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In honor of Valentine's Day and American Heart Month, PlanningWorks wants to share some love with you - our clients! Although no one likes to think about it - it is important to plan and prepare for any health emergency you or a loved one might experience.

To help you be prepared, here are two great options to create an emergency medical card. Keep this card in your wallet, purse, backpack, etc. and print multiple copies for your close family members to carry as well.

  1. Click the following link to print a blank card and fill in the information by hand: http://medids.com/Pocket_Med_ID_Card.pdf
  2. Click the following link to fill out your emergency card online and print: https://www.hopepaige.com/medicalidform/medical-id-card.aspx

Happy Valentine's Day! With love, your PlanningWorks Team

Taking Control

Taking control of what you OWN in your woman-owned business is a priority. I understand, I am one.

Here's how! - View the video links below.  
Plan FIRST because PlanningWorks.

Please feel free to reach out to me or my team.

Lisa Allen, Co-Owner/Partner
PlanningWorks, Inc.

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Market Commentary - Week of 2/10/14

The Markets
American stocks bounced last week like a skier pounding moguls on an Olympic freestyle course. Some found it difficult to understand why stocks had their best week since December of 2013. Barron’s said:

“We just can’t figure out why the markets were strong. It’s not like the news this week was terribly good. The Institute for Supply Management’s manufacturing survey fell to 51.3, well below forecasts for 56.5. The U.S. added just 117,000 jobs, well below forecasts for 170,000. You would think investors would be worried that the economy was running out of steam.”

Experts cited in the article suggested banks have been easing lending standards. Historically, that has been a positive for the economy and may offer insight to gross domestic product growth, industrial production, employment, and profit margins months from now. Others believe the downturn was due to hedge funds derisking their portfolios, and some credit earnings with stocks’ positive movement as almost 66 percent of companies in the Standard & Poor’s 500 Index that have reported this quarter have exceeded earnings expectations forecast by analysts.

Bonds aren’t doing what they were expected to do either. When the Federal Reserve sounded the bell in January – marking the beginning of the end for its third and biggest round of bond buying (called quantitative easing or QE) – it seemed logical bond prices would fall and interest rates rise. After all, basic economic theory suggests less demand should drive prices lower. Perversely, despite the Fed reducing its purchases, Treasury bonds have gained value and yields have fallen. The same thing happened when the Fed ended the first two rounds of quantitative easing and may reflect fear that economies will lose momentum without the Fed’s strong monetary support.

Let’s hope markets continue to do as well as America’s snowboarders. Last week, Americans took Olympic gold (in the men’s and women’s events) on a slope-style course many competitors had trouble navigating and believed might be too risky.

Data as of 2/7/14
1-Week    Y-T-D    1-Year    3-Year    5-Year    10-Year
Standard & Poor's 500 (Domestic Stocks)    0.8%    -2.8%    19.1%    10.9%    15.6%    4.7%
10-year Treasury Note (Yield Only)    2.7    NA    2.0    3.6    3.0    4.1
Gold (per ounce)    0.7    4.8    -24.5    -2.2    7.1    12.0
DJ-UBS Commodity Index    1.9    2.2    -9.0    -7.6    2.6    -0.7
DJ Equity All REIT TR Index    0.7    4.3    3.1    9.6    21.0    8.4
Notes: S&P 500, Gold, DJ-UBS Commodity Index returns exclude reinvested dividends (gold does not pay a dividend) and the three-, five-, and 10-year returns are annualized; the DJ Equity All REIT TR Index does include reinvested dividends and the three-, five-, and 10-year returns are annualized; and the 10-year Treasury Note is simply the yield at the close of the day on each of the historical time periods.
Sources: Yahoo! Finance, Barron’s, djindexes.com, London Bullion Market Association.
Past performance is no guarantee of future results. Indices are unmanaged and cannot be invested into directly. N/A means not applicable.

HOW HAVE LOW INTEREST RATES AFFECTED ECONOMIES, GOVERNMENTS, AND INDIVIDUALS DURING THE PAST FEW YEARS? Late last year, McKinsey & Company released a report that took a closer look at “the distributional affects and risks” of quantitative easing (QE) and low interest rates. In other words, who was affected by QE and low rates and how?

If you’re an investor with an interest in income, you’ve probably got a pretty good idea about how it affected you! The report found, from 2007 through 2012, households in the United Kingdom and the United States:

“…together lost $630 billion in net interest income, although the impact varies across groups. Younger households that are net borrowers have benefited, while older households with significant interest-bearing assets have lost income.”

The other side of that coin is declining yields caused the value of previously-issued bonds to increase. McKinsey estimated corporate and government bonds in the Eurozone, United Kingdom, and United States gained about $16 trillion in value during the period. Housing prices also may have benefitted as the cost of mortgage credit fell.

British and American households weren’t the only ones affected by central bank policies. McKinsey found governments in both regions benefited to the tune of about $1.6 trillion! In part, this was because debt service costs – the money required to cover the payment of interest and principal on debts – was significantly reduced during the period.

Corporate profits also got a boost from low rates. The study found U.S. and U.K. corporate profits also benefitted as companies in each country gained about 5 percent during 2012 because of ultra-low interest rates. Higher profits, unfortunately, did not translate into higher investment possibly because of tighter lending standards and uncertainty over recovery. According to The Economist:

“In the United States, net private non-residential investment fell by 80 percent as a percentage of GDP between 2007 and 2009. Although it has recovered since then, U.S. business investment is still at its lowest level as a share of GDP since at least 1947. Investment in Europe is similarly weak.”

Why look at distributional impacts? It helps economists identify risks countries may face in the future. For instance, The Economist estimated governments may see debt service costs increase by as much as 20 percent. In the United States, that would translate into $75 billion annually.

Weekly Focus – Think About It

“The best and most beautiful things in the world cannot be seen or even touched – they must be felt with the heart.”
--Helen Keller, American author and political activist

Market Commentary - Week of 2/3/14

The Markets
If investors were fishermen, they’d probably toss January 2014 right back into the stream. At the end of the month, U.S. stocks (S&P 500) had lost 3.6 percent of their value, according to Barron’s. Other asset classes hadn’t fared well either. Bond yields fell and emerging markets were all roiled up. If you are like some fisherman (and you know who you are) and like to review portents and signs, here are a few to consider:

January Barometer: The Stock Trader's Almanac’s January Barometer is a theory that gives credit to the idea the performance of the Standard & Poor’s 500 Index during January indicates the direction of the stock market for the remainder of the year. This year’s weak performance suggests things may be headed south during 2014.

How accurate is it? An article on NASDAQ.com said, “The Barometer theory sounds about as scientific as spin-the-bottle and, while impressively accurate pre-1984 (70 percent accuracy on bullish calls and a whopping 90 percent accuracy on bearish calls), its accuracy on the bearish calls has declined dramatically. Since 1985 its batting average for predicting down markets has come down to a lowly 50 percent.” Maybe flipping a coin would work just as well. 

Super Bowl indicator: The theory goes like this: When a team from the old NFL wins, the stock market will have a winning year. If a team from the old AFL wins, markets will not do so well during the year. So, in theory, a Broncos win would cast markets in a bearish light and a Seahawks win would put them in a bullish one.  Except, as Barron’s pointed out, both teams have their roots in the AFC.

The Skyscraper Curse (tallest is negative), The Hemline index (shorter is positive), and The Presidential Approval effect (unpopular is better), The Triple Crown indicator (one horse winning it is negative), and The Sports Illustrated Swimsuit Issue Cover gauge (an American model is a positive indicator) are like chum in the water for some investors.

We would all like to be able to predict the future and, clearly, many try to do just that. As much fun as oddball indicators are, it seems likely, however, that investors’ time would be better spent identifying long-term financial goals and building portfolios that can help meet those goals over time.

Data as of 1/31/14
1-Week    Y-T-D    1-Year    3-Year    5-Year    10-Year
Standard & Poor's 500 (Domestic Stocks)    -0.4%    -3.6%    19.0%    11.5%    16.7%    4.6%
10-year Treasury Note (Yield Only)    2.7    NA    2.0    3.4    2.7    4.2
Gold (per ounce)     -1.3    4.1    -24.9    -2.0    6.4    12.1
DJ-UBS Commodity Index    -0.7    0.3    -11.4    -8.4    2.9    -0.9
DJ Equity All REIT TR Index    1.6    3.6    2.5    9.6    21.6    8.4
Notes: S&P 500, Gold, DJ-UBS Commodity Index returns exclude reinvested dividends (gold does not pay a dividend) and the three-, five-, and 10-year returns are annualized; the DJ Equity All REIT TR Index does include reinvested dividends and the three-, five-, and 10-year returns are annualized; and the 10-year Treasury Note is simply the yield at the close of the day on each of the historical time periods.
Sources: Yahoo! Finance, Barron’s, djindexes.com, London Bullion Market Association.
Past performance is no guarantee of future results. Indices are unmanaged and cannot be invested into directly. N/A means not applicable.

WHAT’S IN AN AD? If you were one of the millions of people watching the Super Bowl on Sunday, then you probably got an eyeful of some of the most enticing advertisements television has to offer. They better be! According to experts, the average cost of a 30-second Super Bowl commercial was expected to be about $4 million this year. That’s right – $4 million – up from about $3.8 million last year. Of course, it was predicted more than 100 million people would watch the game and that’s a sizeable audience!

Whether a company is trying to reach a lot of people at once or target a very specific audience, advertising isn’t as easy as it once was. As a recent article in The Economist pointed out:

“Poor admen… Their industry is going through a particularly difficult time. Not only are they confronting a proliferation of new “channels” through which to pump their messages, they are also having to puzzle out how to craft them in an age of mass skepticism. Consumers are bombarded with brands wherever they look – the average Westerner sees a logo (sometimes the same one repeatedly) perhaps 3,000 times each day – and, thus, are becoming jaded. They are also increasingly familiar with the tricks of the marketing trade and determined to cut through the clutter to get a bargain.”

A survey intended to measure the benefits of 700 brands on both personal and community levels found, “The majority of people worldwide wouldn't care if 73 percent of brands disappeared tomorrow.” Americans are more skeptical than others. In the United States, people would not care if 92 percent of brands disappeared. The U.S. survey results suggested just nine percent of brands are thought to actually help improve the quality of life in America.

Are Super Bowl ads money well spent? Some say yes; others say no. A 2010 study commissioned by Fox Sports (the Super Bowl is shown on the Fox network) reported an 11 percent increase in sales of products and services advertised during the big game. The January 2014 issue of Advertising Age reported just 20 percent of Super Bowl ads lead to sales. Maybe the better gauge is you. Did Super Bowl ads change your purchase decisions or attitude toward a particular brand? 

Weekly Focus – Think About It

“Of life's two chief prizes, beauty and truth, I found the first in a loving heart and the second in a laborer's hand.”
--Khalil Gibran, Lebanese-American poet and author

Market Commentary - Week of 1/27/14

The Markets
Was it a stutter step or have markets lost their balance? 

Anybody who knows football can tell you a lot goes into every play. Strategy, practice, game review, and preparation all affect outcomes, as do decisions and execution during games. Many, many factors influence gains and losses on the field. Similarly, numerous issues affect the performance of stock and bond markets – a fact that became abundantly clear when pundits tried to explain last week’s market downturn. Here are a few of the things which may have helped put investors on the defensive last week:

•    Fears of a China bubble: According to Barron’s, a dip in the nation’s manufacturing index stirred experts’ fears China may be experiencing a credit bubble that is creating property and infrastructure bubbles. If this proves true and the bubble bursts, the repercussions may be felt throughout global markets.
•    Concern about Federal Reserve tapering: The Fed has begun to pursue a less stimulative monetary policy and that has some worried about growth, especially in emerging countries which rely on foreign currency to finance their deficits, according to The Washington Post.
•    Anxiety about emerging markets resilience: Giving weight to concerns about the impact of changing Federal Reserve policy, currencies in Argentina, Venezuela, South Africa, and Turkey lost value late last week. The New York Times said rising interest rates may increase borrowing costs triggering painful readjustment periods in some emerging markets.
•    Unease over unemployment: Reuters suggested stronger economic growth in the United States, Japan, and Europe could camouflage issues related to youth unemployment and skills shortages.
•    Lack of enthusiasm over mixed earnings: Fourth quarter earnings reports have been roughly in line with the mixed results reported throughout 2013. Sixty-three percent of companies’ earnings beat analysts’ expectations, 12 percent were in line, and 25 percent came in lower than expected.

So, is this a correction? Or, has the bull market concluded its run? You may as well ask whether the Broncos or the Seahawks will win on Sunday. Nobody knows for sure.

Data as of 1/24/14
1-Week    Y-T-D    1-Year    3-Year    5-Year    10-Year
Standard & Poor's 500 (Domestic Stocks)    -2.6%    -3.1%    19.8%    11.5%    16.4%    4.5%
10-year Treasury Note (Yield Only)    2.7    NA    1.8    3.4    2.6    4.1
Gold (per ounce)     1.4    5.5    -24.2    -1.9    6.8    12.0
DJ-UBS Commodity Index    1.5    1.0    -10.0    -7.6    2.1    -1.0
DJ Equity All REIT TR Index    -0.7    2.0    0.0    9.9    21.0    8.5
Notes: S&P 500, Gold, DJ-UBS Commodity Index returns exclude reinvested dividends (gold does not pay a dividend) and the three-, five-, and 10-year returns are annualized; the DJ Equity All REIT TR Index does include reinvested dividends and the three-, five-, and 10-year returns are annualized; and the 10-year Treasury Note is simply the yield at the close of the day on each of the historical time periods.
Sources: Yahoo! Finance, Barron’s, djindexes.com, London Bullion Market Association.
Past performance is no guarantee of future results. Indices are unmanaged and cannot be invested into directly. N/A means not applicable.

HOW DO YOU DEFINE ‘BIG DATA?’ There is little agreement about the definition of ‘Big Data.’ Broadly speaking, it is a term that describes the storage and analysis of large and/or complex data sets. According to the MIT Technology Review, “There is unanimous agreement that big data is revolutionizing commerce in the 21st century. When it comes to business, big data offers unprecedented insight, improved decision-making, and untapped sources of profit.” In other words, data – collected through rewards cards, social media websites, industry research, and other sources – is helping companies better understand their businesses and their customers.

Big data is helping companies in diverse industries. The International Business Times reported retailers, supermarkets, and pharmaceutical companies are collecting thousands of gigabytes of consumer data in real time and through online data mining in order to improve sales and marketing efforts. An article on Gizmag.com said:

“Pattern recognition software applied to patient records, clinical trials, medical reports, and journals makes it possible for computers to be used as diagnostic tools, comparing data to arrive at the best possible treatment plan… Fraud detection, pre-trial research in legal cases, stock trading, and patient monitoring are now handled by software after the arrival of big data.”

The Big Data revolution also is likely to change the employment picture in the United States, according to a report titled, The Future of Employment: How Susceptible Are Jobs to Computerization? The report covered a study which was released by Oxford University last September and evaluated about 700 different types of occupations in the United States. It found about 47 percent of jobs in the United States are at risk of being computerized within the next two decades.

Occupations at low risk of being computerized included therapists of different types, social workers, curators, anthropologists, and others. Those at high risk included telemarketers, loan officers, payroll clerks, legal secretaries, and (ironically) data entry technicians.

Weekly Focus – Think About It

“Truth is like the sun. You can shut it out for a time, but it ain't goin' away.”
--Elvis Presley, “The King of Rock and Roll”

Market Commentary - Week of 1/20/14

The Markets
Predict, forecast, divine, foresee… Each year, pundits, analysts, and authorities from around the world offer investors insight to what the year may hold. While prognosticating brings to mind the words of British Prime Minister Winston Churchill who said, “It is always wise to look ahead, but difficult to look further than you can see.” With that firmly in mind, let’s take a look at what some experts have been saying about 2014.

Last week, economists at the World Bank released their latest growth forecast which projects global economies will expand by 3.2 percent this year. That’s an improvement over last year’s growth rate of 2.4 percent. Developing nations are expected to grow faster than high income countries. The Global Economic Prospects report cautioned, “Growth prospects for 2014 are, however, sensitive to the tapering of monetary stimulus in the United States, which began earlier this month, and to the structural shifts taking place in China’s economy.”

The 10 active money managers sitting at Barron’s Roundtable found little to agree about as they discussed interest rates, stock prices, gross domestic product (GDP), and what to have for lunch. According to Barron’s:

“The Roundtable's optimists expect the global economy to pick up, bonds to tick up, and stocks to mosey higher, notwithstanding the errant hiccup. The pessimists… see crippled economies here and abroad, rotten government policies, and a selloff in stocks that could rekindle fears of, yes, systemic risk. Yet, somewhere between these poles, all say, lie plenty of investments worth a wager...”

And, what does the new chairwoman of the U.S. Federal Reserve expect? After all, according to The Wall Street Journal which reviewed more than 700 predictions made by Federal Reserve officials about growth, jobs, and inflation, Janet Yellen made the most accurate forecasts from 2009 through 2012. In an interview published in Time Magazine this week, Yellen said the Fed's policymaking committee generally is hopeful that U.S. economic growth could be upwards of 3 percent during 2014. Additionally, she anticipates inflation will move toward 2 percent and the housing market will pick up and continue to recover.

Ms. Yellen offered no prediction about another subject of great concern to many Americans – the outcome of Super Bowl XLVIII.

Data as of 1/17/14
1-Week    Y-T-D    1-Year    3-Year    5-Year    10-Year
Standard & Poor's 500 (Domestic Stocks)    -0.2%    -0.5%    24.2%    12.4%    18.0%    4.9%
10-year Treasury Note (Yield Only)    2.8    NA    1.9    3.4    2.4    4.1
Gold (per ounce)     0.5    4.0    -25.4    -2.8    8.5    11.9
DJ-UBS Commodity Index    1.2    -0.5    -11.1    -8.3    2.5    -1.3
DJ Equity All REIT TR Index    0.4    2.7    1.9    10.3    19.9    8.9
Notes: S&P 500, Gold, DJ-UBS Commodity Index returns exclude reinvested dividends (gold does not pay a dividend) and the three-, five-, and 10-year returns are annualized; the DJ Equity All REIT TR Index does include reinvested dividends and the three-, five-, and 10-year returns are annualized; and the 10-year Treasury Note is simply the yield at the close of the day on each of the historical time periods. Sources: Yahoo! Finance, Barron’s, djindexes.com, London Bullion Market Association. Past performance is no guarantee of future results. Indices are unmanaged and cannot be invested into directly. N/A means not applicable.

IF YOU’VE EVER DOUBTED THE IDEA THAT CHANGE IS CONSTANT, JUST CONSIDER THE LAST COUPLE DECADES. Businesses that once were thriving have languished. Industries that were lynchpins of American capitalism have gone the way of the Pony Express. Here are a few examples of things that have changed in recent years:

•    Telephones: More than 90 percent of American adults own cell phones, according to the Pew Research Center, and more than one-half rely on that Swiss army knife of communication, the smart phone. The popularity of cell phones put public payphones on the endangered species list and may prove to be the downfall of landlines. According to a Center for Disease Control and Prevention report, almost 40 percent of American homes have only cell phones. That’s a big change from 2003 when the percentage was less than 5 percent of households.

•    Books: Electronic publishing platforms mean authors have the option to publish carefully-scribed works themselves and make the books available to the public at bargain prices. Digital books have made access to the written word easier and, one can only hope, they may lead to primary and secondary schools being able to offer the most up-to-date textbooks to students.

•    Movies: A new Harris poll found two-thirds of Americans go to the movies less often than they did a few years ago. The majority prefer the convenience of watching what they want, when they want, in the comfort of their homes. Instead of going to the theater, they own or rent DVDs and Blu-Rays, subscribe to movies-on-demand or streaming services, and record movies played on TV for later viewing. Of course, the medium for movie watching has also changed. In addition to the big screen, you can view a film on your tablet, smart phone, wall-sized television, or another device.

The world is changing all the time. While it is impossible to predict which trends have momentum and staying power, industries in transformation often open new opportunities for investors.

Weekly Focus – Think About It

“It's not that I'm so smart, it's just that I stay with problems longer.”
--Albert Einstein, Theoretical Physicist

Market Commentary - Week of 1/13/14

The Markets
The People’s Republic of China (PRC) appears to have taken the words of American industrialist Henry Ford to heart. Ford said, “There is one rule for the industrialist and that is: Make the best quality of goods possible at the lowest cost possible, paying the highest wages possible.”

Last week, we learned from CNBC China’s annual trade was more than $4 trillion in 2013. That pushed the PRC ahead of the United States and gave it standing as the world’s biggest trader. According to The New York Times, China’s annual trade surplus, in U.S. dollar terms, was the largest since 2008 and 12.8 percent ahead of 2012’s surplus. In other words, China exported more than it imported.

It’s interesting to note imports to China increased significantly. In fact, imports rose more than exports which reflects strong domestic demand, according to an expert quoted by CNBC. That demand may have been driven by rising wages and a growing middle class. The New York Times wrote:

“Export gains… suggest that despite years of predictions of trouble for China’s export juggernaut, it has not yet been derailed by fast-rising costs for blue-collar labor, by an appreciating Chinese currency, or by foreign investment shifts toward other, lower-wage Asian countries… Blue-collar pay has soared between fivefold and ninefold in dollar terms in the last decade, wrecking China’s reputation as a low-wage place for export-oriented manufacturing… A decade ago [a company] paid about $75 a month for entry-level industrial workers and provided virtually no benefits. Now, [a company] pays $570 a month plus $100 a month in government-mandated benefits.”

The Economist forecast China’s economy will overtake the United States’ in 2019 if economic growth averages 7.75 percent a year in China and 2.5 percent in America and inflation averages 4 percent and 1.5 percent, respectively, between 2010 and 2020. In late 2013, the Organization for Economic Cooperation and Development forecast growth in China would accelerate to about 8.2 percent with 2.4 percent inflation during 2014, according to Reuters. Growth in the United States is estimated to be 2.8 to 3.2 percent with inflation of 1.4 to 1.6 percent for the year, according to the Federal Reserve.

Data as of 1/10/14
1-Week    Y-T-D    1-Year    3-Year    5-Year    10-Year
Standard & Poor's 500 (Domestic Stocks)    0.6%    -0.3%    25.2%    13.2%    16.2%    5.0%
10-year Treasury Note (Yield Only)    2.9    NA    1.9    3.3    2.3    4.1
Gold (per ounce)     0.8    3.6    -25.7    -3.1    8.5    11.3
DJ-UBS Commodity Index    -1.0    -1.7    -10.7    -8.0    1.8    -1.4
DJ Equity All REIT TR Index    1.6    2.2    2.3    10.6    21.1    8.8
Notes: S&P 500, Gold, DJ-UBS Commodity Index returns exclude reinvested dividends (gold does not pay a dividend) and the three-, five-, and 10-year returns are annualized; the DJ Equity All REIT TR Index does include reinvested dividends and the three-, five-, and 10-year returns are annualized; and the 10-year Treasury Note is simply the yield at the close of the day on each of the historical time periods.
Sources: Yahoo! Finance, Barron’s, djindexes.com, London Bullion Market Association.
Past performance is no guarantee of future results. Indices are unmanaged and cannot be invested into directly. N/A means not applicable.

IS THE GLASS HALF FULL WHEN IT COMES TO UNEMPLOYMENT? OR IS IT HALF EMPTY? You’re probably familiar with that famous saying about the three types of lies: there are lies, damned lies, and statistics. When trying to parse the implications of economic data from government and non-government organizations, the myriad of ways in which statistics can be sliced and diced quickly becomes apparent.

December’s jobs report, which was released last week, is a prime example. The unemployment rate fell from 7.0 percent to 6.7 percent; however, just 74,000 jobs were added in the United States during the month. That’s less than one-half the number of jobs economists had anticipated. So, there was less unemployment, but the number of new jobs created didn’t meet expectations. Does that mean the employment picture is weaker than experts thought?

Not necessarily. According to The Economist:

“Payroll gains were revised up in November to 241,000 (from 203,000) suggesting that some of December’s hiring may have been pulled forward. The two-month average of 157,000 is probably a better picture of reality than either month’s tally. Finally, the household survey, which while typically more volatile is still a useful check on the better-known survey of employer payrolls, shows employment rose 143,000, one reason the unemployment rate plunged to 6.7% from 7%.”

Does that mean the employment picture is positive?

Not necessarily. The number of people participating in the labor force in the United States was trending south before the recession started back in December of 2007. Our workforce has been shrinking because of cyclical factors, like people giving up on finding jobs because jobs are hard to find, and structural factors, such as Baby Boomers retiring and the participation of women in the workforce has been leveling off.

All in all, 3.9 million Americans (that’s about 38 percent of all unemployed workers) have been unemployed for at least 27 weeks. Are they discouraged? Have they retired? Are they raising children? There are probably some statistics out there that could provide further insight.

Weekly Focus – Think About It

“The superior man acts before he speaks, and afterwards speaks according to his action.”
--Confucius, Chinese philosopher

Market Commentary - Week of 1/6/14

The Markets
Like a half-full bottle of champagne that was left uncorked overnight, stock markets were anything but effervescent during the first few days of 2014.

On Tuesday, December 31, the Standard & Poor's 500 Index (S&P 500) bubbled upwards, finishing 2013 at an all-time high. On Wednesday, markets were closed as Americans celebrated the New Year. On Thursday, despite relatively positive economic news, the S&P 500 suffered its worst first-day-of-the-new-year performance since 2008. Is it a hangover? Is it lethargy? Are people still on holiday?

Some folks think a key issue is concern about the Fed’s changing monetary policy. MarketWatch suggested investors are wary about the timing of and reasoning behind the Federal Reserve’s decision to taper quantitative easing (QE) this month, as well as conflicting comments made by Fed officials. Last Friday, Philly Fed President Charles Plosser suggested the U.S. central bank may need to become aggressive about raising rates. His comments don’t square with those of outgoing Chairman Ben Bernanke who has said rates will remain near-zero for some time to come.

Plosser’s comments raise red flags because tapering QE is not the same as tightening monetary policy. Tapering is simply providing less economic stimulus. If the Fed raises rates, it will be tightening monetary policy. Generally, tighter monetary policy is used to constrict too-fast economic growth or curb rising inflation. Barron’s may have provided some insight into Plosser’s statement when it declared:

“…We also suspect U.S. and global economic growth will quicken more than most anticipate…Stronger economic growth combined with a further tightening in the resource markets (i.e., expect the unemployment rate to decline toward 6% by year-end and for the factory utilization rate to rise above 80% during the year) may lead to a modest rise in the U.S. inflation rate and produce the first "inflation scare/overheat/can the Fed exit fast enough" panic of the recovery.”

Hold onto your hats! The minutes of the Fed’s Open Market Committee meeting will be available this Wednesday and the way in which they’re interpreted could buffet markets.

Data as of 1/3/14
1-Week    Y-T-D    1-Year    3-Year    5-Year    10-Year
Standard & Poor's 500 (Domestic Stocks)    -0.6%    -0.9%    25.5%    12.9%    14.6%    5.0%
10-year Treasury Note (Yield Only)    3.0    NA    1.9    3.3    2.5    4.4
Gold (per ounce)     1.7    2.8    -26.5    -3.4    7.7    11.4
DJ-UBS Commodity Index    -2.1    -0.7    -9.9    -8.4    0.7    -1.2
DJ Equity All REIT TR Index    0.3    0.7    1.9    9.2    18.2    8.7
Notes: S&P 500, Gold, DJ-UBS Commodity Index returns exclude reinvested dividends (gold does not pay a dividend) and the three-, five-, and 10-year returns are annualized; the DJ Equity All REIT TR Index does include reinvested dividends and the three-, five-, and 10-year returns are annualized; and the 10-year Treasury Note is simply the yield at the close of the day on each of the historical time periods.
Sources: Yahoo! Finance, Barron’s, djindexes.com, London Bullion Market Association.
Past performance is no guarantee of future results. Indices are unmanaged and cannot be invested into directly. N/A means not applicable.

WHAT MAKES A GREAT INVENTION? It probably depends on who you ask. The angel investors (a.k.a. sharks) on the television reality show Shark Tank share their opinions on air, and Time Magazine recently revealed its thoughts in print when it published, “The 25 Best Inventions of the Year 2013.” The article suggested a great invention solves either a problem people thought couldn’t be solved (such as helping quadriplegics walk) or a problem they didn’t realize needed to be solved (who knew we needed a cronut – the offspring of a croissant and a donut – or an invisible skyscraper). Among Time’s top inventions for 2013 were:

•    The Smart Lens: (slide 5) Ever been frustrated by the low resolution of photos snapped with your mobile phone? Now, you can attach a smart lens and your smart phone will take pictures like a high performance camera and save them online automatically.
•    The edible password pill: (slide 10) Nope. It’s not on the market yet but, sometime in the future, you’ll be able to swallow a pill with breakfast. The chip inside will be powered by stomach acid and make your body into its own unique personal password every single day. The FDA has already approved it.
•    The 3Doodler: (slide 12) If you think 3D printing is neat, check out the 3Doodler. It’s a pen that melts and cools colored plastic so you can sketch and scribble actual structures. It’s the more sophisticated brethren of Popsicle sticks and pipe cleaners. 
•    Artificial memories: (slide 14) It’s likely to be just as controversial as cloning and the human genome, but scientists at MIT have managed to implant false memories in mice. They hope human applications will help treat depression and post-traumatic stress.

From the wheel to disposable diapers to the worldwide web, inventions have powered new industries and changed lives. So, are our most inventive days behind us? There are a few pessimists out there, but the Time Invention Poll found more than one-half of respondents think there are plenty of great inventions ahead. Where will they be discovered? Those polled said the United States, China, Japan, India, South Korea, and other nations.

Weekly Focus – Think About It

“Creativity requires the courage to let go of certainties.”
--Erich Fromm, German psychologist and philosopher

Market Commentary - Week of 12/30/13

The Markets
Like the mother of a bride reviewing flower arrangements and fretting that a brilliantly sunny day could be marred by dark clouds hidden just beyond the horizon, pundits have been parsing the exceptional year-to-date performance of U.S. stock markets and fussing over the future.

It’s true. U.S. stock markets look like they may be headed toward a fizzy champagne finish even after retreating a bit last Friday. Through Thursday, the Dow Jones Industrial Index had closed at record highs 50 times this year and the Standard & Poor’s 500 Index wasn’t far behind with 44 record high closes, according to NASDAQ.

U.S. stocks aren’t the only markets analysts are stewing over. They’re also pondering the potential effects of higher interest rates. Last week, the yield on benchmark 10-year Treasury notes ascended beyond 3 percent for the first time since 2011. It’s possible higher yields (and a potential drop in bond values) will cause investors to seek out better performing assets next year, but that may not be all bad, according to Barron’s.

“IS TOPPING 3% A BAD THING? Not necessarily, considering the reason for the 10-year yield's march higher: the Federal Reserve's decision to taper $85 billion a month in Treasury purchases, starting with $10 billion less in January. It's a small paring, but sends a big message: Maybe – just maybe – after years of recovery, the U.S. economy is returning to normal.”

Returning to normal in the United States may not prove to be any easier than seeking a new normal in China. Top communist party leaders in China recently implemented policies that give markets a more significant role in the country’s economic development. Concern that high levels of local government debt could pose a risk to ongoing economic growth has the People’s Bank of China (PBOC) employing some unconventional measures to manage interest rates.

Last week, those actions caused China’s seven-day repurchase rate to rise precipitously which triggered the worst case of interbank jitters since June’s liquidity crunch in China. The PBOC “injected fresh money into the markets on Tuesday, easing the pressure on the financial system and quelling fears about a credit crisis.”

As an investor, it’s important to remember that no one knows what the future holds or how central banks and markets will respond.

Data as of 12/27/13
1-Week    Y-T-D    1-Year    3-Year    5-Year    10-Year
Standard & Poor's 500 (Domestic Stocks)    1.3%    29.1%    29.9%    13.6%    16.2%    5.3%
10-year Treasury Note (Yield Only)    3.0    NA    1.7    3.4    2.1    4.2
Gold (per ounce)     1.6    -28.3    -26.6    -4.9    6.7    11.4
DJ-UBS Commodity Index    0.0    -8.2    -8.3    -7.1    2.4    -0.6
DJ Equity All REIT TR Index    0.4    2.8    3.3    10.0    19.0    8.6
Notes: S&P 500, Gold, DJ-UBS Commodity Index returns exclude reinvested dividends (gold does not pay a dividend) and the three-, five-, and 10-year returns are annualized; the DJ Equity All REIT TR Index does include reinvested dividends and the three-, five-, and 10-year returns are annualized; and the 10-year Treasury Note is simply the yield at the close of the day on each of the historical time periods. Sources: Yahoo! Finance, Barron’s, djindexes.com, London Bullion Market Association. Past performance is no guarantee of future results. Indices are unmanaged and cannot be invested into directly. N/A means not applicable.

WHAT’S THE DIFFERENCE BETWEEN A BULL AND A BUBBLE?  During 2013, stock markets in the United States and Europe generally delivered very attractive returns so it’s not all surprising that talk of market bubbles fills the air. After all, bubbles are not a new phenomenon and they’ve done some damage in the past.

In the 1800s Charles Mackay penned Memoirs of Extraordinary Popular Delusions and the Madness of Crowds. The book chronicled some of the earliest bubbles, including Holland’s Tulipmania of 1624 during which tulip bulbs were valued more highly than gold. He also describes the popularity of the South Seas Corporation whose shares traded higher and higher (on little more than word of mouth) until the stock crashed. More recently, we’ve experienced bubbles in stock markets, real estate, technology stocks, and other types of assets.

So, how do we tell the difference between a bull market and a bubble? According to The Economist, Nobel Laureate Robert Shiller of Yale University, “Describes a bubble as ‘a psycho-economic phenomenon. It’s like a mental illness. It is marked by excessive enthusiasm, participation of the news media, and feelings of regret among people who weren’t in the bubble.’ They are often enlarged by an expansion of credit.”

Shiller measures valuation levels using cyclically-adjusted price-to-earning ratios (CAPEs). According to Barron’s, the Shiller CAPE for the S&P 500 Index was at 21 in January of 2013. That was higher than its long-term average and lower than its recent trend so U.S. equities were somewhere between neutral and significantly over valued. Since January 2013, some U.S. stock markets have delivered returns in the double digits, pushing the Shiller CAPE toward 25. On the face of it, U.S. equities appear to be highly valued.

However, in early December, The Economist reported Shiller was “not yet ready to declare a bubble in American equities… There is nothing like the same excitement about shares that was seen in the late 1990s; net flows into mutual funds only just turned positive this year. Another measure of public indifference is CNBC, a television station that tracks the financial markets, suffered its lowest ratings since 2005 in the third quarter.”

So, is this a bubble or a bull market? The experts aren’t certain. Keep your eyes peeled for signs of irrational exuberance.

Weekly Focus – Think About It

Every day of the week, The Economist explains a new topic on its website. The most popular explanations during 2013 included:

•    What is the difference between Sunni and Shia Muslims?
•    How does copyright work in space?
•    Why are your friends more popular than you?
•    How did Estonia become a leader in technology?
•    Why are there so many tunnels under London?
•    Why don't Americans ride trains?
•    How might your choice of browser affect your job prospects?

Annual Gift Wrap Party

Our guests had a wonderful time wrapping presents, sipping Poinsettias and socializing at our annual Gift Wrap Party, hosted by Lisa Allen, Sharon Hillhouse and Laura Featherston!

We collected more presents than ever before for our Blue Santa donation as well - nice job ladies!

See below for some pictures from the party - enjoy!

 

  

  

  

  

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