Monday, February 29, 2016

Little Things Mean a Lot

Are you putting away all you can for retirement? A new study from Fidelity showed that even a 1 percent increase can make a big difference in what you'll be able to retire with, especially for younger people

The study found that a 25-year-old worker earning $40,000 a year who increases her savings rate by one percentage point now could lead to an additional $190 a month in retirement. That requires setting aside just $33 more a month right now.

And the increases add up. If that 25-year-old could increase his or her savings rate by one percentage point each year for 12 years, that would lead to an extra $1,930 a month in retirement income.

Friday, February 26, 2016

Watching the 50

Has the market recovered from its early-year fall-off? Yesterday, the Dow Jones Industrial Average and the S&P 500 both cleared an important hurdle: They closed above their 50-day moving averages, for the first time all year. 

The 50-day moving average is a key indicator for many investment observers. Generally, a stock that is trading above its 50-day moving average is considered to be in pretty good shape. The same is considered true for the broader indexes as well.

The price of oil also closed above its 50-day average, for just the second time this year. The Nasdaq and the Russell 2000, a small-cap benchmark, remain about 2 percent below their 50-day averages.

Thursday, February 25, 2016

A Good Sign for GDP

After GDP growth slipped to just 0.7 percent in the fourth quarter of last year, many observers worried that the American economy might be headed for recession. But there was some good news yesterday in a note from Citigroup to its clients: Capital spending for most American business is headed upward.

For all the businesses surveyed excluding energy companies, capital expenditures are expected to pick up 4.2 percent in 2016. That's even stronger than the 2.4 percent increase we saw last year.

But the energy sector remains a major sticking point. When the energy businesses are added back to the sample, the businesses plan to pay out $587 billion in capital expenditures this year, which is  down 5.2 percent from 2015. At least that's a smaller rate of decrease than we saw in 2014, when that number dropped by 7.4 percent.

Wednesday, February 24, 2016

Who's Afraid of New Jersey?

Do you think about moving out of New Jersey? If you do, you're not alone. According to a new Gallup poll, nearly half New Jersey residents said they would like to leave the state if they had the opportunity. At 46 percent, New Jersey is tied with Connecticut for the highest in the nation.

Gallup didn't ask why all these people wanted to move, but they found a telling correlation: Residents living in states with the highest aggregated state tax burden are the most likely to report they would like to leave their state if they had the opportunity. Approximately a quarter of residents who live in states with the lowest tax burden say they would like to leave their state, but this rate jumps to 36 percent among residents of the quintile of highest-taxed states.

Which state has the smallest percentage of residents reporting they would like to leave the state? That would be Montana, at just 13 percent.

Tuesday, February 23, 2016

Those Wobbly Dividends

Another sign of the shaky stock market: Fewer companies have been raising or initiating dividends in 2016 than in years past. According to S&P Dow Jones Indices, 84 companies have made a positive move (either initiating or increasing a dividend this year) versus 106 positive actions in the first two months of 2015.

Even those companies that have been increasing their payouts have been doing so at lower rates than in years past. Those stocks have raised dividends by an average of 10 percent this year, compared to 13 percent in 2015, 18 percent in 2014 and 20 percent in 2013.

This February is still much stronger for dividends than a truly bad month. In February of 2009, when the market was imploding, only 30 companies raised their dividends versus 55 so far in 2016. Also, 18 stocks lowered their dividend in February 2009 and five suspended theirs, compared to three decreases and one suspension this month.

Monday, February 22, 2016

Worrying About Inflation

Is it time to start worrying about inflation? So-called core inflation, which strips out volatile food and energy categories, rose 0.3 percent in January, the biggest monthly increase in more than four years, consumer price index data showed on Friday. In the 12 months through January, the core CPI advanced 2.2 percent, the largest rise since June 2012 and greater than the 1.9 percent average annualized increase over the last 10 years.

In addition to concern about increasing prices, the figure drew a lot of attention because it's above the Fed's 2.0 percent inflation target. But the Fed looks at overall CPI, not the core figure.

The overall CPI was unchanged in January after slipping 0.1 percent in December. That measure of CPI has now increased 1.4 percent in the 12 months through January, under the Fed's target but still the biggest rise since October 2014.

Friday, February 19, 2016

Small Business Looking Up

Despite the problems in the stock market, U.S. small-business owners have become more optimistic, according to the Wells Fargo/Gallup Small Business Index. The current  reading is up from last quarter and almost back to where it was one year ago, ending three consecutive quarters of declines in optimism.

The Small Business Index fell sharply in 2008 and continued dropping through the recession, but rose steadily from early 2013 to the beginning of last year. By the second quarter of 2015, however, small-business owners' optimism began to drop again, before rising this quarter.

This quarter's increase is linked to an uptick in small-business owners' perceptions of their cash flow, The current figure 60 percent of owners who report a "very good" or "somewhat good" cash flow is the highest since the fourth quarter of 2007.

Thursday, February 18, 2016

Hedge Funds, Too

The big selling point for hedge funds is that they act differently from the stock markets, and supposedly provide hedging to equity investors. But while stocks were tumbling in January, hedge funds also suffered their biggest monthly loss since May 2012, with returns down by 2.6 percent, according to Preqin, an alternatives data provider.

Hedge funds pursuing equity strategies fell by 4.3 percent in January. That's not much different from the S&P 500, which lost 5.1 percent on the month.

The smaller hedge funds showed the best performance, relatively speaking. Funds managing less than $100 million lost 2.5 percent; funds in the $500 million to $999 million range fell by 3.1 percent, and those with assets of $1 billion or more were down by 2.9 percent. 

Wednesday, February 17, 2016

The Move to Cash

The slump in the stock market has pushed many money mangers into holding good old-fashioned cash. Mutual funds surveyed by Bank of America Merrill Lynch now hold more cash as a percentage of their portfolios than they have at any time since 2001. Cash now accounts for 5.6 percent of the portfolios surveyed, mostly at the expense of stocks and high risk bonds.

The amount of stocks that these fund managers were holding relative to other assets, such as cash and bonds, dropped in early February to its lowest point since 2012. Overall, just 5 percent more respondents were overweight in stocks, compared with 21 percent that were overweight in January.

Cash allocation was nearly this strong last summer, when markets fell on concern over the ability of Greece to meet its debt payments and a sharp slide in Chinese stocks. The percentage of cash in fund portfolios reached 5.5 percent back then.

Tuesday, February 16, 2016

Trouble in Japan

Some grim news out of Japan over the holiday weekend: While America is worried about an economy that grew by just 0.7 percent in he fourth quarter, the Japanese economy actually shrank over that same time frame.

Japanese gross domestic product contracted by an annualized 1.4 percent in the fourth quarter, bigger than a market forecast for a 1.2 percent decline, Japanese data showed on Monday. That followed a revised 1.3 percent increase in the previous quarter.

The culprit appears to be private spending. The data showed that private consumption, which makes up 60 percent of Japan's GDP, fell by 0.8 percent. Since Prime Minister Shinzo Abe took power three years ago, private consumption has shrunk by roughly 1.5 trillion yen, equal to $2.7 trillion.

Monday, February 15, 2016

Thoughts for Presidents' Day

"I hope I shall possess firmness and virtue enough to maintain what I consider the most enviable of all titles, the character of an honest man." ~ George Washington

"Adhere to your purpose and you will soon feel as well as you ever did. On the contrary, if you falter, and give up, you will lose the power of keeping any resolution, and will regret it all your life." ~ Abraham Lincoln

"In matters of style, swim with the current; in matters of principle, stand like a rock." ~ Thomas Jefferson

Friday, February 12, 2016

Americans Worry About the Economy

The wavering stock market has made Americans nervous about the economy, according to Gallup. In February, Gallup's polling found, we are slightly more likely to name the economy generally as the "most important problem facing the country" than we have been in the last two months.

Seventeen percent of Americans cited the economy as the top problem, up from 13 percent last month and 9 percent in December. Altogether, 39 percent of Americans named some economic issue -- including the economy in general, unemployment/jobs, the federal budget, wages and others -- as the most important problem in February. That is up from less than 30 percent in December and January.

Fittingly, in this election year, the responses were split across party lines. Republicans are more likely than Democrats and independents to name the federal budget deficit as the major problem; Democrats and independents are more likely than Republicans to name unemployment or jobs as most important.

Thursday, February 11, 2016

Home Prices Moving Up

Good news for homeowners: The national median existing single-family home price grew nearly 7 percent to $222,700 in the fourth quarter of 2015, compared with the same time last year, according to the National Association of Realtors. Prices had increased 5.4 percent in the third quarter compared with a year earlier.

That price bump came despite the fact that the pace of sales slowed. Total existing home sales, including single-family properties and condos, declined 5.4 percent to a seasonally adjusted annual pace of 5.18 million, down from nearly 5.5 million in the third quarter.

If those trends seem contradictory, they can be explained by the fact that the total amount of housing stock is growing very slowly now. That’s how prices can increase despite the slackening of demand.

Wednesday, February 10, 2016

Jolting Jobs News

The latest jobs report was fairly disappointing, but here's a much more optimistic look at the employment situation. The number of Americans who voluntarily quit their jobs climbed to a post-recession high in December, the Labor Department reported yesterday.

The monthly Job Openings and Labor Turnover Survey, known as Jolts, showed the number of voluntary quits rose to nearly 3.1 million, the highest level since December 2006. New hires, meanwhile, increased to nearly 5.4 million workers, a figure that is also a post-recession best.

Another good sign: There were 5.6 million job openings in December, the second-highest level on record, behind only July 2015. And layoffs dropped to 1.6 million, the lowest level in more than a year.

Tuesday, February 9, 2016

Those Disappearing Earnings

With 63 percent of the companies in the S&P 500 having reported their fourth-quarter earnings, profits are set to contract for a third straight quarter, according to FactSet. That's actually a bit of a surprise: At the beginning of the year, analysts anticipated earnings for S&P 500 companies to rise by 0.8 percent this quarter.

That expectation has come down steadily as the first quarter has progressed. By January 22, the consenus estimate was for a 1.7 percent decline. As of last Friday, the estimate had fallen to a 5.3 percent contraction.

All 10 sectors in the S&P 500 have seen their first-quarter earnings estimates reduced by analysts since New Year’s, but energy has been the worst. Analysts started the year projecting a 43 percent first-quarter earnings drop for stocks in the S&P 500’s energy sector. By the end of January, the sector was projected to report a 69 percent decline; earnings are now expected to contract by a stunning 84 percent.

Monday, February 8, 2016

The Super Bowl's Losers

The Broncos were the big winner last night, but in addition to the Panthers, another loser was the city of San Francisco. The NFL host committee is only reimbursing San Francisco $104,000 for the $4.8 million in city services it spent as the major city closest to Levi’s Stadium.

Last year, the city of Glendale, Arizona — home of the Arizona Cardinals — lost between $579,000 and $1.25 million hosting the Super Bowl, between public safety and transportation costs. That was the second time the city hosted the Super Bowl, and it lost even more the first time, coughing up more than $1 million in 2008.

Two years ago, here in New Jersey, we gave a $7.5 million sales-tax rebate to the NFL for the game held in East Rutherford. New Jersey Transit took the biggest hit - it estimated $7.2 million in additional costs covering the extra Super Bowl ridership, but only made $1.6 million in ticket sales and ad revenue.

Friday, February 5, 2016

January's Jobs Report

The economy added 151,000 jobs in January, a dip below the 231,00 monthly average we've seen over the past three months, according to the report released by the Bureau of Labor Statistics this morning. The unemployment rate fell to 4.9 percent, the first time it's been below 5 percent since February 2008.

Probably the best news in this morning's report is that average hourly earnings increased by 12 cents, to $25.39. Over the past year, average hourly earnings have risen by 2.5 percent, a good sign for a figure that had been relatively stagnant during the recession and recovery.
The gains among industry sectors were fairly broad-based. Retail trade added 58,000 jobs in January, and health care was up 37,000. Manufacturing added 29,000 jobs in January, and employment in financial activities rose by 18,000.

Thursday, February 4, 2016

Those Beleaguered Financial Stocks

We've gotten accustomed to the energy sector dragging down the market, but in this year's sell-off, it's the financials that have looked especially bad. Altogether, the S&P 500 Financials sector is currently down 13.2 percent this year. The worst performer in the group, Legg Mason, is down 28.8 percent on the year.

Of the sector's 90 component stocks, only nine have a positive return on the year. On the other side of the ledger, this year's losers include:
  • Charles Schwab, down 27.3 percent
  • E*Trade, down 24.7 percent
  • Morgan Stanley, down 24.4 percent
  • Bank of America, down 24.1 percent
  • Citigroup, down 24.0 percent

Wednesday, February 3, 2016

A Stormy January

By any measure it was a rough January for the stock markets. The S&P 500 lost 5 percent, marking its worst start to the year since January 2009, just before the market bottomed out in March of that year. According to the portfolio app OpenFolio, 93 percent of all investors lost money this January.

It wasn't just the drop, but how we got there that was so hard to take. The average daily spread between the S&P 500’s intraday high and intraday low was 2.3 percent in January. That's the highest for a month since September 2011 when it was 2.6 percent, according to S&P Dow Jones Indices.

For the year, though we are only a month into 2016, the spread is tracking to be the greatest on an annual basis since 2008. In that disastrous year, the average daily spread was 2.8 percent.

Tuesday, February 2, 2016

The New World's Biggest Stock

The new largest company in the world boasts a name you may not have heard of. With a pop in its stock on Monday  after the company reported earnings and revenue that beat Wall Street’s consensus, Alphabet, the parent company of Google, has surpassed Apple Inc. as the most valuable publicly-traded company in the world. It now has a market capitalization of nearly $565 billion, as opposed to $539 billion for Apple.

Since Alphabet reported strong second-quarter profits in the middle of last July, the stock has surged 28 percent. Meanwhile Apple shares have fallen 25 percent over that time frame, amid concerns about slowing sales of the iPhone.

Alphabet is now the 12th company to achieve the title of the S&P 500’s most valuable company in the history of the index. Aside from Apple, other companies that have held the crown include Exxon Mobil Corp., IBM and Microsoft.

Monday, February 1, 2016

The Biggest LIttle Stock

There was a fun item in the Wall Street Journal over the weekend touting the best-performing U.S. stock over the past 30 years. It's not Apple or Google or any other big name, but little-known Balchem, which is up 107,099 percent since the end of 1985. It's gone from less than a dollar per share to 56 as of last week.

Balchem, which makes flavorings, fumigating gases and nutritional additives for animal feed, isn't that little, though - its total stock market value is about $1.7 billion. Since the end of 1985, Balchem has gained an average of 26.2 percent annually, compared with 10.3 percent for the S&P 500.

Not many stocks ever return 100,000 percent, but over the past 30 years, 44 U.S. stocks have generated total returns of 10,000 percent or more, according to FactSet. Those include Home Depot, Amgen, Nike, UnitedHealth Group, Danaher, Altair, Kansas City Southern, Apple and Altria Group.