Friday, May 25, 2018

The Good News on Student Loans

In this season of graduation, many of us are thinking about student loans. The news in that area is fairly good: The share of new delinquencies on student loans has fallen to its lowest level in more than decade. In the first quarter, slightly over 9 percent of student debt outstanding was newly delinquent, based on figures from the Federal Reserve Bank of New York.

In the first quarter, 10.7 percent of overall student-loan debt was considered delinquent, meaning a payment hadn’t been made on the debt in at least 90 days. This figure marked the smallest share of student-loan borrowers in serious delinquency since 2012.

During the recession, delinquencies across categories of debt--including auto loans and credit-card debt--spiked. Around 2011, debt delinquencies reversed course, except for student-loan delinquencies, which rose through 2012 and remained at an elevated level for several years. The student-loan delinquency rate is still far higher than rates for any other type of consumer debt.

Thursday, May 24, 2018

Another Rate Hike Seems Likely

Federal Reserve officials in their meeting in early May confirmed they planned to raise interest rates in June and were not concerned they were behind the curve on inflation. That was the primary takeaway from that meeting, whose minutes were released to the public yesterday afternoon.

“Most participants judged that if incoming information broadly confirmed their economic outlook, it would likely soon be appropriate for the FOMC to take another step in removing policy accommodation,” the minutes said. Traders in the federal funds futures market see more than a 90 percent chance of a June rate hike.

Although inflation hit the Fed’s 2 percent target in the latest reading for March, for the first time in a year, officials were not convinced it would remain there for long. “It was noted that it was premature to conclude that inflation would remain at levels around 2 percent, especially after several years in which inflation had persistently run below the Fed’s 2 percent objective,” the minutes said. Only a “few” officials thought inflation might move “slightly” above the 2 percent target.

Wednesday, May 23, 2018

A Big Quarter for Banks

Bank profits soared by 28 percent during the first quarter of 2018 to $56 billion, according to statistics published this week by the FDIC. The blockbuster earnings report easily tops the prior record set just three quarters earlier.

The FDIC said that 70 percent of the nation's 5,606 banks grew their bottom line during the last quarter. The percentage of money-losing banks dropped to just 3.9 percent. The FDIC's list of problem banks fell to just 92, the lowest that figure has been since the first quarter of 2008.

The financial industry owes a chunk of the mega earnings to the corporate tax cut passed at the end of last year. The FDIC said the tax law boosted bank profits by about $6.7 billion. However, banks would have still made a record $49.4 billion without the tax cuts.

Tuesday, May 22, 2018

Fortune's Top Ten

We are often in the habit of looking at America's biggest companies in terms of their market capitalization, but Fortune's venerable Fortune 500 list ranks corporations in terms of their revenues. That pushes the tech giants like Apple and Facebook down the list, in favor of the likes of Walmart, which is a clear No. 1 in this ranking. The top ten, with their 2017 revenues in millions:

  1. Walmart $500,343
  2. Exxon Mobil $244,363
  3. Berkshire Hathaway $242,137
  4. Apple $229,234
  5. UnitedHealth Group $201,159
  6. McKesson $198,533
  7. CVS Health $184,765
  8. Amazon.com $177,866
  9. AT&T $160,546
  10. General Motors $157,311
The least familiar name on that list is McKesson. What did they do to make $200 billion last year? McKesson sells medical supplies, pharmaceuticals, and other forms of medical technology.


Monday, May 21, 2018

What We Wish We'd Done

Regrets? We've had a few. A new survey from Bankrate.com finds that not only do Americans have financial regrets, but they continue to procrastinate in addressing the issue, whatever it may be.

While the largest percentage of respondents, at 39 percent, say their biggest financial regret is not saving enough, the next largest, at 18 percent, say they wish they’d started saving for retirement earlier. Fourteen percent regret not saving enough for emergency expenses, and seven percent would have liked to have saved more for the kids’ education.

A whopping 49 percent of those who do have a regret say that they haven’t started to tackle it. Some plan to put it off indefinitely, with 25 percent saying they have no plans to address it; 19 percent think they’ll get around to it in the next year, while six percent say it will take them more than a year.


Friday, May 18, 2018

Sometimes You Have to Wait

More than one-third of Americans (35%) were forced to delay a major life decision in the last year because of finances, according to a new survey by the American Institute of Certified Public Accountants. That may sound like a lot, but it's actually a drop from the 51% who did so in 2015.

What are people delaying?

  • 14% of Americans waited to buy a home, compared to 22% in 2015.
  • 13% of Americans put off higher education, compared to 24% in 2015.
  • 12% of Americans put off a medical procedure, compared to 19% in 2015.
  • 10% delayed retirement, compared to 18% in 2015.
  • 7% delayed having children, compared to 13% in 2015.
  • 6% of people put off marriage, compared to 12% in 2015.


Thursday, May 17, 2018

What It Means to Be Wealthy

Charles Schwab has just come out with its annual Wealth Index. One of the most important questions it asks: What is the net worth an American needs to be “wealthy”? The answer: an average of $2.4 million, the same as last year, in the online survey of 1,000 Americans between age 21 and 75.

To be "financially comfortable" in America today isn't quite as difficult. That requires an average of $1.4 million, up from $1.2 million a year ago, according to the survey.

The survey also asked what made respondents feel “wealthy” in their daily lives. Spending time with family was most commonly cited, at 62 percent overall, followed by “taking time for myself,” which came in at 55 percent.

Wednesday, May 16, 2018

Fund Managers Still Bullish

Many fund managers remain bullish about U.S. stocks, with most of them thinking the market’s recent rally still has further to run. Just 19 percent of investors think January's peak represented the top of a bull run that began nine years ago, according to Bank of America Merrill Lynch’s monthly survey of fund managers.

Three-quarters (76 percent) of the fund managers surveyed thought equities would keep climbing. Almost half of them said stocks would remain strong until 2019 or beyond.

Although U.S. equities have recovered some over the past two weeks, the S&P 500 remains more than 5 percent off its January high. The index hasn't notched a record close since January 26, before a sudden burst of volatility rattled world markets.

Tuesday, May 15, 2018

Congratulations, and Welcome Home

Is someone in your family graduating from college this spring? More graduates are walking across the stage to pick up their diplomas—and then walking right back home to mom and dad’s house. The share of recent graduates moving back into their parents’ homes jumped to 28 percent in 2016 from 19 percent in 2005. 

The trend is most pronounced in areas particularly affected by the housing bubble of the late 2000s. Those areas include Las Vegas and Riverside, California, according to real estate site Zillow’s recent analysis of U.S. Census data, as well as perennially expensive cities like New York City.

In fact, New York had the second highest share of college graduates living with mom and dad in 2016 of any city in the nation, with 42 percent. Only Miami, which had 45 percent of grads living with their parents, was higher.

Monday, May 14, 2018

The Final Numbers on the Equifax Scandal

Last week, in a filing to the SEC, the credit-rating agency Equifax offered its most detailed analysis of its massive breach to date. The company disclosed not only how many consumers it believes were hit but also  broke down which types of information were most likely to have been stolen.

In the end, 147 million people were affected. Names, dates of birth and Social Security numbers were by far the most common type of data stolen by the attackers, Equifax said. Then came mailing addresses, phone numbers and just under 2 million email addresses. Roughly 209,000 credit card numbers and card-expiration dates were taken.

Beyond the information stored in those databases, Equifax said the hackers accessed thousands of images of official documents — such as government-issued IDs — that people had uploaded to the company to prove their identity. Photos of as many as 38,000 driver's licenses and 12,000 Social Security or taxpayer ID cards were accessed.

Friday, May 11, 2018

The Latest on Inflation

The Consumer Price Index rose 0.2 percent in April, with increases in the cost of gasoline and rents being offset by a drop in motor vehicle prices, the Labor Department said yesterday. In the 12 months through April, the CPI increased 2.5 percent, the biggest gain since February 2017. That followed a 2.4 percent rise in the 12 months to March.

Excluding the volatile food and energy components, the CPI edged up just 0.1 percent in April. That follows on the heels of two successive monthly increases of 0.2 percent.

Services prices excluding energy rose 2.9 percent in the year through April, but much of that was due to a rise in housing costs. If you also remove rents from that equation, overall services prices were up just 2.3 percent.

Thursday, May 10, 2018

The World Slows Down

Investors bought just $533 million in world equity mutual funds and exchange-traded funds, which invest primarily in international stocks, in the week ended May 2. That was the slowest weekly pace for this category since January 2017, according to the Investment Company Institute.

After surging to $43 billion in January, monthly inflows into world equity funds slowed to an estimated $8 billion in April. That's the lowest level for that figure since December 2016.

One reason for this is that growth abroad appears to be slowing. Data from European factory orders to European inflation readings have been missing forecasts lately. In the Citigroup Economic Surprise Index, a broad measure of how expectations for economic data are being met, the eurozone index has dropped to its lowest level since September 2011.

Wednesday, May 9, 2018

The Federal Government Rakes It In

Record tax receipts will lead to April having the largest-ever monthly budget surplus for the federal government, according to the nonpartisan Congressional Budget Office. The April surplus will total $218 billion, breaking the prior record of nearly $190 billion set in April 2001.

Greater-than-expected tax receipts drove the surplus. The record $515 billion in receipts for the month was as much as $40 billion more than the agency estimated about a month ago. The prior record for receipts had been $472 billion in April 2015.

The expected April surplus, meanwhile, isn’t keeping the U.S. from running a wider budget deficit for the fiscal year to date. For the first seven months of the budget year, the shortfall totals $382 billion, or $37 billion more than the same period a year ago, CBO estimates. The CBO recently estimated the full-year deficit would be $804 billion, and that trillion-dollar deficits would return in 2020.

Tuesday, May 8, 2018

Why Oil Prices Are Rising

In recent months, oil prices have risen to levels not seen in three and a half years, since a global glut of crude sent energy markets into a tailspin in 2014. Yesterday, the benchmark oil price reached $70 a barrel for the first time since November 2014.

Why has this happened? The biggest reason is that OPEC and other major oil producers, including Russia, agreed to cut crude production by roughly 1.8 million barrels a day from late 2016 levels in an effort to eliminate a longstanding glut of global supplies. OPEC’s crude production in April fell for a third straight month to a one-year low.

Another reason: Growing demand for oil. The International Energy Agency forecasts global oil demand at 99.3 million barrels a day this year, up from 97.8 million barrels a day in 2017.

Monday, May 7, 2018

Retirees Are Staying Put

As the health and wealth of retirees have increased, more are choosing to stay in or near their homes and neighborhoods rather than moving to a lower-tax state or cheaper, more rural areas within their states. That's according to a new study from United Income, called "The State of Retirees: How Longer Lives Have Changed Retirement."

Nearly half of retirees are now living in the suburbs of cities, and their numbers have increased by almost 40 percent over the past 40 years. The share of retirees who say they have moved in the past five years has fallen from a high of 23 percent in 1980 to a low of 15 percent in 2015, the most recent data available, and only 1 percent report moving out of state, according to the study.

Three of the five states with the largest populations of retirees — California, New York and Pennsylvania — are among the states with the highest taxes. Indeed, the share of Californians who are seniors has climbed from 7 percent in 1965 to 11 percent currently. Low-tax Texas and Florida round out the five states with the largest senior populations.

Friday, May 4, 2018

April's Jobs Report

After spending six months at exactly 4.1 percent, the unemployment rate dropped to 3.9 percent in April, the Bureau of Labor Statistics reported this morning. That's the lowest the unemployment rate has been since December 2000. The economy added 164,000 jobs for the month.

The headline figure fell despite the fact that the number of new jobs added was slightly lower than we've been used to. April's figure compared with an average monthly gain of 191,000 over the prior 12 months. Job gains have averaged 208,000 over the last three months.

The biggest driver of job gains last month was professional and business services, which added 54,000 positions. Over the past 12 months, the industry has added 518,000 jobs. Employment in manufacturing increased by 24,000 in April; manufacturing employment has risen by 245,000 over the year, with about three-fourths of the growth in durable goods industries.

Thursday, May 3, 2018

The Biggest Retirement Worry

Retirees’ overall confidence in their ability to continue to cover basic expenses is on the decline, according to the latest Employee Benefit Research Institute’s Retirement Confidence Survey. One major problem:  More than four in 10 retirees report that their health care expenses are higher in retirement than they planned for.

More than any other category of expenses, health care costs have taken retirees by surprise. The 44 percent that say health care costs are higher than they planned for compares to 26 percent who said housing costs are higher than they planned for. And 27 percent said their overall expenses are higher than planned for.

Retiree confidence tends to track with the economy’s performance. In 2009, as the economy was climbing out of recession, only 20 percent said they were very confident in their ability to survive retirement comfortably. The number peaked in 2016 at 39 percent. But this year, despite a strong economy, the number of very confident retirees has dropped back to 32 percent.

Wednesday, May 2, 2018

Apple's Big Day

The world's biggest stock outdid itself yesterday. Apple announced its earnings per share at $2.73 versus the analysts' expectations of $2.67. The company's net income for the first quarter was $13.82 billion, up from $11.03 billion a year ago.

Apple has often faced low expectations and managed to surpass them. Apple's earnings-per-share results have now beaten the Wall Street consensus in 20 of the past 21 quarters.

But the ploy worked: Apple's stock price rose as much 5 percent after hours, as investors digested the company's better-than-expected outlook. The company also announced a plan to return $100 billion to shareholders in a massive stock buyback.

Tuesday, May 1, 2018

Sell in May?

There's an old stock market adage to the tune of "Sell in May and go away." There's a bit of truth to this, since returns are lower on average for the period of May through October, versus November through April.

But some experts think this year might not hew to tradition. The S&P 500 is flattish year-to-date after a wild ride higher at the beginning of the year, with a lot of volatility in between. After some down days in April, some pundits are seeing an upside correction coming in May.

While the S&P 500's total return in the May-through-October period has averaged just 1.2 percent in the past 20 years, it has nevertheless finished higher 70 percent of the time. During the November-to-April period, by contrast, the S&P was up 85 percent of the time, averaging a 6.2 percent total return.