The Ricks Report
January 9, 2017
Numbers of $ignificance
- STRONGER DOLLAR, WEAKER EURO – 19 of 28 economists (68%) polled in late December 2016 believe that the Euro will “hit parity” with the US dollar during 2017, i.e., 1 Euro will equal 1 US dollar, the result of rising US domestic interest rates. The Euro was equal to $1.0581 as of 12/31/16 (source: Financial Times).
- WHEN? – Social Security trustees announced on 6/22/16 that the trust fund backing the payment of Social Security benefits (OASI benefits) would be zero in 2035. When the trustees released their report in 2003, the Social Security Trust Fund was projected to be depleted in 2042 (source: Social Security Trustees Reports).
- CAMPAIGN RHETORIC? – Our nation’s economy will begin its 91st month of growth this week, an expansion exceeded in length only 3 times since 1900. President-elect Trump predicted on 4/02/16 that the US is on course for a “very massive recession” because the country is “sitting on an economic bubble” (source: Reuters).
- SCARY NEWS – Savita Subramanian, head of US equity strategy at Bank of America-Merrill Lynch, predicted on 10/09/16 that the US will “hit a recession sometime in the 2nd half of 2017” (source: CNBC).
Winning at Life with Gregory Ricks
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Bullish sentiment helped world equity markets get off to a fast start last week. Just name a country or region – developed markets, emerging markets, the United States, Latin America, Asia, Europe, the United Kingdom – and it’s likely the area’s benchmark index may have been up for the week.
Not everyone was in the bullish camp, though. Barron’s reported:
“The market optimism is understandable. After a long spell of zero interest rates, a baton transfer from monetary manipulation to fiscal stimulus and pro-growth chutzpah can be an exciting regime change…But investors’ hopes could be misplaced. It would be one thing if there were shovel-ready infrastructure projects or proposed tax cuts on the table that could quickly boost spending. Instead, Republicans propose, for example, changing the basis for corporate tax from location of operations to location of sales. The aim is to encourage domestic production and exports, but the plan could hurt companies that import materials or goods. Will big importers like [big box stores] pass the tax hit onto consumers by raising prices?”
For contrarians, record highs for U.S. stock markets (both the Standard & Poor’s 500 Index and NASDAQ closed at new highs last week) and strong bullish sentiment (Barron’s reported, “The Investors Intelligence survey of newsletter writers showed the bullish herd swelling above 60 percent…”) are red flags, signaling an inflection point may be near.
No matter which camp you fall into, there is a lot of uncertainty. Which policies will the new administration pursue? Will China’s growth slow more quickly than expected? How quickly will the Federal Reserve raise rates? Will interest rates continue to move higher? Will a stronger dollar negatively affect emerging markets? In the face of so much uncertainty, it’s important to be diversified.
|Data as of 1/6/17||1-Week||Y-T-D||1-Year||3-Year||5-Year||10-Year|
|Standard & Poor’s 500 (Domestic Stocks)||1.7%||1.7%||14.4%||7.6%||12.3%||4.9%|
|Dow Jones Global ex-U.S.||2.0||2.0||8.3||-2.4||3.3||-0.9|
|10-year Treasury Note (Yield Only)||2.4||NA||2.2||3.0||2.0||4.7|
|Gold (per ounce)||1.5||1.5||7.7||-1.9||-6.2||6.8|
|Bloomberg Commodity Index||-0.2||-0.2||14.0||-11.3||-9.3||-5.7|
|DJ Equity All REIT Total Return Index||2.0||2.0||10.6||13.2||12.4||5.4|
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.
Are you thinking about starting a business? Small businesses in the United States employed 56.8 million people or 48 percent of the private workforce in 2013 (the latest numbers available), according to the U.S. Small Business Administration. That’s pretty remarkable when you realize that 34 percent of small businesses employ fewer than 100 people.
If you’re thinking of starting a business, the AARP suggests you carefully consider legal and tax issues, including:
- Business structure. Will you be a sole proprietor? Or will you establish a corporation, limited liability company, or partnership? The structure of your business will affect taxes, liability, and other matters.
- Many cities and states require a new business to register, apply for a business license, and pay an annual fee to do business.
- Tax payments. Talk with a tax professional to determine whether you need to make quarterly tax payments. Also, be aware that people who work for themselves pay both the employer and employee portions of Social Security and Medicare taxes. You’ll want to factor that in when deciding pricing for products or services.
- In many cases, your business will need its own bank account and credit cards. You’ll also need a system for tracking business receipts and expenditures. Investing in business accounting software can make recordkeeping a lot easier.
- Contracts specify deadlines, terms of payment, and other particulars, ensuring everyone shares the same understanding and expectations. If your client asks you to sign a contract or asks you to provide a contract, consult with your attorney.
- Liability insurance. Professional liability insurance protects you if you’re ever sued, and some clients may require you to have coverage. Talk with your financial or insurance professional to determine what type of coverage you may need.
Of course, when you work for yourself, it’s critical to set money aside for retirement. Contact your financial and/or tax professional to discuss options that might work for you.
Weekly Focus – Think About It
“We have neglected the truth that a good farmer is a craftsman of the highest order, a kind of artist.”
–Wendell Berry, American novelist and poet
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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/cheering-and-fearing-the-post-trump-rally-1483767229?mod=BOL_hp_we_columns (or go to https://s3-us-west-2.amazonaws.com/peakcontent/+Peak+Commentary/01-09-17_Barrons-Cheering_and_Fearing_the_Post-Trump_Rally-Footnote_1.pdf)
http://www.barrons.com/mdc/public/page/9_3063-economicCalendar.html?mod=BOL_Nav_MAR_hps (Click on U.S. & Intl Recaps, then on “Equities rise to the occasion”) (or go to https://s3-us-west-2.amazonaws.com/peakcontent/+Peak+Commentary/01-09-17_Barrons-Global_Stock_Market_Recap-Footnote_2.pdf)
http://www.barrons.com/articles/no-cigar-yet-dow-stops-short-of-20-000-1483767234 (or go to https://s3-us-west-2.amazonaws.com/peakcontent/+Peak+Commentary/01-09-17_Barrons-No_Cigar_Yet-Dow_Stops_Short_of_20000-Footnote_4.pdf)