Category Archives: Economic Analysis

Independence Day

Independence Day, July 4, is broadly celebrated here in the US, and what better time to consider where you stand with respect to your retirement prospects. Take some quiet time this long weekend to pull together your entire retirement portfolio. Think about it as a balance sheet and income statement for yourself. What are your assets? What are your liabilities? What does/can your monthly income and expenses look like given that? Once you have done this, you can project how it might look in different scenarios, increased savings, market downturns, etc. I encourage everyone to do it. As we launch into the Independence Day long weekend, we share some of our best finds on the internet below.

Independence Day: Strengthening your retirement prospects.
This article is a little long winded, but it does make several interesting points and hones down to a proposal. How does your investment mix compare? The Simple Retirement Portfolio that Spanked the S&P 500
This portfolio is way simpler than the last, simple one. Not only that, it keeps the focus on dividends. 4 Stock Retirement Portfolio with 6.0% Yields and 100% Upside
We are always on the lookout for well performing dividend opportunities, this may be one. Outperforming Unique High Dividend Stock Yields 10%, with Estimates Rising
With so much of our focus on fees, this is a welcome war in the investment space. Fidelity Takes on Vanguard in the Fund Fee Wars, and Investors Win

Independence Day: What’s happening with the global economy?
The global central banks have used a steady diet of easy money to pave the way out of the 2008 downturn. Are we really in a better place now? How was our return on investment? What do they have left if things turn truly sour? “The Global Economy Can No Longer Rely on Debt” – BIS Warns Central Bank Actions “Have Started to Backfire”
Then there is Brexit … big deal or not? anomaly or not? Have a look here. Is Brexit the First of Many Dominoes? A Few Charts
Just in case you thought you were ill prepared, this dismal review of US savings should make you understand just how bad we are at this … the fact that you are looking and trying definitely sets you apart. These statistics about American’s savings habits are staggering

Independence Day
This seems like the perfect time to consider this great infographic. See the Exact Moment the World’s Biggest Cities Were Born

Heat Wave Respite

It is hot outside, stay in the cool air and take a heat wave respite with some cool reading about the economy and your retirement.

Heat wave Respite: A few quick ideas to improve your retirement.
First a quick checklist for you. I may not agree with all these, nor may you, but it is directionally correct. 51 things not to do if you want to be better off financially
Most of you, like me, are over 50 now. So, suck it up and take this advice. 3 Steps to Building Wealth in Your 50s
It is always a good time to start saving money. Perhaps these tips will work for you. 2 Ridiculously Simple Tax Strategies That Can Each Save You $100,000+ Over Your Lifetime
Here is an interesting mix of two favourites, have an investment strategy you can stick with and consider dividend stocks as a means of building retirement income. A Simple Method for Buying Low and Maintaining Diversification

Heat wave Respite: A quick scan of the global economy
The most fascinating and consequential event on the schedule is the June 23 “Brexit” vote in Britain. It seems too close to call; I simply cannot imagine an exit. We shall see. One thing that seems to be consistent, at least here, is that Brexit is masking a real, looming issue with European banks. Forget Brexit, It’s the Banks Stupid! makes the most interesting point “Whatever the outcome of the Brexit referendum next week, it would appear that nothing can stop a systemic crisis developing in Europe.” Brexit is Getting the Blame
This is a fascinating, negative, and likely first-time event in the US economy. US Negative Interest Rate Bets Surge to Record High
It is always worthwhile putting things into perspective. Here, you can look at the global economy over the past 5,000 years. That is right, 5,000 years (or so they say). How about the lowest interest rates ever? US stocks at 60-year highs vs. Europe? Plenty of other fascinating or scary facts embedded here. Visualizing “the 5,000 Year Long Run” in 18 Stunning Charts

Pre-Summer Break

We lower the intensity level this week for a pre-Summer break by giving you a small dose of retirement and economic reality followed by a large dose of miscellany. I hope you enjoy.
Pre-Summer Break: A quick look at your retirement and the economy
We start with the retirement gem of the week, This Simplest Investing Advice is the Best Ever for All Investors
Here is a good, quick overview of the smart-beta ETF world. The Newest Way to Beat the Market
I like pieces like this because it gives you two sides of a coin. In this case, the contra-side is provided by a friend for whom I have the utmost respect, Jonathan Satovsky. Boost Retirement Savings with These New and Simple Strategies
Roth IRAs are a great tool, but your HSA may be an even better retirement tool. Here’s a quick comparison. Why an HSA is Even Better Than a Roth IRA
You may have seen the dismal jobs report this week, it caused mayhem in equity and currency markets, driving the Dollar down around the globe. Here’s some disheartening color commentary on it. 312K Full-Time Jobs Were Lost in the Last Two Months, Offset by 118K Part-Time Hires
Finally, a somewhat transitional piece for you, bridging the gap from retirement to fun facts. The Made Hedge Dictionary of Trading Slang
Pre-Summer Break: A whole lot of interesting finds from around the web.

I love these map pages that distil information into a single view.  Any number of these will make you scratch your head, but try #12, if no other. 40 Maps That Will Help You Make Sense of the World
Photos, too, can help shed light on things. Try the Iran one here, or the 1980 Moscow Olympics, remember, the boycott? Thought-Provoking Historical Photographs You’ve Never Seen Before
If you are a big fan of green energy, this one is heartening … just cover Spain with solar. Here’s how much of the world would need to be covered in solar panels to power the Earth
Just because guys can’t get enough of this stuff – presumably Putin has these all down pat. The rest of us should try the zip ties and ninja ones …  20 Illustrated Guides Every Manly Man on Earth Should Know

Retirement Focus

You may not read my weekly updates, but I implore you to read this one article to improve your retirement focus today. Technically Speaking: Importance of Duration Matching

Retirement Focus: Keeping your eye on the cost of investing.
This is an interesting level set on leveraging the changing market to your advantage.  More investors seeking financial advice are turning to lower-cost options
Never forget, fees are everywhere … and commissions often, too … so keep a sharp eye, always. Are You Letting Fees Destroy Your Retirement Savings?

Retirement Focus: Generating income in retirement.
ETFs tend to keep your costs low, and dividend stocks tend to throw off income without need to focus on appreciation. Combine the two, ETFs and dividend stocks, for a powerful combination. 5 Dividend ETFs for 2016
Of course, if you are so inclined, there is plenty of guidance out there for buying individual dividend focused stocks. Many of these have been shared before, so look, but here is a timely article to consider. Don’t Sell in May: Buy These 4 Dividend Growers Instead

Retirement Focus: Stay aware of the environment.
Demgraphic trends are global, not unique to the US. That means massive implications for world markets and select industries, too. These 6 charts explain the world’s looming demographic crisis
That does have real implications for your Social Security benefits, too. So much is said about Social Security, from it’s fine to it’s a disaster, it is hard to know what is true. This may help you put it into perspective. This Scary Social Security Trend Can’t be Ignored Any Longer

Fiduciary Implications

The initial reaction to the DOL Fiduciary Rule was mixed, now we are beginning to see some Fiduciary Implications. Big players are already making moves to ease compliance, most notably Charles Schwab, and the speed with which this is happening means some benefits may quickly accrue.

So, what have been the fiduciary implications thus far, and what might follow?
The absolute most encouraging fiduciary implications I saw all week was this news about Schwab dropping loaded funds.  Post-DOL fiduciary rule, Schwab dumps load funds as advisors yawn That’s good news because it indicates the market moving to help you with your quest for lower cost investments, and Schwab moving means others will have to follow, despite what they may say.
Inasmuch as the fiduciary implications are technically limited to qualified investments, i.e. your tax favored investments like 401(k) and IRA assets, theoretically only a fraction of your investments are ‘protected’ by the new fiduciary rule. Still, I think once the smart players go to the effort of compliance with the DOL fiduciary rule, they will go ahead and apply it themselves to non-qualified money. Mind you, the SEC is talking about its own fiduciary rule for non-qualified money, and there will be plenty of resistance from the industry. SEC Joins Battle on Broker Bias That Could Remake Industry
Frankly, having a more uniform framework which applies across qualified and non-qualified money will be a better thing, certainly for investors, as the industry will be compelled to comply, limiting the chances of shutting out smaller investors. Keep in mind that the DOL rule makes it relatively easy to choose to walk away from small accounts – whether personal or business – as a rational business decision. Walking away entirely will be an entirely different equation.

Now that we have a glimpse at the fiduciary implications, let’s take a minute on world markets.
First, let’s consider some context for the prior remarks. This is a fascinating article about the future of the asset management industry. I pulled it first for the excellent bubble chart on invested funds. I put it here, though, because it gives you some insight into the industry dynamics. Asset Managers, Prepare to have Your Business Disrupted
You have read here before about the questionable US unemployment data. This article goes one step beyond to show you the US output gap as an alternative means of divining the true state of the economy. I found it fascinating. Why the US Output Gap Means the 10-year is Going Below 1%
I find it hard to internalize the rapid rise of China as an economic power. These few charts give a good primer on where things stand. These 4 maps show how China is dominating global trade
I admit I don’t agree with George Soros much, probably at my own peril. This time, though, he makes a good deal of sense. Soros says China looks ‘eerily’ like the US in the run up to the financial crisis
At the same time, Japan’s woes seem to worsen. In Shocking Finding, the Bank of Japan is Now a Top 10 Holder in 90% of Japanese Stocks

Now, you deserve to lighten up some.
As an adopted Minnesotan, I was surprisingly struck by the sudden loss of Prince. Here is a great link to his entire very last show. Listen to Prince’s Entire Final Concert
I know an inordinate number of people gather around for the Kentucky Derby. This may make it easier for you. The 13 Best Bourbons for Kentucky Derby Season 2016
When you hit the road this Summer, take along the best tools. The Best iPhone Apps for Travelers

Election Madness

Indeed, about mid-way between the Iowa Caucuses and New Hampshire Primary, we have seen an already raucous and unique primary season turn to true election madness.
The Iowa Caucuses delivered on a host of fronts, from a unique partnership with Microsoft to deliver app based election returns to not adequately staffing certain precincts to ‘coin toss’ decision making and ‘tell Carson supporters that he’s dropping out, so switch to us’ tactics. Democratic debate night: The first one-on-one clash leaves Hillary Clinton stumbling on Wall Street Who won the New Hampshire Democratic debate? The Politico Wrongometer The fury of Ben Carson Iowa governor slams Ted Cruz for ‘unethical and unfair’ tactics Bloomberg could be a ‘serious contender’ in 2016, his pollster says

Not one to let you forget your retirement savings, some timely guidance from around the web.
Our last installment zeroed in on dividend stocks as a strategy, here is some more background for you on the approach. Ponder the Future of Your Dividend Growth Stocks Dividends: A Key Component of Total Return 20 dividend stocks that Wall Street loves the most
I have paraphrased Warren Buffett before on this very quote, but the idea is ‘don’t save what you don’t spend, spend what you don’t save.’ That’s the key in the so called accumulation phase – your earning years, pre-retirement. Then, though, you have to become a spender, and making the transition can be difficult. Turning a Saver Into a Spender in Retirement and Spending and Saving in Retirement

Lest you think I forgot the world economy, it still moves along in pretty much the same way.
China is releasing an important data set tomorrow, about its currency surplus. A Preview of This Weekend’s Event that Could Unleash a “Vicious Bear Market Rally”
How about here, at home, how is the US economy doing? Economy added 151,000 jobs in January That sounds good enough, but it isn’t.

I think it is overdue to have some levity here, so here is some miscellany:
First, with the Super Bowl this weekend, how about a preview of games to come? Microsoft Offers Tantalizing Glimpse of HoloLens-Powered Super Bowl
Even some travel tips for you this week: Lonely Planet Releases Travel Guides to 38 Cities – For Free

Retirement Security

What strategies can you use, beyond patience, to better ensure your retirement security after a brutal January?

One way of thinking we have not covered much here is using dividend paying stocks to generate income and provide retirement security. Retirement Strategy: Hopefully, This Will be Easy Enough for Even a Novice Investor to Understand Scrap the 4% Retirement Rule, Buy Dividend Stocks with a 4% Yield Instead
On that note, here is a long, but useful article about the “4% rule.” It’s a good read if someone is selling you on the concept. Why 4% Could Fail
If you want to step out there on your own (which I don’t advise), this is an interesting template of an idea. Earn 6.7% on cash with a decent chance to buy ExxonMobil under $60
Here is some more clarity on tax and Social Security law changes for 2016, too. Tax Law Changes Affecting Your Clients 2 Social Security changes and their effect on retirement income The impressive income tax benefits of $5M+ lifetime gift exemptions

So, what are the tea leaves saying? Let’s take a quick cruise around the web on that topic.
We have looked at this before, and it has not gotten any better. Baltic Dry Index falls to lowest level in history Thoughts on Maritime Trade and the Global Economy What if the Imploding Baltic Dry Index Really Does Reflect Global Trade After All
Then, of course, there is China. China’s banking crisis looms like Banquo’s ghost in Davos and China PMI Misses Some of the biggest hedge fund names in the world are loading up on bets against China’s currency
South Korea’s economy is sputtering, too. South Korea’s Exports Dropped the Most Since the Global Recession
Still one of our biggest trading partners, Japan, joined the negative interest rate club, too. BOJ Shock to Pressure Central Banks
Now here’s one you probably have not heard in a while, Venezuela. Of course, Venezuela, like many others, is an oil driven economy. This is What the Death of a Nation Looks Like: Venezuela Prepares for 720% Hyperinflation
Then, there’s US. The Chart That Explains Everything

Market mayhem

If everybody is thinking alike, then somebody isn’t thinking.” Gen. George S. Patton

The market mayhem continues pretty much unabated since the beginning of the year. Today the Dow is down significantly – over 2%. So, what may be driving this, and will it continue?

One obvious answer to what is driving this, China. How China accumulated $28 trillion in debt in such a short time Government intervention is the only thing keeping China’s stock market afloat

Then there is the market at home, is there simply a problem with fundamentals? A Year of Living Technically: Charting the Markets of 2015 (I urge you to look at the first chart, at least) Ralph Acampora: “We’re falling apart here and no one seems that worried.” US stocks suffer their worst first week since records began

Now that your head is spinning from the current state of markets, let’s focus back on the long term, your retirement:
I will start, as always, with fees. The Huge 401(k) Hit You Can Avoid Do you know where your 401(k) fees are hiding? Of course, it can’t always be that simple. New 401(k) suit targets Vanguard fund fees

How about some simple advice? You may not agree, or may not follow these, but they tend to be pretty sound. Everything You Need to Know About Money on One Index Card Warren Buffett’s 15-Minute Retirement Plan 7 Personal Finance Lessons from Bruce Lee

Another great idea on retirement, know your way around the retirement playing field. Newly improved retirement tax rules Understanding the retiree benefits of HSAs

A couple of iPhone tips for the weekend:
Everyone with an iPhone will like this trick. How to Force-Refresh the iOS App Store on iPhone or iPad This hidden iPhone trick does wonders to speed up your phone

World economic overview

You know that retirement is coming. It isn’t as though it just shows up one day and takes you by surprise, so you need to get ready for it.” Batya Shevich, Warren Buffett: To Be Rich And Successful Is Easy!

With the Federal Open Market Committee raising the Federal Funds Rate for the first time in nearly a decade, it seems like a good time to take a clear headed economic overview.
Now, the Fed move is largely predicated on a robust employment market and related risk of inflationary pressure. Put that in the context of oil & gas and commodities falling through the floor, and you tend to think like Canada. So, what are equity markets telling us? Here are two opposing views: Why Stocks Need to be a Big Part of Your Portfolio in 2016 tells a tale of a failing bond market and focus on consistent dividend paying stocks, but then “Coppock Guide” Signals a Bear Market is at Hand tells a fascinatingly wonkish look at market tops over a very long time. Both articles are worth your time.
This came in advance of the rate hike, but the read is still worthwhile, bottom line: even a small rate hike, if Japan’s experience is any guide, will be difficult to hold. The Simple Explanation Why There is No Such Thing as a “Dovish Rate Hike”
This rate hike occurs in the face of a largely negative rate environment in the EU, and our friends to the North looking in that direction as well. That, I suppose, would presage good investment news for the US economy, but it does feel odd as the high rate outlier. The Next Domino: Canada and The Bank of Canada just said the 3 most controversial words in central banking: ‘negative interest rates’
I would be remiss if I did not tee up the downside potential, and this is a decent list of hot spots around the globe. A Pessimist’s Guide to 2016: When Everything That Can Go Wrong, Does Go Wrong

No matter what happens to global markets, you still want to retire, right?:
Knowing plenty of people who fall prey to the morning coffee routine, or picking up a quick lunch, I thought this was a great read. Cutting Back on Lunch and Coffee Could Save You $700,000 In other words, that Starbucks Grande is costing you a lot of retirement flexibility.
In the same vein, nine more ways you can save more. I’ll paraphrase here a Warren Buffett quote, don’t save what you don’t spend, spend what you don’t save. 9 Ways to Stop Wasting Money Now
Since I’m on a roll here, let’s not forget the impact fees have on your retirement accounts. This is a great story about how Vanguard single handedly is changing the landscape. The Company That’s a Bigger Threat to Wall Street than Occupy
While this does not play directly into your retirement, knowing this may have some meaningful implications for how you think about investing and it is a fascinating component of any global economic overview. These 2 charts basically tell the entire global demographic story
A friendly reminder about healthcare cost in retirement, it really is a big issue, and you really do have to be prepared for it. Health Care in Retirement Will Cost How Much?

Miscellany to lighten your mental load:
Everyone with an iPhone will like this trick. Make Your iPhone Faster With This One Simple Trick
Here is the convergence of two recurring topics here: travel and saving money. The 11 most underrated ski resorts in America
This is a little heavier, sorry, but it is really interesting, too. History in the remaking

Retirement thanksgiving

Retirement is like a long vacation in Las Vegas. The goal is to enjoy it the fullest, but not so fully that you run out of money.” – Jonathan Clements

Since we are giving thanks, let’s have a retirement thanksgiving:
It is always interesting to see what the so-called experts are doing, and I find the trends here most insightful: construction/heavy industrials and retail. Goldman: Hedge funds are betting billions that these 19 stocks are going down
It is always good to stay on top of the changing legal landscape, don’t make a costly mistake. How Retirement Benefits Will Change in 2016
It is also good to know your options, the HSA has been a hidden gem since inception. Learn more here. HSAs Can Be Like DC Plans for Retirement Health Costs
One gentle reminder about fees, this time from a different angle, the impact of a fee focused company, Vanguard, on the industry. The Vanguard Effect

A weekly look at global markets:
In the continuing trend of global economic sluggishness/slowdown, I give you the world commodities markets in a single graph. Collapse of Commodities in One Simple Chart
In the same vein, and another continuing theme, a further dismal report on the Chinese economy. Everyone on Wall Street is talking about this dark new China report

Travel, because it is that time of year:
Talk about making holiday travel bearable, here’s the ticket. The 10 Best First Class Airline Cabins for Holiday Travel
Since you probably won’t be in one of those cabins, I give you this diversion for your travels. 6 Craft Beer Stores Hiding in Airports
Crowd funding unleashes some great ideas, cutting out the middlemen. Jurni is a great travel idea, worth keeping your eye on now. This May Be The Best Carry-On Suitcase Idea We’ve EVER Seen
This one is for your consideration. Indeed, everyone should have a personal favorite museum. Just so happens I agree with this article. How about you? Is This the Greatest National Museum in the World?