3rd Quater Economic Update

Posted by on Oct 31, 2014 in Uncategorized | 0 comments

QUARTERLY ECONOMIC UPDATE     QUOTE OF THE QUARTER   “Plans are only good intentions unless they immediately degenerate into hard work.” – Peter Drucker     QUARTERLY TIP Paying off your home loan or other major consumer debt before you retire leaves you with less pressure to sell assets or make unexpectedly large withdrawals from retirement accounts in the future.       A review of 3Q 2014 THE QUARTER IN BRIEF Stocks ultimately advanced across Q3 2014 with the S&P 500 closing at a new peak of 2,011.36 on September 18. Still, the 3-month gain of the index was minor at 0.62%. A raft of indicators showed the economy in reasonable health, but not so healthy that the Federal Reserve was motivated to alter its exit plan for QE3. Home sales were up and down in the quarter; prices of key commodities fell. Overseas manufacturing gauges left Wall Street unimpressed; performance of foreign stock indices varied greatly. Questions emerged about how well the aging bull market might fare with oncoming shifts in U.S. monetary policy.1,2 DOMESTIC ECONOMIC HEALTH The Federal Reserve described the interval between the end of easing and the eventual alteration of the benchmark interest rate as a “considerable” time. “No news” at the Fed was good news for stocks.3   Household confidence surveys were in disagreement. The University of Michigan’s consumer sentiment index advanced from 82.5 at the end of June to 84.6 as September wrapped up; the Conference Board’s consumer confidence index went from a (revised) June mark of 86.4 to 86.0 in September.4   By September, the jobless rate was down to 5.9%, 0.2% beneath where it was in June. Employers added 243,000 new workers in July, 180,000 in August, and another 248,000 for September. The U-6 rate (unemployed + underemployed) had dipped to 11.8% by the end of the quarter.5   Retail sales were up a healthy 0.6% in August, and the Commerce Department revised July’s headline number to show a 0.3% gain. Households didn’t have to contend with sudden inflationary pressures – the year-over-year rise in the headline and core Consumer Price Index was just 1.7% in August. In July, the headline CPI had shown a yearly gain of 2.0% and the core CPI a 12-month gain of 1.9%. (Both the headline and core Producer Price Index showed 1.8% annualized inflation by August.)4   Summer brought huge fluctuations in headline durable goods orders: +22.5% for July and -18.2% for August. Core hard goods orders, minus aircraft, were simply down 0.5% for July and up 0.7% in August. Amid all this, the influential purchasing manager indices maintained by the Institute for Supply Management approached the 60 mark – the factory PMI went...

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Which Financial Documents Should You Keep on File

Posted by on Oct 31, 2014 in bank statements, cars, credit card statements, insurance, IRS | 0 comments

Which Financial Documents Should You Keep On File? … and for how long?  Provided by Frederick Saide, Ph.D. You might be surprised how many people have financial documents scattered all over the house – on the kitchen table, underneath old newspapers, in the hall closet, in the basement. If this describes your financial “filing system”, you may have a tough time keeping tabs on your financial life. Organization will help you, your advisors … and even your heirs. If you’ve got a meeting scheduled with an accountant, financial consultant, mortgage lender or insurance agent, spare yourself a last-minute scavenger hunt. Take an hour or two to put things in good order. If nothing else, do it for your heirs. When you pass, they will be contending with emotions and won’t want to search through your house for this or that piece of paper. One large file cabinet may suffice. You might prefer a few storage boxes, or stackable units sold at your local big-box retailer. Whatever you choose, here is what should go inside: Investment statements. Organize them by type: IRA statements, 401(k) statements, mutual fund statements. The annual statements are the ones that really matter; you may decide to forego filing the quarterlies or monthlies. When it comes to your IRA or 401(k), is it wise to retain your Form 8606s (which report nondeductible contributions to traditional IRAs), your Form 5498s (the “Fair Market Value Information” statements that your IRA custodian sends you each May), and your Form 1099-Rs (which report IRA income distributions).1 In addition, you will want to retain any record of your original investment in a fund or a stock. (This will help you determine capital gains or losses. Your annual statement will show you the dividend or capital gains distribution.) Bank statements. If you have any fear of being audited, keep the last three years’ worth of them on file. You may question whether the paper trail has to be that long, but under certain circumstances (lawsuit, divorce, past debts) it may be wise to keep more than three years of statements on file. Credit card statements. These are less necessary to have around than many people think, but you might want to keep any statements detailing tax-related purchases for up to seven years. Mortgage documents, mortgage statements and HELOC statements. As a rule, keep mortgage statements for the ownership period of the property plus seven years. As for your mortgage documents, you may wish to keep them for the ownership period of the property plus ten years (though your county recorder’s office likely has copies). Your annual Social Security benefits statement. Keep the most recent one, as it shows your earnings record from...

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What are the markets telling us

Posted by on Oct 23, 2014 in Uncategorized | 0 comments

Last week saw unusual volatility in all financial asset classes which can only be described as dangerous if not ominous. On Wednesday, the 10-year U.S. treasury, the key financial instrument which serves as a marker for the equity market due to its liquidity and its status as the most “risk free” asset in the world, traded at a yield of 2.21 percent and then dropped to 1.86 percent within a few hours. In 2008, we saw this kind of volatility in the 10-year U.S. treasury. Seeing it again last week cannot be ignored or dismissed as typical market over reaction or “exuberance.” Many investors, professionals, and media pundits look to the Volatility Index (VIX), a measure constructed by the Chicago Board of Options Exchange (CBOE). What exactly can we learn by studying the VIX; and, what are the cable market experts telling us? To begin, the VIX is an index which measures the amount of volatility in the prices charged for options. The benchmarks used are the S&P 500 and the options included are either in their first month or second month until expiration. The VIX is always quoted as a number. The VIX is important because it suggests a reasonable expectation of a projected range within which the S&P is likely to trade within the next 30 days. On Monday, October 13, the VIX closed at 25.20 while on Friday, October 17, it closed at 21.99 a negative adjustment of 3.21 percent. The reading of the VIX suggests the options traders and investors anticipate that between now and the next thirty days the S&P will trade within a negative 2.45 percent range. Next, the actual performance of the S&P may be different than the anticipated trading range. The VIX changes constantly even after the markets are closed based on continuing changes in the anticipated volatility in the S&P closest two months’ option premiums. Since the VIX changes constantly, so too does the S&P 500’s trading range for the next month is being continually revised. Regardless of the constant movement, the VIX does give an accurate picture of what traders and investors think about the state of the current equity market. Anticipating future price action is valuable depending on what type of trader or investor you are. Most seniors and boomers are buy-and-hold investors, so volatility does not normally drive their actions. However, Sam Stovall, chief investment strategist for Standard & Poor’s expects a 10 to 20 percent market correction. He also points out the buy-and-hold investors normally need 40 to 70 months to recover from a major market downturn. For nearly 70 years, most investors and advisors have used a 60-40 split between equities and bonds to guide...

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The Market’s Wild Swings

Posted by on Oct 21, 2014 in Uncategorized | 0 comments

A hugely volatile week concludes. What’s next as earnings season gets underway?  Provided by Frederick Saide, Ph.D.   During this past trading week, volatility ruled Wall Street. In fact, stocks either fell or rose 1.5% or more on three consecutive trading days. That had happened only 54 times since 1928.1     What prompted these ups & downs? Several factors.  The International Monetary Fund just cut its global and Asia growth forecasts for 2015 and stated that the Eurozone could soon slide into another recession. European Central Bank president Mario Draghi wants easing to stimulate the Eurozone economy, yet German finance minister Wolfgang Schäuble doesn’t. The DAX and CAC 40 (the benchmark indices of Germany and France) have both corrected since spring.2   So has the Russell 2000, which wrapped up last week down 13% from its peak in early March. Oil entered a bear market Thursday. Finally, the end of the month will presumably see the end of the Federal Reserve’s quantitative easing effort – which has played a big role in the market’s bull run. The S&P 500 ended Friday down more than 5% from its September 18 record close, and Friday actually saw a rare 100-point drop for the Nasdaq Composite (102.10, to be precise).2,3   Where might things go from here? Stocks could fall further – keep in mind that the S&P has gone more than two years without a correction, definitely an abnormality. On the other hand, fall earnings seasons have tended to give stocks a lift throughout history, so let’s hope history repeats. Bespoke Investments cites some encouraging data: in instances where the market sees 1.5% or greater swings on three straight trading days, the S&P has averaged a gain of 0.55% on the next trading day and 1.13% during the following trading week.1   How big a drag will Europe continue to exert on the market? Agreement between EU finance ministers would give domestic and foreign stocks a lift. If that isn’t there, perhaps earnings – the “mother’s milk” of stocks – will help guide the market back to equilibrium and gains.2    Perhaps the wisest words came from Cornerstone Wealth Management CIO Alan Skrainka, who told USA TODAY Friday: “The market was overdue for a correction. Not every correction develops into a bear market. Every economic slowdown is not a recession. Look for opportunities and maintain a long-term perspective.”3     Frederick Saide may be reached at 908-791-3831 or freds@moneymattersusa.com. http://foundationinsurance.moneymattersusa.com   Read our blog: www.retirementincomeconnection.com and follow me on www.mycentraljersey.com        This material was prepared by a third party, and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. Please note...

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Fall Financial Reminders

Posted by on Oct 20, 2014 in Uncategorized | 0 comments

Fall Financial Reminders The year is coming to a close. Have you thought about these financial ideas yet?  Provided by Frederick Saide, Ph.D.  As every calendar year ends, the window slowly closes on a set of financial opportunities. Here are several you might want to explore before 2015 arrives.    Don’t forget that IRA RMD. If you own one or more traditional IRAs, you have to take your annual required minimum distribution (RMD) from one or more of those IRAs by December 31. If you are being asked to take your very first RMD, you actually have until April 15, 2015 to take it – but your 2015 income taxes may be substantially greater as a result. (Note: original owners of Roth IRAs never have to take RMDs from those accounts.)1    Did you recently inherit an IRA? If you have and you weren’t married to the person who started that IRA, you must take the first RMD from that IRA by December 31 of the year after the death of that original IRA owner. You have to do it whether the account is a traditional IRA or a Roth IRA.1   Here’s another thing you might want to do with that newly inherited IRA before New Year’s Eve, though: you might want to divide it into multiple inherited IRAs, thereby promoting a lengthier payout schedule for younger inheritors of those assets. Otherwise, any co-beneficiaries receive distributions per the life expectancy of the oldest beneficiary. If you want to make this move, it must be done by the end of the year that follows the year in which the original IRA owner died.1  Can you max out your contribution to your workplace retirement plan? Your employer likely sponsors a 401(k) or 403(b) plan, and you have until December 31 to boost your 2014 contribution. This year, the contribution limit on both plans is $17,500 for those under 50, $23,000 for those 50 and older.2,3   Can you do the same with your IRA? Again, December 31 is your deadline for tax year 2014. This year, the traditional and Roth IRA contribution limit is $5,500 for those under 50, $6,500 for those 50 and older. High earners may face a lower Roth IRA contribution ceiling per their adjusted gross income level – above $129,000 AGI, an individual filing as single or head of household can’t make a Roth contribution for 2014, and neither can joint filers with AGI exceeding $191,000.3   Ever looked into a Solo(k) or a SEP plan? If you have income from self-employment, you can save for the future using a self-directed retirement plan, such as a Simplified Employee Pension (SEP) plan or a one-person 401(k), the so-called...

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