Friday, October 30, 2015

Back to Home

Has America's homeownership rate bottomed out? In the third quarter, the homeownership rate ticked up slightly, to 63.7 percent from 63.4 percent the previous quarter. It's still near its lowest point in 30 years, but it appears to have plateaued, and many economists think it may not go much lower.

The number of homeowner households increased by 123,000 in the third quarter from a year earlier. At the same time, the number of renter households increased by 1.3 million.

The latter figure may be holding back the rate of homeownership. Home prices are rising faster than incomes, forcing many would be homeowners to continue renting. And there's plenty of supply: The vacancy rate for rental housing rose to 7.3 percent from 6.8 percent in the second quarter.

Thursday, October 29, 2015

GDP Hits a Bump

The economy slowed down in the third quarter, growing at just 1.5 percent, according to figures released this morning by the Commerce Department. That was a disappointing figure, following the 3.9 percent growth the economy posted in the second quarter.

The biggest cuplrit was shrinking inventories. Commerce said the decline in private inventories was responsible for shaving 1.44 percent off the overall 1.5 percent growth rate. The good news is, those types of changes are generally transitory and don't carry over quarter to quarter.

Consumer spending was down slightly in the third quarter, dropping to 3.2 percent from 3.6 percent the previous quarter. But durable goods spending—long-lasting items such as washing machines and automobiles—continued to be strong, rising 6.7 percent.

Wednesday, October 28, 2015

Big Apple

The big news on Wall Street yesterday was the quarterly earnings report from Apple, and it did not disappoint. Apple said that its quarterly profit rose 31 percent, with fourth-quarter net income totaling $11.12 billion, up from $8.47 billion in the year-ago period. Revenue increased to $51.50 billion, up 22 percent from a year earlier.

The iPhone remains the key to Apple’s earnings, accounting for nearly 63 percent of the company's revenue in the quarter. For the quarter, Apple sold 48 million iPhones, outpacing sales of 39 million units a year earlier, with sales to China being a key driver.

Apple didn't disclose sales for its new Apple Watch, including those sales with the iPod, Apple TV and Beats accessories in its “other products” category. Sales of that segment rose 61 percent to $3.04 billion. The one downside: Sales of the iPad continued to slump, falling for a seventh straight quarter.

Tuesday, October 27, 2015

A Shortfall in Retirement

As baby boomers increasingly approach retirement, they're facing a huge shortfall in income, according to a new survey from BlackRock on attitudes about money and financial goals. People ages 55 to 64 who responded to the survey said they expected to have about $45,000 in annual income in retirement. But given the amounts they had actually saved, they would only provide an estimated annual income of $9,129.

Fewer than a quarter of these baby boomers regularly set aside money into long-term savings or investment plans. But they think they're ready. Nearly three quarters of the respondents said they feel financially secure and “prepared to pursue their dreams.”

Even affluent retirees—those earning more than $250,000 a year—hadn’t set aside enough to generate the income they said they needed to meet their retirement expectations. They need close to $60,000 per year to maintain their lfestyle, but have only saved enough to generate less than $40,000 per year.

Monday, October 26, 2015

Hard Times for Hedge Funds

Wth the stock markets and mutual funds having such an unimpressive year, you might think that investors would be flocking to hedge funds. But the opposite has been true. According to Hedge Fund Research, hedge fund assets actually fell in the third quarter this year.

Assets held in hedge funds dropped 3 percent in the third quarter, down 3 percent over that time, to a total of $2.87 trillion. That's the first quarterly drop in three years, and the biggest quarterly drop in six years, since the recession.

It wasn't really a case of investors withdrawing money from these funds. Investor deposits saw a net increase over that time, but because of the turmoil in the markets, hedge funds overall lost enough money to create the overall decline.

Friday, October 23, 2015

Earnings Fuel a Big Bounce for the S&P

Positive earnings reports helped the S&P 500 finish at its highest close in two months yesterday. Reports from some tech giants buoyed the entire market, which finished up 1.7 percent on the day.

Alphabet Inc., the new name of Google's parent company, handily beat the Street's earnings estimates, on the way to boosting its share price by 12 percent. Similarly, better-than-expected earnings lifted Amazon shares by 10 percent. For the moment at least, Amazon’s stock was at a record high.

But it wasn't quite enough to lift the S&P out of correction territory. The S&P 500 fell 12.3 percent from its May and all-time high to its low in August. For the correction to end, it needed to finish above 2054, but it fell just short at 2052.

Thursday, October 22, 2015

Learning About LTC

Long-term care planning is topic that many investors prefer to avoid, according to a new survey from Lincoln Financial. The upshot is that very few people have talked to their financial advisors about whether long-term-care insurance is the right choice for them.

The survey  found that only about 20 percent of consumers have discussed long-term care with a financial professional. Just 17 percent of those consumers ended up buying an LTC insurance policy. LTC insurance isn't an optimal solution for everyone, depending on your overall financial situation, but it's a topic that everyone needs to carefully consider.

Interestingly enough, the survey found that consumers are more likely to recognize that need in a family member’s future rather than in their own. A third of the respondents said it was likely that a family member would need long-term care in the future, compared with 22 percent who said they would need it for themselves.

Wednesday, October 21, 2015

The High Cost of Dying

It’s not a subject most of us like to talk about, but paying for a funeral can be a weighty expense. And according to a new survey from the Consumer Federation of America, it can be a bit of a guessing game as well.

The CFA surveyed 150 funeral homes from ten different regions of the country.  The cost of a full-service funeral ranged very widely, from $2,580 to $13,800. More distressing, those prices can be hard to find. Only 38 of the 150 funeral homes surveyed fully disclosed their prices on their websites, and  24 of them failed to fully disclose prices even after an email and a phone call.

One of the regions was Mercer County here in New Jersey. There, the cost for a full-service funeral ranged from a low of $3,710 to a high of $6,605. A simple immediate burial ranged from $850 on the low end to $4,040 on the high end.

Tuesday, October 20, 2015

What Is China's Real GDP Growth?

China announced its official third quarter GDP growth figure as 6.9 percent yesterday, just a hair beneath the government's target of 7 percent. But is that a real figure, or have the Chinese books been cooked? There has been an awful lot of underlying data that suggests the latter.

Both exports and imports declined for China during the third quarter, and industrial production was weaker than expected. Factories have seen prices fall for 43 consecutive months, and fixed-asset investment decelerated in September. Electricity output is down 1.3 percent over the past year. All those signals point to a slowing economy.

So what is China's actual GDP growth? Many economists have begun paying more attention to these alternate growth measures, and most of them estimate that China's growth is currently somewhere between 4 percent and 5 percent.

Monday, October 19, 2015

A Peek Ahead at the Holiday Season

It's still thankfully a bit early to start seeing holiday sales at our favorite stores, but it's not too early for economist to make forecasts about what that holiday season is going to look like. And the International Council of Shopping Centers thinks it will be a positive one, with shoppers spending an average of $702 this year, up from $677 in 2014.

Among the categories of goods, the biggest gainer figures to be furniture and home furnishings, which are forecast to be up 4.9 percent over last year. Also predicted to be up by more than 3 percent are clothing, and health and personal care items.

Businesses are starting to get ready for the season as well. Macy's has already announced plans to hire 85,000 workers to handle the holiday crush.

Friday, October 16, 2015

Inflation Subdued

Inflation continues to run at a very low pace. In fact, the Labor Department said yesterday that its consumer-price index fell 0.2 percent between September and August. Core CPI, which strips out volatile food and energy prices, rose by 0.2 percent in September.

The price of gasoline fell by 9 percent in the month of September alone. The biggest price gainer over the month was shelter costs, which were up by 3.2 percent. The cost of food rose by 4 percent.

In fact, because overall inflation in the third quarter was so weak, Social Security recipients won’t get a cost-of-living adjustment next year. That's only the third time that has happened in the past 40 years.

Thursday, October 15, 2015

Signs of a Slowing Economy

A couple of stats released by the government this week show the economy largely treading water in recent months. The Commerce Department said retail sales inched up by just 0.1 percent in September. The biggest driver was lower gasoline sales, which dropped by 3.2 percent. On top of that, sales in August - which had originally been thought to rise by 0.2 percent - were revised down to unchanged.

Excluding automobiles, gasoline, building materials and food services, retail sales fell by 0.1 percent in September. These are the so-called core retail sales, which correspond most closely with the consumer spending component of gross domestic product. After the initial August reading showed them growing by 0.4 percent, the figure for that month was also revised downward, dropping by 0.1 percent.

On top of that, U.S. business inventories were flat in August for a second straight month. This follows a rise in inventories increased of more than $100 billion in each of the previous two quarters - a record back-to-back quarterly increase.

Wednesday, October 14, 2015

Fear Strikes Out

It was only a couple of months ago that the stock market's fear gauge, formally known as the CBOE Volatility Index, was starting to reach scary heights. But that measure of the market's volatility fell for a tenth straight session Monday, to a below-average 16. The figure  is now at its lowest level in two months.

Only twice since 1990 has the VIX fallen for ten consecutive sessions: Once in October 2009 and another time in May 2005, according to a study from the research firm See It Market. Both times, the S&P turned positive for next three months, averaging a 3.1 percent return over that period.

Since bottoming out toward the end of September, the S&P 500 has gained 7.2 percent. If that 3.1 percent bounce holds to form, that would be roughly a 10 percent increase for the fourth quarter - not a bad end to a year that looked pretty shaky for a long time.

Tuesday, October 13, 2015

Smart Finances in the Garden State

Yesterday, we talked about what makes New Jersey one of the least tax-friendly states in the country, but we have some better news for you today. According to the personal finance web site, New Jersey's residents are among the nation's best at managing their finances.

The study looked at each state's use of banking services, saving and investing behaviors, and financial education policies. It measured the portion of households with retirement savings accounts, reported investments in stocks, bonds, and mutual funds, the portion of households that reported having an emergency fund, and the rate of personal bankruptcies as well.

On those measures, the Garden State finished seventh, behind North Dakota, New Hampshire, Utah, Minnesota, Virginia, and South Dakota. At the very bottom of the list: Mississippi.

Monday, October 12, 2015

High Taxes in the Garden State

Some bad news for the Garden State: Kiplinger's magazine has once again this year named New Jersey as one of its Top Ten Least Tax-Friendly States. New Jersey finished third from the bottom, ahead of only California and Connecticut.

The most damaging issue is New Jersey's property taxes, which are the highest in the nation. The median home value in our state, $307,700, currently incurs a median annual property tax bill of $7,331.

On the bright side, our gasoline taxes, at just 15 cents per gallon, are the second-lowest in the nation. The only state with lower gas taxes is petroleum-rich Alaska, at 12 cents per gallon.

Friday, October 9, 2015

Earnings Stumble Out of the Gate

Earnings season kicked off this week with the traditional first reporter, Alcoa. Not only is Alcoa always the first to report its earnings each quarter, but its reports are considered something of a bellwether for the quarter ahead, Some studies show that it does project the overall direction of the market: When Alcoa beats expectations, the market tends to rise.

If that's the case, the news is not good. For the quarter, Alcoa earned $44 million, or two cents a share; a year ago, it earned $149 million, or 13 cents a share. Excluding certain items, the company earned $109 million, or 7 cents a share. That was well below the Wall Street consensus of 13 cents a share.

But expectations were very low to begin with. S&P 500 profits are expected to contract 5.6 for this quarter, which would be a second consecutive down quarter. The good news is, that makes upside surprises a little easier to come by.

Thursday, October 8, 2015

What's Driving the Trade Deficit

The U.S. trade deficit widened to $48.3 billion in August, a 15.6 percent increase from the prior month. Except for one fulky labor-drive reading from this spring, the trade deficit was the largest it's been since March 2012.

U.S. exports of goods and services fell to $185.1 billion, the lowest level since October 2012, and  shipments of goods were the weakest they'd been in more than four years. Industrial supplies – led by big drops in exports of fuel oil, plastics and crude oil – had their worst performance since October 2010. Exports of autos and consumer goods were also down.

On the other side of the ledger, imports climbed in August, benefiting from the stronger dollar. Smart phones were the biggest driver: Imports of cell phones and other household goods totaled $2.1 billion in August, accounting for more than half the $4 billion increase in imports of consumer goods.

Wednesday, October 7, 2015

Are Profits Stronger Than We Think?

Are corporate profits much stronger than we think? Although earnings for the S&P 500 have been down roughly 2 percent on the year, a report from the Fed indicates a different trend. The Fed's measure of “Nonfinancial Corporate Business” profits before taxes for the quarter that ended in June shows them increasing by 11 percent year-over-year. That's the strongest growth by that measure since the fourth quarter of 2012.

Even in the S&P, though, the real earnings weakness inheres almost entirely in energy companies, which are projected to fall more than 60 percent in both the third and fourth quarters. Excluding them, S&P 500 profits are estimated to rise 0.1 percent and 3.9 percent in the final two quarters of the year.

Looking at raw figures rather than growth, earnings in the S&P 500 are still above the record level they first reached in 2011, despite the weakness in the energy sector. The S&P 500's net income has roughly doubled since 2009.

Tuesday, October 6, 2015

Crisis of Confidence

We've talked about how rough the third quarter was for stock market investors. A new survey from John Hancock confirms the notion that individual investors have lost confidence in this market: The Investor Sentiment Index set a record high at the end of the second quarter - but that's all gone now.

For the third quarter, the Investor Sentiment Index fell back to its lowest level since the third quarter of 2014. Confidence in stock investing fell to 51 percent from 60 percent in the second quarter, in balanced mutual funds to 53 percent from 63 percent, and in bonds to 19 percent from 25 percent.

Looking forward, those investors are getting doubtful about blue-chip stocks. Twenty percent of investors said blue chip stocks would be the top-performing asset class over the next six months, down from 29 percent who said this in the fourth quarter of 2014. Sixteen percent of respondents chose small-cap stocks as their other top choice, and 11 percent said emerging markets.

Monday, October 5, 2015

Introducing the College Scorecard

It's the time of year when many high school kids start thinking in earnest about where they'd like to go to college, and when many parents start wondering how they're going to pay for it. The Department of Education has just released a new tool to help with this situation: The College Scorecard.

One nice thing about this site is that the emphasis is on finances. You can find the average cost to attend a college, the average debt that the students have accumulated upon graduation, and their future earnings power based on the degree they've earned. So it's not just about paying for school, but making the most out of it.

There are also plenty of links to resources on financial aid and scholarship information. It's a handy place to stop and check out each school on your student's wish list, and temper their expectations accordingly.

Friday, October 2, 2015

September's Jobs Report

September's employment report, just out this morning, was a somewhat disappointing one, showing that the American economy added just 142,000 jobs on the month. The headline unemployment rate remained unchanged at 5.1 percent.

After a year of averaging more than 200,000 new jobs added, the economy appears to have slowed a bit over the summer. The average over the past three months has been 167,000 new jobs. After an average of 260,000 new jobs added per month in 2014, September's figures bring the 2015 average down to 198,000.

The biggest culprit appears to be the oil & gas industry, a victim of falling oil prices. While most industries have added jobs to a greater or lesser extent over the past year, employment in oil & gas is down 3 percent since August 2014.

Thursday, October 1, 2015

End of a Rough Quarter

The stock market broke the curse of September 30 yesterday, but that was about the only good thing you could say about the quarter that just came to an end. The S&P 500 rose by 1.9 percent on the day, but that wasn't enough to prevent if from being down overall for the second straight quarter.

The S&P lost 6.9 percent over the third quarter. With commodity prices plummeting, the materials sector was down 17 percent and the energy sector 18 percent. Among the index's ten sectors, only the utilities sector posted a gain for the quarter.

Overall, it was the S&P's biggest quarterly decline since September 2011. But it could have been worse: The Dow Jones Industrial Average had its worst quarter since 2008.