Triad Financial Strategies - Unmatched Quality and Service: February 2013

Monday, February 25, 2013

Weekly Commentary February 25th, 2013

The Markets

Like Canadian geese migrating in anticipation of winter, stock markets moved south last week in anticipation of monetary tightening. Minutes from the January Federal Reserve Open Market Committee meeting were released mid-week. After reviewing them, many analysts decided that quantitative easing may begin to taper off before the end of the year. Not everyone agreed with this interpretation; however, it caused major U.S. stock markets, as well as some Asian and European stock markets, to dip lower. Many markets recovered ground before Friday, but in the U.S., only the Dow Jones Industrial Index finished the week with a gain.

Interestingly, expectations that the Fed’s quantitative easing program may end relatively soon had little effect on Treasury bond markets. This seems counterintuitive because an end to quantitative easing (the Fed’s program of buying Treasuries to create liquidity and encourage economic improvement) could potentially lower demand for these securities and cause Treasury yields to move higher. Instead, yields moved lower last week. Experts suggested that bond investors’ apparent lack of concern may be rooted in the belief that the Federal Reserve will not ease interest rates even if it changes its policy on quantitative easing. In previous statements, the Fed has said it will not modify interest rates until unemployment rates and inflation reach specific targets.

Last week, The Conference Board announced that its Leading Economic Index® (LEI) for the U.S. showed America’s economy gaining some momentum. The LEI tracks 10 leading economic indicators to gauge short-term economic outlooks. The Conference Board’s LEI for China also signaled improvement. While this may prove to be good news, the impact of sequester – $85 billion in automatic spending cuts that are scheduled to begin in early March – on America’s economic growth remains unknown and highly debated.

It’s important to look at more than tuition and fees when planning for college. That’s because tuition and fees account for just about 39 percent of the total budget for students who live on campus at public four-year state colleges and universities. Tuition and fees are about 20 percent of the budget for students who live off campus at public two-year state colleges and universities.

If that’s an unwelcome surprise, you won’t be thrilled to learn that during the 2012-2013 school year the average college budget for a student who lived on campus and attended an in-state, four-year public institution and was more than $22,000. That budget included:

· Tuition and fees

· Room and board

· Books and supplies

· Transportation

· Other expenses

On average, the same items for a student who commuted to a two-year, in-state public college ran about $15,500. At a private non-profit, four-year college or university the average budget was more than $43,000.

Making college possible

So, how do students and their families afford college? The good news is that financial aid is available for many. Total financial aid for full-time students was more than $14,000 on average during the 2011-2012 academic year (the most recent data available). In addition, according to the College Board, undergraduate students received financial assistance from a variety of sources:

· 39 percent received federal loans and work/study

· 26 percent received Pell and other federal grant programs

· 18 percent received institutional grants

· 9 percent received federal education tax credits and deductions

· 5 percent received state grants

· 4 percent received private or employer grants

Is it worth it?

Scrimping and saving to pay for college often has a significant pay off. The median income for a person with a bachelor’s degree who worked full-time, year-round in 2008 was almost $56,000. That’s about $22,000 more than the median income for a high school graduate. In addition, the unemployment rate for college graduates was significantly lower than that of high school graduates during 2008 (the most recent data available).

Weekly Focus – Think About It

“Education is the ability to listen to almost anything without losing your temper or your self-confidence.”

--Robert Frost, poet

Tuesday, February 19, 2013

Weekly Commentary February 19th, 2013

The Markets

Stocks delivered mixed performance last week. The Dow Jones Industrials and NASDAQ Indices moved lower while the Standard & Poor’s 500 and Russell 2000 Indices moved higher for the week. Stocks were helped by positive economic news in the United States, including modestly positive retail sales for January, improved consumer sentiment, and a decline in initial jobless claims. However, these positives were offset to some extent by concerns about weakness overseas. Germany reported that its economy contracted during the fourth quarter of 2012. It’s the country’s worst economic performance since 2009.

Overall, the major stock indices remain in positive territory for the year. They’ve been buoyed, in part, by better than expected fourth quarter earnings. On January 1, 2013, analysts expected profitability of companies in the S&P 500 Index would increase by about 2.9 percent year-to-year. As 2012 fourth quarter’s earnings season headed toward the finish line last week, that estimate had almost doubled to 5.6 percent. About 70 percent of companies have exceeded analysts’ expectations so far. On average, over the long term, about 62 percent of companies beat expectations.

The yield on benchmark 10-year Treasury bonds continued to hover around 2 percent during the week. Reports of weaker than expected economic growth in Europe during the last quarter of 2012 may have increased demand for Treasuries. When demand increases, prices often go up and yields go down. Bond yields also have been affected by the Federal Reserve’s quantitative easing program. The Fed has been buying Treasury bonds in an effort to help support the economy. In general, these purchases are believed to be keeping bond yields lower than they might be otherwise. Quantitative easing will not continue indefinitely which may be the reason the Financial Industry Regulatory Authority issued a statement last week that said, “Many economists believe that interest rates are not likely to get much lower and will eventually rise. If that is true, then outstanding bonds, particularly those with a low interest rate and high duration may experience significant price drops as interest rates rise along the way.”

children are targeted for identity theft far MORE OFTEN than you might think. That’s right. A 2012 report from Carnegie Mellon CyLab found children are targeted for identity theft 35 times more frequently than adults. That’s because the unused social security numbers assigned to children for tax purposes are uniquely valuable to identity thieves. These numbers can be paired with any name and address and used for many years. Often the theft isn’t discovered until a child applies for a student loan or a job, or tries to buy a mobile phone or a car.

The report is based on 42,000 identity protection scans of children, ages 18 and under, that were completed during 2009 and 2010. Researchers found social security numbers for more than 4,300 children – 10.2 percent of those scanned – were being used by someone else (a stranger, a parent, or another family member) to:

· Buy homes and automobiles

· Establish credit card accounts

· Secure employment and get driver’s licenses

Source: Child Identity Theft, Richard Power, Carnegie Mellon CyLab

The youngest victim was five months old. The victim of the largest fraud (about three-quarters of a million dollars) was a 16-year-old girl.

The first step in protecting your child’s social security number is to check with credit bureaus and find out whether a file has been opened using your child’s social security number. In many cases, even if the number is being used, your child’s full identity has not been stolen. In addition to contacting credit bureaus, watch for warning signs your child’s social security number may be in play. These include receiving:

· Pre-approved credit card offers in your child’s name

· Notices from the IRS indicating your child didn’t pay income taxes

· Calls from collection agencies asking for your child

Source: Child Identity Theft, Richard Power, Carnegie Mellon CyLab; Federal Trade Commission Consumer Information, Child Identity Theft, August 2012

If you would like to learn more about how to protect your child from identity theft, visit the Federal Trade Commission’s web site at www.ftc.gov, and click on Privacy and Identity, Repairing Identity Theft, and then Child Identity Theft.

Weekly Focus – Think About It

“The greatest pleasure in life is doing what people say you cannot do.”

--Walter Bagehot, British economist and journalist

Monday, February 11, 2013

Weekly Commentary February 11th, 2013

The Markets

Like a climber determined to reach a peak, stock markets continued to move higher last week.

Signs of strength in U.S. and international trade data improved the outlook for economic growth at home and abroad. The U.S. trade deficit narrowed in December, a sign that the economy did better than expected during the fourth quarter of last year. In China, robust domestic demand pushed imports significantly higher while exports grew more than anticipated. In Europe, Germany’s 2012 surplus was its second highest in more than 60 years which is a sign of underlying strength in one of the Eurozone’s biggest economies.

Positive economic news hurt gold futures which ended the week modestly lower. However, it made riskier assets, like stocks, attractive to investors, which helped push equity markets higher during the week (although trading volumes were low on Friday because of bad weather in the northeast). The NASDAQ closed at a 12-year high, the S&P 500 Index reached a five-year high, and the S&P 500 posted gains for a sixth consecutive week.

The Treasury bond market gained ground during the week. However, at a symposium at the St. Louis Federal Reserve, Federal Reserve Board Governor Jeremy Stein’s comments seemed to reinforce the idea that Fed officials are concerned that ongoing accommodative monetary policies could cause some sectors of the bond market to overheat. His comments reinforced the idea that the Fed is considering tightening its credit policies down the road.

there is a new trend in Funerals: Plan your own. Susan Boyle, the Scottish chanteuse who was discovered on Britain’s Got Talent back in 2009 wants to leave mourners at her funeral laughing. What is her plan? She wants to have ‘Nellie the Elephant’ played during the service. Whether you applaud her approach or find it appalling, there is a new trend in the funeral industry: preplanning, prepaying, and personalization. Here are a few of the reasons people are choosing to plan and pay for their funerals ahead of time:

Control. When you plan the funeral, you have a pretty good idea about what will happen. You can decide whether there will be a viewing and how your life will be celebrated after the service. You can also create a file with personal information for your obituary, as well as any instructions you have for burial, cremation, or organ donation. Just make sure you leave it with a loved one so they know how to proceed.

Negotiate. Grieving family members are rarely good negotiators. Planning ahead gives you a chance to negotiate and secure a guaranteed price on a prepaid plan offered by a funeral home. Make sure you find out answers to questions such as: What happens if prices increase? What happens if you move? What happens if you change your mind?

Goodwill. If prepaid plans leave too many questions unanswered, you may choose to fund your funeral through a trust or an insurance policy. Regardless of the payment method, providing instructions with your wishes and funds to cover the expenses can relieve some of the anxiety and stress of a funeral.

Personalize. There are many new and unusual options available for funerals and memorial services. Whether you opt for traditional burial, cremation, green burial, mummification, cryonics, a memorial space flight, a memorial reef, or having your ashes compressed into a gemstone, there is a business willing to help.

Funeral preferences are changing. Alternatives to traditional funeral home services are becoming popular, especially among Baby Boomers. If you would like to learn more about the options available, visit the Funeral Consumers Alliance web site (www.funerals.org) and the National Funeral Directors Associations web site (www.nfda.org).

Weekly Focus – Think About It

“Live as if you were to die tomorrow. Learn as if you were to live forever.”

Mahatma Gandhi, philosopher

Tuesday, February 5, 2013

Weekly Commentary February 5th, 2013

The Markets

“The future’s so bright, I gotta wear shades.”

For the last several weeks investors have appeared to agree with the sentiment expressed in the 1980s song by Timbuk3. A high degree of investor optimism has helped push markets higher.[i] The trend continued last week as the National Association of Active Investment Managers’ weekly survey found that professional investors are as bullish as they have been since the survey began six years ago.[ii] That may be part of the reason that the Dow Jones Industrial Index moved to within one percent of its all-time high during Friday’s rally.[iii]

With markets hitting new highs, investors have to ask: Are stocks fully valued in general? According to noted economist Robert Shiller, stocks are somewhat pricey relative to earnings, but not as expensive as they have been in the past.[iv] The Standard & Poor's 500 Index recently traded at about 13 times expected earnings for 2013. It traded at 15.2 times expected earnings in October of 2007 and at 25.6 times in March of 2000.[v] Forecasted or expected earnings reflect analysts’ estimates of companies’ earnings going forward. They are projections that help analysts evaluate companies’ potential and not facts.[vi]

While contrarians – individuals who invest against prevailing market trends[vii] – may argue that all of this optimism means it’s a good time to bet against equity markets, historically strong performance during January often has been followed by strong annual performance. There have been notable exceptions, of course, including 1987 and 1997.²

The unflattering names for victims of elder financial abuse – freeloader’s friend, human ATM, pushover partner – may go a long way toward explaining why the crime often goes unreported. The Administration on Aging (AoA) suggests that for every documented case of elder abuse, up to five cases may go unreported.[i]

Elder financial abuse occurs when someone – a stranger, a family member, a trusted professional, or someone else – illegally takes or uses the assets or property of an older individual or accepts payment for goods and services that are never delivered.[ii] Despite underreporting, the cost to Americans over the age of 60 is enormous. A 2011 study of elder abuse estimated that the annual financial loss suffered by victims was almost $3 billion.[iii]

In an effort to focus attention on the problem, the AoA declared 2013 the Year of Elder Abuse Prevention (YEAP). The organization has developed materials and resources to raise awareness about and protect against elder abuse.[iv] Here are a few of their suggestions:

· Call or visit elderly relatives, friends, and neighbors regularly.

· Offer to fill in for a caregiver for a few hours or days.

· Engage older acquaintances by asking them to share their talents and skills.

· Ask faith leaders to discuss the issue of elder abuse with their congregation.

· Ask the local bank manager to teach tellers the signs of elder financial abuse.

· Suggest to the local paper, radio, or TV station that it cover World Elder Abuse Awareness Day or YEAP.

Source: Administration on Aging Fact Sheet⁸

Educating older people about telephone and computer scams may be a wise idea since fraud can be a significant way in which elders are parted from their money.¹⁰ To learn more about YEAP and protecting elders from abuse of all types, visit the AoA web site at www.aoa.gov.

Weekly Focus – Think About It

“The future belongs to those who believe in the beauty of their dreams.”

—Eleanor Roosevelt. First Lady[v]