Paper Chase: Age and Money
Retail sales rose .3%. This is important because consumption makes up two thirds of the consumer economy. This increase was slightly better than analysts’s expectations and are due to falling gas prices which puts more money in consumer’s pockets. Crude oil has fallen to a 4 year low below 75 dollars due to increased production in the United States and decreasing global demand.
High Stocks, Low Yield
In an environment of slow global growth and easy monetary policy, rates will remain low meaning investors looking for income could be waiting a long time. Investors have to be tactical when looking for income. Emerging markets and the high yield market are attractive as in 6% which historically isn’t good but is the world we now live in.
I believe the Fed can start to move policy as we are no longer in emergency conditions. Contrary to popular opinion, I believe normalizing policy will be great for markets as it will create stability and restore natural equilibrium.
Earnings
With 93% of companies reporting, 74% beat estimates, 17% missed estimates, 9% met estimates. The norm is about 64% and is usually in a tight range between 62 and 65%. This means companies have surprised Wall Street by earning more. It looks like we will have 8% earnings growth for the third quarter when 4% was expected entering the quarter.
Better Than the Rest
The recycling of jobs will allow young people to get work. Job openings are buoyant and strong, and the economy is in solid shape. The tailwinds from economic growth are in innovation and technology which has created more efficient production in the U.S., energy as its consumption multiplier is incredible, we are delevered differently from Europe and Japan with our policy resulting in the creation of lending and velocity in our economy. Dollar rallies dulling exports are overestimated as the U.S. is a closed economy with exports as a percentage of gdp are in low teens. Expect good but not great growth of between 3% growth in GDP for the 4th quarter.
What I’m Doing
I’m already looking towards 2015. I believe in biotech’s as they are drivers of healthcare (which I always like as people will always get old and sick), airlines, shipping, and utilities for they have a high dividend yield for those in search of income. 2015 will not be as bad nor as good as it once looked.
Age and Money
The holidays are a great time to check in on your parents, grandparents etc. and other aging relatives. It’s important to have a conversation with your loved ones particularly if you have noticed or know they are forgetting regular payments, making payments more than once, having trouble completing basic math, avoiding discussing finances or making unusual, large purchases. It is not normally a discussion people are receptive to, but it is one that must be had.
Hard Talk, Easy Stuff
Start with consolidating accounts as disparate separate accounts can be tedious and difficult to track down. Use auto bill pay (something we all should be using). Make sure wills are current and financial power of attorney work in the state they live in for it is not as flexible as medical power of attorney. Assign roles for siblings or family members to help. For example, have one person be a point on financial matters and another the principal on medical issues. More importantly, it’s important people agree with responsibilities and there are regular meetings to discuss events as they occur. If need be, be open to the possibility of bringing in a lawyer and financial planner. Reinforce to the relative in question that it is their plan, and you are only there for support.
