Paper Chase: Digital Salsa
Stocks closed 2014 at near record levels as the Dow finished positive for a 6th straight year up 7.5%. This is the longest run of positive gains since 1991 through 1999.
The S&P 500 ended the year up 11%. This is now 3 straight years of double digit growth led by improved consumer confidence, more hiring, and higher corporate earnings.
Crude oil dropped more than 50% which is the worst fall since 2008.
Coffee was the top commodity in 2014 gaining more than 50% on the year.
Whenever we have a long period of market gains, emotionally we become cautious; however, the Facts are behind continued market growth when looking at the Fed and economy. The Fed is on board with the notion that economies, while debatable that they are getting better, are getting less worse. The coming year should see the same, but humility tells us to move a bit into cash as the bull run may not continue.
There are two types of investors, those whom have been humbled and those whom are about to be. We have had a tremendous run. The S&P 500 achieved 53 new highs in 2014 following a 32% gain in 2013. If the idea is to buy low and sell high, I can tell you now is not low. I do suggest staying in the market as you will never be able to “time” it completely.
Are People Finally Getting In?
Not really. Between the dotcom implosion and the recession in 2008, we lost a generation of investors. Furthermore, 1-2% interest rates have people putting money into other things than the market. People seem to love stocks when they are expensive and hate them when they are cheap. In 2009, buying stocks was crazy. Now, people seem to want to buy them at an incredible multiple of what they could have been. The market should be fine as long as complacency and an “all is well” attitude does not set in. It’s easy to lose money in the market. Don’t forget that.
Can we handle the higher rates promised by the Fed this year? I don’t know. When the market dipped 10% in October, a call for the Fed to do more caused stocks to soar.
I expect lower than 3% on the ten year treasury to continue due to stable interest rates courtesy of the Fed. While there could be some increase in the price of oil, the existing supply and demand imbalance will not go away.
In fact, I suspect oil prices are going lower, and oil is not a falling knife that you want to catch. 2008 saw oil production jump 47.5% in less than 3 months. Prices were said to increase, but the benefit of hindsight tells then was the time to sell. It has since dropped 45%.
Normally, anything that drops that precipitously sounds like a buying opportunity, but markets moving this high this fast without a pullback, indicate a time to play defense. That last nickel will not be worth it when the market heads south which it always does.
Minimum Wage Effect
The minimum wage is a simple policy that has its intended effect. As the economy has grown and expanded, the benefits have not reached the bottom half of the labor force. The policy only affects 3 million workers which is less than 2% of the entire labor force.
An increased minimum wage does mean some people will be thrown out of work. If a low skilled employee does not justify wage x and the minimum wage is x, the employee will be fired. There is no perfect policy. People will get hurt.
The CBO does say 24.5 million low wage workers get raise. This means there are roughly 49 beneficiaries for every 1 job loser.
There is an argument that states should make these decisions rather than central government based in Washington DC. If there is such a policy to be enacted as the minimum wage, the 50 states should rightfully decide that policy as the government should not interfere with the right of consenting adults to sign labor contracts.
I believe movement towards states setting their own minimum wage does make sense because prices and cost of living vary greatly across the country. We do need a federal floor though. State variation is good, but a higher federal floor won’t allow states to get too far from that federal floor.
Of course the minimum wage is no substitute for fast economic growth. When the aggregate burden of government is reduced on net making it less of a burden on the private sector, faster economic growth and job creation to the point where entry level wages can be higher than the minimum wage.
Fania Records was launched in 1964 and purchased by Emusica for between 9 and 12 million dollars in 2005. Emusica transferred Fania to the Codigo Group in 2008.
Dubbed “The MoTown of Salsa”, Fania Records was the epicenter for Latinos coming to New York from places such as the Dominican Republic, Puerto Rico, and Cuba. Fania became their home. and the basis for who they were and what they stood for in New York and around the world.
At the time of acquisition, there were said to be no old recordings. An old receipt for a storage unit in the hudson valley revealed over 4,000 recordings.
Music, old and new, is an experience people enjoy. It’s a feeling that becomes a memory. Going digital when most labels were still producing physical product allowed the world to become Fania’s market as opposed to one part of the United States.
Now, there is a demand for salsa in China, Japan, Europe, South America, and greater parts of Asia. Fania has DJs remixing and producing their older music for a younger, club going audience.
Fania never has to worry about being lost in translation for the only thing they are worried about is making the people dance?
New Years Resolutions
Keep track of your spending. Cut costs, pay down debt and save more. Take small but consistent steps when doing so.
Create a budget and stick to it. Lower your discretionary spending, and most importantly, start building your emergency fund.
Pay down credit card debt. Remember to pay the most expensive balance first and ask for a lower interest rate. make sure you do the homework on balance transfers.
Refocus on your retirement. It is never too early, and we never want it to become too late. Max out your retirement plans, take advantage of catchup contributions, and make sure to contribute to a traditional or roth ira if you are eligible.
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