Tuesday, June 30, 2015

The China Collapse

Greece has taken center stage in the world economic news, as investors around the globe watch to see if the country will default and/or exit from the euro. That's taken the spotlight away from China, where the news isn't as dire but has been plenty bad for Chinese investors in recent weeks.

The Shanghai Composite Index has lost about 20 percent of its value within the space of less than three weeks. The market has lost $1.25 trillion in market capitalization in that time frame. Two other Chinese markets are already officially in bear market territory.

As a result, China's central bank has just slashed interest rates, hoping to stanch the bloodletting. On the other hand, the volatility of the Chinese market may make this swoon look worse than it is: Even with the recent sell-off, the Shanghai Composite is still up 29 percent on the year.

Monday, June 29, 2015

The Wealthy Are Buying Real Estate

What type of asset are the ultra-wealthy looking to buy right now? Real estate. A new Savills/Wealth Briefing survey of private bankers and wealth managers found that 91 percent of global high-net-worth investors were looking to increase or maintain their real estate holdings.

The choices of types of real estate are all over the map, so to speak. Seventy-two percent of wealth managers said their clients would buy residential properties over the next five years, 60 percent said they'd buy development land, and 50 percent said they would buy offices. Just 44 percent said they'd get into more retail investments.

North America remains the prime destination for investors, according to 67 percent of wealth management respondents, It's followed by 63 percent looking to the U.K. and 58 percent for both Pacific Asia and the South Asian Subcontinent.

Friday, June 26, 2015

America's Day

There's no getting around it: Americans are working more, an additional seven minutes per day, according to the Labor Department's latest American Time Use Survey. The average American worked for three hours and 35 minutes each day last year, the highest that figure has been since 2008, when the recession kicked into full gear.

Perhaps in response to that work, we're also sleeping more. Sleep was the single largest daily activity in 2014, accounting for eight hours and 48 minutes of the average day. That’s up from eight hours and 44 minutes in 2013.

Leisure and sports took up five hours and 18 minutes of the average day last year, up two minutes from the prior year - which was entirely devoted to watching television. The average day in 2014 included two hours and 49 minutes of TV time, three minutes more than in 2013.

Thursday, June 25, 2015

Where Are the Stocks Going?

If it seems like there aren't that many stocks to pick from any more, there's a reason for that. The U.S. now has half as many publicly listed companies trading on its exchanges as it did at the peak in 1996, according to a recent report from the National Bureau of Economic Research shows. Listed companies peaked at 7,322 in 1996, but that number today is down almost by half, to 3,700.

There are two forces at work. There has been a high number of delistings, which the researchers figured account for roughly 46 percent of the decline. The relatively low number of new listings - much less than on foreign exchanges - is estimated to account for 54 percent of the drop. 

From 1997 to 2012, the U.S. had 8,327 companies get delisted. The biggest reason? Mergers.  Of those more than 8000 stocks that disappeared from the markets, 4,957 were due to companies merging with other companies.

Wednesday, June 24, 2015

Feeling Good About Retirement

American investors' confidence in their ability to retire comfortably has finally reached pre-recession levels. For the second quarter of 2015, the Wells Fargo/Gallup Investor and Retirement Optimism was at a seven-year high in its measure of investors’ faith in the markets and their ability to save enough for retirement.

Confidence remained equally high both among retirees, whose median age was 68, and non-retirees, whose median age was 45. Confidence in the “American Dream” remained solid, as 84 percent of investors say it remains achievable for them. The vast majority — 96 percent — says  living comfortably in retirement is central to that dream.

That belief is pushing more non-retirees to formalize a retirement strategy. About seven in 10 say they have a specific plan to reach retirement and investment goals, but only half of them, or 36 percent of non-retirees, have formalized that strategy in writing. Retirees report being a bit more diligent: 73 percent say they have a strategic plan, and 43 percent have put it in writing.

Tuesday, June 23, 2015

Americans Keep Getting More Generous

Americans are more generous than ever, according to research newly released by GivingUSA. We collectively donated an estimated $358 billion to charity in 2014. That beats the old record of $355 billion, set before the onset of the recession back in 2007.

Charitable donations last year were up by 7.1 percent from the revised estimate of $340 billion donated in 2013, the report said. Giving has now increased five years in a row, at an average of 5.5 percent per year.

Among the various ways people can give, the largest is individual donations, at $258.5 billion last year. But the fastest-growing has been bequests - people leaving behind charitable donations in their will. That summed to a total of $28 billion in 2014, an increase of 15.5 percent over the previous year.

Monday, June 22, 2015

More to IPOs Than Meets the Eye

The FitBit IPO made the biggest splash in the world of initial public offerings last week. The maker of high-tech fitness products went public last week and raised more than $730 million in the process. But it should also serve as a lesson in how these things are perceived by the public. Some things to keep in mind:
  • High-tech or consumer-friendly IPOs tend to get a lot more ink than less-exciting companies. FitBit isn't close to being the biggest IPO this year; Columbia Pipeline Partners and Tallgrass Energy each raised more than $1 billion.
  • Despite some high-profile deals, IPO activity is down significantly this year. Through June 10, there have been 57 IPOs this year, raising $10.5 billion; those numbers for the same time frame in 2014 were 110 and $19.9 billion.

Friday, June 19, 2015

Tim Duncan Gets Dunked On

It can happen to the best of us: San Antonio Spurs forward  Tim Duncan says he lost about $25 million in investments to a dishonest financial adviser. Earlier this year, Duncan sued Charles Banks, his former financial adviser, whom he had known since his rookie year back in 1997.

Duncan says that Banks took Duncan's $7.5 million investment in his company, Gameday Entertainment LLC, and used it for his personal benefit, and also claims that his signature was forged on several different documents. Banks also “encouraged, promoted, hustled and advised Duncan to invest in several wineries and investment funds that he controls," the lawsuit states.

Duncan says he wasn't aware that any of this was going on until he began preparing documents pertaining to his divorce last year. Now he needs to decide if he's going to play one more year with the Spurs - maybe he could use the money.

Thursday, June 18, 2015

Is the Fed Waking Up?

The Federal Reserve didn’t raise interest rates after its meeting concluded yesterday, but it did signal such a move is likely in the coming months. The Fed released its so-called dot plot, which shows officials’ outlooks for interest rates, and 15 of 17 said they expected to start raising them before the end of the year.

Now all eyes are on September, which is the next real opportunity for the Fed to raise interest rates. The new dot plot shows that all 17 members expect the fed funds rate for the end of 2015 to be under 1 percent, with the median member seeing rates between 0.5 percent and 0.75 percent. That would appear to signal rate hikes later this year.

The Fed also upgraded its assessment of the economy slightly from "slowed" to "expanding moderately."  The Fed noted improvements in housing, although household spending remains "moderate" and the report highlighted continued weakness in business spending and "soft" U.S. export growth.

Wednesday, June 17, 2015

401(k)s Go Underwater

It's a sign of the times: As baby boomers reach retirement age, withdrawals from 401(k) plans are now exceeding new contributions. Investors pulled a net $11.4 billion from tax-deferred savings plans in 2013, the most recent year for which we have full data, according to an analysis by BrightScope Inc.

As recently as 2011, there was a net inflow of more than $25 billion to the nation's 401(k) plans. In 2012, the positive inflow was about $11 billion, roughly the same amount as the deficit the following year.

Financial-services research firm Cerulli Associates projects that the outflows will persist at least until 2019, when investors will pull an estimated $51.6 billion. The number of Americans reaching retirement age this year is expected to hit 3.5 million, up from 2.7 million in 2010.

Tuesday, June 16, 2015

The Impact of Gas Prices

At the beginning of the year, the consensus was that oil prices had gone about as low as they possibly could, and were due to bounce back. But oil prices dropped again yesterday, to below $60 a barrel, while Baker Hughes reported that new rigs looking for oil fell for the 27th straight week.

People are noticing. According to Gallup, 57 percent of all American households say that lower gas prices are making a difference in their household finances. Just 17 percent said that lower gas prices have made no difference.

When asked what households are doing with that extra money, the most common response has been "paying down bills." That may be why these lower prices haven't had much impact on the economy; people are using their savings to pay down debt they had already incurred.

Monday, June 15, 2015

The Age of ETFs

Are you a fan of exchange-traded funds, or ETFs? Your answer may depend on your age. That's the upshot of a study from TD Ameritrade, which showed that younger investors are much more likely to include ETFs in their portfolios than older ones.

For investors aged 26 to 35 who have accounts with TD Ameritrade, 14 percent of their assets are tied up in ETFs.  Among their parents' generation - those aged 56 to 65 - those investors have just 7 percent of their assets in ETFs.

It may be as simple as the fact that the younger group is the first to have grown up with ETFs always being an investment choice. iShares, now the leader in this category, didn't even put it first product on the market until 2000.

Friday, June 12, 2015

Stuck in Neutral?

According to the latest survey by the American Association of Individual Investors, bullish sentiment among retail investors has fallen this week to a two-year low, and pessimism rose to a nine-month high. The optimism reading has tumbled by more than 30 percent from where it stood at the end of last year.

But this might be good news. The sentiment survey conducted by AAII is often viewed as a contrarian indicator. When optimism is down among retail investors, history shows equities have a tendency to rise in value. In other words, the fact that all these individual investors are negative on the market is more likely a good sign than a bad one.

What's really a good sign for the market is neurtal sentiment, and we've got a lot of that right now. Those investors saying they are impartial on stocks’ direction was 47.4 percent this week, the record 10th consecutive week that neutral bias has been above 45 percent. An unusually high level of neutral attitude ypically leads to above-average performance among stocks six to 12 months later.

Thursday, June 11, 2015

Slowdown in the Garden State

New Jersey ranked near the bottom among all states in economic growth in 2014, according to a study released yesterday by the Commerce Department. Our state’s GDP grew by just 0.4 percent last year, which placed 45th among the 50 states. The state's economy had grown by 0.8 percent in 2013.
Two states saw their economies contract last year: Mississippi at -1.2 percent and Alaska at -1.3 percent. In addition to those two states, New Jersey also finished ahead of Indiana, Iowa, Maine and Virginia.
The fastest-growing states last year were the energy producers, North Dakota at 6.3 percent and Texas at 5.2 percent, but most observers expect that to turn around in 2015 with the drop in oil prices. Rounding out the top five were West Virginia at 5.1 percent, Wyoming at 5.1 percent, and Colorado at 4.7 percent.

Wednesday, June 10, 2015

Another Insult for Travelers

The airlines' increasing fees for checking luggage onto planes has led many travelers to switch to carry-on bags that can be stowed overhead, which are still free on most carriers - if you can find space for yours. Now that's going to get tougher: The airlines' trade group, the International Air Transport Association, announced yesterday that it wants those carry-on bags to be smaller.

The current maximum carry-on size allowed by U.S. airlines is 22 inches by 14 inches by 9 inches. Under the new guidelines, those same bags could be no larger than be 21.5 inches tall by 13.5 inches wide by 7.5 inches deep.

That's not much smaller than the existing limits, but it does mean a lot of passengers will need to buy new bags. Or pay $25 to have those bags checked. Either way, it's another indignity for frequent travelers.

Tuesday, June 9, 2015

Email Comes to Retirement Plans

Did you ever wonder why you get so much snail mail regarding your 401(k) or other retirement accounts? It's because that's the law: All plan documents and disclosures must be delivered via hard copy. But that might be changing.

A bipartisan group of four Congressmen - two Republicans and two Democrats - have introduced the Receiving Electronic Statements to Improve Retiree Earnings Act. The proposed legislation would permit sponsors to send plan documents and disclosures to employees via email. If enacted, the amendment would affect plans beginning December 31, 2015.

The lawmakers said that sponsors spend up to $60 million annually to print a single four-page notice. Presumably, if plans are able to distribute all that information vie email, some of that expense might find its way back into the pockets of retirement savers.

Monday, June 8, 2015

Skyworks the Skyrocket

There are two things that rarely happen to stocks: One, a stock that goes up a great amount in one year is not likely to maintain that growth for a second year. Two, large-cap stocks are unlikely to show huge periods of sustained growth. That's what makes the performance of the little-known Skyworks Solutions so remarkable.

A semiconductor manufacturer based in Woburn, Massachusetts, Skyworks was the best performer in the entire S&P 500 last year, rising 165 percent. Usually, what goes up must come down, but Skyworks has been the third-best performer in the S&P in 2015, up an additional 45 percent already this year.

Altogether, Skyworks is up 285 percent since the beginning of 2014. You would not want to bet on that kind of incredible success continuing, especially for a large-cap stock, but it's been a remarkable performance nonetheless.

Friday, June 5, 2015

May's Jobs Report

The May unemployment report, released this morning by the Bureau of Labor Statistics, was another strong one. The economy added 280,000 jobs last month, up from 221,000 in April. We're still down slightly in recent months, with an average of  207,000 for the past three months, compared with 251,000 in the 12 months prior to May.

The headline unemployment rate ticked up a notch to 5.5 percent, despite the strong jobs number. That's mostly a result of more people entering the workforce and seeking new jobs, which is a sign of a stronger economy.

Another sign of a strengthening economy: Average hourly earnings for private-sector workers were up 2.3 percent in May from a year earlier, to an average of $24.96. That’s the fastest growth since the summer of 2013 and up from an average of 2 percent for the entire economic recovery.

Thursday, June 4, 2015

You're Nothing Without Your Health

What's the most important thing in life for wealthy people? According to the new 2015 U.S. Trust Insights on Wealth and Worth survey, it's health, followed by family and financial security. Also important were a feeling of connectedness and giving back to society.

Health and family were particularly important for older clients. Younger people - the infamous millennials - rated meaningful work as the most important element in their lives, followed by financial security, with health way down in fourth place.

One thing that most agreed on - they're not where they want to be, not yet. A full 81 percent have at least one area that needs work. The most common area that needs more attention for all age groups is health — except for millennials, who say they need to focus on financial security.

Wednesday, June 3, 2015

The Big Apple

PriceWaterhouseCoopers recently released a study on the largest corporations in the world, and maybe the most fascinating material was about the biggest one of them all, Apple. Some facts:
  • With a market cap that is closing in on $750 billion, Apple is worth almost twice as much as the world’s second largest company, Google, with a net asset value of $375 billion.
  • Apple is worth as much as the second and third largest companies in the world, Google and ExxonMobil, put together.
  • Apple is worth more than the net worth of the 14 richest people on earth combined, including Bill Gates, Warren Buffett, and the entire Walton family.
  • And it’s getting bigger. In the past year, Apple increased in value by more than the total asset value of General Electric.

Tuesday, June 2, 2015

Making the Best of Your 401(k)

Here’s the good news about retirement planning: Employees are participating in their 401(k) plans at a record rate according to a survey from Aon Hewitt. Participation rates  hit 79 percent in 2014, which is the highest they’ve been since the company began tracking such data in 2002. Average plan balances are also at a record high, rising from $91,060 at the end of 2013 to $100,320.

Here’s the bad news: They’re not doing much to manage those plans. Only 24 percent of workers raised their contribution rates in 2014, and just 15 percent rebalanced the investments in their accounts. Unless you’re in target date funds, which do the rebalancing for you, changing the mix in your retirement portfolio as you age is a necessity.

Employees also aren’t taking advantage of all the investment options at their disposal. The average account was invested in just 3.6 funds last year, down from 3.7 in 2013 and 3.9 in 2012.

Monday, June 1, 2015

Welcome to the June Swoon

Today is the first day of June, which means that summer is almost upon us - but it also means that the market's dreaded June swoon is also upon us.  The S&P 500 index has declined in six of the last 10 Junes, with an  average performance of negative 1.3 percent.

The Dow Jones industrial average has been even worse. It has been down in eight of the last 10 Junes, and the index has averaged a 1.6 percent decline. The Nasdaq composite is the relative outperformer, losing ground in seven of the past ten Junes but posting an average loss of just 0.9 percent.

Two sectors in the S&P 500 actually show positive average performance for the month: utilities and energy. The utilities sector averages a gain of 1.3 percent over the past ten Junes, and energy averages 0.8 percent.