Monthly Archives: March 2018

Saving and Investing

March 26, 2018

The Markets

Why am I saving and investing?

After a week like last week, it’s an important question. There are many reasons people save and invest, including to:

• Live the life they want today and in the future
• Accumulate resources so they’re prepared for any bumps in the road
• Provide an education for their children• Offer assistance to parents
• Support a young person with a disability
• Do good in the world
• Live comfortably in retirement without anxiety

However, none of these reasons have anything to do with short-term market fluctuations. 

Last week, major U.S. stock indices experienced a selloff, and we saw a dramatic downturn in stock markets. The Dow Jones Industrial Average was down 5.7 percent, the Standard & Poor’s 500 index lost 6 percent, and the NASDAQ fell 6.5 percent, reported Barron’s.

Those are big moves for a single week. The kind of moves that light up the emotion centers of investors’ brains and make them want to sell.

It’s not a new phenomenon. In 2002, in an article for CNN Money, Jason Zweig explained the brain’s potentially negative influence on investment decisions, “But in the world of investing, a panicky response to a false alarm – dumping all your stocks just because the Dow is dropping – can be as costly as ignoring real danger. For one thing, it can cause you to flee the market at a low point and miss out when the market bounces back. A moment of panic can also disrupt your long-term investing strategy.”

So, what happened last week? In short:

The Fed raised rates, as expected. The Federal Reserve raised the Fed funds rate by a quarter of a percent, which may benefit savers and investors, but will make borrowing more expensive.
Tariffs triggered trade war worries. The Trump administration levied tariffs on China, raising concerns of a global trade war.
You’re fired! There was additional turnover among senior advisers to President Trump.
Can they do that? British news reported a data analytics firm has been influencing elections around the world in some unsavory ways.
Don’t share my data! There was news a social media firm had shared the personal data of thousands with a researcher who shared it with a third-party firm without permission.
Sigh. Another data breach. An online travel company experienced a data breach that may have exposed the personal information of 880,000 users.
The economy is chugging along. Last week’s U.S. economic releases were overshadowed by everything else, but many indicated a strengthening economy, reported Barron’s.

That’s a lot to take in over the span of five days. The critical thing is to recognize these short-term events are unlikely to change your long-term financial goals. Financial decisions, including buying and selling investments, are important and can be life shaping. They should be grounded by long-term financial goals and foundational principles of investing. They should not be based on the brain’s instinctive fear and flight response. 

  

LET’S TAKE A GOOD NEWS BREAK. After last week, we could all use some good news. Here are 10 intriguing headlines from the Good News Network:

1. Scientists Believe They Found a Way to Stop Future Hurricanes in Their Tracks
2. Strangers Rally Around 13-Year-old Whose Rock Museum was Robbed
3. Dog that Shoplifted a Book on ‘Abandonment’ is Given the Love It was Asking For
4. Stranger Becomes Honorary Grandma After She Opens Home to Stranded Father in Distress
5. We’re Not Spinning a Yarn Here: Knitting May Boost Health and Happiness
6. Robot Becomes Part of the Community After Easing Daily Burden of Water Collection in Remote Village
7. Instead of Using Trees, Scientists are Making Sustainable Paper Out of Manure
8. World’s First Mass-Produced, 3D-Printed Car is Electric and Costs Under $10K
9. This Pollution-Gobbling City Bench Can Absorb as Many Toxins as 275 Trees
10. Free Clothing Hung on Streets to Help the Homeless Stay Warm

There is a lot of good news in the world. Unfortunately, it doesn’t pack a wallop like bad news does, so we hear less about it. 

Weekly Focus – Think About It 

“When the weather changes, nobody believes the laws of physics have changed. Similarly, I don’t believe that when the stock market goes into terrible gyrations its rules have changed.” 
Benoit Mandelbrot, Mathematician and polymath

* These views are those of Carson Group Coaching, and not the presenting Representative or the Representative’s Broker/Dealer, and should not be construed as investment advice.
* This newsletter was prepared by Carson Group Coaching. Carson Group Coaching is not affiliated with the named broker/dealer.
* Government bonds and Treasury Bills are guaranteed by the U.S. government as to the timely payment of principal and interest and, if held to maturity, offer a fixed rate of return and fixed principal value.  However, the value of fund shares is not guaranteed and will fluctuate.
* Corporate bonds are considered higher risk than government bonds but normally offer a higher yield and are subject to market, interest rate and credit risk as well as additional risks based on the quality of issuer coupon rate, price, yield, maturity, and redemption features.
* The Standard & Poor’s 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general. You cannot invest directly in this index.
* All indexes referenced are unmanaged. Unmanaged index returns do not reflect fees, expenses, or sales charges. Index performance is not indicative of the performance of any investment.
* The Dow Jones Global ex-U.S. Index covers approximately 95% of the market capitalization of the 45 developed and emerging countries included in the Index.
* The 10-year Treasury Note represents debt owed by the United States Treasury to the public. Since the U.S. Government is seen as a risk-free borrower, investors use the 10-year Treasury Note as a benchmark for the long-term bond market.
* Gold represents the afternoon gold price as reported by the London Bullion Market Association. The gold price is set twice daily by the London Gold Fixing Company at 10:30 and 15:00 and is expressed in U.S. dollars per fine troy ounce.
* The Bloomberg Commodity Index is designed to be a highly liquid and diversified benchmark for the commodity futures market. The Index is composed of futures contracts on 19 physical commodities and was launched on July 14, 1998.
* The DJ Equity All REIT Total Return Index measures the total return performance of the equity subcategory of the Real Estate Investment Trust (REIT) industry as calculated by Dow Jones.
* Yahoo! Finance is the source for any reference to the performance of an index between two specific periods.
* Opinions expressed are subject to change without notice and are not intended as investment advice or to predict future performance.
* Economic forecasts set forth may not develop as predicted and there can be no guarantee that strategies promoted will be successful.
* Past performance does not guarantee future results. Investing involves risk, including loss of principal.
* You cannot invest directly in an index.
* Stock investing involves risk including loss of principal.
* Consult your financial professional before making any investment decision.

Sources:
https://www.barrons.com/articles/why-did-dow-drop-1-400-pick-your-poison-1521852744 (or go to https://s3-us-west-2.amazonaws.com/peakcontent/+Peak+Commentary/03-26-18_Barrons-Why_Did_Dow_Drop_1400-Pick_Your_Poison-Footnote_1.pdf)
https://www.scientificamerican.com/article/what-is-loss-aversion/
http://money.cnn.com/2002/09/25/pf/investing/agenda_brain_short/index.htm
https://www.consumerreports.org/interest-rate/fed-rate-hike-your-money/
https://www.cnn.com/2018/03/22/politics/donald-trump-china-tariffs-trade-war/index.html
https://www.brookings.edu/research/tracking-turnover-in-the-trump-administration/
https://www.ft.com/content/e4e95b6c-2dac-11e8-9b4b-bc4b9f08f381 (or go to https://s3-us-west-2.amazonaws.com/peakcontent/+Peak+Commentary/03-26-18_FinancialTimes-Chiefs_Hubris_Steered_Cambridge_Analytica_to_Data_Scandal-Footnote_7.pdf)
https://www.marketwatch.com/story/this-data-breach-affected-880000-people-and-it-has-nothing-to-do-with-facebook-2018-03-24
https://www.cnet.com/news/how-to-stop-sharing-facebook-data-after-cambridge-analytica-mess/
http://www.barrons.com/mdc/public/page/9_3063-economicCalendar.html?mod=BOL_Nav_MAR_other (Click on U.S. & Intl Recaps, then “Factory sector accelerates, housing prices climb”) (or go to https://s3-us-west-2.amazonaws.com/peakcontent/+Peak+Commentary/03-26-18_Barrons-Factory_Sector_Accerlerates-Housing_Prices_Climb-Footnote_10.pdf)
https://www.goodnewsnetwork.org/scientists-believe-they-found-a-way-to-stop-future-hurricanes-in-their-tracks/
https://www.goodnewsnetwork.org/strangers-rally-around-13-year-old-whose-rock-museum-was-robbed/
https://www.goodnewsnetwork.org/dog-shoplifts-book-on-abandonment/
https://www.goodnewsnetwork.org/stranger-becomes-honorary-grandma-after-she-opens-home-to-stranded-father-in-distress/
https://www.goodnewsnetwork.org/were-not-spinning-a-yarn-here-knitting-may-boost-health-and-happiness/
https://www.goodnewsnetwork.org/robot-becomes-part-of-the-community-after-easing-daily-burden-of-water-collection-in-remote-village/
https://www.goodnewsnetwork.org/instead-of-using-trees-scientists-are-making-sustainable-paper-out-of-manure/
https://www.goodnewsnetwork.org/worlds-first-mass-produced-3d-printed-car-is-electric-and-costs-under-10k/
https://www.goodnewsnetwork.org/this-pollution-gobbling-city-bench-absorbs-as-much-co2-as-275-trees/
https://www.goodnewsnetwork.org/free-clothing-hung-on-streets-to-help-the-homeless/
https://www.brainyquote.com/quotes/benoit_mandelbrot_301439

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March 19, 2018

The Markets

It’s a good time for a gut check. 

Last week, after sliding lower for four days, the Standard & Poor’s 500 Index recouped some of its losses on Friday. The reasons behind the week’s poor showing were diverse. Barron’s reported:

“The market is so discombobulated right now that it can’t even decide what it’s afraid of. What do we mean? When the Standard & Poor’s 500 index suffered its first correction since the beginning of 2016 last month, the cause was easily identified – a good old-fashioned inflation scare caused by a larger-than-expected increase in wages and a rapidly rising 10-year Treasury yield, which almost hit 3 percent…Fast-forward more than a month and those fears seem almost quaint.” 

Those fears included:

• Special Counsel Robert Mueller’s subpoena of the Trump Organization.
• The effects of recent tariffs and the possibility of trade wars.
• The departure of Secretary of State Rex Tillerson.
• The Atlanta Fed revised its GDPNow Forecast downward for the first quarter of 2018. Weakness in consumer spending, net exports, and inventory investment offset gains in private fixed-investment growth.
• The Commerce Department reported weak retail sales for the third month in a row. Economists had expected sales to rise.

Here’s the thing: During 2017, volatility settled at historically low levels and stock markets charged ahead. As a result, it was relatively easy for investors to become sanguine about risk. You could say 2017 made investing seem as mundane as driving across the flatlands of the Plains states. It’s possible 2018 will be more like traveling icy switchbacks through the Rocky Mountains. 

No matter what happens in the months to come, it’s a good time to reassess your risk tolerance and make sure it aligns with your financial goals and asset allocation.

 
HOW MUCH DO YOU SPEND ON HEALTHCARE? Healthcare costs have been going up for a long time. The Centers for Medicare & Medicaid Services reported annual health spending – healthcare paid for through private health insurance, Medicare, Medicaid, or out-of-pocket spending by businesses, households and governments – in the United States averaged $3.3 trillion in 2016.

That’s about $10,348 per person. It’s a significant amount even before you consider the median income in the United States was about $57,600 that year.

Here’s another perspective: Healthcare spending was equal to almost one-fifth (17.9 percent of GDP) of everything the United States economy produced during 2016 (Gross Domestic Product – GDP – measures the value of all goods and services produced in a country). That’s more than U.S. manufacturing produced (11.7 percent of GDP) during 2016. Add in retail (5.9 percent of GDP) and the total is just shy of spending on healthcare.

The cost of healthcare is important not just because it’s high, but because it’s a critical aspect of retirement planning. A retirement plan is built around a horizon, which is the number of years you expect retirement to last. It’s a difficult number to think about because it’s a reflection of how long you expect to live. 

In general, the planning horizon for women should be longer than the planning horizon for men. Women tend to live longer, and that means their healthcare costs may be considerably higher. About $79,000 higher, according to one estimate that found a healthy 55-year-old woman could pay almost $523,000 in healthcare expenses (Medicare Parts A, B, D, a supplemental policy F, dental, and all out-of-pocket expenses) during retirement.

There are a variety of approaches that may help cover the expense – even if you’re closing in on retirement. A retirement planning strategy that factors in healthcare expenses with an appropriate planning horizon can help improve financial stability in your later years.

Weekly Focus – Think About It 

“We’re optimistic about ourselves, we’re optimistic about our kids, we’re optimistic about our families, but we’re not so optimistic about the guy sitting next to us, and we’re somewhat pessimistic about the fate of our fellow citizens and the fate of our country. But private optimism about our own personal future remains persistent. And it doesn’t mean that we think things will magically turn out okay, but rather that we have the unique ability to make it so.”
 –Tali Sharot, Associate Professor of Cognitive Neuroscience, University College London

* These views are those of Carson Group Coaching, and not the presenting Representative or the Representative’s Broker/Dealer, and should not be construed as investment advice.
* This newsletter was prepared by Carson Group Coaching. Carson Group Coaching is not affiliated with the named broker/dealer.
* Government bonds and Treasury Bills are guaranteed by the U.S. government as to the timely payment of principal and interest and, if held to maturity, offer a fixed rate of return and fixed principal value.  However, the value of fund shares is not guaranteed and will fluctuate.
* Corporate bonds are considered higher risk than government bonds but normally offer a higher yield and are subject to market, interest rate and credit risk as well as additional risks based on the quality of issuer coupon rate, price, yield, maturity, and redemption features.
* The Standard & Poor’s 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general. You cannot invest directly in this index.
* All indexes referenced are unmanaged. Unmanaged index returns do not reflect fees, expenses, or sales charges. Index performance is not indicative of the performance of any investment.
* The Dow Jones Global ex-U.S. Index covers approximately 95% of the market capitalization of the 45 developed and emerging countries included in the Index.
* The 10-year Treasury Note represents debt owed by the United States Treasury to the public. Since the U.S. Government is seen as a risk-free borrower, investors use the 10-year Treasury Note as a benchmark for the long-term bond market.
* Gold represents the afternoon gold price as reported by the London Bullion Market Association. The gold price is set twice daily by the London Gold Fixing Company at 10:30 and 15:00 and is expressed in U.S. dollars per fine troy ounce.
* The Bloomberg Commodity Index is designed to be a highly liquid and diversified benchmark for the commodity futures market. The Index is composed of futures contracts on 19 physical commodities and was launched on July 14, 1998.
* The DJ Equity All REIT Total Return Index measures the total return performance of the equity subcategory of the Real Estate Investment Trust (REIT) industry as calculated by Dow Jones.
* Yahoo! Finance is the source for any reference to the performance of an index between two specific periods.
* Opinions expressed are subject to change without notice and are not intended as investment advice or to predict future performance.
* Economic forecasts set forth may not develop as predicted and there can be no guarantee that strategies promoted will be successful.
* Past performance does not guarantee future results. Investing involves risk, including loss of principal.
* You cannot invest directly in an index.* Stock investing involves risk including loss of principal.
* Consult your financial professional before making any investment decision.

Sources:
https://finance.yahoo.com/quote/%5EGSPC/history?p=%5EGSPC
https://www.barrons.com/articles/whipsawed-by-events-the-dow-drops-389-points-1521249865 (or go to https://s3-us-west-2.amazonaws.com/peakcontent/+Peak+Commentary/03-19-18_Barrons-Whipsawed_by_Events_the_Dow_Drops_389_Points-Footnote_2.pdf)
https://www.frbatlanta.org/cqer/research/gdpnow.aspx
https://www.cnbc.com/2018/03/14/retail-sales-decline-for-third-straight-month-in-february.html
https://finance.yahoo.com/news/markets-story-2017-fake-news-real-returns-162747489.html
https://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and-Reports/NationalHealthExpendData/index.html
https://www.cms.gov/research-statistics-data-and-systems/statistics-trends-and-reports/nationalhealthexpenddata/nhe-fact-sheet.html
https://www.bea.gov/iTable/iTable.cfm?reqid=56&step=2&isuri=1#reqid=56&step=51&isuri=1&5602=5 (Click on Value Added By Industry, then select U. Value Added by Industry as Percentage of Gross Domestic Product) (or go to https://s3-us-west-2.amazonaws.com/peakcontent/+Peak+Commentary/03-19-18_BureauOfEconomics-U_Value_Added_by_Industry_as_a_Percentage_of+GDP-Footnote_8.pdf)
http://www.hvsfinancial.com/wp-content/uploads/2016/12/Women_Retirement_Health_Care.pdf 
https://www.ted.com/talks/tali_sharot_the_optimism_bias/transcript#t-141213

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March 12, 2018

The Markets

It’s a bird…It’s a plane…It’s a labor shortage!

There is little doubt the Millennial generation has been reshaping our world. One of the most remarkable aspects of this demographic group is a preference for experiences over consumer goods. “Three out of four millennials would rather spend their money on an experience than buy something desirable. This “experience generation” is now a third of the U.S. population,” reported Eventbrite.

Well, a new experience has arrived – a labor shortage in the United States.

Last week, Barron’s reported, “Across the nation, in industries as varied as trucking, construction, retailing, fast food, oil drilling, technology, and manufacturing, it’s becoming increasingly difficult to find good help. And, with the economy in its ninth year of growth and another baby boomer retiring every nine seconds, the labor crunch is about to get much worse…This, of course, is how a labor market works: Production rises, workers get scarce, and employers raise wages to attract employees.”

Currently, the population of the United States is growing faster than the U.S. workforce, reported Barron’s. It’s a state of affairs that occurred twice during the last century (1948 through 1967 and 1991 through 1999) and was accompanied by labor shortages both times. This time, Baby Boomers’ retirements may exacerbate the situation. Some estimates suggest the current labor shortage could last through 2050.

Despite low unemployment and high demand for workers, wage growth slowed in February.

There is a wild card in play, however. Many Americans prefer to participate in the workforce through the Gig economy. Gig workers have temporary jobs or freelance rather than working for an employer. MBO Partners reported, “Independents are the nearly 41 million adult Americans of all ages, skill, and income levels – consultants, freelancers, contractors, temporary, or on-call workers – who work independently to build businesses, develop their careers, pursue passions, and/or to supplement their incomes.”

The government has yet to figure out how to measure the Gig economy. When it does, a clearer employment and wage picture may emerge.

IT’S NOT JUST FOR MILLENNIALS! While the emergence of the Gig economy often is attributed to Millennials, MBO Partners’ 2017 survey found the full-time Gig workforce is a generational mash-up. It includes:

• 38 percent Millennials (ages 21 to 37)
• 27 percent Gen Xers (ages 38 to 52) 
• 35 percent Baby Boomers (ages 53 to 72) and Matures (ages 72 and older) 

Full-time independents work at least 15 hours per week and average 35 hours per week.

While the term ‘Gig economy’ may conjure images of ride-sharing drivers and homeowners who rent to vacationers, it includes a much broader swath of careers and many people who earn six figures. So, what do Gig economy jobs look like? According to Entrepreneur.com and Forbes, some of the top gigs include:

Deep learning professionals. Facilitating machines learning by developing neural networks similar to those of the human brain.
Robotics designers and programmers. Responsible for building and designing mechanical elements and machinery to streamline operations.
Ethical hackers. ‘White hats’ help companies evaluate systems for security vulnerabilities.
Virtual reality freelancers. They develop algorithms and have 3D modeling and scanning skills.
Social media marketers. Understand platform algorithms and create engaging content to help companies develop their brands and market their products on a platform.
Multimedia artists. Employ technology to create designs and special effects for digital media.
Broadcast and sound engineering technicians. Sound is a vital part of radio programs, television broadcasts, concerts, and movies.
Carpenters. Demand for carpenters is expected to grow by 6 percent through 2024.
Delivery truck drivers. This may change with the debut of self-driving delivery trucks.

If you’re a risk taker looking for a flexible career or a retiree looking to supplement your income, a job in the Gig economy may be just the ticket. 

Weekly Focus – Think About It 

“You don’t concentrate on risks. You concentrate on results. No risk is too great to prevent the necessary job from getting done.”
–Chuck Yeager, retired United States Air Force officer, flying ace, and test pilot

* These views are those of Carson Group Coaching, and not the presenting Representative or the Representative’s Broker/Dealer, and should not be construed as investment advice
.* This newsletter was prepared by Carson Group Coaching. Carson Group Coaching is not affiliated with the named broker/dealer.
* Government bonds and Treasury Bills are guaranteed by the U.S. government as to the timely payment of principal and interest and, if held to maturity, offer a fixed rate of return and fixed principal value.  However, the value of fund shares is not guaranteed and will fluctuate.
* Corporate bonds are considered higher risk than government bonds but normally offer a higher yield and are subject to market, interest rate and credit risk as well as additional risks based on the quality of issuer coupon rate, price, yield, maturity, and redemption features.
* The Standard & Poor’s 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general. You cannot invest directly in this index.
* All indexes referenced are unmanaged. Unmanaged index returns do not reflect fees, expenses, or sales charges. Index performance is not indicative of the performance of any investment.
* The Dow Jones Global ex-U.S. Index covers approximately 95% of the market capitalization of the 45 developed and emerging countries included in the Index.
* The 10-year Treasury Note represents debt owed by the United States Treasury to the public. Since the U.S. Government is seen as a risk-free borrower, investors use the 10-year Treasury Note as a benchmark for the long-term bond market.
* Gold represents the afternoon gold price as reported by the London Bullion Market Association. The gold price is set twice daily by the London Gold Fixing Company at 10:30 and 15:00 and is expressed in U.S. dollars per fine troy ounce.
* The Bloomberg Commodity Index is designed to be a highly liquid and diversified benchmark for the commodity futures market. The Index is composed of futures contracts on 19 physical commodities and was launched on July 14, 1998.
* The DJ Equity All REIT Total Return Index measures the total return performance of the equity subcategory of the Real Estate Investment Trust (REIT) industry as calculated by Dow Jones.
* Yahoo! Finance is the source for any reference to the performance of an index between two specific periods.
* Opinions expressed are subject to change without notice and are not intended as investment advice or to predict future performance.
* Economic forecasts set forth may not develop as predicted and there can be no guarantee that strategies promoted will be successful.
* Past performance does not guarantee future results. Investing involves risk, including loss of principal.
* You cannot invest directly in an index.* Stock investing involves risk including loss of principal.
* Consult your financial professional before making any investment decision.

Sources:
https://www.eventbrite.com/blog/experience-economy-ds00/
https://www.barrons.com/articles/the-great-labor-crunch-1520655014 (or go to https://s3-us-west-2.amazonaws.com/peakcontent/+Peak+Commentary/03-12-18_Barrons-The_Great_Labor_Crunch-Footnote_2.pdf)
https://www.bls.gov/news.release/jec.nr0.htm
https://dictionary.cambridge.org/us/dictionary/english/gig-economy
https://www.mbopartners.com/uploads/files/state-of-independence-reports/StateofIndependence-2017-Final.pdf
https://www.bls.gov/careeroutlook/2016/article/what-is-the-gig-economy.htm
https://www.entrepreneur.com/slideshow/309958#1
https://www.forbes.com/pictures/58c0595f31358e1a35aca769/10-great-gig-economy-jobs/#45b1e497622e
https://study.com/articles/Multimedia_Artist_Job_Description_Duties_and_Requirements.html
http://money.cnn.com/2018/03/08/technology/starsky-self-driving-truck-florida/index.html
https://www.gobankingrates.com/making-money/side-gigs-can-make-rich/#1
https://www.riskology.co/99-risk-quotes/

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