Monthly Archives: November 2014

“Your Financial Choices”

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“Your Financial Choices” The show airs on WDIY Wednesday evenings, from 6-7 p.m. The show is hosted by Valley National’s Laurie Siebert CPA, CFP®, AEP®. This week, Laurie will be joined by guests Dr. Vera Cole, Program Officer for the Energy and Sustainability Policy degree program at Penn State and consumers Paul and Marie North to discuss: “The financial and environmental incentive of solar and geothermal energy”

Host, Laurie A. Siebert, CPA, CFP®, AEP® will take calls on these topics and others. WDIY is broadcast on FM 88.1 for reception in most of the Lehigh Valley; and, it is broadcast on FM 93.9 in the Easton and Phillipsburg area; and, it is broadcast on FM 93.7 in the Fogelsville and Macungie area – or listen to it online from anywhere on the internet.  For more information, including how to listen to the show online, check the show’s website www.yourfinancialchoices.com and visit www.wdiy.org.

Motivational Quote of the Week

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“I know this goes without saying, but Stonehenge really was the most incredible accomplishment. It took five hundred men just to pull each sarsen, plus a hundred more to dash around positioning the rollers. Just think about it for a minute. Can you imagine trying to talk six hundred people into helping you drag a fifty-ton stone eighteen miles across the countryside and muscle it into an upright position, and then saying, ‘Right, lads! Another twenty like that, plus some lintels and maybe a couple of dozen nice bluestones from Wales, and we can party!’ Whoever was the person behind Stonehenge was one dickens of a motivator, I’ll tell you that.”

– Bill Bryson, Notes from a Small Island

Personal Notes

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I just returned from a four-day investment conference hosted by Charles Schwab in Denver. It was the 4th of these annual Impact Meetings which I and several of Valley National advisors have attended in the last four years. I picked up some enlightening, actionable information which I intend to discuss in upcoming weeks. And I met some famous people. More information on this topic will be forthcoming.

Thomas M. Riddle
President, VNFA

The Markets This Week

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The stock market motored ahead last week by about 1%, again finishing at all-time highs. Investors were cheered by the Republican midterm electoral win, continued strong corporate quarterly profits, and speculation that the European Central Bank would amplify its monetary stimulus.

While one beaten-up group, small-caps, didn’t do as well, other industry sectors that had taken a pounding lately, like energy and commodity-related stocks, rebounded sharply.

On Thursday, European Central Bank President Mario Draghi said the ECB would do what’s necessary to kick-start the faltering euro zone, implying up to a 1 trillion euro ($1.25 trillion) increase in the bank’s balance sheet through simulative bond-buying. Despite having heard that before, investors took it to heart.

Last week, the Dow rose 183 points or 1% to 17,573.93, and the Standard & Poor’s 500 index gained 14 to 2,031.92. Both were new closing highs. The Nasdaq Composite index ended little changed at 4632.53, as did the Russell 2000 small cap index, at 1173.32.

Last Wednesday, all three Dow Jones major averages, the industrials, transports and utilities, closed at a record. Like perfect games in baseball, that doesn’t happen often; the last time was on April 25, 2007. When you throw in the S&P 500, which also made a new high that day, you would have to go back to March 1998 to find the last time all four ended at all-time highs on the same day.

(Source: Barrons Online)

Heads Up!

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Two weeks ago, U.S. interest rates may have hit their low point for the next 20 or 30 years. A study of the history of Interest rates in the U.S. indicates rates rise for decades e.g., 1952 to 1981, then decline for decades. The 33 year long downtrend in rates could have ended in mid-October. Trying to figure out the future of interest rates, like the stock market, is difficult. Even the smartest money can forecast rates moving in the wrong direction. Having offered that caution, my reason for believing rates have bottomed is the FED’s talking points’ language has changed to indicate they are preparing the financial world for higher rates here in the U.S. Once the FED starts moving rates higher, they could continue to raise them for years to come.

NOTE: the term “interest rates” as used above refers to the interest rate paid on U.S. Treasury Bills, Notes and Bonds. Keep in mind that all interest rates here in the U.S. are connected to these rates even savings accounts and CD rates at the bank, corporate borrowing rates, and mortgage interest rates for new home buyers.

The “Heat Map”

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Most of the time the U.S. stock market looks to 3 factors (call them the “pillars” that support the stock market) to support its upward trend – let’s grade each of the pillars.

CONSUMER SPENDING: We grade this factor to A- (very favorable)

THE FED AND ITS POLICIES: We continue to grade this factor an A+ (extremely favorable) because the FED cannot do much more than it is doing to support the stock market and asset prices.

BUSINESS PROFITABILITY: We have raised this factor grade to a B+ (above average). With over 360 companies in the S&P 500 having reported third-quarter results, profits are up 7.2% and revenue 3.9%, says Sheraz Mian, Zacks’ director of research. The improving tone of the reports has been a subtle, constructive factor, adds TD Ameritrade chief strategist J.J. Kinahan.

OTHER CONCERNS: The “Heat Map” is indicating the U.S. stock market is in good shape ASSUMING no international crisis. We have added the risk of an EBOLA pandemic to the “powder keg” in the Middle East to the situations to be watched. On a scale of 1 to 10 with 10 being the highest level of crisis, we rate these collectively as a 2, reduced from a rating of 3 in last week’s commentary. Risks continue to lurk, and they deserve our ongoing attention.

The Economy

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United States Gross Domestic Product “GDP” advanced an annualized 3.50 percent in the third quarter of 2014. Real personal consumption expenditures improved 1.8 percent, durable goods increased 7.2 percent and nondurables increased 1.1 percent. Real federal government consumption expenditures and gross investment rose 10 percent during the third quarter. Private inventories accounted for a subtraction of .57 percent from the third-quarter GDP.

The Federal Reserve made a decision to end its asset purchase program on October 29th. The Fed believes economic activity will continue to expand at a moderate pace, with labor market indicators and inflation moving toward acceptable mandate levels. Inflation in the near term will likely be held down by lower energy prices, however the likelihood of inflation running persistently below 2 percent has diminished somewhat since early this year. The Fed will maintain their existing policy of reinvesting principal payments from its holdings of agency debt and agency mortgage-backed securities. This policy should maintain accommodative financial conditions. The Federal Reserve will remain data dependent as it assesses its interest rate policy moving forward. The Committee anticipates to maintain the 0 to ¼ percent target federal funds rate range for a considerable time following the end of its asset purchase program in October, especially if projected inflation continues to run below the Fed’s 2 percent long-term goal, and provided inflation expectations remain well anchored.

The Numbers

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Last week, U.S. Stocks and Foreign Stocks increased and Bonds decreased. During the last 12 months, STOCKS outperformed BONDS.

Returns through 10-31-2014

1-week

Y-T-D

1-Year

3-Years

5-Years

10-Years

Bonds- BarCap Aggregate Index

  -.2

 5.1

  4.1

  2.7

  4.2

4.6

US Stocks-Standard & Poor’s 500

  2.7

 10.9

17.3

19.8

16.7

8.2

Foreign Stocks- MS EAFE Developed Countries

 2.2

-2.8

 -.6

 9.7

  6.5

5.8

Source: Morningstar Workstation. Past performance is no guarantee of future results. Indices are unmanaged and cannot be invested into directly. Three, five and ten year returns are annualized excluding dividends.

“Your Financial Choices”

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“Your Financial Choices” The show airs on WDIY Wednesday evenings, from 6-7 p.m. The show is hosted by Valley National’s Laurie Siebert CPA, CFP®, AEP®. This week, Laurie will be attending an educational seminar and the show will be pre-recorded.

Join host, Laurie A. Siebert, CPA, CFP®, AEP® live when she returns on November 12 to discuss “Financial and environmental incentives of solar and geothermal energy with experts and users in the area.” WDIY is broadcast on FM 88.1 for reception in most of the Lehigh Valley; and, it is broadcast on FM 93.9 in the Easton and Phillipsburg area; and, it is broadcast on FM 93.7 in the Fogelsville and Macungie area – or listen to it online from anywhere on the internet.  For more information, including how to listen to the show online, check the show’s website www.yourfinancialchoices.com and visit www.wdiy.org.