The Ricks Report
August 21, 2017
Fixed Indexed Annuities used in the appropriate way can be wonderful additions to a well-rounded retirement plan. These tools give their owners opportunity to capture positive gains in market indexes while having protection from market downturns. I am including in this email a brochure for such a product from Nationwide to give you all a better understanding on how these contracts work. I want to show you these brochures because I believe they clearly display the power of a Fixed Indexed Annuity, when compared to the old “buy and hold” style of investing in the market, during great and terrible periods. I want to be clear in that I am not recommending this specific annuity to the reader, as an in-depth conversation is needed to determine what type of portfolio setup is appropriate for each individual client, but this should give you all a good starting point to understand the basics of how an annuity may benefit your retirement planning. Please give my office a call if you are interested in learning more about how these tools work and how one may benefit you.
Numbers of $ignificance
- THE STAKES ARE HIGH – The average interest rate paid by the government on its interest bearing debt was 2.279% as of 7/31/17. The average interest rate paid on interest bearing debt was 5.041% as of 7/31/07 (10 years earlier) or 2.8 percentage points higher. Every 1 percentage point increase in the cost of debt on our nation’s $14.4 trillion of publicly held debt is equal to $144 billion of annual interest expense (source: Treasury Department).
- ALTERNATIVES TO BE DISCUSSED – A new state law in Colorado (House bill # 1041) requires high school guidance counselors to discuss alternatives to college as part of a student’s academic and career planning, e.g., military service and trade schools. The law is effective for the school year that begins this month. 70% of all 2016 high school graduates enrolled in college (source: Department of Labor).
Winning at Life with Gregory Ricks
Tune in every weeknight from 7:00 pm to 8:00 pm and every Saturday from 10:00 am to 1:00 pm! We are now on News Talk 99.5 WRNO and News Talk 104.9 WBUV, as well as Facebook LIVE, Periscope (GregoryRicks) and the iHeart app. Gregory Ricks and James Parker will be live in studio talking about some great current events and financial solutions. This week’s guest will be Jude Heath, CPA and member of the Total Wealth Authority. Remember, you can listen from any smartphone or computer through iHeartRadio.
Here, there, and everywhere…
Markets around the world appear to be benefitting from global economic recovery.
After pointing out the United States’ economy is the heart of the global financial system, Barron’s reported:
“The Standard & Poor’s 500 index has tirelessly amassed 30 record closes this year, but is up just 1.2 percent since March 1. Meanwhile, nearly every foreign stock market has sprinted ahead…We wrote on March 25 about how a global recovery should goose smaller, fresher bull markets abroad. By now, it is firmly becoming the consensus view – metals are rallying, with copper up 18 percent this year; the MSCI All Worlds Index has risen for eight straight months.”
Emerging markets haven’t performed too shabbily either. Through the end of last week, the MSCI Emerging Markets Index was up 22.88 percent year-to-date. Franklin Templeton’s Mark Mobius wrote improved performance in emerging markets is the result of “…encouraging economic data in China, investor inflows, and corporate earnings growth.”
So, global stock markets have been delivering relatively robust performance this year.
What have bonds been up to? They’ve gained value year-to-date, too.
Bond markets continue to tell a different story than stock markets. The Federal Reserve raised its benchmark interest rate for the third time in June. In theory, interest rates should be moving higher, yet the yield on 10-year Treasury bonds was lower (2.19 percent) at the end of last week than it was at the start of the year (2.45 percent).
|Data as of 8/18/17||1-Week||Y-T-D||1-Year||3-Year||5-Year||10-Year|
|Standard & Poor’s 500 (Domestic Stocks)||-0.7%||8.3%||10.9%||7.2%||11.3%||5.3%|
|Dow Jones Global ex-U.S.||0.3||15.4||12.5||0.2||4.8||-0.1|
|10-year Treasury Note (Yield Only)||2.2||NA||1.5||2.4||1.8||4.6|
|Gold (per ounce)||0.8||11.8||-4.0||0.0||-4.3||7.0|
|Bloomberg Commodity Index||-0.6||-4.9||-4.1||-12.7||-10.4||-6.4|
|DJ Equity All REIT Total Return Index||0.3||4.1||-0.8||7.6||9.5||6.5|
S&P 500, Dow Jones Global ex-US, Gold, Bloomberg Commodity Index returns exclude reinvested dividends (gold does not pay a dividend) and the three-, five-, and 10-year returns are annualized; the DJ Equity All REIT Total Return Index does include reinvested dividends and the three-, five-, and 10-year returns are annualized; and the 10-year Treasury Note is simply the yield at the close of the day on each of the historical time periods.
Sources: Yahoo! Finance, Barron’s, djindexes.com, London Bullion Market Association.
Past performance is no guarantee of future results. Indices are unmanaged and cannot be invested into directly. N/A means not applicable.
Have you tried taco mode? In March, the Harvard Business Review (HBR) offered some ideas about innovation in America. It’s a topic that deserves some attention as “…recent data suggests that innovation is getting harder and the pace of growth is slowing down. A major challenge in business and policy spheres is to understand the environments that are most conducive to innovation.”
One place to look for examples of innovation is the sharing economy where innovations often echo the late 1800s. Back then, according to HBR, innovation primarily occurred outside of companies. In contrast, today, the majority of patents go to inventors who are associated with companies.
Let’s take a look at a couple recent ideas that may or may not gain traction:
- Taco Mode. Ridesharing – arranging for a ride via an app – has changed transportation and become one of the industry’s fastest growing market segments, according to data from Statista reported by com.
The latest rideshare innovation is Taco Mode. Hungry passengers can request rides that include stops at fast food chain drive-throughs. One company executive described the option as ‘inverse delivery.’ The hungry are delivered to the food rather than vice versa.
- Just-in-time watch rentals. The demand for Swiss watches has fallen off in the United States. The Federation of the Swiss Watch Industry reported exports to the United States dropped steadily (-9.6 percent) between 2015 and June 2017.
Could the culprit be luxury watch rentals? Barron’s Penta reported luxury watch rentals are a relatively recent sharing-economy innovation. For a monthly membership fee of $149 to $999, watch lovers have opportunities to “…access experiences and embark on journeys otherwise unattainable – without having to spend a major chunk of their savings.”
- Neighborhood networks. It’s a straightforward concept: A social network that connects neighbors so they can share tools, leftovers, playgroups, and more. It’s big in Brazil, according to Forbes. One company has more than 140,000 registered users across 3,800 cities.
But, anyone who has ever watched Homer Simpson borrow Ned Flanders’ tools and not return them understands why some aspects of this idea may not catch on.
What innovations would you like to see in the sharing economy?
Weekly Focus – Think About It
“One word sums up our country’s achievements: miraculous. From a standing start 240 years ago – a span of time less than triple my days on earth – Americans have combined human ingenuity, a market system, a tide of talented and ambitious immigrants, and the rule of law to deliver abundance beyond any dreams of our forefathers.”
–Warren Buffett, Oracle of Omaha
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Gregory Ricks & Associates is a Registered Investment Advisor which offers services and charges fees as set forth in Form ADV, a copy of which you should obtain prior to investment. Information presented is for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any specific securities, investments, or investment strategies. Investments involve risk and unless otherwise stated, are not guaranteed. Be sure to first consult with a qualified financial advisor and/or tax professional before implementing any strategy discussed herein.
* The Standard & Poor’s 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general.
* The 10-year Treasury Note represents debt owed by the United States Treasury to the public. Since the U.S. Government is seen as a risk-free borrower, investors use the 10-year Treasury Note as a benchmark for the long-term bond market.
* Opinions expressed are subject to change without notice and are not intended as investment advice or to predict future performance.
* Past performance does not guarantee future results.
* You cannot invest directly in an index
http://www.barrons.com/articles/investors-chasing-faster-growth-look-abroad-1503109144 (or go to https://s3-us-west-2.amazonaws.com/peakcontent/+Peak+Commentary/08-21-17_Barrons-Investors_Chasing_Faster_Growth_Look_Abroad-Footnote_1.pdf)
https://finance.yahoo.com/quote/^TNX/history?period1=1483250400&period2=1503118800&interval=1d&filter=history&frequency=1d (or go to https://s3-us-west-2.amazonaws.com/peakcontent/+Peak+Commentary/08-21-17_Yahoo_Finance-10-year_Treasury_Bond_Yield-Footnote_5.pdf)