretionary sector to their lowest levels in years. The rolling 65-day correlation for consumer discretionary stocks in the S&P 500 stocks is at 0.39, near the lowest in at least seven years, according to Chris Verrone and Todd Sohn at Strategas Research Partners. The average since the start of 2011 is 0.56.

The changing retail landscape has made for very different fortunes for different consumer companies. Some of the biggest movers this year:

  • Wynn Resorts: up 66.58 percent
  • Netflix: up 45.52 percent
  • Mattel: down 47.30 percent
  • Foot Locker: down 51.81 percent

Wednesday, September 20, 2017

A World of Contrasts

A lot of stocks listed in emerging economies are are having banner years. The  MSCI Emerging Market Index has climbed 28 percent in dollar terms in 2017, far outpacing the 12 percent advance for S&P 500, according to Yardeni Research.

But not all of them are flourishing, and the range of individual country performances has been extreme. Yardeni says the correlation between individual emerging-market stock exchanges this year has plunged to 10-year lows.

For example, the MSCI India Index this year is up 23 percent in rupees while Brazil has climbed 24 percent in reals. Meanwhile, Russian stocks, as measured by the MSCI benchmark in rubles, have slumped 9.1 percent. Pakistan, which was upgraded from frontier market to emerging status just this year, is down 19 percent.

Tuesday, September 19, 2017

Where the Buybacks Here

Buybacks for companies in the S&P 500 index have been steadily dropping: They reached $120.1 billion in the second quarter, which is off 5.8 percent from the year-ago period, when companies repurchased $127.5 billion of their own stock. It's also down 9.8 percent from the first quarter of 2017.

One area where buybacks actually increased was the technology sector. Tech spent $27.6 billion on buybacks in the quarter, up 0.5 percent from the first quarter of 2017. Tech represents 23 percent of all buybacks, according to S&P.

On the other hand, there's Apple. The largest company in the economy by market capitalization, Apple spent "just" $7.1 billion on buybacks in the second quarter, down from $10.2 billion in the second quarter of 2016.

Monday, September 18, 2017

Another Year for Coming Out of the Market

Even with stocks in the midst of one of their best-ever runs, investors are on pace to pull more money out of U.S. stock funds than they put in for the third straight year and the eighth in the last 10 years. Through the first seven months of this year, investors pulled a net $8 billion out of U.S. stock funds.

In the years running up to the Great Recession, more money was going into the market than coming out. Now, the tide is in the opposite direction. Investors pulled an average of nearly $24 billion out of domestic stock funds annually from 2008 through 2016.

Instead of U.S. stocks, investors have been more interested in bonds. More than $235 billion went into bond funds through the first seven months of the year.

Friday, September 15, 2017

The Bulls Are Back

After tracking below historical levels for much of the year, bullish sentiment among investors jumped to its highest level since January for the week ended Wednesday. That's according to the American Association of Individual Investors’ latest sentiment survey.

Of those polled, 41 percent said they felt the stock market would rise over the next six months, up from 29 percent in the prior week. Meanwhile, 22 percent said they expected stocks to fall, down sharply from 36 percent.

But remember, the AAII results are often a contrarian indicator. That’s because some feel the stock market is most likely to crash when investors are piling in with little hesitation, as was the case around the time of the dot-com boom. On March 8, 2000, AAII said 58 percent of investors were bullish on the stock market - two days before the Nasdaq Composite finally reached its peak.

Thursday, September 14, 2017

The High Cost of Sports

America’s sports-industrial complex took in more than $100 billion last year, according to a survey released this week by Fans’ spending included $55.9 billion for sporting events, $33.4 billion for athletic equipment, $19.2 billion for gym memberships, $8 billion for sports-themed games, $4.8 billion for race entry fees and $2.3 billion for fantasy sports leagues.

In addition, 43 percent of the 18-to-53 age cohort paid to attend a sporting event in the preceding 12 months. Among those 53 and older, only 21 percent attended a sporting event. noted that a family of four put out $503 in 2016 to attend an NFL game, up 232 percent from $151 in 1991 - covering two adult tickets, two children’s tickets, two small beers, four small soft drinks, four hot dogs, two programs, two adult-size ball caps and parking. The same family spent $339 in 2016 to attend an NBA game, and $219 to watch a Major League Baseball game.

Wednesday, September 13, 2017

America's Good News

America's middle class had its highest-earning year ever in 2016, the U.S. Census Bureau reported yesterday. Median household income in America was $59,039 last year. That surpassed the previous record of $58,655 set in 1999.

We're even doing a little better here in the Northeast: Median household incomes here are the highest in the nation, at $64,390. That's followed by the West ($64,275), the Midwest ($58,305) and the South ($53,861).

The Census Bureau also reported Tuesday that the poverty rate fell 12.7 percent in 2016 — meaning 2.5 million people escaped poverty. This is the first time since the recession that the poverty rate has returned to the basic 2007 level of 12.5 percent, a sign of how the U.S. economy has recovered from the Great Recession.

Tuesday, September 12, 2017

The Old Bull

With the S&P 500 closing at a new all-time high yesterday, it has now been 3,108 calendar days since the last 20 percent decline, the traditional marker for a bear market.The current bull is now the second longest in history, behind the 4,494 days that passed between December 1987 and March 2000.

Today’s close was also a big deal in terms of gains for the current bull market.  The S&P’s gain of 267.6 percent over the course of this bull makes this the second strongest bull market on record as well, after the 1987 to 2000 era.

We haven't had a 10 percent correction in more than 18 months, but we also haven’t even had a correction of 5 percent since last June. The 441-day streak without a 5 percent correction is the sixth longest on record for the S&P 500.

Monday, September 11, 2017

A Good Time for Active Management

The research is in, and everyone agrees: This is a great investing landscape for active management. Nearly half of all actively managed U.S. stock funds did better than a composite of index funds in the 12 months through June, according to Morningstar.

The reason? Stocks are moving less often in herds, a departure from the years following the Great Recession. A scattered performance gives stock-picking managers more opportunities to differentiate themselves from index funds.

The Standard & Poor’s 500 rose 15.5 percent in the year through June 30, but that masks some big differences in performance underneath. The best-performing sector of the 11 that make up the index, financials, jumped nearly 33 percent over that time. The worst, telecoms, lost nearly 16 percent. That gap of nearly 49 percentage points between the first- and last-place sectors compares with a gap of 28 percentage points at the end of last year.

Friday, September 8, 2017

What Makes Millennials Sick

Do your money troubles make you sick? Financial anxiety has made about a quarter of millennials feel physically ill, according to a new study by Northwestern Mutual. It's also made more than half feel depressed.

For many millennials, who came of age and entered the job market during the economic recession, the bad feelings are pervasive. Some 69 percent said they experienced anxiety because of their income, 67 percent said it was because of their level of savings, and 53 percent said it was because of worry about losing their job.

About a third of the millennials surveyed said they were prone to excessive or frivolous spending, more than the 26 percent of those in Generation X and 19 percent of baby boomers who said this. Millennials spent $233 a month on meals, compared with $182 in older generations, and $161 per month on cellphone charges, versus $135 for people in older generations.

Thursday, September 7, 2017

Worries for the Car Business

In the periodic Beige Book of regional economic reports, the Fed said that the U.S. economy expanded at a modest to moderate pace in July through mid-August, but that signs of an acceleration in inflation remained slight. While consumer spending increased in most districts, there are also many signs of worry about a prolonged slowdown in the auto industry.

In Cleveland, year-to-date production at auto assembly plants declined more than 16 percent when compared with the same period a year ago, although much of decline was due to retooling. Slowing demand for autos has led some of the Fed's reporters to temper their outlook for the economy in coming months. In Chicago, one contact noticed auto suppliers no longer are searching for space to build new factories.

Vehicle sales in August slumped to the worst rate in more than three years. After a multiyear auto expansion, there are mounting signs that American car buyers are beginning to lose interest.

Wednesday, September 6, 2017

Manufacturing Shows Strong

U.S. factories expanded at a brisk pace in August, a likely sign of strength for the U.S. economy as new orders, production and employment all improved. The Institute for Supply Management said last week that its manufacturing index rose to 58.8 percent last month from 56.3 percent in July.

Anything above 50 signals that factory activity is increasing. The measure now stands at its highest level since April 2011, pointing to solid economic growth.

Of the 18 industries in the index, 15 showed expansion, while only apparel, primary metals and furniture contracted. On Friday, data from the Bureau of Labor Statistics showed that manufacturing was one of the leading sources of U.S. job growth in August, adding 36,000 new positions.

Tuesday, September 5, 2017

Hollywood's Bummer Summer

Did you have a good summer? It was probably better than the one Hollywood had. The 18-week summer movie season — the first weekend in May through Labor Day weekend — is down more than 14 percent compared with the last two years.

The final numbers aren't in, but this will all but certainly be the first time in a decade that the summer season didn’t break $4 billion at the box office. The month of August brought in $649.5 million, a nearly 35 percent decline compared with the $993.8 million the August box office brought in last year.

Adding insult to injury, the movie business is set to end the season with possibly the worst Labor Day weekend in 30 years. Over the holiday weekend, there wasn't a single major wide release opening in theaters for the first time since 1992.

Monday, September 4, 2017

Thoughts for Labor Day

"When you have a country that can boast that more than 95 percent of its eligible workforce is employed and pumping money back into economy, that's exceptionally good news, especially as we prepare to observe Labor Day." ~ J. D. Hayworth

"God sells us all things at the price of labor."  ~ Leonardo da Vinci

"A mind always employed is always happy.  This is the true secret, the grand recipe, for felicity."  ~ Thomas Jefferson

Friday, September 1, 2017

August's Jobs Report

The employment situation cooled off slightly in August, with the economy adding 156,000 jobs, according to figures out this morning. That's down a bit from the average gain of 185,000 over the past three months. The headline unemployment rate ticked up to 4.4 percent.

Overall, hiring this year has averaged 176,000 a month, roughly in line with 2016's average of 187,000. The leading source of job growth in August was manufacturing, which added 36,000 jobs. Another 28,000 jobs came from construction.

One mystery remains: Why, with the economy nearing full employment, wages aren't rising faster. Average hourly pay has risen just 2.5 percent over the 12 months ending in August. Pay raises typically average 3.5 percent to 4 percent when the unemployment rate is this low.