Thursday, October 17, 2019

Retail, Car Sales Slip

Retail sales fell 0.3 percent in September, the Commerce Department said yesterday. That ended a streak of six straight strong monthly gains that helped to fuel economic growth in the middle of the year.

Sales receipts fell almost 1 percent at auto dealers even though they reported a strong increase in the number of new vehicles sold. That means the dropoff likely reflects end-of-summer discounting and more corporate-fleet sales. Sales also declined 0.7 percent at gas stations, reflecting lower prices at the pump.

Retail sales were flat if gasoline and auto dealer receipts are excluded, but households also slashed spending on building materials and online purchases. Meanwhile, receipts at clothing stores rose by 1.3 percent, while furniture sales climbed by 0.6 percent.

Wednesday, October 16, 2019

Worries About Global Growth

The International Monetary Fund is growing more pessimistic about the global economy. The IMF’s latest World Economic Outlook trimmed its global growth forecast for this year by 0.2 percentage points and 0.1 percentage point next year, compared with the organization’s view from July.

That means global economic growth is expected to fall to 3 percent rate this year. That would be the slowest pace since the 2008 financial crisis, and down from a 3.8 percent pace seen in 2017.

Global trade growth reached just 1 percent in the first half of 2019, the weakest level since 2012. After expanding by 3.6 percent in 2018, the IMF now projects global trade volume will increase just 1.1 percent in 2019, which is 1.4 percentage points less than it forecast in July.

Tuesday, October 15, 2019

The Humble but Hot Money Market Fund

What's one of the hottest investment vehicles these days? The humble money market fund. Investors are flocking to the relative safety of money market funds at the highest level since the financial crisis began in 2008.

The industry has pulled in $322 billion over the past six months, the fastest pace since the second half of 2008, bringing assets to nearly $3.5 trillion, according to data from FactSet and Bank of America Merrill Lynch. Total money market assets are now at their highest level since September 2009.

This trend is more about safety than about returns. Money market funds are now yielding about 2 percent, down from the 2.47 percent they delivered at the beginning of 2019.

Monday, October 14, 2019

Nervous About Earnings

U.S. companies start reporting third-quarter results this week, and S&P 500 earnings for the July-September period look set to mark the weakest performance in about three years. Analysts are forecasting a 3.2 percent decline in earnings for the quarter from a year ago,

Banks will be in the spotlight this week, with J.P. Morgan Chase, Citigroup and Wells Fargo scheduled to announce on Tuesday, and Bank of America following up the next day. The financial sector is expected to show earnings growth of just 1.73 percent, according to S&P Global Market Intelligence.

And that's the second-strongest sector. The only sector projected at greater earnings growth is health care, at 1.83 percent. Seven sectors are forecast to produce negative earnings growth, with the worst being energy, expected to drop a whopping 31.58 percent.

Friday, October 11, 2019

How Americans Spend Their Money

Are you aware of how much you spend on various things each year? The folks at a website called How Much looked at census data to figure out where the average American family spends its money.

The average American "consumer unit" earns $78,635 in income each year, $11,394 of which goes to taxes. Then the rest goes to:

  • Shelter - $11,747
  • Pensions & Social Security - $6,831
  • Food at Home - $4,464
  • Utilities - $4,049
  • Vehicle Purchases - $3,975
  • Food Away from Home - $3,459
  • Health Insurance - $3,405
  • Entertainment - $3,226
  • Other Vehicle Expenses - $2,859
  • Other Housing Expenses - $2,270

Thursday, October 10, 2019

The Fed's Forecast

Federal Reserve officials were more worried about the U.S. economy by the time they met in mid-September, according to minutes of the central bank’s meeting that were released yesterday. They even noted that the probability of a recession had increased "notably" in  recent months.

“Participants generally judged that downside risks to the outlook for economic activity had increased somewhat since their July meeting,” the minutes said. "Particularly those stemming from trade policy uncertainty and conditions abroad.”

The Fed did not alter its official forecast that the economy would grow at a rate slightly above 2 percent this year. It also predicted that GDP would run slightly below 2 percent in both 2021 and 2022.

Wednesday, October 9, 2019

Producer Prices Continue to Slow

U.S. producer prices unexpectedly fell in September, leading to the smallest annual increase in nearly three years. The producer price index dropped 0.3 percent last month, the Bureau of Labor Statistics said yesterday. That was the largest decline since January and followed a 0.1 percent gain in August.

In the 12 months through September the PPI increased 1.4 percent, which is the smallest gain since November 2016. It had risen 1.8 percent in August; the Fed's target inflation rate is 2 percent. Excluding the volatile food, energy and trade services components, producer prices were unchanged in September.

Wholesale prices for goods fell 0.4 percent, with three-quarters of the decline reflecting the lower cost of gasoline. Wholesale food prices rose 0.3 percent, however.

Tuesday, October 8, 2019

A Lack of Retirement Info

Does your employer help you much with your retirement planning? Transamerica Center for Retirement Studies' 19th annual retirement survey found that while 64 percent of workers overall are confident they will be able to retire with a comfortable lifestyle, only 18 percent are “very confident.”

That may be, in part, because plan sponsors don't do enough to assist their employees with retirement transition. The organization found that few plan sponsors provide things like:

  • Educational resources (30 percent)
  • Information about distribution options (28 percent) 
  • Retirement planning materials (25 percent) 

Moreover, 22 percent of plan sponsors say they do “nothing” to help employees transition their savings and finances into retirement, with 26 percent of small companies saying this compared with only 7 percent of both medium and large companies.

Monday, October 7, 2019

The Secret of Utilities

Through the first three quarters of 2019, which ended last week, the top-performing sector was information technology, which returned 30.3 percent. It was followed by real estate at 28.4 percent and utilities at 25.0 percent.

But if you zoom out a little further, to the 12 months that ended on September 30, the top performer was the usually sleepy utilities sector. It's returned 27.1 percent over the past year, outpacing real estate, at 24.5 percent, and consumer staples, at 16.6 percent.

Why have utilities been so strong? Along with real estate, utilities are considered a strong play when bond returns are low. Utilities and real estate are generally considered dividend-income investments. As the yield on 10-year U.S. Treasury notes has declined from 3.05 percent to 1.59 percent, utilities have thrived.

Friday, October 4, 2019

September Jobs Report

The headline unemployment rate dropped to 3.5 percent in September, matching a level it last saw in December 1969, the Labor Department reported this morning This happened even though the economy added just 136,000 jobs for the month, the slowest pace of job growth in four months.

One reason for this anomaly is that the previous two months saw upward revisions in jobs created. August rose sharply, from an initial estimate of 130,000 to 168,000, while July increased from 159,000 to 166,000, for a total net gain of 45,000.

The bulk of the hiring in September was concentrated in the services sector. Education and health care providers added 40,000 positions. Government added 22,000 workers in September, with only 1,000 of the jobs being due to temporary federal hiring for the 2020 Census.

Thursday, October 3, 2019

Selling but Not Buying

There's a strange phenomenon in the stock market right now: Corporate share sales have surged to a  four and a half year high at the same time corporate buying has dropped.

Corporate executives unloaded $14.2 billion worth of their companies’ stock last month through September 26, according to a TrimTabs analysis. That’s the highest of any September in the past 10 years. September also marked the sixth month this year that insider selling has topped $10 billion, which is already the most months to cross that threshold since 2006.

Meanwhile, overall corporate demand for shares, in the form of stock buybacks and cash mergers and acquisitions, has dropped. Share repurchase volume was $145.9 billion in the third quarter, just a little over half the $281 billion worth of stock repurchased in the second quarter. It was the lowest quarterly total since the third quarter of 2017.

Wednesday, October 2, 2019

Manufacturing Takes a Step Back

Worrisome news from the manufacturing sector: The U.S. manufacturing purchasing managers’ index from the Institute for Supply Management came in at 47.8 percent in September, its lowest level since June 2009. Any figure below 50 percent signals a contraction.

The new export orders index was only 41 percent, its lowest level since March 2009. The ISM employment gauge for the sector showed its lowest reading since January 2016. New orders, backlog, raw materials, inventories, exports and imports also contracted across the board last month.

The sector had contracted for the first time in more than three years in August. That ended a 35-month expansion period where the PMI averaged 56.5 percent, according to ISM.

Tuesday, October 1, 2019

Low-Tech Security Issues

We're all worried about being the victim of a data breach - having a credit card or Social Security number stolen by a hacker. But a new report out from the information security service Shred-It notes that we need to pay attention to low-tech protection as well.

The report said that common workplace occurrences may be the cause of many security breaches. It found that 65 percent of managers expressed concern that their employees or contractors had printed and left behind a document that could lead to a data breach.

Seven in 10 managers said they had seen or picked up confidential documents left in a printer, and more than three in four managers admitted that they had inadvertently sent an email containing sensitive information to the wrong person. And 88 percent reported having received an email containing sensitive information they were not intended to receive from someone within or outside of their organization.

Monday, September 30, 2019

A Blah Third Quarter

The third quarter of 2019 comes to a close today, and it’s been a pretty blah quarter for most of the market indexes. After a very strong start to the year, the last three months have seen little movement in the markets.

For the third quarter, the S&P 500 is on track for a 1.1 percent gain, after rising 3.8 percent in the second quarter and 13 percent in the first quarter. The Dow also rose 1.1 percent in the third quarter, after rising 2.6 percent in the second and 11 percent in the first. The Nasdaq had the biggest reversal, falling 0.4 percent between July and September, compared with a 3.6 percent increase in the second quarter and a 16.5 percent rally in the first.

But don’t lose sight of the bigger picture. The S&P 500 is up 18.6 percent on the year; the Dow Jones industrial average is up 15.4 percent, and the Nasdaq is up 20 percent.

Friday, September 27, 2019

Falling Off the 500

What does it take to get dropped from the S&P 500? S&P Dow Jones Indices announced late yesterday that it was booting Nektar Therapeutics, which has been testing a treatment for breast cancer, from the S&P 500 index. Nektar was the worst performing stock on the index in the past 12 months, dropping more than 70 percent.

Nektar's earnings fell 112 percent in the second quarter. How do you lose more than 100 percent of your earnings? The company had recorded earnings of $5.33 per share in the year-ago period, thanks to a billion-dollar payment from Bristol-Myers. But that turned into a loss of 63 cents per share for the second quarter of 2019.

More recently, Nektar tested a combination of its drug, NKTR-214, with Bristol-Myers' Opdivo in breast cancer patients. Across 38 patients who could be evaluated, just five responded. As a result, Nektar stock fell 6.6 percent in one day yesterday - and S&P took its action.

Thursday, September 26, 2019

Where Do You Work?

Do you leave home and go to work every morning? The option to work from home has become an increasingly desired perk for a lot of employees. In 2017, a Gallup poll found that 43 percent of Americans worked remotely “at least sometimes.”

The next wave in this: Working from anywhere (WFA), in which workers can live and work wherever they choose, whether it be in the U.S. or even a different country. A new study shows that work from anywhere may even help people delay retirement.

In a study of U.S. patent examiners, the researchers noted that workers “who had been on the job longer — that is, those older and closer to retirement age — were more likely to move to retirement-friendly coastal areas of Florida and Texas than their lower-tenured peers.” The research suggests that offering a WFA policy could end up encouraging valued senior employees to remain in the workforce longer.

Wednesday, September 25, 2019

The Latest Consumer Report

September's consumer confidence report posted the biggest drop since the start of the year, as Americans’ expectations for the economy and the job market deteriorated. Both the present situation and expectations gauges declined, with the latter dropping to the lowest level since January.

Some of the findings:

  • Confidence among those earning $125,000 or more a year suffered the largest one-month decline since April 2015.
  • The share of consumers who see business conditions getting worse six months from now climbed to the highest level since November 2013.
  • The share of those respondents who say incomes will increase six months from now dropped from 25 percent to 19 percent, the lowest since January.
  • Buying plans for motor vehicles, homes and major appliances also declined in September.

Tuesday, September 24, 2019

The Key to Long-Term Savings

What's the best way to save money over the long haul? Housing is the biggest part of most Americans’ budgets; the average American household spends a total of roughly $60,000 per year; nearly $20,000 of that spending is on housing, government data shows.

And now, new research from TD Ameritrade — which looks at people who save 20 percent or more of their incomes, called “super savers” — shows that the single biggest difference between what super savers spent less on was housing. Super savers spent just 14 percent of their incomes on housing, while regular folks dropped 23 percent.

What’s more, research released this week by the Principal found that more than four in 10 people who fully funded or were very close to fully funding their 401(k)s said that one of the sacrifices they made to save so much was that they lived in a modest home.

Sunday, September 22, 2019

Defining the Upper Class

Do you define yourself as "upper income"? According to a 2018 report from the Pew Research Center, 19 percent of American adults live in “upper-income households.” The median income of that group was $187,872 in 2016.

Pew defines the upper class as adults whose annual household income is more than double the national median. That’s after incomes have been adjusted for household size, since smaller households require less money to support the same lifestyle as larger ones.

Here’s the minimum amount you’d have to earn each year to be considered upper-class, depending on the size of your household:

  • Household of one: Minimum of $78,281 
  • Household of two: Minimum of $110,706
  • Household of three: Minimum of $135,586 
  • Household of four: Minimum of $156,561
  • Household of five: Minimum of $175,041 

Friday, September 20, 2019

Working Past 65

Are you planning to stop working at age 65? That may be a thing of the past. According to Northwestern Mutual’s new 2019 Planning & Progress Study, 46 percent of Americans expect to work past the traditional retirement age of 65.

On the positive side, 53 percent of Americans who said they expect to work past the age of 65 have noted that it will be by choice. This is slightly higher than the 47 percent who reported they expect to beyond retirement age out of necessity.

Why keep working? These are the most popular answers:

  • 58 percent believe they will still enjoy their career by age 65 and wish to continue.
  • 46 percent believe they will want additional disposable income.
  • 39 percent believe working is a social outlet that will help them stay active and prevent boredom.

Thursday, September 19, 2019

The Future of Rate Cuts

As was widely expected, the Federal Reserve reduced its benchmark short-term rate to a range between 1.75 percent and 2 percent yesterday afternoon. That’s the second rate cut in as many months.

The big question now is if there will be another rate cut this year. Seven Fed officials said they believed there would be one more rate cut this year, while five indicated they thought this move would be the year’s last.  So they're nearly evenly split.

Five more members thought no move was needed after July, including at Wednesday’s meeting. While the seven who see another easing yet this year is not a majority, it is a sizable block.

Wednesday, September 18, 2019

The Economy's Mixed Signals

The risk of a global recession is at its highest since August 2009, according to the new Bank of America Merrill Lynch Fund Manager Survey for September. Some 38 percent of investors polled expect a recession over the next year. That figure was 34 percent in its August survey, which had been the highest response since October 2011.

But the same survey showed fund managers are buying America more than they have in over a year. Allocation to U.S. equities soared 15 percentage points to a net 17 percent overweight, the biggest monthly increase since June 2018.

On top of that, the Federal Reserve said yesterday that manufacturing production rose 0.6 percent last month, following  on the heels of a drop of 0.4 percent in July. Manufacturing accounts for about 11 percent of the U.S. economy,

Monday, September 16, 2019

Is the Oil Shock Good for Stocks?

Oil futures on Monday marked the sharpest daily rise in more than a decade after a weekend attack on major crude facilities in Saudi Arabia threatened to create a supply crunch. West Texas Intermediate crude gained 14.7 percent, to $62.90 a barrel, representing the largest daily gain since September 22, 2008.

But that might be good news for stocks. History shows that past oil shocks haven’t always caused much harm to stocks. While one-day crude-oil price jumps of more than 10 percent are usually accompanied by market losses on the same day, they have been, on average, followed by better-than-usual performance six months out, according to Dow Jones Market Data.

The S&P 500 has, on average, risen 10.2 percent in the six months following one-day, crude-oil price spikes of 10 percent or more, nearly 4 percentage points higher than the 6.3 percent average growth of the S&P 500 during other periods. The Dow has risen 8.7 percent six months after a 10 percent crude surge, versus a typical 6.1 percent rise, while the Nasdaq has seen a 15.5 percent rise compared with a typical 8.2 percent rise.

The Shock to Oil Prices

Are we headed for an oil shock? Oil prices soared last night after a drone strike disrupted Saudi Arabia's oil facilities, leading to a possible disruption of the world's supply of crude. The attacks knocked out more than half of Saudi oil output, or more than 5 percent of global supply.

U.S. crude futures jumped as much as 15 percent before settling back at around an 11 percent increase. Brent crude, the benchmark used in European oil markets, rose by 18 percent before trading up about 12 percent.

Gasoline futures were also up 11 percent, according to market data source Refinitiv. That would counteract a long-term trend: The average U.S. price of regular-grade gasoline has dropped 3 cents per gallon over the past three weeks to $2.63, and is 20 cents lower than what it was in mid-July.

Friday, September 13, 2019

The Latest Inflation Reading

The core consumer price index rose 0.3 percent in August and was up 2.4 percent from a year earlier, the Labor Department said yesterday. While those figures are unexceptional, the more important news was the rise in medical costs.

August saw the biggest monthly rise in medical-care costs since 2016 as well as record increases in health-insurance prices. There was a 1.9 percent monthly rise - and an 18.6 percent annual increase  - in health-insurance prices, along with increases in hospital services and nonprescription drugs.

Also driving the core inflation gain were used-car prices, up 1.1 percent for a third straight increase, while shelter costs, which make up about a third of total CPI, rose 0.2 percent from the prior month. Energy prices fell 1.9 percent from the prior month as gasoline dropped 3.5 percent, but apparel was up 0.2 percent.

Thursday, September 12, 2019

Small Caps Make a Comeback

This has been a rough year, comparatively speaking, for small-cap stocks, but they may be making a comeback. The benchmark small-cap Russell 2000 index has far outperformed both the Dow Jones Industrial Average and the S&P 500 index this week.

The Russell 2000 has gained 4.6 percent so far this week and rose at least 1 percent in three consecutive sessions. That may not sound like much, but it is its first time doing so since last January.

More significantly, the Russell’s weekly gain marked a 3.81 percentage-point spread between its increase and that of the S&P 500. If that holds, it would mark the widest margin of underperformance between the large-cap index and the Russell on a weekly basis since November of 2016.

Wednesday, September 11, 2019

Signs of Cooling in Housing

Even though mortgage rates are around the lowest they've been in three years, buyers are suddenly much more cautious about purchasing a home. Competition is cooling, and consequently sellers can no longer command any price.

Consumer sentiment in housing did improve in August, according to a monthly survey from Fannie Mae. But that's only because of a big jump in the share of those who think mortgage rates are going to continue to fall. There are other signs that the housing market is cooling.

For instance, just more than 10 percent of offers written by Redfin in August faced a bidding war, according to the brokerage’s monthly survey. That is down from 42 percent a year ago. The supply of homes for sale is growing in the midrange and higher end, but it is still tight at the entry level.

Tuesday, September 10, 2019

The Decline of Younger Workers

Young people just aren't working these days. Between 2000 and 2018, the workforce participation rate for ages 16 to 19 fell from about one half of the population to one third, according to a new study from the Brookings Institution. The participation rate for ages 20 to 24 dropped from almost 80 percent to about 71 percent,

The drop in younger workers will continue into 2028, according to Bureau of Labor Statistics projections. The labor force participation rate for the 16- to 24-year-old age group is projected to shrink by 3.5 percent from 2018 to 2028, the agency said.

As a result, just over half of the young working population (51.7 percent) will be part of the workforce by 2028. That’s a 14 percent drop from the rate in 1998, when almost 66 percent of the 16- to 24-year old demographic had a job or was looking for one. It remains to be seen what effects these drops will have on our economy - and our society.

Monday, September 9, 2019

Stranded in Newark

If you’re flying out of Newark Liberty International Airport anytime soon, you may want to bring an extra book to read. According to a new study, our local airport ranked as the worst in the U.S. for having the highest share of flights that were delayed for over 15 minutes or cancelled. The air-passenger rights company AirHelp found that only 64 percent of flights departed Newark on time.

Passengers won’t do much better flying out of other New York City-area airports. LaGuardia’s on-time performance rate was only 66 percent, third-worst in the nation, and JFK came in at No. 8, with almost 74 percent of its flights leaving on time.

This comes on the heels of last month's study showing Newark airport at the top of security wait times across the country. The average TSA wait time at Newark Liberty is 23 minutes.

Friday, September 6, 2019

August's Jobs Report

The economy added just 130,000 new jobs in August, marking the smallest increase in three months, according to figures released by the Bureau of Labor Statistics this morning. Removing the temporary workers hired for the U.S. Census, the private sector added around 100,000 jobs last month. The headline unemployment rate was unchanged at 3.7 percent.

The federal government added 28,000 jobs last month, mostly temporary workers hired to help prepare the census that takes place every ten years. Professional and business services led the way in hiring by adding 37,00 new jobs; health-care added 24,000, and financial companies 15,000. But retailers and energy companies cut jobs.

One caveat: The government tends to undershoot its August jobs number. With so many people on vacation, the number of respondents to the government’s monthly questionnaire is often the lowest of the year. As more responses are returned, the government usually ends up revising job growth higher.

Thursday, September 5, 2019

The Latest From the Beige Book

The Fed's latest Beige Book, compiling on-the-spot reports from around the country, suggests that the economy continued to expand at a modest pace through the end of August. Coverage of New Jersey's economy is split between the Fed's New York City and Philadelphia offices, so those are the reports that are of the most concern to us.

In New York, the labor market has remained very tight, with businesses reporting trouble finding qualified workers in a wide variety of roles, including engineers, teachers, construction workers, truck drivers, and retail clerks. Tourism has picked up noticeably, and banks reported a rebound in loan demand, though the financial sector overall showed signs of softening.

In Philadelphia, malls and convenience stores continued to report modest growth in retail sales. Some mall store operators reported modest increases in year-over-year sales and foot traffic. Tourism activity continued to grow at a modest pace; one contact noted that the Jersey shore season has been fine, with high occupancy, that restaurants and other retail are performing well, and that casino revenues in Atlantic City were up.

Wednesday, September 4, 2019

Cracks in Manufacturing

Are there serious problems in manufacturing? Yesterday, the Institute for Supply Management reported that its manufacturing index fell from 51.2 percent in July to 49.1 percent in August. Any reading below 50 percent indicates a contraction in activity.

August's mark is the lowest reading for this index since January 2016. The ISM Manufacturing Index has now declined for five straight months.

The new orders index fell to 47.2 percent and the production index fell to 49.5 percent. Only nine of the 18 manufacturing industries reported growth in August and only three reported gains in new orders. The ISM also noted “a notable decrease in business confidence” in August.

Tuesday, September 3, 2019

Summer's End

Now that we're past Labor Day, not only is summer coming to an end, but there's downbeat news for investors as well: September is, on average, the worst month for stock prices. Since 1937, the average September performance of the S&P 500 index and the Dow Jones Industrial Average is a 1 percent decline, while the Nasdaq Composite Index has seen an average fall of 0.5 percent, according to Dow Jones Market Data.

Such performance wouldn’t be welcome news for equity market investors, who just suffered through a 1.7 percent August decline for the Dow, a 1.8 percent loss for the S&P and a 2.6 percent drop for the Nasdaq. These are the worst August performances for all three benchmarks since 2015.

It’s not all bad news, however. According to an analysis by LPL Financial, the past 15 times that the S&P 500 lost ground in August, the rest of the year saw positive returns every single time.

Sunday, September 1, 2019

Thoughts for Labor Day

“No work is insignificant. All labor that uplifts humanity has dignity and importance and should be undertaken with painstaking excellence.”  ~ Martin Luther King, Jr.

“Without ambition one starts nothing. Without work one finishes nothing. The prize will not be sent to you. You have to win it.” ~ Ralph Waldo Emerson

"One machine can do the work of fifty ordinary men. No machine can do the work of one extraordinary man." ~ Elbert Hubbard

Friday, August 30, 2019

GDP Estimates Slow a Touch

The U.S. economy slowed a bit more than initially thought in the second quarter, the Commerce Department reported yesterday. The strongest growth in consumer spending in four and a half years was offset by declining exports and a smaller inventory build.

Gross domestic product increased at a 2.0 percent annualized rate, the Commerce Department said in its second reading of second-quarter GDP, revised down from the 2.1 percent pace estimated last month. The economy grew at a 3.1 percent rate in the first quarter of this year. Altogether, it expanded 2.6 percent in the first half of the year.

The brightest spot in the second quarter: Growth in consumer spending, which accounts for more than two-thirds of U.S. economic activity, surged at a 4.7 percent rate. That was the fastest since the fourth quarter of 2014 and was a slight upward revision from the 4.3 percent pace estimated last month.

Thursday, August 29, 2019

The Rich Aren't Spending

The rich have cut their spending on everything from homes to jewelry, leading some to wonder if the wealthiest Americans are beginning to fear a recession. From real estate and retail stores to classic cars and art, the weakest segment of the American economy right now is the very top.

Luxury real estate is having its worst year since the financial crisis, with Manhattan seeing six straight quarters of sales declines. According to Redfin, sales of homes priced at $1.5 million or more fell 5 percent in the U.S. in the second quarter.

Retailers to the 1 percent are faring the worst, with Barney’s filing for bankruptcy and Nordstrom posting three consecutive quarterly declines in revenue. At this month’s massive Pebble Beach car auctions, less than half of the cars offered for $1 million or more were able to sell. And in the first half of 2019, art auction sales were down for the first time in years. Sales at Sotheby’s dropped 10 percent, and Christie’s auction sales were down 22 percent from a year ago.

Tuesday, August 27, 2019

A Lifetime of Jobs


How many jobs have you had in your life?  According to a new report out from the Bureau of Labor Statistics, Americans born from 1957 to 1964 held an average of 12.3 jobs from ages 18 to 52. These baby boomers held an average of 5.7 jobs between the ages 18 and 24, or nearly one a year.

The average fell to 4.5 jobs from ages 25 to 34, to 2.9 jobs from ages 35 to 44, and to 1.9 jobs from ages 45 to 52. In other words, the trajectory was that as the worker gets older, he or she holds on to each job for significantly longer.

Although job duration tended to be longer the older a worker was when starting the job, these baby boomers continued to have large numbers of short-duration jobs. Among jobs started by 35- to 44-year-olds, 36 percent ended in less than a year, and 75 percent ended in fewer than five years.

Monday, August 26, 2019

Investors Are Getting Shaky

U.S. investor optimism sunk to the lowest level since the fourth quarter of 2016 following the market volatility seen at the start of this month, according to a new survey from Wells Fargo. Confidence among American investors weakened in the 12-month outlook for the stock market and U.S. employment.

The third quarter Wells Fargo/Gallup Investor and Retirement Optimism Index was down 13 points from 85 in the second quarter and far below the post-recession high of 117 reached in the fourth quarter of 2017. This was the largest quarterly drop for the index in over three years.

Investor optimism dropped this quarter across all four components of the index: investors’ 12-month outlook for the stock market, 12-month outlook for unemployment, optimism about unemployment, and inflation. The percentage of investors who said now was a good time to invest in the market fell to 59 percent this quarter from 65 percent in the prior quarter.

Friday, August 23, 2019

Trouble in the Small Caps

Despite an overall solid year for the markets, the small-cap asset class remains a problem child. The Russell 2000 index, which tracks companies with a median market capitalization of $784 million, remains 13 percent below the record high it set last August.

What's more, companies in the index appear mired in an earnings recession. The small-cap sector's profits fell by double digits in the first quarter and look set to fall by 9 percent in the second, according to an analysis Bank of America.

On top of that, debt levels reached an all-time high for the Russell 2000 in the first quarter of 2019, according to an analysis by RBC. Some experts say that this rising debt is masking even an worse performance among small-cap companies than shown by the anemic 2019 earnings level.

Thursday, August 22, 2019

Retirement Millionaires

Here's some strong news from the world of retirement savings. According to Fidelity, the number of 401(k) and IRA millionaires hit a record high at the end of the second quarter.

The number of people with $1 million or more in their 401(k) increased to a record 196,000, up from 180,000 at the end of the first quarter. Meanwhile, the number of IRA millionaires increased to 179,700, also a record high and an increase from 168,100 in the previous quarter.

On top of that, employee savings rates hit a record high, after 32 percent of savers increased their contributions in the second quarter of this year. Now, the average employee contribution rate is 8.8 percent, which is nearly a full percentage point higher than a decade ago.

Wednesday, August 21, 2019

America's Indebtedness Problem

Americans aren't paying off their credit card bills. U.S. credit card balances grew to $868 billion in the second quarter, from $848 billion in the previous three months. That's according to a new report from the Federal Reserve Bank of New York.

Even worse, the proportion of those balances seriously past due is on the rise. Payments on about 5.2 percent of those balances were 90 days overdue in the latest quarter, up from 5.0 percent in the first quarter. The figure has been increasing continuously since 2017.

Credit card debt is the only major area of indebtedness, though, where people are losing ground. Delinquency rates declined for auto loans, home equity lines of credit, mortgages and other debt categories.

Tuesday, August 20, 2019

New Jersey's Dropping Unemployment Rate

Here's some more good news about our state: The Bureau of Labor Statistics reported that New Jersey's unemployment rate dropped by 0.7 percent from July 2018 to July, falling from 4.0 percent to 3.3 percent. That's the largest drop for any of the 50 states over the past year.

New Jersey's current unemployment rate is the lowest for the state since these figures were first compiled, back in 1976. We were also one of only six states that saw the jobless rate decline in July of this year.

All told, there are currently 4.202 million employed persons in New Jersey, according to the BLS. That's up from 4.154 million jobs in the state a year ago.

Monday, August 19, 2019

Mortgages Go Negative

The latest news from the world of falling interest rates: A bank in Denmark is offering borrowers mortgages at a negative interest rate. It's effectively paying its customers to borrow money for a house purchase.

Jyske Bank, Denmark's third-largest bank, said this week that customers would now be able to take out a 10-year fixed-rate mortgage with an interest rate of  minus 0.5 percent, meaning customers will pay back less than the amount they borrowed. If you bought a house for $1 million and paid off your mortgage in full in 10 years, you would pay the bank back only $995,000.

Financial markets are in a volatile, uncertain spot right now, particularly in Europe. As such, some banks are willing to lend money at negative rates, accepting a small loss rather than risking a bigger loss by lending money at higher rates that customers cannot meet.

Thursday, August 15, 2019

A Strong July for Retail

Some good news to offset the fear of the yield curve going inverted: U.S. consumers spent more at retail stores and restaurants in July, the Commerce Department said yesterday. Retail sales rose a healthy 0.7 percent last month, following a 0.3 percent gain in June. Online retailers, grocery stores, clothing retailers and electronics and appliance stores all reported strong gains.

Sales soared 2.8 percent at internet retailers, a gain that may have been tied to Amazon Prime Day and competing sales from rivals. But it wasn’t just internet retailers: Sales also rose sharply at department stores, restaurants and electronics outlets.

Some other risers: Grocery and beverage stores were up 4 percent year-over-year; general merchandise stores were up 2.1 percent; and furniture and home furnishings stores were up 2 percent.

That Scary Yield Curve

The infamous yield curve - the spread between the 2-year Treasury note yield and the 10-year -inverted yesterday morning for the first time in over a decade. This is widely considered a signal of an upcoming economic recession, but that doesn’t have to mean doom and gloom for stock investors.

The Dow had its biggest one-day drop of the year yesterday; it and the S&P 500 both fell by about 3 percent. But over the past few decades, an inversion hasn't always translated to a lasting selloff in equity markets.

On average, since 1978, the S&P 500 has returned 2.5 percent after a yield-curve inversion in the three months afterward. Over the longer term,13.48 percent a year after, 14.73 percent in the following two years, and 16.41 percent three years out, according to Dow Jones Market Data

Wednesday, August 14, 2019

What's Driving Inflation

Inflation continues to creep upward. The Labor Department said yesterday morning that the Consumer Price Index rose 0.3 percent last month, lifted by gains in the cost of energy products and a range of other goods.

In July, energy prices overall increased 1.3 percent after falling 2.3 percent the month before. The biggest driver came at the gas pump, where prices rebounded 2.5 percent after dropping 3.6 percent in June. Nevertheless, gas prices still remain 3.3 percent lower than a year ago.

Other costs contributed to the rise as well. Electricity rose 0.6 percent, while shelter costs increased 0.3 percent. Food prices were unchanged for a second straight month, and food consumed at home slipped 0.1 percent.

Tuesday, August 13, 2019

The Bond Market's Warning

The moves in the bond market today shed some light about the state of the economy. The yield on the 10-year Treasury note fell 9.1 basis points to 1.640 percent. That's its lowest level since October 2016.

Remember, bond yields move inversely to their prices, so when demand for them goes up, the yield that they have to offer goes down. Increasing demand for safe assets like Treasurys could be indicating a flight to safety on the part of investors.

In addition, the spread between 2-year and 10-year Treasury yields narrowed to about only 5 basis points yesterday, near its lowest level since 2007. If the 10-year yield looks falls below the 2-year note yield, an inversion is typically a recession warning.

Monday, August 12, 2019

Retirement Confidence vs. Retirement Reality

How much money will you need for a comfortable retirement? On average, Americans believe they need $1.7 million to retire, according to a recent survey from Charles Schwab.

According to another study, this one by the Employee Benefit Research Institute, two-thirds of U.S. workers said they are very or somewhat confident they’ll be able to live comfortably throughout retirement. But confidence doesn't always comport with the reality of the situation.

The good news is that 401(k) balances are near all-time highs, and in the last decade, the average 401(k) retirement plan balance rose by 466 percent. At the same time, that balance is roughly $297,700 - well short of $1.7 million.

Friday, August 9, 2019

Boomers Take Care

Here's some comforting family news: Nine in 10 baby boomers who expect to be caregivers say they would be willing to make significant lifestyle changes in order to care for a family member or loved one. That's according to a new study from the Bankers Life Center for a Secure Retirement.

Study participants said they would be willing to do these things to provide care for a loved one:

  • Reduce spending: 66 percent
  • Travel less: 41 percent
  • Move to a new home: 27 percent
  • Work less: 27 percent
  • Stop working altogether: 19 percent


The study also found that 45 percent of boomers believed they would need long-term care at some point, up from 36 percent in 2013. Sixty-six percent reported that they had had detailed conversations about how they wanted to receive long-term care, and 55 percent had had detailed conversations about how to pay for care.

Thursday, August 8, 2019

Bankruptcy Takes Its Toll

Here's a sobering economic signal: In the first seven months of the year, U.S.-based companies announced 42,937 job cuts due to bankruptcy, according to a new report from outplacement and business coaching firm Challenger, Gray & Christmas. That's up 40 percent from the same period last year and nearly 20 percent higher than all bankruptcy-related job losses last year.

That is the highest seven-month total since 2009, when 50,258 cuts due to bankruptcy were announced. In fact, it is higher than the annual totals for bankruptcy cuts every year since 2009.

Companies cited bankruptcy as the reason for 11.6 percent of all job cuts announced from January to July. That’s compared to 11.3 percent of all cuts for the same period in 2018. Since 2007, bankruptcy has accounted for approximately 6 percent of all job cuts every year.

Wednesday, August 7, 2019

Investment Views of the Ultra-Wealthy

Some ultra-wealthy investors have begun trimming their stock positions a bit, according to the latest from TIGER 21. Short for The Investment Group for Enhanced Results in the 21st Century, that's a investment club of about 700 people with at least $10 million to invest.

Members of TIGER 21 reduced their stock allocation to 21 percent from 22 percent during the second quarter, according to the group’s quarterly report. These investors continue to maintain a 12 percent allocation in cash and cash equivalents.

What are they excited about? Real estate. TIGER 21 members have stepped up their investments in real estate for the first time in three quarters, with it now accounting for 28 percent of their holdings, up from 26 percent in the first quarter.

Tuesday, August 6, 2019

The S&P's Rout

Worries about a looming trade war with China resulted in the worst day for the markets all year yesterday. The S&P 500 finished down by nearly 3 percent on the day—the biggest one-day drop for the index this year.

All 11 of the S&P's sectors declined, led by a 4.2 percent drop for the tech sector.  The S&P 500 is now down 4.6 percent in the last five days, and is off 6 percent from its July 26 high.

The carnage was so thorough that only 11 stocks in the S&P 500 closed higher. Some of the more notable names in that group included Tyson Foods, Abiomed, and Newmont Goldcorp.

Monday, August 5, 2019

The Equifax Fallout

A while back, Equifax – the credit rating agency that was victimized by a data breach in 2017 – announced that everyone affected could get $125 as part of a settlement with the Federal Trade Commission. Let’s hope you didn’t spend that money, because last week, the FTC announced that, due to an overwhelming response, cash payments aren’t going to be anywhere near $125 each.

About 147 million people were affected by the Equifax breach, but only $31 million was set aside for payments as part of the $700 million settlement. For everyone to have gotten $125 from that pot, there would have to be only 248,000 claimants. While the FTC didn’t give a number, they said there were already “an enormous number of claims filed.”

The FTC is now recommending that you instead take four years of free credit monitoring and identity protection. This is available not only from Equifax but from its two fellow major credit bureaus, Experian and TransUnion.

Friday, August 2, 2019

July's Jobs Report

The Labor Department reported this morning that the economy added 164,000 jobs during the month of July, which is almost exactly the average monthly gain for the year. The headline unemployment rate remained unchanged at 3.7 percent.

The bad news: Job gains for the two previous months were revised downward by a total of 41,000. Over the past three months, monthly job growth has averaged about 140,000 — down from 233,000 in the final three months of 2018.

On the other hand, an influx of 370,000 new workers to the labor force brought the labor participation rate up to 63 percent, its highest since March. The total labor force of 163.4 million Americans set a new record high.

Thursday, August 1, 2019

What the Rate Cut Means

As expected, the Federal Reserve yesterday cut its benchmark interest rate by a quarter percentage point. But the stock the market didn't react well, apparently because Fed chair Jerome Powell refrained from suggesting further rate cuts were on the way.

Following the announcement, the Dow Jones Industrial Average closed down 1.2 percent, marking its biggest one-day fall since May 31. The S&P 500 dropped 1.1 percent.

On the other hand, history shows the market usually responds more positively to a rate cut. Since 1990, the S&P 500 has gained on average 0.16 percent on the day of a 25-basis-point cut. One month later, the S&P is an average of 0.57 percent higher.

Tuesday, July 30, 2019

The GDP Outlook from the Business Sector

The economic expansion will continue but growth will slow over the next 12 months, if you put stock in the latest Business Conditions Survey just out from the National Association for Business Economics. Less than half of respondents to the survey expect GDP growth to rise by more than 2 percent over the next four quarters — down from 53 percent who said so in April, and 67 percent who said so in January.

U.S. GDP rose 2.1 percent in the second quarter, according to data released by the Commerce Department last week, That was down from 3.1 percent in the first quarter and comes on the heels of 2.5 percent growth for all of 2018.

The Business Conditions Survey also suggested that the job market may be cooling slightly. One third of respondents said that they had hired during the second quarter, down from 44 percent who had said so a year earlier. And just under one third said they expected to hire in the next three months, down from 41 percent a year ago.

Those Incredible Buybacks

Companies in the S&P 500 index are returning cash to their shareholders at a historic rates, according to a new report from Goldman Sachs. In the 12 months ended March 31, firms in the S&P 500 index  spent 103.8 percent of their free cash flow on stock buybacks and dividends, up from 101.9 percent in the fourth quarter of last year.

This is the first time that the S&P companies have spent more cash than they earned on payouts since the period between September 2006 and March of 2008. At that time, there was a seven-quarter stretch during which S&P 500 companies paid out more to shareholders than they earned in cash.

Not surprisingly, these corporations now have a lot less cash on hand. Overall, during the past year, nonfinancial companies in the S&P 500 have seen their cash levels decline by $272 billion, a 15 percent decline that represents the largest drop since at least 1980.

Monday, July 29, 2019

Winner Take All?

Is the stock market “winner take all”? Just 1.3 percent of the world’s public companies account for all the market gains during the past three decades, according to a new study from a professor at Arizona State’s Business School. Outside the U.S., the gains are even more concentrated, with less than 1 percent of all equities driving all of the net appreciation in share prices.

From 1990 to 2018, just five companies - Apple, Microsoft, Amazon.Com, Alphabet Inc. (Google) and Exxon Mobil - accounted for 8.3 percent of global net wealth creation. But those five companies account for just 0.008 percent of the total sample set of 62,000 publicly traded companies.

During that 1990-2018 period, the best-performing 811 companies accounted for the entire net stock market appreciation of $44.7 trillion (in excess of the returns you could get from Treasury bills).  Meanwhile, a majority of stocks - 37,195, or 60.9 percent - were net money losers, subtracting a $21.83 trillion from the total.

Friday, July 26, 2019

Second Quarter GDP Report

Growth decelerated in the second quarter as tariffs and a global slowdown weighed on the U.S. economy, the Commerce Department reported this morning. GDP increased by 2.1 percent in the quarter, down from 3.1 percent in the first quarter.

The biggest factors driving growth last quarter: Personal consumption expenditures rose 4.3 percent, the strongest performance since the fourth quarter of 2017. Government consumption expenditures and gross investment rose 5 percent, the fastest pace since the second quarter of 2009. At the same time, gross private domestic investment tumbled 5.5 percent, the worst since the fourth quarter of 2015.

This morning's report also featured revisions for the past five years. Updated government figures show that GDP expanded 2.5 percent on a fourth-quarter-over-fourth-quarter basis last year, down from the previous estimate of 3 percent .

Thursday, July 25, 2019

Tesla's Crash

One of the biggest casualties of this week's earnings report: The electric-car maker Tesla. The Wall Street consenus had the ecletric-car maker losing 40 cents per share this quarter. Instead, it lost nearly three times as much, $1.12 per share.

That's a big miss, resulting in the stock losing 10 percent of its value in a single day. But on the other hand, Tesla had lost $3.06 per share during the same period last year. So the company is at least losing less money now.

But there was also some good news from Tesla. It reaffirmed its guidance for full-year delivery, saying it still expects to sell 360,000 to 400,000 vehicles this year, mostly Model 3s.

Wednesday, July 24, 2019

Rumblings in the Housing Market

Sales of previously owned homes slipped 1.7 percent in June, reflecting ongoing weakness in the U.S. housing market despite a sharp drop in mortgage rates. Existing-home sales sold at a 5.27 million annual pace last month, down from 5.36 million in May, the National Association of Realtors said yesterday.

A 30-year fixed-rate mortgage averaged 3.8 percent in June vs. almost 5 percent last November. But even after that big drop in mortgage rates, sales of previously owned homes are 2.2 percent lower than a year ago.

On the other hand, the median selling price in June rose 4.3 percent to $285,700 from a year earlier. That means that home prices have now risen in every month for more than seven years.

Tuesday, July 23, 2019

The Problems of Newlyweds

Is someone you know planning to get married? Here’s a little cautionary warning you can give them: Most engaged couples and newlyweds don’t talk about money on a regular basis, according to the findings of a new survey by Northwestern Mutual and wedding planning and registry specialist The Knot.

Only 37 percent of newlyweds and engaged couples talk about their finances monthly. While being on the same page financially is critical to a happy, long-lasting marriage, 72 percent of those surveyed do not have a clear plan when it comes to saving for their passions.

The ironic thing is that 82 percent of couples feel closer to their partners when they’re in agreement about money. But at the same time, 40 percent feel anxious when they think about financial planning as a couple - and 20 percent admit to hiding purchases and cash from their partners.

Monday, July 22, 2019

The Big Week Ahead

If you're a stock investor, this is a week for you to keep your eyes and ears open. One-third of the 30 components of the Dow Jones Industrial Average and 144 companies on the S&P 500 index are due to report their earnings, making for one of the busiest earning stretches this season.

The parade of reports could provide some good news for a market that has mostly skidded lower over the past several sessions. Both benchmarks, as well as the tech-heavy Nasdaq, finished Friday with their steepest weekly declines since the end of May.

The big names from the Dow that are set to report include Coca-Cola, Caterpillar, McDonald’s and Visa. But maybe the most intriguing is a non-Dow company, Facebook, which will report earnings on Wednesday. Facebook is expected to announce a $2 billion hit to earnings in order to settle a fine from the FTC over data privacy. 

Friday, July 19, 2019

New Jersey's New Claim to Fame

Which state saw the biggest drop in its unemployment rate last month? Why, it’s our own New Jersey. Unemployment here in the Garden State dropped from an already low  3.8 percent in May to 3.5 percent in June, according to new figures out from the Bureau of Labor Statistics.

That 0.3 percentage point drop edged out Colorado and Alabama, which both fell by 0.2 percentage points, to lead the nation last month. The overall nationwide unemployment figure is 3.7 percent, but state unemployment figures range from a low of 2.1 percent in Vermont to a high of 6.4 percent in Alaska.

New Jersey’s 3.5 percent unemployment rate marks the lowest in our state’s history for as long as these figures have been kept, which dates back to 1976. According to the BLS, we have added 47,600 jobs over the past 12 months.

Thursday, July 18, 2019

The Latest From the Beige Book

The U.S. economy continued growing at a “modest” rate in recent weeks, with consumers continuing to spend and a “generally positive” outlook overall despite disruptions caused by U.S. trade policy. That's according to the latest Beige Book, published by the Federal Reserve yesterday.

Employment continued to expand and “labor markets remained tight, with contacts across the country experiencing difficulties filling open positions,” the Fed reported. “The outlook generally was positive for the coming months, with expectations of continued modest growth, despite widespread concerns about the possible negative impact of trade-related uncertainty.”

In our area, ports along the East Coast saw robust activity, with one reporting record-breaking imports led by furniture. On the other hand, prices for Broadway theater admissions were down roughly 10 percent from a year earlier.

Wednesday, July 17, 2019

Fund Fees Are Falling

Investing in equity and hybrid mutual funds through 401(k) plans became cheaper in 2018 according to a new report from the Investment Company Institute, a trade group for the fund industry. This is part of a longer-term trend; the fees investors have been paying have dropped significantly since 2000.

At the end of last year, mutual funds represented 63 percent of the $5.2 trillion in 401(k) plan assets. Plan participants incurred an average expense ratio of 0.41 percent for equity mutual funds in 2018, which is down from 0.45 percent in 2017 and  down from 0.77 percent in 2000 — a 47 percent decline.

The average expense ratio that 401(k) plan participants incurred for investing in hybrid mutual funds fell to 0.49 percent in 2018, down from 0.51 percent in 2017 and 0.72 percent in 2000. Bond mutual fund investors, on the other hand, saw their average expense ratio hold steady at 0.34 percent between 2017 and 2018, although they're down from 0.6 percent in 2000.

Tuesday, July 16, 2019

The Chinese Slowdown

While the American economy continues to be strong, China's economic growth has slumped to its lowest level in nearly three decades. The country's GDP grew at 6.2 percent in the quarter ended June, according to government figures released on Monday. That's the slowest quarterly growth since 1992 and down from 6.4 percent in the previous quarter.

China's exports fell 1.3 percent year-on-year for the first half in dollar terms, while imports dropped 7.3 percent. The country recorded a sharper decline in exports to the United States, which decreased 8.1 percent for the first six months of 2019. Imports from the United States plunged 30 percent year on year.

This is already affecting American companies that do business in China. To take one significant example, Apple's revenue in the Greater China region, which includes Hong Kong and Taiwan and accounts for 18 percent of its overall revenue, dropped 21.5 percent in the second quarter from the same period a year ago.

Monday, July 15, 2019

What American Kids Need

Are you giving more money to your adult children than you are to your retirement plan? For many Americans, this is the tradeoff they're facing. According to a report by Merrill Lynch and Age Wave, U.S. parents spend $500 billion a year on their 18- to 34-year-old adult children – twice the amount they contribute to their retirement savings.

Seventy percent of adults between the ages of 18 and 34 received some sort of parental financial support in the last year, with over half of those between the ages of 30 and 34, the report states. More than half of all millennials acknowledge that they could not afford their current lifestyle without the financial support of their parents.

What are parents paying for? The report shows that they aren’t just helping their grown children with emergencies. Some 60 percent are covering food and groceries, 54 percent are covering cell phones, and 47 percent are helping with car expenses.

Friday, July 12, 2019

A Record Day for the S&P


The S&P 500 Index  hit an all-time intraday high on Wednesday, rising above 3,000 for the first time, before closing at 2,993, its second-highest close. More remarkably, of the S&P’s 500 components, a whopping 54 stocks hit intraday highs as well.

Among the more notable names setting new highs:

  • PayPal, which is up 42 percent year-to-date
  • Lockheed Martin, up 41 percent
  • Microsoft, up 36 percent
  • Starbucks, up 37 percent
  • American Express, up 33 percent
  • Costco, up 33 percent
  • Oracle, up 33 percent
  • Waste Management, up 32 percent
  • Walt Disney, up 31 percent
  • Dollar General, up 30 percent

Wednesday, July 10, 2019

The Biggest Earnings Movers

As we close in on earnings season, Bespoke Investments has put together a list of the stocks that tend to move the most when they report their earnings. In first place is TravelZoo, an Internet travel site that has seen its share price move an average of 13 percent, up or down, every time it reports.

The other big movers tend to be smaller stocks the size of TravelZoo - with the very large exception of Netflix. The full Top Ten:

  1. TravelZoo: 13.0 percent
  2. Netflix: 12.8 percent
  3. Stamps.com: 12.6 percent
  4. iRobot: 12.2 percent
  5. Synchronoss Tech: 11.9 percent
  6. Sierra Wireless: 11.8 percent
  7. Glu Mobile: 11.8 percent
  8. Fossil: 11.7 percent
  9. Skechers USA: 11.5 percent
  10. First Solar: 11.4 percent

Tuesday, July 9, 2019

The Winning Sectors

Despite all the good economic news and the continued strength of the stock market, earnings growth is expected to slow to a crawl this year for large U.S. companies. In fact, during the first quarter of 2019, earnings per share declined from a year earlier for most of the S&P 500’s sectors, six out of the total of eleven.

Which sectors were able to grow earnings? These are the fortunate five:
  • Health care, 9.8 percent
  • Real estate, 7.4 percent
  • Financials, 6.2 percent
  • Industrials, 5.9 percent
  • Information technology, 4.0 percent 


According to S&P Global Market Intelligence, only three of these sectors are expected to continue to show earnings growth when the second-quarter numbers are revealed: Financials, Health care, and Industrials.

Monday, July 8, 2019

Optimizing Your Social Security Strategy

Have you thought about when you'll start taking Social Security? According to a new report from United Income, almost all American retirees claim Social Security at the wrong time. The upshot is that they will miss out on a collective $3.4 trillion in benefits before they die.

While they can tap their benefits as early as age 62, retirees could boost the size of their checks for every year they wait until age 70, when they can get the maximum benefit. The advantage in waiting is substantial: A person eligible for a $725 monthly check at 62 could get $1,280 if they wait to start at age 70.

Only 4 percent of U.S. retirees are waiting until age 70 to claim Social Security, but 57 percent should be doing so, the report calculated. Meanwhile, more than 70 percent start taking checks before turning 64, a time when ideally only 6.5 percent of retirees should be cashing checks. The lost income from these less-than-optimal decisions amounts to about $111,000 per household, the researchers estimate.

Friday, July 5, 2019

The June Jobs Report

The employment picture bounced back strong in June, following a disappointing month of May, according to figures out this morning from the Bureau of Labor Statistics. The American economy added 224,000 jobs last month, after adding just 24,000 jobs in May. The headline unemployment rate ticked up to 3.7 percent.

All told, for the first half of 2019, we have averaged a solid 172,000 new jobs per month. That's down a bit from the strong pace of 223,000 jobs per month we saw in 2018, although the June report was back to that level.

The leading industry for job growth last month was health care, which added 35,000 jobs. Employment in transportation and warehousing expanded by 24,000 in June, while construction added 21,000. Over the past 12 months, construction employment has increased by 224,000.

Thursday, July 4, 2019

Thoughts for Independence Day

"Those who expect to reap the blessings of freedom must undergo the fatigue of supporting it." ~ Thomas Paine

"Freedom is nothing but a chance to be better." ~ Albert Camus

"Men first crossed the Atlantic not to find soil for their ploughs but to secure liberty for their souls." ~ Robert J. McCracken

Tuesday, July 2, 2019

The First Half's Biggest Losers

Yesterday we looked at the best stocks for the first half of 2019; today we present the biggest losers. None of these fell by nearly as much as the best performers rose, but look at what a rough six months it's been for retail:

  1. Nordstrom, down 31 percent
  2. Mylan, down 31 percent
  3. Gap Inc., down 30 percent
  4. Kohl's Corp., down 28 percent
  5. Kraft Heinz, down 27 percent
  6. Macy's, down 25 percent
  7. AbbVie Inc., down 22 percent
  8. Foot Locker, down 22 percent
  9. ABiomed, down 22 percent
  10. Kroger Co., down 21 percent

The First Half's Biggest Winners

As we mentioned yesterday, this was a blazing first half for the stock market, with the S&P 500 rising by 17.3 percent. Here are the ten best-performing stocks in the S&P over the first six months of 2019:

  1. Coty, up 105 percent
  2. Xerox, up 81 percent
  3. Chipotle Mexican Grill, up 68 percent
  4. Advanced Micro Devices, up 67 percent
  5. Anadarko Petroleum, up 63 percent
  6. Cadence Design Systems, up 61 percent
  7. Hess Corp., up 60 percent
  8. MSCI Inc., up 60 percent
  9. Total System Services, up 58 percent
  10. Dentsply Sirona, up 55 percent

Monday, July 1, 2019

The Blazing First Half

With a gain of about 6.9 percent, the S&P 500 index notched its best June since 1955, when the benchmark rose 8.2 percent. The Dow Jones Industrial Average put up its best June gain of 7.2 percent since 1938 when the blue-chip benchmark surged 24.3 percent.

That capped off the best first half of a year since 1997 for the S&P, rising 17.3 percent. All 11 of the S&P 500 sectors rose in the first half of the year, with tech rising more than 26 percent to lead the gains. Energy was the market’s laggard in the first half, rising just 7.1 percent.

Meanwhile, the Dow Jones industrial average registered a 14 percent gain. But that trailed the Nasdaq composite index, which led everybody with 20 percent.

Friday, June 28, 2019

What the New Indexes Mean

FTSE Russell, which operates many of the most-followed mid-cap and small-cap stock indexes will rebalance its suite of indexes at the close of trading today. The changes will reflect several broad trends in equity markets over the past year, including the resilience of large-capitalization companies and the dismal performance of smaller U.S. firms.

The dividing line between the large cap index and the small fell this year, from a capitalization of $3.7 billion to $3.6 billion, as a result of the poor performance of small cap companies, which shrunk in average market capitalization from $2.5 trillion to $2.4 trillion. The Russell 2000 small cap index fell 6.3 percent over the past 12 months, versus a 7.5 percent rise in price for larger companies.

Earnings for Russell 2000 small-cap companies fell 14.5 percent in the first quarter of this year on 3.4 percent of sales growth. Equity analysts expect the second quarter will likely show small-cap earnings falling 11.5 percent, on 3.6 percent of revenue growth.

Thursday, June 27, 2019

The Refinery Fire Ramifications

Gasoline futures rose by more than 5 percent yesterday, reaching $1.9787 a gallon, their highest since May 23. That followed a report that the Philadelphia Energy Solutions plant, the largest east coast refinery, is expected permanently shut its oil refinery in the city after a massive fire caused substantial damage to the complex.

Shutting the refinery, the largest and oldest on the U.S. East Coast, would result in not only hundreds of lost jobs but also sharply higher gasoline prices as gasoline supplies are squeezed in the busiest, most densely populated corridor of the United States.

AAA warned that the closure would likely affect retail gasoline prices here in New Jersey very soon. Motorists in the mid-Atlantic region will likely continue to see modest increases in pump prices, AAA said, especially leading up to what is expected to be a high-demand travel period for the Fourth of July.

Wednesday, June 26, 2019

A Shock to Confidence

What has suddenly happened to American confidence? The Conference Board’s Consumer Confidence Index tumbled to 121.5 in June, dropping from 131.3 in May. This is the lowest consumer confidence has been since September 2017.

The June reading snapped a string of three consecutive months of improvements. That 9.8 point decline is tied with last December for the largest monthly decline since August 2011.

The sudden drop also surprised the experts. June’s results missed consensus expectations for a reading of 131.0, according to Bloomberg-compiled data. The magnitude of that miss relative to expectations was the largest Bloomberg has recorded since June 2010. 

Tuesday, June 25, 2019

The Cost of Caregiving

Are you taking care of an elderly family member? According to a new GAO study, “Retirement Security: Some Parental and Spousal Caregivers Face Financial Risks,” an estimated tenth of Americans provided care to a parent or spouse for some period of time from 2011 through 2017, with women and minority caregivers being the most likely to be the ones providing care.

And they've paid a hefty price. The study noted that for an estimated 68 percent of working parental and spousal caregivers, offering care took a toll on their jobs. They ended up going to work late, leaving early, or taking time off during the day to provide care.

That played out in the money field, too, with data indicating that spousal caregivers ages 59–66 had lower levels of retirement assets and less income than married noncaregivers of the same ages. Specifically, spousal caregivers had an estimated 50 percent less in individual retirement account assets, 39 percent less in non-IRA assets, and 11 percent less in Social Security income.

Monday, June 24, 2019

One Hot June

The month of June is shaping up to be the hottest one in generations. On Friday, the S&P 500 notched a record close, its first since April 30, while the Dow Jones Industrial Average finished less than 1 percent short of its all-time peak set last October 3.

How rare his this month been? Recent gains have put the Dow in position to ring up its best June gain of 7.7 percent since 1938, when the blue-chip benchmark surged an eye-popping 24.3 percent on the month.

The S&P 500 index is on track for its best June return, with a gain of about 7.2 percent, since 1955 when it rose 8.2 percent. The Nasdaq Composite Index was on track for a 7.8 percent return in June, but that would merely represent its best June since a 16.6 percent gain back in 2000.

Thursday, June 13, 2019

A Hot Year for IPOs

Beyond Meat has been the most impressive IPO of the year, with its stock up more than 400 percent since the company went public. But it's not the only winner. The Renaissance Capital IPO ETF, a basket of the 60 or so most recent large IPOs, is up 34 percent this year, more than twice the performance of the S&P 500.

Some of the other big names among this year's IPOs include Zoom Video Communications, which is up 176 percent, and  PagerDuty, which is up 109 percent. The internet craft site Pinterest has also done very well, rising 44 percent.

But two of the hottest names in this year's IPO crowd have also been among the most disappointing. The two ride-sharing stocks have both been unimpressive in their debuts: Uber Technologies is down 6 percent, and Lyft is down 19 percent.

Here Come the Materials

What's been the strongest sector in the market so far in June? It's the little-discussed materials sector, which is by far having the best month of any of the 11 sectors in S&P 500 groups. It's risen 9.5 percent in June.

By comparison, the information technology sector is up 6.3 percent so far in June, which is second best overall. Consumer discretionary shares and consumer staples are both set for monthly gains of at least 5 percent.

The materials group, which tends to be very sensitive to global economic growth expectations, is on track for its best monthly gain since October of 2015, when it rose 13.45 percent. The sector consists of companies most closely tied to production of raw materials used in manufacturing, including steel, aluminum and chemicals.

Wednesday, June 12, 2019

Trouble Brewing in 401(k)s

A grand total of $1.7 million: That’s how much Americans believe they should save in order to retire, according to a Charles Schwab survey of 1,000 401(k) plan participants between the ages of 25 and 70. Unfortunately, the survey also found that few are likely to attain that goal. 

Almost 60 percent of survey respondents said their 401(k) plan was their only or largest source of retirement savings, but 51 percent are contributing less than 10 percent of their salary to their 401(k), with the average annual contribution totaling $8,788. Only 23 percent of respondents reported contributing the maximum allowed in their 401(k) plans, which is $19,000 for employees under 50 and $25,000 for those 50 and older.

Schwab found that if employees start saving at age 45, they need to invest as much as 35 percent of their salary to reach that goal, but if they start saving in their 20s, they need a 10 percent to 15 percent salary contribution. But one-third of auto-enrollees reported they never increased their contribution level.

Tuesday, June 11, 2019

Hirings at a Record High

A very positive big-picture look at the employment front: The total number of workers hired rose to a new high in April, according to Labor Department data released yesterday. But despite this, the amount of available jobs still vastly outnumbers unemployed workers.

Hirings increased to 5.9 million for the month, a gain of 240,000 from March, the Job Openings and Labor Turnover Survey indicated. The hiring rate rose to 3.9 percent, an increase of one-tenth of a percentage point. The total hirings was the most recorded in the data series’ history going back to December 2000.

Openings for the month actually decreased slightly, falling 25,000 to 7.45 million. However, workers that the Bureau of Labor Statistics classifies as unemployed declined by 387,000 to 5.82 million, leaving the gap at 1.63 million.

Monday, June 10, 2019

When Bad News Is Good

U.S. stocks closed higher Friday, following a weaker-than-expected jobs report, finishing off the best week of the year for both the S&P 500 and the Dow Jones industrial average. Why is that? The markets could be entering a period in which bad economic news is good for stock markets.

The hope is that data show a decelerating economy will force the Fed to cut interest rates. Lower interest rates are seen as good for stock prices, because they hold down bond yields, making equities a relatively more attractive investment.

For the week, the Dow gained 4.7 percent, the S&P 500 returned 4.4 percent, while the Nasdaq climbed 3.9 percent. The Dow and S&P 500 had their best weekly showing since late November, while it was the Nasdaq’s best performance since the week ended December 28.

Friday, June 7, 2019

May's Jobs Report

Employment slowed down in May, with the economy adding just 75,000 jobs, the Labor Department reported this morning. This was the second time in four months that payrolls increased by less than 100,000, although the headline unemployment figure remained at 3.6 percent.

In addition to the weak total for May, the previous two months’ reports saw substantial downward revisions. March’s count fell from 189,000 to 153,000 and the April total was taken down to 224,000 from 263,000, for a total reduction of 75,000 jobs. Employers have added 164,000 jobs per month on average in 2019, compared with 223,000 jobs per month last year.

Health care and professional and business services were the bright spots in May, and have added nearly 900,000 jobs over the past year. But construction, mining and manufacturing showed little change from April, and retail lost 7,600 jobs.

Thursday, June 6, 2019

Oil in a Bear Market

Oil prices plunged on Wednesday, with futures falling to their lowest since January, after the U.S. government reported an unexpected surge in the nation’s crude stockpiles. U.S. West Texas Intermediate crude fell to $50.66 a barrel after the report, its lowest level since January 15.

That means that oil prices have officially entered a bear market, defined as a drop of 20 percent. Prices have settled 22 percent below the most recent high of $66.30 on April 23.

The reason for all this: U.S. commercial crude inventories jumped by 6.8 million barrels in the week through May 31, the U.S. Energy Information Administration reported, even though U.S. crude imports jumped by more than 1 million barrels per day. Meanwhile, weekly U.S. oil production ticked up to an all-time high 12.4 million barrels per day.

Wednesday, June 5, 2019

The New Direction for Interest Rates

Is the next step for the Federal Reserve an interest rate cut? Fed chair Jerome Powell said yesterday that the Fed was “closely monitoring” the impact of trade developments and would “act as appropriate” to sustain the economic expansion. That came after St. Louis Fed President James Bullard said the Fed may need to cut interest rates soon amid concerns about weak inflation and risks to economic growth.

The markets seemed to think this meant a potential cut in interest rates, and reacted accordingly. After a disastrous Monday, the Dow Jones Industrial Average and the S&P 500 both rose 1.8 percent yesterday, while the Nasdaq was up 2.2 percent.

The last time the Federal Reserve cut its benchmark Fed Funds rate was on December 17, 2008, shortly after the financial markets melted down. That was its tenth rate cut in just over a year, and brought the rate to near zero; the Fed wouldn’t raise rates again until December 2015.

Tuesday, June 4, 2019

Tough Times for the Giants

A rough day for three of America’s biggest companies yesterday, due to possible antitrust action:

  • After a Reuters report saying the Justice Department is considering a probe of the company’s practices, Apple's market capitalization below the $800 billion mark for the first time in nearly four months. That leaves Apple in third place on the list of most valuable U.S. companies, behind Microsoft at $923.4 billion and Amazon.com at $835.3 billion.  
  • Facebook shares fell as much as 8 percent following a Wall Street Journal report that said the FTC will be able to examine the effect of Facebook’s practices on digital competition. Facebook’s drop shaved more than $40 billion from its market cap, bringing it to about $463 billion.
  • Alphabet shares slipped after a report said the Justice Department is readying an antitrust investigation against its prime subsidiary, Google. Alphabet shares dropped 6.7 percent on  the day.

Monday, June 3, 2019

GDP Slows Down a Bit

The U.S. grew a bit slower in the first three months of 2019 than originally reported, mostly because of weaker business investment, the Commerce Department reported. Gross domestic product grew at a 3.1 percent annual pace in the first quarter, down slightly from an initial 3.2 percent estimate.

Most worryingly, corporate profits also fell for the second quarter in a row in a negative sign for the economy. Adjusted corporate profits before taxes fell at annual 2.8 percent pace, the biggest quarterly decline for that measure since 2015.

Consumer spending rose a mild 1.3 percent, held down by reduced purchases of durable or long-lasting goods such as autos or appliances. But spending on durable goods sank 4.6 percent, marking the biggest drop for that category in 10 years.

Friday, May 31, 2019

The World's Most Competitive Economies

The United States has lost its spot as the world's most competitive economy, according to an annual ranking from the IMD World Competitiveness Center. High fuel prices and fluctuations in the dollar's value diminished the confidence in the American economy, along with the trade war with China, the center said.

So what's surpassed us? Both Singapore and Hong Kong had more competitive economies than the U.S., per the report, which evaluates 63 countries on 235 measures. The full Top Ten:

  1. Singapore
  2. Hong Kong
  3. United States 
  4. Switzerland
  5. United Arab Republic
  6. Netherlands
  7. Ireland
  8. Denmark
  9. Sweden
  10. Qatar

Thursday, May 30, 2019

The Inverted Yield Curve

Is the bond market worried about a possible recession sometime soon? The yield curve has inverted again, with the inversion between the three-month Treasury bill and the 10-year note widened to its deepest level since the financial crisis. The three-month bill yield rose to 2.362 percent yesterday, while the 10-year note yield dropped to 2.26 percent, its lowest since September 2017.

Under normal market conditions, those that buy debt from the U.S. government for many years get better interest rates than those who loan money for a matter of months. When that inverts, as it has now, many investors and economists believe that the yield curve is sending a warning about economic growth in the United States.

The yield curve inverted once before this year, in March. But before that instance, the yield curve hadn't flipped since 2007 — just before the start of the Great Recession.

Wednesday, May 29, 2019

The Market's Biggest Winners

The S&P 500 has been a strong so far this year, rising by more than 12 percent. Often when this happens, the best-performing stocks tend to be the little-known ones, but 2019 has landed several big names at the top of the charts:

  • Coty is up 88.6 percent through Friday; the beauty and cosmetics maker soared after the German conglomerate Jab Holding boosted its stake in the company.
  • Anadarko Petroleum is up 61.8 percent, on the heels of Occidental Petroleum outbidding Chevron to buy the oil company for $38 billion. 
  • Xerox  is up 58.4 percent, one of several software and chip stocks that have done well during this year’s market rally.
  • Tyson Foods  is up 53.2 percent, as meat prices are expected to keep rising.
  • Chipotle Mexican Grill  is up 50.5 percent year to date. 

Tuesday, May 28, 2019

New Jersey's Loss Is Florida's Gain

New Jersey lost about $3.4 billion in revenue from people moving out of state in 2016, according to a new study from Bloomberg. That's the third largest financial drain suffered by any state, exceeded only by New York and Connecticut.

Florida posted a net income influx of nearly 3 percent of the state’s adjusted gross income in 2016, the most recent year for which figures were available. That's no surprise, but the states that followed may be: South Carolina, Idaho and Oregon were also among the largest gainers.

Florida reeled in $17.2 billion more than it lost. The Sunshine State was the No. 1 recipient of the wealth exodus from 18 individual states — with New York, Illinois and New Jersey combining to contribute about $8 billion to Florida’s income base.

Monday, May 27, 2019

Thoughts for Memorial Day

"Patriotism is not short, frenzied outbursts of emotion, but the tranquil and steady dedication of a lifetime." ~ Adlai Stevenson

"Those who have long enjoyed such privileges as we enjoy forget in time that men have died to win them." ~ Franklin D. Roosevelt

"Some people live an entire lifetime and wonder if they have ever made a difference in the world. A veteran does not have that problem." ~ Ronald Reagan

Friday, May 24, 2019

That Lingering Fragility

Feelings of financial security among American adults are high, according to the just-out Report on the Economic Well-being of U.S. Households for 2018, a study that Fed has been conducting since 2013. Seventy-five percent of adults say they are either doing “okay” or “living comfortably,” up 12 percentage points from 2013.

But financial fragility remains high, too, especially among minorities and those lacking higher education. Forget saving for retirement: An unexpected expense of $400 can force more than one-third of American adults into a difficult financial situation.

If faced with an unexpected expense of $400, 61 percent of adults say they could cover it with cash, savings, or a credit card paid off at the next statement. But 27 percent would have to borrow or sell something to pay for the expense, and 12 percent would not be able to cover the expense at all.

Thursday, May 23, 2019

Housing on Shaky Ground

A sizable drop in mortgage interest rates didn’t do much to help home sales in April, as high prices and tight supply at the low end of the market continued to sideline buyers. Sales of existing U.S. homes, which accounts for 90 percent of the housing market, fell 0.4 percent in April compared with March.

Sales were 4.4 percent lower compared with April 2018. That was the 14th straight month of annual declines. Here in the Northeast, home sales decreased by 4.5 percent. The median price in the Northeast was $277,700, up 0.9 percent from April 2018.

The inventory of existing homes for sale increased to 1.83 million, up 1.7 percent annually to a 4.2-month supply at the current sales pace. Homes sat on the market for an average of 24 days in April, down from 36 days in March and down from 26 days a year ago.


Wednesday, May 22, 2019

Millennials' Financial Woes

Burdened by significant student loan debt and the fact that many of them spent their first working years in the midst of an economic downturn, millennials are already way behind previous generations on a number of key financial metrics. That's according to a recent analysis by the Wall Street Journal.

In 2016, the average net worth of a household headed by those age 18 to 34 was roughly $92,000. In inflation-adjusted dollars, that was 40 percent lower than the worth of young households in 2001, and 20 percent lower than that of young households in 1989.

Similarly, only about a third of millennials owned homes in 2016. That's compared to half of young people in 2001 who owned homes,  and just under half of young people in 1989.

Tuesday, May 21, 2019

Who's Moving Into Cash?

Are the superrich getting spooked? Members of Tiger 21, a group of about 700 individuals with at least $10 million to invest, increased their cash holdings by 20 percent in the first quarter, bringing the group’s total allocation to levels not seen since the start of 2013. The move marks Tiger 21’s first cash-raising effort in three years.

The group is backing away from hedge funds, but just slightly. Real estate, still the asset of choice, has steadily fallen out of favor, dropping from a peak of 33 percent in the second quarter of 2017 to the current 26 percent level.

Group members have remained steady their bond holdings. That asset class accounts for 9 percent of their holdings, similar to the fourth quarter of 2018.

Monday, May 20, 2019

The Bank of Mom and Dad

Kids have been borrowing or receiving gifts from parents for years, but a new study by Legal & General, a U.K.-based financial services firm and global investor, has quantified the effect. If the Bank of Mom and Dad were a real lender, the total amount loaned out is estimated to be $47.3 billion, just less than U.S. Bancorp, the fifth-largest bank in the nation.

One in five U.S. homeowners received gifts or loans from family to help them buy their home. The average sum given as a gift or interest-free loan is $39,000 per loan. That helped to support the purchase of $317 billion worth of property across America in 2018.

This amount doesn’t include other loans or gifts given out by Mom and Dad, usually dealing with college. Those loans averaged roughly $41,500 apiece.




Friday, May 17, 2019

Earnings Season's Biggest Surprises

Which companies had the biggest upside surprises in terms of sales this earnings season? According to FactSet, these are the ten stocks whose sales figures outperformed the Wall Street analysts the most:

  • Pioneer Natural Resources, exceeded expectations by 38 percent
  • Fifth Third Bancorp, exceeded expectations by 32 percent
  • HollyFrontier, exceeded expectations by 19 percent
  • Alexandria Real Estate Equities , exceeded expectations by 16 percent
  • Lockheed Martin, exceeded expectations by 14 percent
  • Electronic Arts, exceeded expectations by 14 percent
  • Principal Financial Group, exceeded expectations by 12 percent
  • Anadarko Petroleum, exceeded expectations by 12 percent
  • Vulcan Materials, exceeded expectations by 11 percent
  • Westinghouse Air Brake Technologies, exceeded expectations by 11 percent

Thursday, May 16, 2019

A Surprise in Retail Sales

U.S. retail sales unexpectedly declined in April, the Commerce Department said yesterday. The value of overall sales declined 0.2 percent after a 1.7 percent increase in March that had been the strongest gain since 2017.

Overall consumer spending, which includes spending on services such as haircuts and travel, had jumped in March by the most in nearly a decade, but April was a different story. One example of the turnaround: Sales at automobile dealers fell 1.1 percent after increasing 3.2 percent in the previous month.

Sales at clothing stores fell 0.2 percent in April, and by 1.9 percent at home and garden supply stores. Other down sectors included health and personal care, and electronics and appliances. Categories with increases included general merchandise, food and beverage stores, and restaurants and bars.

Tuesday, May 14, 2019

Victims of the Trade War

The trade war between the U.S. and China means hard times for the markets, especially those companies that do a lot of business with China. The Dow Jones Industrial Average and the S&P 500 Index both fell by 2.4 percent yesterday, while the Nasdaq Composite Index dropped 3.4 percent.

Apple led the Dow decliners with a loss of 5.8 percent, after reporting a 22 percent decline in sales in China for the quarter ended March 30 from a year earlier. Other Dow stocks that lost at least 3.5 percent:

  • Boeing, down 4.9 percent
  • Caterpillar, down 4.6 percent
  • DowDuPont, down 3.9 percent
  • Cisco Systems, down 3.9 percent
  • United Technologies, down 3.8 percent
  • Goldman Sachs, down 3.5 percent

Sunday, May 12, 2019

The Bad News from Uber

Uber's hotly anticipated IPO turned into a bit of a dud on Friday. By one measure, it was the fifth weakest one-day return of a company with a value of at least $10 billion of the past 24 years, according to data from Dealogic.

Uber’s stock closed at $41.57, giving it a valuation of $69.71 billion, which is certainly a very big number. But it also finished Friday's trading down 7.6 percent from its official public debut at $45.

The first-day drop put Uber’s return better than only four other companies that were valued at $10 billion or more. ADT, the security company, raised about $1.5 billion on January of 2018 but saw a first-day slide of 11.5 percent. Genuity, one of the last gasps of the dot-com era, saw its stock slide by 14.5 percent on its first day of trading back in June 2000.

Friday, May 10, 2019

Producer Prices Ease Off

The producer price index increased just 0.2 percent last month,  the Labor Department said yesterday. That's significant because that index had jumped 0.6 percent in March, setting off a few alarm bells. In the 12 months through April, the PPI increased 2.2 percent.

Some big changes between the two months: Wholesale energy prices rose 1.8 percent in April after jumping 5.6 percent in March. Goods prices increased 0.3 percent last month after surging 1.0 percent in March.

The producer-price index is a measure of the prices businesses receive for their goods and services. It measures things such as wholesale food prices, which fell 0.2 percent in April. It can be seen as sort of a precursor to consumer inflation.

Wednesday, May 8, 2019

Are Americans Overconfident About Retirement?

According to the 2019 Retirement Confidence Survey of Americans 25 and older, just out from the Employee Benefit Research Institute, 82 percent of retirees are confident they will have enough money to live comfortably throughout retirement. That’s a sharp rise from 75 percent a year ago and comparable to the highs in 2005 and 2017.

The outlook among those still in the workforce is slightly less rosy. In that group, 67 percent of workers are confident they will have enough money to live comfortably throughout retirement, up from 64 percent a year ago and 60 percent in 2017. That figure is near the peaks of 1999 and 2004.

But should they be so optimistic? The EBRI survey also found that 40 percent of workers said they have less than $25,000 in savings and investments, not counting their home and any traditional pension plans. Another 9 percent had $25,000 to $49,999 and another 9 percent had $50,000 to $99,000. That’s 58 percent who have less than $100,000 saved.

The Long-Term Care Stats

How do you feel about your long-term care? Only around 52 percent of workers said they're at least somewhat confident they'll be able to afford long-term care in retirement, according to a new report from EBRI. Just 15 percent considered themselves "very confident" about their ability to cover this particular expense.

These costs add up fast. Roughly 70 percent of today's retirees will need long-term care at some point in their life, according to the U.S. Department of Health and Human Services, and of those who need it, 20 percent will need it for at least five years. The average cost for a semi-private room in a nursing home is nearly $7,000 per month, according to the U.S. Department of Health and Human Services, and hiring a health aide to come to your home and help with household tasks can run you around $20 per hour.

The key is to address this issue early. For a 55-year-old couple, the average cost for long-term care insurance is around $2,500 per year, according to the American Association for Long-Term Care Insurance. Meanwhile, the average 60-year-old couple can expect to pay around $3,400 per year in premiums.

Tuesday, May 7, 2019

A Day of Sound and Fury

Stock prices opened sharply lower yesterday after President Trump tweeted a vow Sunday to raise tariffs from 10 percent to 25 percent on $200 billion worth of imported Chinese goods. The stocks of companies that trade heavily with China were especially hard hit.

Boeing, the single largest U.S. exporter to China, fell 1.3 percent. Apple, which has also been sensitive to signs of weakness in China, declined 1.5 percent. The Philadelphia chip index slid 1.7 percent, since silicon chipmakers get a sizable portion of their revenue from China.

But before the day was over, the markets came bouncing back. The Dow Jones industrial index was down as much as 471 points, while the S&P 500 traded down 1.2 percent at its lows. The Dow came back to finish the day down just 67 points, while the S&P lost just 0.4 percent.

Monday, May 6, 2019

The Uber IPO

The big business news this week is Uber's IPO, expected to take place on Friday. The ride-hailing giant has indicated an expected price range of $44 to $50 a share, meaning the company could raise up to $9 billion at the high end of that range.

That's slightly less than some of the biggest tech IPOs in recent years. Facebook raised $16 billion through its 2012 offering, while Visa Inc. raised almost $18 billion in 2008. China's Alibaba Group raked in roughly $25 billion in 2014.

Still, that's not too bad for a company that's bleeding red ink.  Uber reported $1 billion in net income last year thanks to the sale of some operations in Russia and Asia, but it posted an operating loss of $3 billion.

Friday, May 3, 2019

April's Unemployment Report

Another strong month for job creation has dropped the unemployment rate to its lowest point in almost 50 years, the Bureau of Labor Statistics reported this morning. April saw a robust 263,000 new hires while the unemployment rate fell to 3.6 percent, the lowest it's been since December 1969.

One reason the headline unemployment figure dropped again was because the number of people counted as being in the labor force dropped.  A sharp decline in the labor force of 490,000 in April brought the labor force participation rate down to 62.8 percent.

Professional and business services led job creation for the month with 76,000 new positions. Construction added 33,000, bringing to 256,000 the total new jobs created in the field over the past year. Health care rose by 27,000 in April, while financial positions increased by 12,000.

Thursday, May 2, 2019

Inflation and the Fed

As expected, the Federal Reserve kept its benchmark interest rate in a range of 2.25 percent to 2.5 percent in a statement yesterday after its two-day meeting. The biggest reason the Fed is staying the course? Low inflation.

Their post-meeting policy statement noted: “On a 12-month basis, overall inflation and inflation for items other than food and energy have declined and are running below 2 percent,” On Monday, data was released showing that core inflation, as measured by the personal consumption expenditure price index, fell to 1.6 percent in March, a 19-month low.

Fed chair Jerome Powell indicated after the meeting that rates are likely to stay right where they are for the foreseeable future. “We do think our policy stance is appropriate right now,” he said. “We don’t see a strong case for moving in either direction.”

Wednesday, May 1, 2019

The Change in May

“Sell in May and go away” is a widely followed stock market saying with some basis in truth. The six months from May to the end of October, as compared against returns in the November-to-April stretch — have on average underperformed. But that record may be changing.

Stocks over the six-month span ending in October have posted comparatively weaker returns in only three of the past five years. Two years ago, in 2017, that stretch offered a gain of more than 8 percent gain, compared with only a 2.8 percent gain from November of 2017 to end of April of 2018.

If this summer outperforms the previous six months, we’re in for some good times. The period from the end of last October through the last day of April produced a return of roughly 8.2 percent, according to FactSet data.

Tuesday, April 30, 2019

The Rise in Internet Crime

How bad is internet crime getting? The FBI’s Internet Crime and Complaint Center received 50,000 more complaints in 2018 (351,936) than in 2017 (301,580), with losses from those complaints amounting to $2.7 billion, a $1.3 billion jump from the $1.4 billion in losses reported in 2017, according to the agency’s new crime report. The most prominent scams:
  • Payroll Diversion Scams: In 2018, the Internet Crime and Complaint Center, received over 100 payroll diversion complaints, resulting in losses of over $100 million. In these scams, criminals target employees through phishing emails designed to capture the employee’s login credentials, and the stolen credentials are then used to redirect their direct deposit information.
  • Extortion Schemes: In 2018, IC3 received over 51,000 complaints – a 242 percent increase over 2017 – about Internet extortion schemes, with losses totaling over $83 million. These schemes typically take the form of ransomware, denial of service attacks, network intrusions, and sextortion.
  • Tech Support Fraud: In 2018, IC3 received over 14,000 complaints related to tech support fraud, resulting in losses of approximately $40 million – an increase of over 160 percent from 2017. The majority of the victims in these schemes were elderly.

Monday, April 29, 2019

First Quarter GDP

A strong economic sign: The U.S. economy expanded at a 3.2 percent annual pace in the first three months of 2019, the government said Friday. This was the first time since 2015 that first-quarter GDP topped 3 percent.

Fueling the stronger GDP growth were stronger inventory building and trade. Exports rose 3.7 percent, while imports dropped by the same amount, leading to a smaller trade deficit.

One unexpected factor was a sharp upturn in state and local government spending. Spending by local governments likely picked up due to the partial federal government shutdown, jumping 3.9 percent after a 1.3 percent drop in the prior three months. This was the fastest gain in three years. The contribution from state and local government spending came largely as a result of highway and road construction.

Thursday, April 25, 2019

Losing Affluence

A sign of how America has changed over the past generation: More than half of Americans who grew up rich no longer think of themselves as rich. That’s according to a recent poll of more than 4,000 Americans by Business Insider.

The survey asked respondents to identify their upbringing and define their current financial situation. Of those who responded, around 36 percent who said they grew up affluent think they're still affluent today. But nearly 60 percent now consider themselves to be in a lower class — about half said they're middle class or upper middle class, while the other half said they're poor or working class.

Similarly, nearly 60 percent of those with an upper middle class upbringing now identify with a lower class. Half of this group think they're middle class, while the remaining half think they're poor or working class. Around 34 percent of those brought up upper middle class think their station has remained the same - only about 4 percent think they're now affluent.