Monthly Archives: March 2015

Heads Up!

Posted on by

The IRS has experienced huge cybersecurity losses during the past several years by hackers stealing taxpayer’s identities and then filing for fraudulent refunds. To stem the losses, the IRS is selectively sending letters to taxpayers to verify identities. Taxpayers receiving an Identity Verification Letter should use IDVerify.irs.gov to verify information for the fastest, easiest way to complete the task.

Only those taxpayers receiving Letter 5071C should access idverify.irs.gov.

The website will ask a series of questions that only the real taxpayer can answer.

Once the identity is verified, the taxpayers can confirm whether or not they filed the return in question. If they did not file the return, the IRS can take steps at that time to assist them. If they did file the return, it will take approximately six weeks to process it and issue a refund.

Letter 5071C is mailed through the U.S. Postal Service to the address on the return. It asks taxpayers to verify their identities in order for the IRS to complete processing of the returns if the taxpayers did file it or reject the returns if the taxpayers did not file it. The IRS does not request such information via email, nor will the IRS call a taxpayer directly to ask this information without you receiving a letter first. The letter number can be found in the upper corner of the page.

The letter gives taxpayers two options to contact the IRS and confirm whether or not they filed the return. Taxpayers may use the idverify.irs.gov site or call a toll-free number on the letter. Because of the high-volume on the toll-free numbers, the IRS-sponsored website, idverify.irs.gov, is the safest, fastest option for taxpayers with web access.

Taxpayers should have available their prior year tax return and their current year tax return, if they filed one, including supporting documents, such as Forms W-2 and 1099 and Schedules A and C.

The Economy

Posted on by

Last week the negative economic reports exceeded the positive. Following is a quick summary of the events:

Positives:

  1. Building permits rose 3% vs an expected rise of 0.5%.
  2. The Fed removed “patient” and US stocks rose 1.2%

Negatives:

  1. Housing starts fell 17% to an annualized pace of 987k vs expectations for a 2.4% fall and 1.04mm homes.
  2. Empire State factory index came in at 6.9, vs expectations of 8 and down from 7.8 previously.
  3. The Philly Fed index came in at 5.0 vs expectations of 7.
  4. The ten-year yield is back below 2%
  5. Mortgage applications fell 2% week over week.
  6. Mortgage Refinancing applications fell 5%.
  7. Industrial production rose 0.1% month over month vs expectations of a 0.3% rise.

The “Heat Map”

Posted on by

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: This grade is an A (very favorable) due to the favorable effect of lower gasoline and heating oil prices.

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. Now it seems investors are back to thinking the first hike will be in September and that there will be fewer this year. Indeed, the Fed’s own median Fed Funds rate projection for 2015’s end, released Wednesday, is about 0.625%, down from 1.12% in December. That brought the central bank closer to the more gradual trajectory that Fed Fund futures market has been predicting all along.

BUSINESS PROFITABILITY: This factor’s grade is a C (average). Many forecasters are starting to think earnings will be flat in 2015 thanks to the dollar’s potentially painful influence. Negative first quarter earnings warnings will begin soon and the March quarter at least will be terrible for energy companies, poor for most big companies, and weak in general.

OTHER CONCERNS: The “Heat Map” is indicating the U.S. stock market is in OK shape ASSUMING no international crisis. On a scale of 1 to 10 with 10 being the highest level of crisis, we rate these international risks collectively as a 2, the same as last week. These risks deserve our ongoing attention.

The Numbers

Posted on by

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

Returns through 3-20-2015

1-week

Y-T-D

1-Year

3-Years

5-Years

10-Years

Bonds- BarCap Aggregate Index

.8

1.5

 6.0

 3.3

 4.3

4.9

US Stocks-Standard & Poor’s 500

2.7

2.9

14.9

16.9

15.1

8.1

Foreign Stocks- MS EAFE Developed Countries

4.0

6.8

3.9

9.4

6.8

4.9

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”

Posted on by

“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 guest host, Rodman Young, CPA\PFS, CFP® who will discuss: “Your income tax questions”

Laurie and Rod will take your calls on these topics and other inquiries this week. This show will be broadcast at the regular time. Questions may be submitted early through www.yourfinancialchoices.com by clicking Contact Laurie. 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.

The Markets This Week

Posted on by

The stock market soared nearly 3% last week, closing just below previous all-time highs. Investors celebrated the Federal Reserve’s go slower policy on raising interest rates. The central bank’s statements suggested hikes would be fewer, and possibly smaller and later than previously expected, given low inflation and less-than-robust economic U.S. expansion.

The market has blown hot and cold in recent weeks, shifting with perceptions about the timing of the first Fed Fund’s rate hike. When a June move was anticipated, stocks fell, as they did in the previous two weeks. Fed projections were “marked to market,” says David Lefkowitz, senior equity strategist at UBS Wealth Management Research, and the “Goldilocks” scenario pleased investors. The Fed’s median remains above the futures market prediction of about 0.5%.

LAST WEEK, the Dow Jones Industrial Average tacked on 378 points, or 2.1%, to 18127.65, while the Standard & Poor’s 500 index jumped 55 points to 2108.10. The Nasdaq Composite gained 155, or 3.2%, to 5026.42, not far below its high of 5048, set back in 2000.

“The Fed moved the goal posts in a substantial way” and pushed out the timing on rate hikes, says Jonathan Golub, chief U.S. market strategist for RBC Capital Markets. Rates will be lower for longer than the market thought, which is attractive for risk assets like equity, he adds.

It lowered the bar on the unemployment rate needed for a hike, to 5%-5.2%, instead of 5.2% 5.5%, he says. With the rate already 5.5%, the Fed gave itself more wiggle room on timing. It also downgraded its forecasts of U.S. GDP growth to 2.3%-2.7% this year, from 2.6%-2.7%.

Partly behind the Fed’s actions, says Golub, is a quiet desire to contain the dollar, which has risen 25% in the last 10 months and will hurt the profits of U.S. multinationals. That’s something investors will be looking at keenly, and soon. For the near term, however, the market will be in limbo, as first-quarter earnings reports don’t begin for three weeks and the economic data calendar is relatively sparse until then.

Oil’s effect is built in, and the bottom up analyst EPS estimates for the first quarter have stopped going down, a potential salutary influence, Golub notes. Nevertheless, the magnitude of the effect of the rising dollar on earnings is yet to be ascertained and could lead to surprises and volatility.

(Source: Barrons Online)

Heads Up!

Posted on by

Eight months ago each Euro could be exchanged for $1.40; today, one Euro will bring only $1.05. This severe decline of the Euro is, in part, due to the European Central Bank’s announcement to kick off the European version of Quantitative Easing (“QE”) which in turn reduces interest rates in Europe. European exporters have suddenly become much more competitive due to the lower Euro.

Other export nations like China and South Korea will not stand still and watch the European exporters take market share through the lower Euro. China and South Korea have already reduced their interest rates thus attempting to make their currencies weaker, and more competitive against the weaker Euro. We can expect Brazil, Mexico and Canada to follow suit. The end result is a possibility of a worldwide currency war. What happens several years down the road is not clear, but the outcome is unlikely to be good.

The Economy

Posted on by

Last week the positive economic reports exceeded the negative. Following is a quick summary of the events:

Positives:

  1. Initial jobless claims fell to 289k vs estimates of 305k.
  2. Consumer Price Index in China rose 1.4% year over year, higher than expected.
  3. National Federation of Independent Business small business optimism index came in at 98.
  4. Mortgage Brokers Association purchase applications rose 1.9%.
  5. Import prices fell 9.4% year over year, a win for the consumer.

Negatives:

  1. Core US retail sales fell 0.2% vs an expected rise of 0.3%.
  2. Headline Producer Price Index fell 0.5%, way more than the expected 0.3% rise. The disinflation theme continues. Core price index also fell 0.5%.
  3. University of Michigan consumer sentiment fell to 91.2 to a four-month low and below the 95.5 expected.
  4. Refinance applications fell 2.9%.

The “Heat Map”

Posted on by

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: This grade is an A (very favorable) due to the favorable effect of lower gasoline and heating oil prices.

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: This factor’s grade has been reduced to a C (average). Many forecasters are starting to think earnings will be flat in 2015 thanks to the dollar’s potentially painful influence. Negative first quarter earnings warnings will begin soon and the March quarter at least will be terrible for energy companies, poor for most big companies, and weak in general.

OTHER CONCERNS: The “Heat Map” is indicating the U.S. stock market is in OK shape ASSUMING no international crisis. On a scale of 1 to 10 with 10 being the highest level of crisis, we rate these international risks collectively as a 2, the same as last week. These risks deserve our ongoing attention.