|
The light at the end of the tunnel
|
 As we look at the trajectory of the U.S. economic recovery, once again this year we see a light at the end of the tunnel and wonder if it is an oncoming train. At this point, it looks as if 2012 may bring the start of sustainable growth. But the end result remains vulnerable to outside influences, so the real question is, How will we know?
The bright spots: employment and housing
When it comes to sustainable growth, economists focus on a number of key indicators, including: - Employment. Employment generates wage income, which is the base of consumption. Consumption accounts for more than two-thirds of our economy, so without growing employment, we can't grow anything else with any lasting momentum. The 2012 employment picture has been encouraging, despite some recent weakness. Increases in employment have been accompanied by growth in incomes, which has helped to support an increase in consumer spending.
- Housing. We're starting to see rising prices in some markets, as well as an uptick in housing starts. Combine that with high affordability levels, low mortgage rates, and rising rents, and you've got a recipe for a continued recovery.
- Durable goods demand. You may not need a new car every year, but you will eventually, and it seems that many Americans are digging into their pockets to fund big-ticket purchases again.
Are these improvements sustainable? They could be. The current level of employment growth seems to be sustainable around a trend line that would promote continued recovery; continued growth in spending would follow as a result. The housing recovery and growth in durable goods demand should also be able to continue their forward trajectory. Factor in a gradual recovery in local and state government spending and slow growth in business investment-both of which are occurring-and the recovery appears to be on track. So what could derail it?
The obstacles: political vs. economic
Major obstacles to the ongoing economic recovery would likely be external events: - A war in the Middle East
- A European economic collapse
- A significant political event in the U.S.
Of the three, the most probable seems to be the last (although ongoing debt concerns in Europe have certainly added to market volatility). Notably, however, all three examples are political, not economic, events. That political events now trump economic ones is a reflection of the new world order. In some sense, though, this is just a reversion to the origins of the economics discipline, when it was known as political economy. Events in the real world are once again dominating those in the financial world. Which brings us to the major issue of the day. The oncoming train?
It's no secret that the U.S. has budget problems, which came to light in a very public way last summer with the debate in Congress over whether or not to raise the debt ceiling. Now, we have to face the reality that this year's presidential election will determine the government that will have to make long-term decisions about how to deal with the country's budget woes. To understand the basis of the decisions they will make, we must first understand the underlying facts: - The so-called fiscal cliff. The expiration of the Bush tax cuts, the sequestration of government spending, and the renewed debate over the debt ceiling are all expected to hit at the end of the year-or sooner. As a result, we could be facing some extreme uncertainty and the possible derailment of the economic improvements we've seen thus far.
- Spending and taxes. We currently spend about 50 percent more than we raise in taxes; taxes cover about two-thirds of spending and borrowing accounts for about one-third.
- Should we just raise taxes? The numbers above mean that if we raised taxes without cutting spending, taxes would have to go up by about 50 percent. - What about cutting spending alone? We would either have to substantially eliminate discretionary spending (defense and other government programs) or cut back on discretionary spending while also reducing Social Security and Medicare spending. Neither "solution" would sit well with U.S. citizens; just look at what happened in Greece. The light
Despite how uncertain our economic picture may be, especially when you consider the political obstacles that could derail the recovery, there are positive developments at work. As financial advisors, we work with investors to help keep their financial plans on track, regardless of what the future brings. And we'll be keeping an eye on that light in the tunnel and hoping for the best. � 2012 Commonwealth Financial Network |
|
Top publishers join forces to create the "Netflix for magazines"
|
We constantly read about the potential effect of digital media on the publishing industry. Yahoo Business reports that a new service called "Next Issue" will offer readers 75 magazines per month via electronic tablets. It seems as though it was inevitable. At a time when media companies of all types and sizes are embroiled in a battle for your eyeballs so to speak, a new digital clearing house has emerged that offers all your favorite magazines in one place.
Netflix for magazines
"We think of Next Issue, very simply, as NetFlix for magazines," says Morgan Guenther, CEO of Next Issue Media. "You get all the greatest titles in the world, available on-demand on your tablet for one low price every month."
Specifically, $10 to $15 month, or a $120 - $180 year depending on which plan you select and whether you want access only to monthly titles, or seek to read weekly titles as well. Next Issue currently includes about 75 magazines via Apple's iPad or Google's Android tablets, which account for about half the industry's overall circulation.
Lower cost than magazine subscriptions
For comparison, a one-year subscription to People magazine alone would cost about $100, so for even the moderate readers out there, Next Issue clearly offers value. "So if you think about our business, we're going for the reader," Guenther says, explaining his company's relatively narrow stable of titles compared to a universe of 5,000 to 8,000 magazines. While they currently, theoretically, have access to half the available market, adding additional content in the future is not only easy, but likely.
New magazine issues provided simultaneously with news stand release
One area where he says Next Issue differs from NetFlix is that there is no waiting period for new releases, since the service offers all current content and back issues of its available titles.
As for its effect on the magazine industry, a $25-30 billion business Guenther describes as still being robust but in secular decline, the fact that all the publishing heavyweights have not only signed-on but also are stakeholders, speaks volumes.
Owned by publishers
"We are often likened to being the Hulu for magazines since we're owned by the five big publishers in the world; News Corp, Meredith, Hearst, Time Inc., and Conde Nast," Guenther says.
Even so, he emphasizes that his is a different, far more niche business than one targeting a mass population via mailboxes. For Next Issue, he says, it's all about "mobile, high-resolution, internet connected devices."
|
|
Strong passwords ward off attacks by e-mail hackers
|
Commonwealth Financial network recently published this surprising information on hackers and how using strong passwords help make your finances more secure.
Let's review two of the major types of attacks on client e-mail accounts and how a strong password can help.
Brute-force attacks. In a brute-force attack, hackers run a program that systematically tries every possible combination of letters, numbers, and symbols until it finds one that works. Although this type of attack can eventually crack any password, the more complex the password, the longer it will take to crack (and the more likely hackers will be to give up first). If a client's password is just four letters or numbers, it will be compromised instantaneously in a brute-force attack. A simple increase to eight characters provides exponentially greater protection; adding a letter and a symbol bolsters that protection even further.
Dictionary attacks. Similar to a brute-force attack but not as comprehensive, a dictionary attack program runs through words until it finds a match. Clients who use everyday words (i.e., anything found in a dictionary) as passwords are vulnerable to this type of attack.
What qualifies as a strong password? For the greatest protection, your clients should be using eight-character passwords made up of upper- and lowercase letters, numbers, and symbols.  Source: LockDown, www.lockdown.co.uk
The Yahoo, Hotmail, and Gmail weaknessThe main security flaw in personal e-mail accounts, such as those from Yahoo!, Hotmail, and Gmail, is that they don't automatically disable after numerous invalid password attempts. If someone tries to guess a client's password, they will have an infinite amount of time and chances to do so. This makes it all too easy for hackers to gain access to clients' e-mail accounts-and is even more reason to encourage clients to use strong passwords. After all, these are often the same e-mail accounts that clients use to correspond with your office! Read the whole article here. |
10 annoying hotel fees and how to avoid them
|
Here's how to avoid invoice shock when you stay in a hotel. Cameron Huddleston, Contributing Editor at Kiplinger.com gives some helpful advice on how to lower a hotel bill. Fees and surcharges collected by hotels are expected to reach a record high of $1.95 billion this year, according to a study by the New York University School of Continuing and Professional Studies. Yes, that's billion with a "B" -- and the number reflects an increase in the amounts charged, as well as a 5% increase in the number of rooms occupied in 2012.
According to the study, hotel fees and surcharges emerged as an industry practice in 1997 and have increased every year except 2002 and 2009 (when lodging demand declined). Often, you might not even be aware of the fees hotels charge until after you've booked a room or received your bill at checkout, says Anne Banas, executive editor of SmarterTravel.com. You often can avoid extra charges, though, if you know which amenities hotels typically add a fee for using. Here are ten common ones -- and advice from Banas on how to keep these fees off your bill.
1. Resort fees. Resorts often charge extra for the plethora of activities and services they offer. Banas says that you need to ask when you book your room what sort of fees are charged. Find out whether you'll have to pay them if you don't use the services. If the answer is no, make sure charges don't show up on your bill for services you didn't use. If they do, ask to have the fees removed.
2. Early check-in fee. Banas says that some hotels will charge you extra if you check in before a certain time. If you arrive early, ask whether there is an early check-in fee. If so, ask if the hotel will store your bags for free (most will) until you check in later. That way you can start seeing the sites without lugging around your bags.
3. Additional person fee. Hotel room rates are based on double occupancy. You usually don't have to pay extra for kids in the room. But hotels often charge $20 to $50 per additional adult per night, Banas says. To avoid this fee, you need to be aware of it before you book so that you can search for another hotel that doesn't charge it.
4. Wi-Fi fee. A lot of hotels charge $10 to $20 per night for Wi-Fi. Banas says that one way to get around the charge is to sign up for the hotel's loyalty program, which should be free. Generally, you'll get privileges, such as free Wi-Fi, immediately. You're also more likely to find free Wi-Fi at budget hotels, Banas says.
5. Mini-bar and snack fee. Most travelers know that the beverages in mini-bars are pricey -- and many avoid them for that reason. You don't have to consume them to see a charge on your bill, though. Simply moving an item in the mini-bar can result in a charge because everything in that refrigerator is on a sensor. If you see a charge for something you didn't consume, show the hotel clerk that it's still there and contest the charge. Also watch out for those complimentary-looking bottles of water or baskets of snacks -- they probably aren't free. Even if you don't see a price attached to them, ask whether there is a charge.
6. Parking fee. Hotels in major cities charge $25 to $35 a day for parking, Banas says. And some hotels have mandatory valet parking, so you'll have to pay a tip, too. Before arriving at your hotel, use Google Maps to get a street view of the area where you'll be staying and look for nearby parking garages. Then call to get a price. One way to avoid parking costs altogether is to look for hotels with free parking promotions. You often can find such offers listed on a city's visitors bureau or tourism Web site. Also, you usually can find free street parking Saturday evening until Monday morning in most large cities.
7. Gym fee. Some hotels tack on a gym fee, so make sure you ask for it to be removed if you didn't use the gym.
8. Housekeeping gratuity. If you usually leave a tip for the housekeeper, check your bill first next time. Banas says that some hotels add a 10% housekeeping gratuity. You don't want to pay twice by leaving a tip in your room, too.
9. Spa gratuity. When you make a reservation at a spa, ask whether a gratuity for massage services will be added to your bill, Banas says. Don't fall victim to over-tipping by leaving a little cash for the therapist if you're already being charged a gratuity.
10. Telephone surcharge. Don't pick up the phone in your hotel room for any reason other than to call the front desk, Banas says. Not only do hotels charge for long-distance calls, but also they often make you pay for local calls. So use your own phone for all calls.
Avoiding these fees means more work for the consumer, Banas says, but it can be worth it. However, she says that you shouldn't let a fee that you can't get removed from your bill worry you too much if you've gotten a great rate at a good hotel -- especially one that offers some nice freebies. |
What's happening now
|
San Francisco tops the list of America's "Best Places to Live," according to Bloomberg's Business Week. Columbus came in at number 32, but Cleveland is number 6!
Facebook is launching a new "gifts" feature which will keep track of special dates, like birthdays, and ask a user's friends whether they want to send something. The service will send a gift a the click of a mouse, but you have to give Facebook your credit card details. Will this work?
Is Walmart planning on marketing its own branded tablets and book readers? They're dropping the Amazon Kindle line.
Did you know that the government doesn't need a warrant to track who you call or e-mail? There has been a massive spike in "non-content" surveillance by federal law enforcement over the last two years, jumping 60% from 23,535 cases in 2009 to 37,616 in 2011.
Here are five consumable products that aren't worth the extra cost. Dish washing soap is at the top of the list
|
|
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. |
|
|
|
|
October 2012
| 
|
Commonwealth Financial Network's article this month is optimistic about the country's sustainable growth. Employment, housing, and durable goods demand all are forecast to be stronger for the rest of the year. The obstacles to economic growth are unforeseen external events.
The digital world continues to make us more technology obsessed. New Issue, a magazine subscription service will enable us to read 75 magazines for a reasonable monthly cost, using electronic tablets such as iPad, Kindle Fire, Galaxy, Nook, etc. There will be no waiting period for new magazine issue releases.
Does accessibility to online financial information make you feel insecure about the possibility of your account(s) being hacked? Commonwealth points out that strong passwords are essential to keeping your finances secure. The strongest password combinations turn out to be a mix of alpha, numeric, and symbols.
Hotels are notorious for adding unexpected fees to your bill. We want you to enjoy your vacation, so we're providing you with 10 tips for avoiding annoying surcharges when you're traveling.
Don't forget to scroll down to our last section, "What's Happening Now" for some news that you may not have heard or read. For example, did you know that Columbus made Business Week's list of the country's best cities, but we're ranked below Cleveland and Cincinnati? We are open to discussing any questions you may have about your finances. Please feel free to contact us at 614-888-2121 (toll-free 877-389-2121), or send an e-mail to:
Sincerely, Joe
|
Market Update
| Up the wall of worry
We had another strong month to end the quarter, with markets generally finishing in the black, though well off their mid-September highs. The dominant factor in all markets was central bank action, with the prize for the most effective action going to the European Central Bank (ECB) for its announcement that it would support the sovereign bond markets for nations in trouble. The Federal Reserve (the Fed) got the silver medal this quarter for its announcement of unlimited quantitative easing, and the Bank of Japan and the Chinese central bank also joined the party.
Not surprisingly, markets responded. The S&P 500 Index rose 2.58 percent for a very strong September, and the Nasdaq posted a solid return for the month of 1.61 percent. Both indices posted strong quarterly results, with the S&P 500 up 6.35 percent and the Nasdaq up 6.17 percent.
Technicals remained very strong, with both indices well above their 50- and 200-day moving averages. The Nasdaq remained within its previous trading channel, while the S&P 500 broke out to the high side, though it later moved back in, suggesting that the move may have been premature.
U.S. fundamentals were weaker than the technicals. Earnings guidance continues to be generally negative and blamed on the weak global economy. The divergence between the strong technical results and the weaker trends in fundamentals is something we continue to watch closely.
International markets showed very similar trends to those of the U.S., but to an even greater degree. The MSCI EAFE Index was up a very strong 2.96 percent for September and 6.92 percent for the quarter, while the MSCI Emerging Markets Index was up an even more impressive 5.84 percent for the month and 6.97 percent for the quarter. Again, however, end-of-month results were down from higher mid-month levels for largely the same reasons as the U.S. markets. Positive factors were the ECB announcement, the decision by the German constitutional court that the rescue plans in the European Stability Mechanism were indeed constitutional, and the perception that Greece and Spain had started to get their houses in order. Negative factors were the realization toward month-end that the problems in those countries remained unresolved.
Despite the Fed's QE3 announcement, the 10-year Treasury yield ended the third quarter at 1.63 percent, within a basis point of where it had begun. Over the course of the quarter, however, rates proved quite volatile, falling below 1.4 percent and rising above 1.9 percent. Meanwhile, riskier bonds experienced spread tightening on a widespread risk asset rally. Junk bond yields rallied from 7.3 percent to 6.6 percent, according to the Bank of America Merrill Lynch High Yield Master II Index, and the spread over Treasuries tightened from 5.7 percent to 5 percent. On a historical basis, yields are at extreme lows. On the other hand, spreads remain higher than in the 2005-2007 time frame, although they still imply a relatively optimistic outlook for financially stressed companies.
The strong performance of risk assets in the first half of September depended largely on government action, and the weakness in the second half suggested that the effect of those actions may not last. Experience with past announcements by the Fed in the U.S. and the ECB in Europe also suggest that the effects may be temporary. Overall, although the month and quarter as a whole had excellent results, the pending lack of further government support and weakening economic and business fundamentals suggest caution.
Uncertainly rules worldwide
Reasons for uncertainty remain in each of the major economic areas. In the U.S., the upcoming presidential election has exacerbated concerns over impending tax increases and spending cuts known as the fiscal cliff. Either of these on its own might create volatility, but the combination of the two has had the effect of discouraging businesses and consumers from investing and spending. At the start of the quarter, employment and economic activity was growing at a reasonably healthy pace in the U.S. During the quarter, however, as uncertainty mounted, most measures of economic activity declined.
Europe faced its own set of elections and fiscal challenges. Debt problems in Greece and Spain continued to worsen during the quarter, as their economies weakened. Despite the periodic support of policy announcements, there were riots in both countries by quarter-end. Italy and France continued to wrestle with their fiscal issues, with no resolution in sight. Even Germany faced a weakening economy and a consequent dip in political support for the whole European project. At the end of the quarter, despite very real progress made, the future of the euro was in doubt by many.
Finally, although China does not have elections, it does have a pending change of government. Domestic political woes during the quarter included the downfall of Bo Xilai, a senior politician who had been tipped as a candidate for the highest level of power. Moreover, the incoming top man, Xi Jinping, disappeared from public sight for two weeks with no explanation. This uncertainty at the top of the government has exacerbated the nation's economic uncertainty. China's economy continued to slow during the quarter, and growth approached levels that historically were thought to risk social unrest. Perhaps, as a consequence, the government has encouraged nationalism, which has led to an emerging conflict with Japan and other nations over the ownership of islands in the surrounding seas.
Economies respond to uncertainty
In light of all this, it is no surprise that the U.S. real economy continued to exhibit weakness. Employment gains slowed substantially over the quarter, and business activity indices fell. Manufacturing indices flirted with an outright decline, and, although service industry indices showed stronger performance, they were lower than earlier in the year.
Not all of the news, however, was bad. Housing remained a bright spot. According to the Case-Shiller 20-City Home Price Index, the beginning of the third quarter marked the first time that home prices had risen on a yearly basis since the artificial boost caused by the 2010 government new homebuyer program (see chart). Prior to that, prices had been falling since the end of 2006. Consumers appear to be slowly taking advantage of attractive 30-year mortgage rates, which fell to a historic low of 3.45 percent by quarter-end, according to the Fed.
With its announcement of QE3, the Fed made clear its intention to keep mortgage rates at low levels, with the goal of extending the current housing market rebound. In 2012, housing affordability, defined by the ability to afford a median mortgage on a median income, hit its most attractive level since data collection began in 1986. Housing is a foundational component of any economic recovery, and the fact that it continues to recover suggests that a stronger overall recovery may follow once some of the political uncertainty has been resolved.
Light at the end of the tunnel
Despite the current levels of uncertainty in economics and politics, in many ways, we are in a better place now than we have been in for several years. In the U.S., overall debt levels have been reduced, and employment has recovered. Consumer spending remains relatively strong, and the economy continues to grow. In Europe, much of the uncertainty revolves around problems that are now known, rather than estimates of unknown problems. We have made substantial progress over the past several years, and the problem now is slow growth, rather than decline.
It is also worth bearing in mind that, if uncertainty is a major driver of the current slow growth, then the election may resolve much of that uncertainty, clearing the way for faster growth. Even if the election does not fully clarify the situation, it will lay the groundwork for future resolution. In short, although risks remain, we are considerably closer to the end of the tunnel than we were.
As such, it is important to stick to long-term planning to help ensure that you are in a position to benefit from long-term growth. Short-term uncertainty and volatility notwithstanding, the U.S. appears to be among the best-positioned nations in the world for long-term growth.
Authored by Brad McMillan, vice president, chief investment officer, at Commonwealth Financial Network.
| |
|
|
|
|
