Friday, August 29, 2014

A Small Piece of the Pie

With the S&P 500 hitting new record highs, many investors are benefiting from the stock market's growth. More than half of all Americans - about 52 percent - own at least some stock, primarily within their 401(k)s.

But most of those people own very small amounts of stock, at least compared to wealthier investors. As the Washington Post pointed out yesterday, just 10 percent of Americans own about 80 percent of all stock assets in the United States.

The most recent available study on stock wealth was from 2010. A that point, the top 10 percent held about $500,000 in stock, while the middle fifth held an average of about $9,000. So while many people are benefiting from the market's run, some are benefiting much more than others.

Thursday, August 28, 2014

Dividends From Around the World

Dividend-paying stocks are often seen as a safe haven, while investing in foreign stocks is seen as a bit risky. But investors these days are able to combine those two strategies into one. A study from Henderson Global Investors shows that global dividends increased by 12 percent in the second quarter over the year-earlier period.

European companies paid out $153.4 billion in dividends last quarter, as compared with $98.5 billion for North American companies. European stocks averaged a 3.3 percent dividend yield at that point, as opposed to 2.0 percent in the U.S.

And those numbers have been growing recently. Worldwide dividends were $780 billion in 2010, but they have topped $1 trillion in 2012 and 2013.

Wednesday, August 27, 2014

The S&P's New Record

The S&P 500 Index closed above 2,000 for the first time ever yesterday. It had cleared 2,000 on Monday as well, but fell back below the mark before the end of the day. In the five years since the S&P bottomed out in 2009, the index has nearly tripled - it's up 195 percent over that time.

The Nasdaq is also closing in on a record. It's within 10 percent of the high it set back in March 2000. That has some pundits comparing the current market to the dot-com mania of the late 1990s.

But there's an important difference between the two eras. When the dot-com bubble peaked, the S&P 500 was trading at close to 30 times the annual earnings of its companies. Although valuations have been rising, they are still only about 19 times earnings right now.

Tuesday, August 26, 2014

The Housing Market Settling Down

We had a hiccup in the housing market last year: After home sales peaked in July 2013, they began to slow down as mortgage rates began to rise. But now we seem to be past that: July sales were up 2.4 percent from the June rate, meaning they were the highest in 10 months.

One positive side note on that growth is that there are fewer distressed and foreclosed homes making up the market. Distressed sales made up just 9 percent of all home sales in July, the lowest that figure has been since the National Association of Realtors began compiling those numbers back in October 2008.

Interestingly enough, home sizes seem to have peaked as well. In the third quarter of 2013, the median new home in the U.S. was 2,491 square feet, the highest on record. But in each of the last two quarters, median home size has been exactly the same, at 2,478 square feet.

Monday, August 25, 2014

Job Security

Americans are not nearly as worried about losing their jobs as they were during the recession, according to a new Gallup survey. In fact job security is the highest it's ever been in the history of this survey, which dates back to 1993.

The survey shows that 58 percent of Americans are completely satisfied with their job security. That number had been around 50 percent for the duration of the recession, and was at just 51 percent as recently as 2013. But even before the recession, American workers didn't feel this secure. The previous high for this particular question was 56 percent, recorded in 2007.

There was only one question on the job-satisfaction survey that came back worse this year than in 2013. Slightly fewer people reported that they were satisfied with the flexibility of hours their employer offered.

Friday, August 22, 2014

The Strong Side of Private

Publicly traded companies have been doing pretty well lately, but according to a new study from Sageworks, private companies are doing even better. For the 12 months ended on August 14, revenue growth at public companies averaged 2.6 percent. But revenue at private companies averaged a whopping 10.7 percent.

It's been like that for a few years now. Over the prior three 12-month periods, public company revenue growth rates were 4.5 percent, 3.4 percent,  and 2.7 percent. But those at private companies were 16.2 percent, 17.7 percent, and 10.6 percent.

But don't make the mistake of thinking that's the natural course of things, the private companies always out-earn public ones. During the recession, it was the opposite. For the 12 months ended August 14, 2010, public companies showed sales growth of 1.2 percent - while private companies' sales were dropping by 0.6 percent.

Thursday, August 21, 2014

The High Cost of Car Maintenance

It may seem like it’s horrifically expensive to keep your car in New Jersey, especially given our sky-high insurance rates. But rest assured, there are states that have it worse.  In a new survey from Bankrate, New Jersey came in as just the fourth most-expensive place to keep a car.
Considering insurance, repairs and gasoline, the average car owner in New Jersey spends $2,421 on his or her vehicle each year. But four states actually spend more: Wyoming, Louisiana, Florida and Mississippi. Only Louisiana and Washington D.C., charge higher auto insurance rates than our state’s average of $1,244.  But our average annual repair bill - $393 – is the highest in the nation.
The cheapest state in which to keep a car? Iowa, whose residents spend just $1,942 per year on each vehicle.

Wednesday, August 20, 2014

Better Than Google

Google's IPO, one of the most celebrated and successful initial public offerings in the history of the American stock market, took place ten years ago yesterday. Over those ten years, Google's stock has increased by 1,294 percent. If you had invested $10,000 in Google's IPO, you'd have about $140,000 today.

Incredibly, as the Wall Street Journal points out, there are ten stocks that have performed better than Google over those ten years. They are:

  • Keurig Green Mountain, up 7,729 percent
  • Monster Beverage, up 6,569 percent
  • Priceline, up 6,277 percent
  • Apple, up 4,419 percent
  • Alexion Pharmaceuticals, up 4,265 percent
  • Regneron Pharmaceuticals, up 4,167 percent
  • Netflix, up 2,840 percent
  • Intuitive Surgical, up 1,796 percent
  •, up 1,687 percent
  • Western Digital, up 1,306 percent

Tuesday, August 19, 2014

A Reason for the Struggle of Small Businesses

One of the factors that has helped keep the economic recovery slow is that small businesses are still showing little growth. At the end of the first quarter of this year, banks held $585 billion in loans to small businesses - down from a peak of $711 billion in 2008, according to the Federal Deposit Insurance Corp.

Loans to businesses for smaller amounts are also on the decline. The number of loans for $1 million or less held by banks is still down about 14 percent since 2008.

Fortunately, loans to bigger businesses are showing more strength. Loans to businesses of all sizes grew to $2.48 trillion as of the end of the first quarter, which is up 9 percent since 2008. All told, loans and leases grew in the second quarter at the highest quarterly rate since the end of the financial crisis.

Monday, August 18, 2014

Kids Get Back to Work

As summer begins to draw to a close, we're seeing some fascinating statistics about the state of the labor market. For one thing, younger people were able to get summer jobs this year at the highest pace in years. The Labor Department reported last week that there were more than 20 million people aged 16 to 24 with jobs this summer - the highest that number has been since 2008.

The percentage of youth working is climbing very slowly. The fraction of people in that age cohort with summer jobs was 51.9 percent this year, up from 50.7 percent a year earlier. But that's down from 59 percent back in 2004 and a whopping 69 percent in 1989.

Back in 1989, it was actually more common for young people to have a job during the summer than adults. At that point, just 64 percent of those over the age of 24 had jobs.

Friday, August 15, 2014

Americans Keep Working

One of the reason that the face of retirement has changed so much in recent decades is that more and more people are working past the age of 55. For a long time, after the introduction of Social Security and the end of World War II, the percentage of older people who remained in the work force steadily declined.

By 1993, only 29 percent of people older than 55 were in the labor force. But from that point forward, the trend reversed itself. As of 2012 more than 41 percent of those over 55 were still in the labor force, the highest that number had been since the early 1960s.

A survey from the Federal Reserve last week signaled that this might continue to be the case for a while. More than 20 percent of people the Fed surveyed said their plan for retirement is “to work as long as possible” - and the number of people saying this gets higher as the respondents get older.

Thursday, August 14, 2014

Cash on the Barrelhead

Should you be worried about this stock market? Fund managers are getting a little nervous. According to a new survey by Bank of America Merrill Lynch, funds’ cash holdings have reached their highest level since June 2012.

The fund managers' cash holdings jumped sharply in August, from 4.5 percent in July to 5.1 percent as of now. The survey talked to 224 different managers, who manage a total of $675 billion.

But this isn't just protection against a drop in equities; the managers also want to own dollars right now. Some 61 percent said the dollar is undervalued right now, and 84 percent of them expect the dollar to rally - a record high for this survey.

Wednesday, August 13, 2014

More Help Wanted Signs

Here’s another sign of strength in the economy and in the employment market: U.S. job openings increased to their highest level in more than 13 years in June. They rose to a seasonally adjusted 4.67 million, according to figures released by the Labor Department on Tuesday. That was the highest number for that figure since February 2001.

The Labor Department notes that the number of job openings has trended strongly upward in recent months. From June 2013 to January 2014, the number of job openings barely moved, dropping by 97,000. But from January 2014 through June 2014, the number of job openings increased by 797,000 openings – an average of 159,000 new job openings per month.

Hiring levels are also picking up. The Labor Department also said yesterday that hiring has now risen to its highest level since February 2008.

Tuesday, August 12, 2014

Paying for the Three R's

If you've got kids headed back to school this month, you know one of the most painful activities parents have to go through: back-to-school shopping. And it's gotten a bit more painful this year, as the cost of equipping our children for school keeps going up.

According to the National Retail Federation, parents expect to spend an average of $669 getting their kids ready for school this year, including new clothes, school supplies, and electronics. That's up 22 percent from five years ago.

The bulk of that money goes to clothing, accessories and shoes. The average shopper will spend $231 on back-to-school clothes this year, and another $125 on shoes. That person will spend roughly as much - $212 - on electronics items as they spend on clothes.

Monday, August 11, 2014

Health Care Stocks Get Well

Among the industry sectors, the biggest winner for the current earnings season is shaping up to be health care. Health care stocks in the S&P 500 have reported a 12.3 percent increase in revenue from a year earlier so far in the second quarter, nearly twice as much as the next strongest growth sector. Johnson & Johnson, the country's largest health-care company, reported earnings growth of 9.1 percent.

The sector showing the next highest growth for the quarter is consumer discretionary, which has posted revenue growth of 6.4 percent. That's followed by technology stocks, which have reported revenue growth of 6.0 percent.

Overall, stocks in the S&P have reported revenue growth of 4.9 percent this quarter. That's up a bit from the Wall Street expectation of 3.0 percent to 3.5 percent growth before the reports started coming in.

Friday, August 8, 2014

Buffett's Bad Year

It has turned into a pretty middling year for the stock market, with the S&P 500 index up by just under 5 percent on the year so far. But it’s been surprisingly poor for one famously successful investor: Warren Buffett.
Berkshire Hathaway, Buffett’s investment vehicle, has returned just 1.7 percent so far this year. Looking back over the past 12 months, Buffett’s record gets even worse: He is up by just under 7 percent, wile the S&P is up by more than 13 percent.
What has dragged down Buffett’s performance? Coca-Cola is down by more than 5 percent on the year, while Wal-Mart is down by 7 percent. But his biggest loser is General Motors, which has lost 17 percent of its value in 2014.

Thursday, August 7, 2014

The Market Wakes Up

As we headed into the halfway point of the year, we noted how remarkably stable the stock market had been this year. From April through the middle of July, the S&P 500 went 62 straight trading days without a 1 percent daily move in either direction. That was the longest such stretch since 1995.
But the market is starting to stir now. In the past 14 trading sessions, the S&P 500 has already had three different days in which it moved by at least 1 percent.
That doesn’t mean this market is unusually choppy, though. Before the 1 percent streak was broken, the Volatility Index, or VIX, was at 11, which is a historically low number. It has since risen to near 17 – much higher than it has been, but still will below the historic average of 20.

Wednesday, August 6, 2014

Top Consumer Complaints of the Year

Last week, the Consumer Federation of America released the results of its annual survey on Americans' Top Ten consumer complaints. These are in the order of the frequency in which consumers report them. How many of these have you faced?

  1. Auto: Misrepresentations in advertising or sales of new and used cars, lemons, faulty repairs, leasing and towing disputes
  2. Home Improvement/Construction: Shoddy work, failure to start or complete the job
  3. Credit/Debt: Billing and fee disputes, mortgage modifications and mortgage-related fraud, credit repair, debt relief services, predatory lending, illegal or abusive debt collection tactics
  4. Retail Sales: False advertising and other deceptive practices, defective merchandise, problems with rebates, coupons, gift cards and gift certificates, failure to deliver
  5. Services: Misrepresentations, shoddy work, failure to have required licenses, failure to perform
  6. Utilities: Service problems or billing disputes with phone, cable, satellite, Internet, electric and gas service
  7. Landlord/Tenant: Unhealthy or unsafe conditions, failure to make repairs or provide promised amenities, deposit and rent disputes, illegal eviction tactics
  8. (tie) Home Solicitations: Misrepresentations or failure to deliver in door-to-door, telemarketing or mail solicitations, do-not-call violations
  1. (tie) Internet Sales: misrepresentations or other deceptive practices, failure to deliver online purchases  
  2. Health Products/Services: Misleading claims, unlicensed practitioners, failure to deliver
  3. Fraud: Bogus sweepstakes and lotteries, work-at-home schemes, grant offers, fake check scams, imposter scams and other common frauds

Tuesday, August 5, 2014

Consistency Wins Out

Just about everyone's 401(k) took some kind of hit during the stock market downturn of 2008-09. Research from the Employee Benefits Research Institute shows that the average 401(k) balance dropped by 34.7 percent in 2008 alone.

Many savers compounded the error by reducing the amount of money they put into those accounts. But the study also showed the importance of staying the course, even through a sharp market decline. The average 401(k) account had $63,929 in it by the end of 2012. But among those who maintained consistent contributions to their accounts, the average balance was $107,053.

Plan holders who made regular contributions to their 401(k)s earned a 6.8 percent return between the end of 2007 and the end of 2012, despite the massive downturn in the middle of those years. That's one more lesson in the importance of not neglecting your retirement plan.

Monday, August 4, 2014

Not So Hot in August

As we embark on another August, it's worth pointing out that this is generally a pretty dismal time for stocks. Summer in general is the weakest time of the year for the market, with the worst months historically coming from June to September.

Since 1985, the S&P 500 has lost an average of 0.6 percent in August. Over that time frame, the index has declined nearly half the time in August. The only weaker month has been September, in which the S&P has dropped by an average of 0.7 percent.

The odd thing about August is that it often seems out of step with the rest of the year. In 2013, when the S&P was up by about 30 percent overall, it lost 3.1 percent in August. But in 2012, when the S&P was up just 13 percent, we had the rare good August, with the index gaining 2.0 percent.

Friday, August 1, 2014

July's Jobs Report

July was another solid month for job creation, according to figures released this morning by the Bureau of Labor Statistics. The economy added 209,000 jobs in July, marking the sixth consecutive month of 200,000-plus new jobs.

Still, the headline unemployment rate notched upward, from 6.1 percent to 6.2 percent, a result of more people entering the job market. The labor force participation rate rose slightly from June's number, increasing from 62.8 percent to 62.9 percent. It's still near historic lows, however.

That 209,000 figure matches the average number for job creation over the past 12 months, but it's down somewhat from more recent months. The BLS revised the figures for May and June in this morning's report, up to 229,000 and 298,000, respectively.