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| January 12, 2010 |
Issue 28 | |
Journey with DWM to
What's Next
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Some economists say "up" and some say "down". The truth is, no one knows the future. But affluent, enlightened investors recognize that DWM strategies perform in up markets and protect in down markets. Regardless of what the future holds, with DWM, savvy investors are ready for what's next. | |
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Jobs: It's Tough Out There |
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Friday's jobs report was a big disappointment. Optimists had hoped for the first positive numbers in this area for the past two years. Unfortunately, the results showed that non-farm payrolls had dropped by 85,000 in December and the nation's unemployment rate held firm at 10%.
What was more amazing are two other statistics. First, the employment rate is at 58.2%, the lowest rate since 1983. And, there are now more government employees than employees in goods-producing industries. We've gone from providing jobs in profit-making industry to providing jobs in "profit-eating" government. Please see below:
It's not all glum-temp help is improving and tends to be a good early indicator of more hiring to come. In the meantime, employees, more than ever, are expected to keep pulling on their oars.
For more information, click here: |
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Economy: The Lost Decade |
The U.S. economy has expanded for seventy years, but by a wide range of measures, it stagnated in the first decade of the new millennium. It's more than just the stock market that lost ground over the last ten years:
· Job Growth was essentially zero
· Economic output (GDP) was weak
· Household net worth (inflation adjusted) fell as stock prices stagnated
· Home prices declined in the second half of the decade
· Consumer debt skyrocketed.
Actually, to those that recognize that the economy goes in cycles, the last ten years should not have been a big surprise.
Take a look at the salad days of the 1980s and 1990s on the charts.We can remember those years with great affection. They were great, far above the century average annual returns of 10-12% per year. And, as any good mathematician will tell you, you can only deviate from the historical norm for so long before you start to "regress to the mean".
O.K. So, if we regressed to the mean in the last ten years in this "lost decade" does that foretell better times in the next ten years? The answer is most definitely yes.
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Palatine, IL 60067
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Recordkeeping: Slim Down Your Files in 2010 |
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Are you sick of all those paper records, Bunky? Want to just start a big bonfire? No worries. There are better solutions.
As you finish your tax return this year, take the opportunity to clean house. With only a few exceptions, you don't need to keep all of those papers. You might even want to digitize your records and go digital.
First, you'll need a shredder (to guard against identity theft). Then, go through the old files, determining which to keep and which to shred. You should keep your tax returns forever, but you can get rid of the supporting documents, such as canceled checks, old receipts and acknowledgements for charitable donations, three years after you filed your taxes. Keep receipts for major home improvements until you sell the house.
You generally can toss your monthly investment statements when your year-end statements arrive. And make sure to keep any Form 8606 tax records reporting nondeductible traditional IRA contributions.
To really clear the decks, go completely paperless by going digital. Kiplinger's February 2010 magazine indicates that electronic records are as legally valid as the original paper ones, so PDF or scan your crucial documents. Most tax preparers will provide an encrypted PDF of your tax returns, if you request it. You might even decide during this whole process to stem the onslaught of paper by signing up for online banking and bill paying, including electronic delivery of your bills.
If you go digital, be sure to keep key records in at least two places-on a hard drive as well as backed up on a CD or even at a website. This applies to tax returns, estate planning documents and other important records. One such site, www.mypersonalvault.com provides an excellent location to store your digitized records. You can upload documents directly from your computer or even fax them to your vault using your vault fax number.
For the Kiplinger's article: click here |
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World: Chinese Overtake Japan |
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Next year, China will overtake Japan to become the world's second-largest economy. Its rapid ascent has led some to question whether China will follow in Japan's footsteps, with the bursting of a massive bubble followed by decades of decline.
It's amazing to reflect on how Japan's relative importance in the world economy (measured here as its GDP as a share of the US GDP) has fallen over the last two decades. With its aging and shrinking population, there is no reason to believe Japan's decline can be reversed.
For China, this is a major accomplishment for a country that only a few decades ago was among the poorest in the world. And, according to the Economist, China's output is more sustainable than Japan's.
China is still far poorer than Japan was its peak and thus has more room to improve productivity. As labor continues to migrate from agriculture to industry, their economy should come more in line with the developed world. In addition, China's stimulus package has produced much needed infrastructure that will reinforce its future growth.
According to the Economist, if China can shift away from investments and exports in the long run toward more domestic consumption, that would make their output more sustainable, and help it to avoid experiencing a bubble like Japan's.
For the Economist article: click here |
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