Tuesday, May 31, 2016

Dangerous Car Loans

Mortgages and student loans are generally the biggest debts we face, but car loans, the third-largest form of debt in the U.S., can also be pernicious and affect our financial plans. Americans had over $1 trillion in auto loans outstanding in the third quarter of 2015, according to the Fed.

Nearly a quarter of adults surveyed said they or their spouse either purchased or leased a new or used car or truck in the last year. About two thirds of those who purchased a new or used vehicle took out a loan to do so. And 12 percent of car buyers who used loans to pay for their vehicle took out a loan with a longer repayment period than the amount of time they planned to own the vehicle.

That’s a potentially dangerous financial situation to be in, considering how high interest rates on car loans can be. Five percent of those who got their loan from a car dealership or seller and 4 percent who got the loan from a bank, credit union or Internet lender were paying an interest rate of 10 percent or higher.

Monday, May 30, 2016

Thoughts for Memorial Day

“The brave die never, though they sleep in dust: Their courage nerves a thousand living men.” ~ Minot J. Savage

"Who kept the faith and fought the fight; The glory theirs, the duty ours." ~ Wallace Bruce

“Let every nation know, whether it wishes us well or ill, that we shall pay any price, bear any burden, meet any hardship, support any friend, oppose any foe to assure the survival and the success of liberty.” ~ John F. Kennedy

Friday, May 27, 2016

A Disastrous Earnings Season

First-quarter earnings season is close to over, and it looks like it may be the worst once since the Great Recession. Overall profits for S&P 500 companies in the quarter so far have been their weakest in six and a half years.

A full 98.4 percent of S&P 500 companies have now reported as of yesterday, and earnings per share is down 7 percent from a year ago, according to FactSet. That's the biggest drop since the third quarter of 2009. On the heels of a 3.2 percent decline in the fourth quarter, it also marks the fourth straight quarter of year-over-year earnings declines.

With oil prices continuing to be low, energy was the worst performer, with a staggering 108 percent decline in earnings for the quarter.The materials subsector was second weakest with a 14.5 percent decline, followed by the financial sector, which was down 12.2 percent.

Thursday, May 26, 2016

Time to Hit the Road

Are you hitting the road this Memorial Day weekend? Get ready to run into some traffic, as more than 38 million Americans will be traveling over the holiday weekend, according to a survey by AAA Travel. That includes nearly 1 million people right here in New Jersey.

More than 960,000 New Jersey residents are expected to travel more than 50 miles this weekend. That's the highest travel volume for the holiday in a decade, since 965,000 residents hit the road in 2006. It’s also a 1.7 percent increase from the 944,000 travelers last Memorial Day weekend.

Low gas prices are one thing spurring all that travel. This year’s gas prices are the lowest since 2005, when a gallon cost an average of $2.04 in New Jersey and $2.10 nationally. AAA estimates Americans have saved $18 billion on gas so far this year compared with the same period in 2015.

Wednesday, May 25, 2016

The Tech Rebound

Yesterday was another big day for tech stocks, and the sector that has been one of the most disappointing in the entire market is now close to posting a gain on the year. After a string of disappointing first-quarter earnings in April, tech companies in the S&P 500 have risen 3.4 percent so far in May.

That increase brings the tech sector’s 2016 losses down to 0.1 percent. The sector is still the third-worst performer behind health care and financials so far this year, but there may be more good news on the way.

Of tech companies in the S&P 500, 76 percent have announced earnings above analysts’ estimates, and 61 percent have reported revenues that beat expectations, according to FactSet as of Friday. That's higher than the overall marks for the S&P 500, where 71 percent have beat earnings expectations and 53 percent exceeded revenue forecasts.

Tuesday, May 24, 2016

Even the Wealthy Don't Diversify

Diversification is a watchword for most financial advisors, but many people still haven't caught on -  even the wealthy. Some 27 percent of investors with at least $1 million in net worth said their No. 1 investing mistake before working with a financial adviser was a failure to diversify their portfolios properly.

That's according to a survey of clients of the financial advisory firm deVere Group in the U.S., U.K., Asia, Africa and Europe. The firm says the problems weren't because of a lack of knowledge about diversification, but because of what happens when habits and emotions get in the way of making good decisions.

Other regrets included 23 percent of clients saying they wish they had started investing earlier, 20 percent regretted focusing too much on short-term results when investing, 15 percent said they were emotional over investments and 8 percent said they did not keep enough cash in reserve.

Monday, May 23, 2016

America's Biggest Retirement Regret

According to a survey of more than 1,000 adults from Bankrate.com, their biggest regret is not saving for retirement early enough. Nearly one in five Americans put this in the No. 1 spot. What’s more, among those 65 and up, 27 percent said this was the biggest regret, compared with 17 percent of those aged 30 to 49.

According to 2015 data from the Employee Benefit Research Institute, fully 28 percent of workers say they have less than $1,000 saved and 17 percent have between $1,000 and $9,999. Meanwhile, just 14 percent of workers have $250,000 or more saved.

Other financial regrets that Americans have include not having enough saved for emergencies, cited by 13 percent, and taking on too much student loan debt. Just 3 percent said their biggest regret was buying too much house.

Friday, May 20, 2016

The Great White North

The U.S.markets aren't the only ones that have been having a blah year. The S&P 500 is in negative territory for the year, albeit just barely, at negative 0.37 percent. But the broadest measures of the European, Japanese and Chinese markets have also been hovering around zero.

The big exception? Canada. The iShares MSCI Canada ETF, which tracks performance of large and mid-sized Canadian companies, is up more than 11 percent since the beginning of the year.

Canada's economy has been surprisingly robust this year. Strong consumer spending and export growth have been helped along by a Canadian dollar that has shed about 13 percent of its value against its U.S. counterpart since the beginning of 2015. 

Thursday, May 19, 2016

The Rising Cost of Good Health

One big reason to save for retirement: Health care costs. The average healthy 65-year-old couple retiring this year is projected to spend $288,400 in today’s dollars on lifetime Medicare Parts B, D and supplemental insurance (Plan F) premiums, according to a new HealthView Services report.

By HealthView’s analysis, when dental, hearing, vision and all other out-of-pocket expenses are included, that couple's total retirement health care bill rises to $377,412. All calculations are based on assumptions that men and women have life expectancies of 87 and 89, respectively.

The longer life expectancy means sharply higher costs for women. According to HealthView, a healthy 30-year-old woman who lives to age 91 is projected to spend $118,632 more in total health care costs than a healthy male of the same age who lives to age 87.

Wednesday, May 18, 2016

Working Well Past 65

Who needs to retire? Almost 20 percent of Americans 65 and older are now working, according to the latest data from the U.S. Bureau of Labor Statistics. That’s the most older people with a job since the early 1960s. And because of the huge baby boom generation that is just now hitting retirement age, the U.S. has its largest number of older workers ever.

When asked to describe their plans for retirement, 27 percent of Americans said they will “keep working as long as possible,” a 2015 Federal Reserve study found. Another 12 percent said they don’t plan to retire at all.

Sure, some of this is for financial reasons. Three in five retirees surveyed by the Transamerica Center for Retirement Studies said making money or earning benefits was at least one reason they retired later than they planned to, and almost half said financial problems were their main reason for working past 65. But 36 percent said they worked past 65 mainly because they enjoy their jobs or “want to stay involved.”

Tuesday, May 17, 2016

401(k) Fees Continue to Fall

A piece of good news for anyone with a 401(k) is that fees continue to drop. This has been a long-term trend as the 401(k) business continues to grow, but it has accelerated in recent years.

Consider this: On average, the fees that 401(k) participants pay for funds that invest in stocks fell from 0.77 percent of assets in 2000 to 0.74 percent in 2009, according to ICI, a mutual-fund-industry trade group. That's a positive trend, but it then dropped more sharply, to 0.54 percent in 2014.

That can add up to a big difference in your retirement savings. According to Vanguard Group, over a four-decade career, investors in a plan that charged 0.25 percent a year could amass as much as 20 percent more money than they could in one that charged 1.25 percent.

Monday, May 16, 2016

Forecasts for a Slowing Economy

The economy got off to a stumbling start this year, with just 0.5 percent growth in the first quarter. And we are now eight years removed from the onset of the last recession. Is another one on the horizon?

According to the Wall Street Journal, it's getting more likely. Forecasters in the newspaper's latest survey of business, academic and financial economists estimated, on average, that the U.S. had a 20 percent chance of falling into recession in the next year. That is double the odds from as recently as September.

This rough start to the year also prompted economists to lower their estimates for economic and job growth this year. The average forecast now calls for 1.9 percent growth this year, down from 2.1 percent in last month’s survey.

Friday, May 13, 2016

Alphabet on Top

There's a new largest company in the United States. The market cap of Google parent company Alphabet Inc. reached $494.860 billion, edging surpassed the market cap of Apple at $494.721 billion on Thursday.

Ironically, it happened on a day that Alphabet's stock fell. The company's stock slipped by 0.3 percent yesterday - but Apple fell even further, finishing down 2.4 percent on the day.

Apple shares have dropped 16 of the past 20 sessions, a stretch that included an eight-day losing streak that tied Apple’s longest since 1998. Thursday was also the first time in more than two years that Apple’s market cap has been below $500 billion. In 2015, Apple became the first company ever to have a market cap above $700 billion, eventually topping out at $775 billion.

Wednesday, May 11, 2016

The Disappearing Middle Class

There's a fascinating study out from the Pew Research Center, showing what's happening to a legendary but shrinking group of people: the American middle class. In nearly one-quarter of metro areas, middle-class adults no longer make up a majority. That’s up from fewer than 10 percent of metro areas in 2000.

Nationally, the proportion of middle-class adults shrank to 51 percent in 2014 from 55 percent in 2000, Pew found. Upper-income adults now constitute 20 percent of the population, up from 17 percent. The lower-income share has risen to 29 percent from 28 percent.

Pew defines the middle class as households with incomes between two-thirds of median income and twice the median, adjusted for household size and the local cost of living, which means a three-person household was middle class in 2014 if its annual income fell between $42,000 and $125,000. But because the median household income in the U.S. has fallen since 1999, the minimum amount it takes to be middle income has also fallen: from $45,115 in 1999 to $41,641 in 2014.

China's Effect on the Market

The big global news: China's cabinet has approved measures to reverse an export decline that has threatened to throw many of the Chinese people out of work. The moves include more bank lending, greater tax rebates, and support for export credits, all in an effort to boost the world's second-biggest economy.

The markets liked that idea, as U.S. stocks surged to their biggest gain since March 11. The S&P 500  and the Dow Jones Industrial Average both rose by 1.3 percent on the day.

All 10 industrial sectors of the Standard & Poor's 500 index finished higher yesterday, but the biggest winners were energy, chemicals and machinery companies. Companies that make basic building materials, chemicals, building and mining equipment, and aircraft would seem to benefit most from greater sales to China.

Tuesday, May 10, 2016

The Joys of Working Longer

Many of us face a dilemma of whether to work as long as we can stay productive and make more money, or retire as soon as we can and take it easy. A new study in the Journal of Epidemiology and Community Health throws another wrinkle into that equation: Retiring later may actually extend your life.

The study followed 3,000 Americans over the course of 18 years. It found that among healthy retirees, if they retired even just one year older, their risk of mortality was 11 percent lower. Even among unhealthy retirees, there was a lower death risk when they retired later.

The conclusion that the researchers come to is unequivocal: “Early retirement may be a risk factor for mortality, and prolonged working life may provide survival benefits among U.S. adults.” If you're thinking about when to retire, that's food for thought.

Monday, May 9, 2016

Muni Bonds Staying Hot

The big news in the world of municipal bonds recently has been Puerto Rico defaulting on $370 million worth of bonds. But that hasn't slowed down investors' enthusiasm for getting into muni bonds.

Municipal bond fund inflows saw another $1.1 billion in inflows last week, according to Lipper, which keeps track of such things. That was the 30th consecutive week in which muni bond funds have seen positive inflows.

All told, muni bond funds have taken in $25 billion in new investments since September. Still muni bond funds hold a grand total of $371 billion, while equity funds have more than $5 trillion.

Friday, May 6, 2016

April Jobs Report

After the first quarter GDP number came in it a disappointing 0.5 percent, many economists were wondering if we'd see a slowing of jobs growth as well. We got our answer this morning: The economy added just 165,000 jobs in April, a notch below the 232,000 average we'd seen for the past 12 months. The headline unemployment figure was unchanged at 5.0 percent.

The weaker economy was also reflected in the Labor Department's changes to earlier months. March’s originally reported payroll number was revised down to 208,000 from 215,000, and February was revised down to 233,000 from 245,000. 

Professional and business services added 65,000 jobs in April, the single-best sector on the month. Healthcare added 44,000 jobs, while financial activities added 20,000. The Labor Department lists every other sector, though, as having little or no change.

Thursday, May 5, 2016

Looking to Savings

Economic turmoil over the past eight years has reshaped the views of many Americans as to how they will pay for their retirement. Those younger than 40 are turning to an old standby: the simple savings account.

In four Gallup polls from April 2013 through April 2016, an average of 37 percent of those aged 18 to 39 listed savings accounts as a major source of retirement money. That's up 11 percentage points from the 26 percent who named it in the 2002-2007 polls.

Retirement savings accounts such as IRAs and 401(k)s are still the source mentioned by this cohort most often, but the percentage naming these types of retirement accounts has dropped from 57 percent to 51 percent. Savings accounts are now a clear second among this group.

Wednesday, May 4, 2016

The Ups and Downs for College Grads

There's good news and bad news for new college graduates. One new study has found that they are no carrying record levels of debt. But they're also getting record starting salaries.

About seven in 10 seniors set to graduate this spring borrowed for their educations, and they’ll carry an average of $37,172 in student debt as they enter the workforce, according to higher-education expert Mark Kantrowitz. That breaks the record set by the 2015 class, which owed just over $35,000.

But Americans who earned a bachelor’s degree last year landed a job with an average starting salary of $50,651, according to the National Association of Colleges and Employers. That was 5 percent higher than the average starting salary for 2014 grads. The New York Federal Reserve says the median salary for recent college graduates was $43,000 in 2015, up from $39,992 the previous year.

Tuesday, May 3, 2016

We Love to Save

Retirement savers are upping their game: A record 13.6 percent of 401(k) participants raised their savings rate during the first quarter this year, according to Fidelity Investments. That's a record number of people increasing their retirement savings rate. Employee contributions, combined with employer matching funds and profit sharing, rose 12.7 percent - another record.

Not only are savings rates up, but more people are saving in both a 401(k) and an Individual Retirement Account. Fidelity's universe of double savers is up 7 percent from a year ago, to 1.3 million people, with an average contribution of $11,600, up $300.

That's not the only sign of an increase in saving. A recent Gallup poll found that two out of three Americans would rather save than spend. The gap between the two camps is at its widest since 2001, the first time Gallup asked that question.

Monday, May 2, 2016

A Disappointing April

April turned out to be a so-so month for stocks: The S&P 500 gained a minuscule 0.27 percent in April, and the Dow Jones industrial average was up 0.5 percent for the month, its third straight up month.

But for a while it looked like we were going to do better than that. As of April 20, the S&P was already up more than 2 percent on the month, but it gave back nearly all those gains before the month was out. It's now up an anemic 1.05 percent for the year.

The reason that is concerning is because the first four months of the year are traditionally big gainers for the market. Now we've arrived at May, and the infamous recommendation “Sell in May and go away.” Given that pattern, it would have been nice to solidify the gains we saw in early April.