Encore careers: become your own boss
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These days, retiring from one career doesn't necessarily mean quitting work altogether. In fact, entrepreneurs in their 50s and 60s have launched more new businesses over the past decade than any other demographic. Drawing on the knowledge and professional networks they've developed over the years, these older entrepreneurs are proving that, when it comes to starting a business, the adage "the older, the wiser" often rings true.
Why the business boom among older Americans?
For older business owners, entrepreneurship offers a number of benefits, such as:
- The chance to pursue a lifelong passion
- A more flexible lifestyle
- Supplemental income
- New challenges
- The satisfaction of being their own boss
Of course, starting a business isn't a decision to be taken lightly. According to the U.S. Small Business Administration, nearly half of new ventures fail within the first five years. Yet, despite these grim statistics, older entrepreneurs are often better equipped than their younger counterparts to withstand the hardships of business ownership. On the other hand, they may have greater family responsibilities and living expenses to consider.
Is entrepreneurship for you?
If you're thinking about going into business for yourself, keep these tips in mind:
- Maximize your skills. What's your area of expertise? Take advantage of your experience and existing network.
- Do what you love. Now's your chance to be genuinely, 100-percent passionate about your work.
- Conduct a self-assessment. Be sure to consider your risk tolerance and acknowledge your limits. How driven are you to succeed?
- Test the waters. Before you take the plunge, do your research and find a mentor in the industry you're looking to join.
- Choose the right business model. Franchise, sole proprietorship, online business? The model you select can have a big impact on your success.
- Take advantage of your resources. Work with your financial planner to determine how starting a business will affect your overall financial situation.
Launching a business comes with significant risks, as well as the potential for significant rewards. To increase your chances of success, it's important to plan ahead and weigh all aspects of the decision with your financial advisor. For more information and tips on becoming an entrepreneur after 50, visit the U.S. Small Business Administration's website at www.sba.gov/content/50-entrepreneurs. NOTE: If you're thinking about taking the plunge into a business start-up, feel free to give us a call to learn ways that Chornyak & Associates might be of help in your plans (614-888-2121 or chornyak@chornyak.com).
Joe
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China: How its slowdown will affect the U.S.
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Art Pine at Kiplinger online tells us that the slowdown in China's economy is having an impact on the global economy.
There's no question that China's economy is losing steam. The fast-rising economic juggernaut grew by only 7.6% during the year ending in the second quarter, it reported last week. That's the slowest growth China has posted since the 2008 global financial collapse, and far below the 10%-12% pace it typically enjoyed before the recession.
But China isn't headed for anything like recession -- or even a hard landing, as some forecasters have feared. Though the growth rate of 7.5%-8% now predicted for the second half of 2012 won't match China's previous growth rates, it's not a terrible performance, either. Compare it, for example, with the U.S.'s 2% pace of growth: an anemic recovery, but still not a recession.
The slowdown in China is big enough, however, to have a modest impact on the global economy. China has been the single biggest contributor to global growth in recent years. Exporters from Europe and several Asian countries will be particularly hard-hit, and the overall world economy will lose some momentum.
By itself, the Chinese slowing can't push the U.S. economy back into recession. But it does add to the already large risks posed by the continued disarray and economic slump in Europe and the prospect of Congress failing to avert the looming fiscal cliff -- deep, mandatory across-the-board budget cuts and tax increases scheduled for 2013.
In addition, the Obama administration's hopes that China will move further away from being an export-led economy to one fueled more by domestic consumption, which presumably would spur more buying of U.S.-made products, also will be put on hold. China hadn't made much progress before the current slowdown began and isn't likely to now.
The slowdown may even prompt the country to return to relying on exports to boost its economic growth rate. That would mean more state support for exporting industries -- through subsidies and preferences -- plus increased tariffs and regulatory restrictions, new restraints on foreign imports and limiting any further increase in the value of the yuan.
Watch for a more defiant posture from Beijing on the geopolitical front as well, the classic blame-the-foreigners ploy, which China often adopts to divert public attention from an economic squeeze. Among the possible signs: more strident Chinese rhetoric and angrier responses to disputes over the Spratly Islands and the South China Sea.
It's not clear where the Chinese economy will go from here. Although some forecasts predict that the slowdown has hit bottom and China will begin growing faster over the next few months, it's also possible that its economy has shifted in some fundamental way, and that growth will continue at a 7%-8% pace indefinitely.
That's what happened to Japan in the early 1970s. After growing at a double-digit rate for most of the 1960s, Japan's economy slowed to a more sustainable pace once it had matured. Despite the slower growth, Japan remained an economic powerhouse well into the 1980s. China may be headed into the same kind of transition.
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How to avoid bank fees
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Sheryl Nance-Nash of depositaccounts.com presents some sensible hints for steering clear of the multitude of fees charged by banks. With a fee for this, a fee for that, fees are a new four-letter word. They certainly add up. The onus is on you to beat the banks at their game. Here's how.
Form a relationship
Know that most banks are looking for a "total relationship", that is your bank wants to hold your accounts and help you with other products, but it also wants an opportunity to lend you money, whether it is through an SBA or other business loan, or for an automobile or home loan, points out Charlie Crawford, CEO and Chairman of Private Bank of Buckhead.
Just say no
Do not opt in to pay overdraft fees on debit card purchases or ATM withdrawals. "Banks cannot charge for overdrafts triggered by using your debit card at the cash register or ATM unless you opt in," explains Jean Ann Fox, director of financial services with the Consumer Federation of America.
The typical overdraft fee is $35 per transaction. "Avoid paying the bank's steepest rate for borrowing money by just saying no to overdraft fees. If your bank talked you into opting in for overdraft coverage, you have the right to change your mind and opt out," says Fox. Ask your bank to opt out of overdrafts triggered by checks, recurring debit transactions, and electronic bill pay.
Use ATMs wisely
Is your bank a member of a free ATM network such as SUM or Allpoint? If so, you can use another bank's ATM and not incur a fee, says Edgar Dworsky, founder and editor of ConsumerWorld.org.
Find out if your bank offers accounts that reimburse you for ATM fees anywhere you bank. Even some brokerage accounts like Schwab also offer that feature.
Know what earns waivers
Many banks offer fee waivers if you agree to bank online, use ATMs, use online bill pay, turn off paper statements, or turn on direct deposit, says Rountree.
Keep track of your account balance so you don't inadvertently trigger a monthly fee by falling below the minimum balance requirement.
Choose your account carefully
Select an account that fits the way you use an account. "If you can't keep a sufficient balance to avoid monthly fees for interest-bearing checking, switch to a non-interest account," says Fox.
Read the entire article here. |
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Joblessness: becoming a long-term problem?
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Kiplinger reports that there is no quick fix to our long-term unemployment problem.
Long-term unemployment used to be a relatively minor problem for the U.S. Until recently, those out of work beyond the 26-week maximum for unemployment insurance accounted for less than 10% of the total number of unemployed, though during the recovery from the 1981-1982 recession, the figure rose to 26%.
In the wake of the Great Recession, the figure has risen to a record 45.5% of all Americans who are unable to find work. A stunning 31.3% of those unemployed in 2011 were out of work for a full year or more -- more than double the 1983 peak of 13.3%.
The average length of time that a laid-off worker remains out of a job was 40.8 weeks last December, compared with 19.2 weeks in 1983 and less than 10 weeks in the late 1960s. The Labor Department's report for last month shows the average duration of unemployment at 39.7 weeks. For the first time, long-term unemployment here is matching European levels.
Moreover, many of the really long-term unemployed are about to lose a major part of their safety net. When the 2008-2009 recession began, Congress extended federal jobless benefits to 99 weeks. Though lawmakers renewed the program last February, they ordered states to begin paring it gradually, starting now. The extension will disappear at year-end, reverting to the previous standard of 26 weeks, unless Congress once again acts.
Neither state nor federal governments are likely to save as much as that cutback implies. Trimming back the 99-week maximum for jobless benefits will cut federal costs for unemployment insurance, but it will increase outlays for other programs, since more of those caught in the squeeze will apply for food stamps or federal disability payments. Applications for disability benefits already are soaring because of the slump.
That's one reason Congress may end up backpedaling when the issue comes up later this year, possibly trimming the maximum to 35 weeks or so. But that would still leave at least 3.8 million long-term jobless persons without unemployment benefits. There's no guarantee that lawmakers will agree to that, and any vote may be delayed until after the election.
There is no quick fix for the long-term unemployment problem. The only surefire remedy is to spur enough job growth to absorb those who have been out of work for long periods, and that isn't likely to happen until the economy picks up substantially. Right now, the recovery is weak -- and losing momentum. Hiring is stagnant again.
As a result, lawmakers are caught in a dilemma: If slashing benefits now could hurt the economy, since out-of-work families would have less to spend on a wide range of products, is it better to wait and cut unemployment benefits later, when the economy is churning out enough jobs to accommodate the unemployed?
The worst outcome would be for the nation to accept a higher rate of long-term unemployment as normal and abandon efforts to spur more job growth, dooming itself to a smaller labor force, higher social costs and fewer people to pay taxes.
Continue reading the article here. |
What's happening now
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Radio Shack's decision to sell iPhones may lead to the company's demise.
A number of companies, particularly in the Silicon Valley are moving away from the traditional vacation-accrual policy and toward a looser, more employee-friendly unlimited paid time off policy. Click here to learn more.
Which two women made Time magazine's list of the 20 most influential Americans of all time? Find out here.
Still planning a summer vacation? National Geographic names America's top ten beaches.
Most Olympic athletes scrape by through a combination of small sponsorships, minimal stipends, and part-time jobs, except for these: the highest paid Olympians.
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This communication is strictly intended for individuals residing in the States of: AL, AR, AZ, CA, CO, CT, FL, GA, IA, IL, IN, KY, LA, MA, ME, MI, MT, NC, NY, OH, PA, SC, TX, VA WI, WV. No offers may be made or accepted from any resident outside these States due to various state requirements and registration requirements regarding investment products and services. Securities and Advisory Services Offered Through Commonwealth Financial Network, Member FINRA/SIPC, a Registered Investment Adviser. Fixed-insurance products and services offered by Chornyak & Associates, LTD are separate and unrelated to Commonwealth. This informational e-mail is an advertisement. To opt out of receiving future messages, follow the "Unsubscribe" instructions below. Disclosures: Certain sections of this commentary contain forward-looking statements that are based on our reasonable expectations, estimates, projections, and assumptions. Forward-looking statements are not guarantees of future performance and involve certain risks and uncertainties, which are difficult to predict. All indices are unmanaged and are not available for direct investment by the public. Past performance is not indicative of future results. The S&P 500 is based on the average performance of the 500 industrial stocks monitored by Standard & Poor's. The Nasdaq Composite Index measures the performance of all issues listed in the Nasdaq Stock Market, except for rights, warrants, units, and convertible debentures. The Dow Jones Industrial Average is computed by summing the prices of the stocks of 30 large companies and then dividing that total by an adjusted value, one which has been adjusted over the years to account for the effects of stock splits on the prices of the 30 companies. Dividends are reinvested to reflect the actual performance of the underlying securities. The MSCI EAFE Index is a float-adjusted market capitalization index designed to measure developed market equity performance, excluding the U.S. and Canada. The MSCI Emerging Markets Index is a market capitalization-weighted index composed of companies representative of the market structure of 26 emerging market countries in Europe, Latin America, and the Pacific Basin. The Russell 2000� Index measures the performance of the 2,000 smallest companies in the Russell 3000 Index. The Barclays Capital Aggregate Bond Index is an unmanaged market value-weighted performance benchmark for investment-grade fixed-rate debt issues, including government, corporate, asset-backed, and mortgage-backed securities with maturities of at least one year. The U.S. Treasury Index is based on the auctions of U.S. Treasury bills, or on the U.S. Treasury's daily yield curve. The Barclays Capital Mortgage-Backed Securities (MBS) Index is an unmanaged market value-weighted index of 15- and 30-year fixed-rate securities backed by mortgage pools of the Government National Mortgage Association (GNMA), Federal National Mortgage Association (Fannie Mae), and the Federal Home Loan Mortgage Corporation (FHLMC), and balloon mortgages with fixed-rate coupons. The Barclays Capital Municipal Bond Index includes investment-grade, tax-exempt, and fixed-rate bonds with long-term maturities (greater than 2 years) selected from issues larger than $50 million. The Barclays Capital U.S. Treasury Inflation Protected Securities (TIPS) Index measures the performance of intermediate (1- to 10-year) U.S. TIPS. |
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August 2012
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Entrepreneurs are part of what makes America great. Many citizens over 50, rather than retiring early, have started their own businesses and are enjoying personal and monetary rewards. In this month's feature article we present a story by Commonwealth Financial Network that gives you some food for thought on the possibilities of entering the world of entrepreneurship. China has been an economic dynamo for years, but recent reports indicate that the nation's output is slowing. A fascinating article from Kiplinger online describes the situation and points to some conclusions for the global economy, including our own. I came across an interesting piece on the web site depositaccounts.com that gives some good tips for avoiding those annoying bank fees that seem to chip away at our finances. I encourage you to take advantage of online banking because, in addition to being convenient, the service often leads to fee waivers. Check it out. Our nation's chronic unemployment is causing vast hardships to millions, and doesn't seem to be improving. The number of days the average person remains unemployed is now almost double the same figure for the 1981-83 recession. Slashing benefits could hurt the economy by further hampering purchasing power. Our second article from Kiplinger indicates that we may be headed for a "new normal." Finally, in our links section, you may be interested to find out, among other things, where the top ten American beaches are and who are the highest paid Olympian athletes. I would love to hear from our clients and e-newsletter readers. You can reach me at 614-888-2121 (or toll- free 877-389-2121), or send an e-mail to:
Sincerely, Joe
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Market Update
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Financial markets take one step back, two steps forward
July was a volatile month, with both stocks and bonds bouncing around only to end the month up slightly. Uncertainty-economic and political, domestic and international-drove the volatility. Throughout July, the S&P 500 Index moved more than 2 percent up and down, before ending the month up 1.39 percent, while the Nasdaq showed similar volatility and wound up essentially flat, with a small positive move of 0.15 percent. Domestic stocks suffered from announcements of a slowing economy, although earnings results were reasonably robust, with 71 percent of S&P 500 companies beating estimates, as of the last week of July. Still, only 43 percent of companies succeeded in beating top-line revenue estimates, the lowest percentage we've seen since the first quarter of 2009.
Technical indicators strengthened over the month, with the 50-day moving average well above the 200-day moving average for both indices. The S&P 500 has traded within a well-defined channel, which began back in early June (see chart). Equities ended July toward the upper bounds of the channel. Technical analysts will likely be watching for a breakout in either direction as a sign of where the market is headed for the remainder of the year.
International markets showed similar trends. The MSCI EAFE Index was up 1.13 percent, while the MSCI Emerging Markets Index was up 1.61 percent. Despite the improvement, technical indicators remained weak. The dominant influences on these markets were actions by official institutions. On July 5, both the European Central Bank (ECB) and the People's Bank of China announced rate cuts within minutes of each other. This fueled some speculation of coordinated action, but whether this was agreed upon ahead of time or just a coincidence is unclear.
Central bank speculation also took center stage toward the end of the month, when Mario Draghi, the ECB president, stated that the bank would do whatever it took to support the euro. Although the remarks were made in a meeting not primarily focused on the European debt crisis, investors extrapolated from Mr. Draghi's comments that he and the ECB might consider ramping up purchases of peripheral European debt. This resulted in a bounce back in the demand for both European equity and debt.
Slowing growth around the world, combined with political uncertainty, benefited fixed income. U.S. Treasury yields declined to all-time lows in July. After breaking below 1.5 percent, yields on the 10-year tumbled to 1.38 percent. This didn't last long, however, as they rebounded on Mr. Draghi's pledge to preserve the euro. Despite this setback, the Barclays Capital Aggregate Bond Index returned 1.38 percent over the month. U.S. Treasury yields are now at their historic lows, but they remain higher than yields in Germany, Switzerland, and Japan.
Investors continued to gravitate toward risky bonds as well, causing the Barclays Capital U.S. Corporate High Yield Index to return 1.90 percent in July. Low default rates and reasonably attractive spreads have resulted in the high-yield index outperforming the Barclays Capital Aggregate Bond Index year-to-date. On an absolute basis, yields are very low compared with historical standards, but relative to Treasuries they remain near average levels.
Overall, U.S. markets remain reasonably strong, although valuations are fair to high by historical standards. International markets are weaker on both an absolute and a technical basis and seem to depend significantly on governmental action, but they are more reasonably valued.
Focus on uncertainty from Washington, DC
Washington remained at the center of attention in July. The Supreme Court of the United States ruled that "Obamacare," formally the Patient Protection and Affordable Care Act, was constitutional, laying the grounds for implementation. Although the ruling did remove uncertainty over the act, it also effectively guaranteed that taxes would increase by at least the amounts written into the bill. The ruling also increased the perceived stakes in the upcoming election, with Republicans vowing to repeal the bill if they take control of the government.
Growing awareness of the consequences of the pending "fiscal cliff" also increased uncertainty. The fiscal cliff-a term used to describe numerous tax increases and spending cuts that will take effect at the end of this year unless explicitly repealed-would likely cut anywhere from 3 percent to 6 percent of gross domestic product (GDP) at the start of 2013. Given current growth levels of under 2 percent, this would likely mean a recession early next year unless Congress acts.
Finally, it is becoming clear that the U.S. will hit the federal debt ceiling again by early fall, well before the election. Given the acrimony and last-minute settlement of the issue last time, many investors expect that this year's process could be equally disruptive.
All of these factors have acted to increase uncertainty and postpone decision making by both consumers and businesses. This has, without question, been a contributing factor to slower U.S. economic growth.
Europe remains unsettled as well
Hurricane Greece continued to spin, without much effect in July, but Hurricane Spain spun back up in a big way. In the early part of the month, the Spanish banking system was found to be insolvent, and a hurried agreement was reached to recapitalize it. The details were somewhat foggy, but the speed and size of the agreement calmed markets. That calm fell apart later in the month, as the details became clearer, and Spanish government bond yields spiked back above the 7-percent threshold that is considered a red line. At the end of the month, the reaffirmation of support for the euro by Mr. Draghi calmed markets again.
Although markets were soothed at month-end, Spain's fiscal problems continued to worsen and other countries also disclosed worsening budget problems. France announced measures to increase public spending and lower the retirement age-directly contrary to austerity demands made on other countries. Germany is also showing signs of economic slowing, and political uncertainty is growing there as well. Germany's Federal Constitutional Court announced that it would not be rushed and would rule on the latest rescue measures on September 12. Should the court rule against the measures, the entire Spanish rescue package could unravel.
Although perceived risk has decreased in Europe, the underlying problems are largely unsolved, and the risk may ratchet up again at any time.
A growing but slowing economy
All of the uncertainty had a slowing effect on the U.S. economy. Although growth continued, the level of growth ticked down to a 1.5-percent annualized rate in the second quarter. This level of growth is weak by historical standards, but it was actually slightly better than some economists had feared. The quality of GDP growth was not as good in the second quarter compared with the first. Spending on durable goods weakened, indicating a reduction in consumer confidence. Reduced government spending continued to be a drag in the second quarter as well.
Job growth in July remained at a relatively low level of 80,000, while the ISM Manufacturing Index dropped to contractionary levels. Consumer confidence showed a drop at the start of the month. Real consumer income continued to rise, although retail spending declined for the third month in a row while the personal savings rate increased.
Although the rate of growth slowed, the fact that growth continued despite all of the uncertainty described above was encouraging. In addition, there were encouraging signs below the surface. In terms of employment, for example, both hours and average earnings increased, which may suggest that employers are choosing to increase overtime for existing employees rather than hire new workers-a trend that will eventually lead to an increase in hiring. Moreover, the housing market continues to show signs of recovery. On a seasonally adjusted basis, July showed the fourth monthly successive rise in prices, according to the Case-Shiller 20-City Home Price Index. Other indices showed improvement as well, and the supply of houses for sale remained below historical levels.
Slow and steady with risks of storms
Overall, the economy and markets have proceeded cautiously in July, with slow growth offset by macro uncertainty. Risks certainly remain at many levels-fiscal, governmental, and international-but the slow improvement of the U.S. economy looks likely to continue and provide the basis for sustained improvement over time, despite short-term volatility. Although it is important to be aware of the risks, it is even more important to remain focused on goals. Investors should seek to match the time frames of their strategies to their goals rather than let short-term concerns override long-term plans.
Authored by Brad McMillan, vice president, chief investment officer, at Commonwealth Financial Network.
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