­­­­­­­­


The Ricks Report

June 5, 2017     

Numbers of $ignificance

  • THE VERY WEALTHY – The top 0.1% of US taxpayers (i.e., top 1 out of every 1,000 taxpayers) paid 19.9% of all federal income tax for the 2014 tax year (source: Internal Revenue Service).
  • THE LATEST FORECAST – The 10-year budget forecast released by the Trump White House on 5/23/17 boasted that it would reduce our deficit by $5.6 trillion “compared to the current fiscal path.” The math behind the statement is that the Trump plan would reduce the current $8.8 trillion of deficits projected over the 10 fiscal years of 2018-2027 by $3.6 trillion through reduced spending and by another $2.0 trillion due to the “anticipated economic gains that will result” from the plan.  The net result: $8.8 trillion of deficits are reduced to $3.2 trillion of deficits (source: OMB).

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, the guest will be Wes Blanchard, Estate Planning Attorney and  member of the Total Wealth Authority. Remember, you can listen from any smartphone or computer through iHeartRadio.

 The Markets

The bull market in U.S. stocks is getting really old!

In fact, this bull has been charging, standing, or sitting for more than eight years. In April, it became the second longest bull market in American history, according to CNN Money.

There are some good reasons the stock market in the United States has continued to trend higher. For one, companies have become more profitable. During the first quarter of 2017, companies in the Standard & Poor’s 500 Index reported earnings increased by 14 percent, year-over-year. That was the highest earnings growth rate since 2011, according to FactSet.

In addition, the economy in the United States has been chugging along at a steady pace. CIO Charles Lieberman wrote in Bloomberg View:

“…U.S. economic growth is continuing at a moderate pace, an economic recovery is finally underway in Europe, inflation is under control, corporate profits are rising, and there is some prospect for tax reform and deregulation, even if whatever gets implemented is less than what is really needed. These conditions imply continued growth in corporate profits.”

Last week’s employment report boosted both stock and bond markets. Financial Times opined the report was weak enough to ease pressure on bond rates and strong enough to boost share prices higher.

No one can say with certainty how long a bull market will last. Typically, bull markets are interrupted by corrections – declines in value of 10 percent or more. Historically, bulls have turned into bears, eventually. That’s why it’s important to employ investment strategies that manage risk and preserve capital even when markets are moving higher.

 

Data as of 6/2/17 1-Week Y-T-D 1-Year 3-Year 5-Year 10-Year
Standard & Poor’s 500 (Domestic Stocks) 1.0% 8.9% 15.9% 8.2% 13.8% 4.7%
Dow Jones Global ex-U.S. 1.2 13.9 17.3 -0.2 7.0 -1.1
10-year Treasury Note (Yield Only) 2.2 NA 1.8 2.6 1.5 4.9
Gold (per ounce) 0.8 10.0 5.2 0.7 -4.9 6.6
Bloomberg Commodity Index -2.0 -5.9 -5.1 -14.8 -8.4 -7.3
DJ Equity All REIT Total Return Index 1.1 4.5 6.1 9.1 11.8 5.1

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.

 

Fresh from the annals of improbable research. Anyone who enjoys the Ig Nobel Prizes – which spur people’s interest in science, medicine, and technology by making them laugh and then making them think – may like The Annals of Improbable Research (AIR). An enthusiastically nerdy science humor magazine, the publication offers readers the opportunity to read about new and improbable things every other month.

During its 21-year history, AIR has covered a variety of topics, including:

  • The Taxonomy of Barney. “In February 1994, we observed on television an animal which was there identified as a dinosaur, Barney. Its behavioral characteristics suggested that it was dissimilar to the diverse dinosaurian faunas that are so well documented…To test the hypothesis that Barney is a reptile descended from the true dinosaurs, we went into the field in order to capture and study a living specimen. This we accomplished with remarkable ease, as Barney was advertised to be appearing at a local shopping mall.”
  • Horse Calculus. “The idea is that a heart is like a little battery, pushing weak electric currents in a three-dimensional pattern round the body…During each heartbeat, the vector (tip of the arrow) draws a loop – the heart loop – whose shape is a powerful diagnostic of health. Therefore it is useful to measure this loop…His specific question was: does the theory apply to a real horse or only to an ideal cylindrical horse…The moral of this is that applications of mathematical knowledge can be unexpected; you may find yourself taking a surface integral over a horse.”
  • Which Feels Heavier – A Pound of Lead or a Pound of Feathers? “Which weighs more – a pound of lead or a pound of feathers?” The seemingly naive answer to the familiar riddle is the pound of lead. The correct answer, of course, is that they weigh the same amount. We investigated whether the naive answer to the riddle might have a basis in perception. When blindfolded participants hefted a pound of lead and a pound of feathers each contained in boxes of identical size, shape, and mass, they reported that the box containing the pound of lead felt heavier at a level above chance.”

Lurking beneath the unusual is some potentially useful scientific research.

Weekly Focus – Think About It

“Being a scientist is like being an explorer. You have this immense curiosity, this stubbornness, this resolute will that you will go forward no matter what other people say.”

–Sara Seager, Professor of Planetary Science and Physics

at Massachusetts Institute of Technology (MIT)

 

Best regards,

Gregory Ricks

 

P.S.  Please feel free to forward this commentary to family, friends, or colleagues. If you would like us to add them to the list, please reply to this email with their email address and we will ask for their permission to be added.

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

Sources:

http://money.cnn.com/2016/04/29/investing/stocks-2nd-longest-bull-market-ever/

https://insight.factset.com/hubfs/Resources/Research%20Desk/Earnings%20Insight/EarningsInsight_060217.pdf

https://www.bloomberg.com/view/articles/2017-05-30/stocks-rally-as-washington-burns-and-that-s-not-odd

https://www.ft.com/content/1fab9c52-bc35-31d8-a3a3-f428649ca203 (or go to https://s3-us-west-2.amazonaws.com/peakcontent/+Peak+Commentary/06-05-17_FinancialTimes-US_Stocks_Set_New_Records_as_Wall_St_Shrugs_Off_Disappointing_Jobs_Report-Footnote_4.pdf)

https://www.yardeni.com/pub/sp500corrbear.pdf

http://www.improbable.com/ig/ (or go to https://s3-us-west-2.amazonaws.com/peakcontent/+Peak+Commentary/06-05-17_Improbable-About_the_Ig-Footnote_6.pdf)

http://www.improbable.com/airchives/paperair/volume1/v1i1/barney.htm (or go to https://s3-us-west-2.amazonaws.com/peakcontent/+Peak+Commentary/06-05-17_Improbable-The_Taxonomy_of_Barney-Footnote_7.pdf)

http://www.improbable.com/airchives/paperair/volume16/v16i4/Horse_calculus.pdf (or go to https://s3-us-west-2.amazonaws.com/peakcontent/+Peak+Commentary/06-05-17_Improbable-Horse_Calculus-Footnote_8.pdf)

http://www.improbable.com/airchives/paperair/volume20/v20i5/Feathers-Research-Review-20-5.pdf (or go to https://s3-us-west-2.amazonaws.com/peakcontent/+Peak+Commentary/06-05-17_Improbable-Feathers_Research_Review-Footnote_9.pdf)

http://blog.ted.com/the-ted2015-conference-in-30-quotes/