The Weekly Update 1-27-2012

Clarity of purpose is like a laser beam focused on creating your personally designed future!
Over the years, and several thousand client appointments, I have seen and heard a ton of ideas on creating and growing wealth.  I have chunked all of them down to my core rules of clarity.  They are easy to write and easy to read, but not always easy to do.  If you take them to heart and focus on what they will do for you the clarity and purpose each of us deserves will bubble up.  It is a law of the universe!  :-)

The Rules Of Clarity:

1)  Eliminate outstanding debt and have plenty of cash on hand to eliminate worries during volatile economic times.  This can include paying off your mortgage for those inclined to think in terms of philosophy versus quantification.

2)  Have a list of your monthly costs.  Yes, a budget!

3)  Know your sources of income, i.e. your earned income, retirement income, social security, etc.

4)  Properly allocate and diversify your investments to reflect your constraints for time, risk and volatility.  Once that is done, ALWAYS set a predetermined dollar amount aside to invest each month.  This is called "dollar cost averaging" and it is how you grow assets in periods of economic volatility.   If you don't know or understand what this is, call me and we will have a class!!

So, back to rule #1 above.  I recently had a detailed conversation with a client where it made sense for them to pay off their mortgage and that is what I recommended.  At present the numbers suggest keeping a mortgage as interest rates are so low.  You could get a 30 year fixed rate at about 3.5% which would cost about 2.45% after taxes. 

Paying off your mortgage is not a wrong or bad decision, it is just the fact that there is a sense of freedom in not having a mortgage.  Besides, it frees up money to dollar cost average in to a volatile investment environment.  There is an old saying that says "scared money never wins".  If the house is paid off, you know how much it costs to have the sun come up and you know where the money is coming from to cover it...you are golden!!

For me, I paid off the home I live in and have a small mortgage on the home where I play.  Peace of mind always wins over money, as money can get scared and change, but peace of mind is total clarity!!


     

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.  To determine which investment(s) may be appropriate for you, consult your financial advisor prior to investing.  All performance referenced is historical and is no guarantee of future results.  All indices are unmanaged and may not be invested into directly.

The Weekly Update 1-20-2012

2012 market performance is off to the best start since 1987!

This would have been easy to predict.  All you had to do was look at the headlines in your daily news source and it was obvious.  I present a few here for you to consider.

The International Monetary Fund (IMF) has reduced their economic growth forecasts for developing countries by 13% and the U.S. in particular by 48.15%!

The IMF is also requesting an additional $600 billion in funding to help out Euroland.  The U.S. is the largest part of the IMF and will thus have the lion's share of the tab.

Standard and Poor's downgraded the credit ratings on over half of European countries.  They also downgraded the European Financial Stability Fund (EFSF) Aka, the Euro "bailout fund".

Talks are taking place to discuss how to deal with Greece when they default.

Housing starts released today dropped 4% and permits, which indicate future growth, were flat.

Gasoline is pushing up toward $4.00 in most of the country leaving less for discretionary consumer purchases.

Retail sales for the past holiday season ended up as zero growth.  Never mind, this one was not in the paper.

There are rumors the Federal Reserve will start a form of QE-3 when they meet next week.  The $1 trillion will be used to buy semi worthless mortgaged back securities from banks.  In essence transferring the bad loans to we taxpayers.


U.S. Debt is the highest in history at 100% of our productivity or GDP.

The Federal Reserve of Philadelphia index of conditions came in at 7.3% versus economists estimates of 10.3%, only off by a cool 29%!

As I write this The U.S. has routed three aircraft carriers to the Persian Gulf to make a presence in the wake of Iran's threats against the U.S. and other counties located in the gulf region.

Goldman Sachs reported earnings dropped 58% and,......you guessed it... the stock went up 8.10%.

I called our Wealth Strategies Group Solution Network™ Charted Financial Analyst, Charles Sizemore, CFA, and asked him to explain to me how the market could possibly go up in light of this type of news.  He replied, it is just like what the character played by Matthew Broderick said in the movie The Freshman,  "THERE'S A KIND OF FREEDOM IN BEING COMPLETELY SCREWED BECAUSE YOU KNOW THINGS CAN'T GET ANY WORSE."

We will continue to be open minded, but cautious as February tends to be a risky month.  Please call me with questions, comments or discussion.  1.800.800.6364


  

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.  To determine which investment(s) may be appropriate for you, consult your financial advisor prior to investing.  All performance referenced is historical and is no guarantee of future results.  All indices are unmanaged and may not be invested into directly.

The Weekly Update 1-12-2012

I think we are all pretty close to "gills" on the jobs information front!  As it is a new year perhaps we should focus on a different subject of equal or more importance.  After all it is a root cause of why jobs creation stinks. But, before we leave the "JOBS" are "THE ISSUE" and update "THE DEBT IS AN ISSUE", a quick jobs update is in order.

Last week I suggested that of the 200,000 jobs created last month a good portion were seasonal hires and were likely being fired as I typed the posting.  Well the rat has emerged from the data pile and 44% of the 200,000 created last month, 88,000, were created in the high paying careers of restaurants, retail and couriers.  Gee, who could have seen that coming!

A quick observation:  There were over 1.3 billion cell phones manufactured last year and exactly ZERO were manufactured in the U.S.  All those jobs were created elsewhere.

Debt and the ability of various governments around the world to issue it at a reasonable rate of interest is going to be a problem in 2012  This month $1.1 trillion of sovereign debt will need to be reissued, i.e. rolled over.  In March there will be an additional $1.3 trillion.  For the G7 Nations combined the total 2012 roll over amount will be approximately $7.5 trillion.  The size alone is likely to push interest rates up a little bit, if not quite a bit.  That increase in interest rates will put additional pressure on expenses and budgets of countries around the world.

The current interest rate debt service is barely manageable and at higher interest rates it could quickly become unmanageable.  2012 could just be the year where the cost to carry the debt built up around the world becomes impossible to service.  At the very least, anticipate this reality, as we have, in allocating the assets in your portfolio.

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.  To determine which investment(s) may be appropriate for you, consult your financial advisor prior to investing.  All performance referenced is historical and is no guarantee of future results.  All indices are unmanaged and may not be invested into directly.

The Weekly Update 12-6-2012

The first jobs creation report of 2012 is out!

The non-farm payroll report reflected 200,000 jobs were created in December.  212,000 were private sector jobs and that was offset by a loss of 12,000 government jobs.  The net result of this is an unemployment rate of 8.5%, down from 8.6% last month.

Everyone understands this does include seasonal hires for the holiday shopping season, right?  Would it not stand to reason that when January data is released many of the jobs just created will evaporate?  I hope not, but unless some magic dust is sprinkled over the data you would have to think many of these December jobs have already been lost.

So far this week Boeing permanently released 2,160 workers in Kansas and Pepsi has cut 4,000 more across the country.  I am sure there are more, but you see the trend here.  As I have commented before, JOBS are THE ISSUE for turning our economy around.  Scroll down to The Weekly Update 12-2-2011 below for more detail.

We will have to wait and see if in fact this is a real trend.  I hope it is!  We will wait and see.

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.  To determine which investment(s) may be appropriate for you, consult your financial advisor prior to investing.  All performance referenced is historical and is no guarantee of future results.  All indices are unmanaged and may not be invested into directly.

The Weekly Update 12-30-2011

Headlines you are likely to see in 2012:

Meltdown of Euro banks hits China , economy slows.

U.S. total debt and liabilities hit $116 trillion.

U.S. unemployment remains stubbornly high.

Banks forced to sell foreclosed property to meet liquidity requirements.

Federal Reserve  announces QE-3 to induce economic growth.

Consumer spending stuck in the mud.

Half of homeowners are under water as home values continue down.

Payroll tax reinstated after two month extension, consumers frozen.

Oil back over $150/bbl causing large drop in consumer spending.

This all adds up to "OPPORTUNITY"!  But you have to be ready, willing and able to act.  For those that are, the rewards over the next three to five years should be beyond great.  You also need a plan.  Here is our plan to guide our clients to wins in 2012.

1)  Have no debt where possible.  Debt causes fear and fear never wins!
2)  Know how much you need to run your life each day, i.e. a budget.
3)  List where the money for your budget comes from, i.e. work, investment income, Social Security, etc.
4)  Have an emergency reserve fund in cash. Enough that you can sleep at night.
5)  Dollar cost average in to positive long term investment trends.

What are the positive long term trends?  Here are a few favorites, without the names...which are our "special sauce".  Technology, biotech, health care, energy, precious metals, food/ agriculture.

HAPPY NEW YEAR TO YOU AND THOSE YOU LOVE! 

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.  To determine which investment(s) may be appropriate for you, consult your financial advisor prior to investing.  All performance referenced is historical and is no guarantee of future results.  All indices are unmanaged and may not be invested into directly.

Weekly Update for 12-23-2011

This is a key number......approximately one in three jobs is related to NEW housing.  Therefore, it would be reasonable to conclude that NEW jobs growth is unlikely to occur without an increase in NEW housing sales.  Why NEW housing?  Well, existing houses are already built and require little, if any, new job creation in the economy to be sold.  This is why you keep an eye on NEW home sales.

In addition, this data can be effected by miscalculations.  This week the National Association of Realtors announced they had been double counting existing home sales and therefore reduced 2007 sales by 11%,  2008 by 16%,  2009 by 16%  and 2010 by 15%!!!   This makes one wonder how much NEW home sales have been over estimated.

As if that were not enough weak news,  we are starting to see banks selling homes they have foreclosed on hitting the market.  An incredible 46% of November 2011 home sales were foreclosure related!  This will likely keep a lid on home prices for 2012.

And the kicker is home prices have continued to drop with an additional 3.5% reduction for November 2011!  Perhaps more importantly this data suggests that NEW home sales, which create a ton of jobs, are still finding a bottom and any growth of significance is beyond 2012.   

Fewer applications for unemployment is not the same as job creation.  Without an increase in NEW housing sales NEW job creation will flounder as will consumer spending.  The daisy chain of economic data of present does not seem to jive with the Rosy market outlook of late.

I  would suggest there is a potential for 10% upside in this year end rally, yet the risk on the downside could be 20-30% , or more.  We are likely to know much more about 2011 trends and their effect on 2012 by the end of January 2012.

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.  To determine which investment(s) may be appropriate for you, consult your financial advisor prior to investing.  All performance referenced is historical and is no guarantee of future results.  All indices are unmanaged and may not be invested into directly.

Weekly Update 12-16-2011

It's pretty much all about Europe!  On my weekly post dated 11-18-2011 I clearly detailed the daisy chain of European events and the cause and effect each has on our U.S. Equity markets.  See that posting at  http://www.wealthstratgroup.com/.   

The end of this story is the U.S. market lives or dies with Europe!

If Europe is in a state of flux, we can pretty much expect at least a few more months of directionless drift punctuated with a lot of volatility.  Europe will probably have a recession starting this last quarter, and the U.S. MIGHT have a mild recession, but that is not what is driving the markets right now.  It is fear of a Eurozone meltdown!

If we do see a U.S. equity market drop of significant proportions, it will have started in Europe.  Most of all, it is difficult to timeline the who, what, where, when, why or how contributors

The macroeconomic picture is just terrible, the demographic picture is terrible and we must continue to be realistic in our expectations.  That said, cash dividends do not lie.  I continue to like income investment vehicles.  I will continue to focus on income generation in our client accounts keeping cash on hand to take advantage of good pricing on dips in this market.

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.  To determine which investment(s) may be appropriate for you, consult your financial advisor prior to investing.  All performance referenced is historical and is no guarantee of future results.  All indices are unmanaged and may not be invested into directly.