At the Vegas Money Show, we thought that attendance was probably 30% higher than in the past. The event was packed! It was a great time and wonderful education opportunities for investors. If you didn’t make it out to Vegas, we’ll also be at the Money Show in San Fransisco later this year, so we look forward to seeing you there.
Let’s look at the news this week: the U.S. stock market has gone straight up for the last four weeks. On average, the stock market grows 10% per year, so far in the last few months we’ve seen 15% growth. We believe that the market is euphoric and dangerously ahead of itself. For 18 Tuesdays in a row the stock market has been up, and consumer confidence is surging. There is a wealth effect going on out there, even though the economy is not truly changing for the better.
Domestically, the Obama Administration’s recent scandals: Benghazi, AP wiretapping and the IRS targeting conservative groups, have been labeled the worst week in President Obama’s five years in office. Whatever your political opinions are on these matters, it’s good practice to see how these news items affect the stock markets. So far, President Obama’s approval rating is untouched, but it’s important to keep track of these kinds of trends and news stories.
In other economic news, Wal-Mart is having a disappointing year for sales, producer prices are going down and manufacturing looks rather dim right now in the U.S. However, with the Federal Reserve’s involvement in the markets, bad news is good news, and good news is good news, so it seems as though the stock market will just keep climbing for the foreseeable future. That said, risk is high, although we do have some investment ideas for you that we’ll talking about in the days to come.
This is a podcast summary. For more information, please listen to the entire broadcast here.
Three unusual things happened last week in the markets, which illustrate this point:
Twitter flashcrash: The Associated Press Twitter account was hacked, and a false tweet was sent out, describing an explosion at the White House. It took three minutes for the AP to retract this false story, but in that time, the stock market crashed about 1%. Twitter is a new medium for instant action and this kind of technology creates volatility.
The Charles Schwab brokerage site was down for about 24 hours – blocking access to brokers. Again, this was just a glitch, but it proves that technology is a factor in our financial lives.
The Chicago board options exchange went down for about three hours as well. Another example of the havoc wreaked by even minor disturbances in service.
Mark Cuban, the owner of the Dallas Mavericks and a well-known technology mogul, had a great quote about the fallout from the AP Twitter event last week (read his full comments here): “What’s going to happen when there’s a real event? Do you really thing that there’s going to be any bids at all?” he said. “All we have are circuit-breakers that we hope will work. And then after the circuit breakers, what happens?”
We agree, and believe that it’s important that you have diversification and safety in your portfolios. In this day and age, we are dependent on technology. This dependence adds volatility to an already unstable market, and it’s important for investors to be aware. Our advice is this: plan for these events ahead of time, realize that changes are inevitable and preparation is invaluable.
This is a podcast summary. For more information, please listen to the entire broadcast here.
Wealth taxes are taxes on successful people. In the U.S., the only stated wealth tax is estate taxes. However, we think that there are some disturbing trends on the horizon for the wealthy or those who wish to be wealthy.
For example, here in California, we have a wealth tax, Proposition 30, which was voted in November. This was a retroactive tax on anyone whom the state of California deems as wealthy, and it was a significant amount. Also, as we saw in the country of Cyprus recently, depositors of banks were taxed - which is a significant wealth tax.
We are also hearing that annual asset taxes are currently being considered in Europe, meaning that you would have to round up all of your assets and be taxed on the value of those every year. In the U.S., an IRA tax was proposed by President Obama recently, on anyone who has an IRA in excess of three million dollars. That is a serious wealth tax and something that investors need to be aware of.
These wealth tax trends are disturbing to us, and this is something that high-net-worth investors must start strategizing about in the months and years to come, unfortunately.
This is a podcast summary. For more information, please listen to the entire broadcast here.
We recently read this cover story in Barron’s magazine, and we want to pass it on to you, our readers, as well:
“In his State of the Union speech last Tuesday, President Obama concluded that “the State of our Union is stronger.” The big question is: stronger than what?
Federal debt is a record $12.2 trillion, or 76% of the nation’s annual output of goods and services. While that’s still well below Greece’s 153%, we’re headed steadily in the wrong direction.
According to estimates by the Congressional Budget Office, adjusted by Barron’s to account for recent tax increases and other factors, if the U.S. doesn’t raise taxes further and cut spending dramatically, the national debt could easily reach 153% of economic output by 2035.
These are not just numbers. If the U.S. national debt continues ballooning, we can be sure of a deep, long-lasting recession — very likely a depression — sometime in the next two to three decades. The unemployment rate could easily surge to 20%.”
If you’d like to find out more about how we can help you and your money face upcoming challenges, act now by listening to the Monday Morning Market Outlook podcast, and then by giving us a call at 800-391-1118.
In election cycles lately, we’ve heard a lot about the “middle class”. However, our concern today is what we call the “investor class”. The investor class is made up of smart savers, savvy businesspeople, and those who have been good with their money – people who have money to invest, save or protect. Typically, the investor class is very self-reliant, and your only safety net is the one you’ve built for yourself.
The investor class has to be prepared for three big changes starting this year:
There was a fascinating and eye-opening article in the Wall Street Journal recently for anyone who believed that Obamacare was going to bring healthcare prices down. We encourage you to read the whole thing here, but here’s how it begins:
“Health-insurance premiums have been rising—and consumers will experience another series of price shocks later this year when some see their premiums skyrocket thanks to the Affordable Care Act, aka ObamaCare.
The reason: The congressional Democrats who crafted the legislation ignored virtually every actuarial principle governing rational insurance pricing. Premiums will soon reflect that disregard—indeed, premiums are already reflecting it.”
Be aware of the slow economic growth, new tax planning you’ll need to do, and higher costs coming this year – but also be prepared to use some of this bad news to create investment opportunities for your portfolio. Opportunities are on their way, so be ready to act and aware of what the risks and your goals are ahead of time.
Obviously, the fiscal cliff deal was a bit complicated and will have to be revisited (there will be more debt ceiling talks in Washington by March 1, 2013) but so far, these are the highlights for investors:
Income tax rates go up on individuals earning more than $400,000, or couples making more than $450,000
Estate taxes at 40%, first $5 million exempt for individual, and $10 million for family estates
Capital gains and dividends only change for individuals earning more than $400,000, or couples making more than $450,000
Social security payroll tax cut went away (we think this is a good thing, despite it being a tax increase, since Social Security has to be paid for)
No spending cuts in this deal, and it looks like those spending negotiations are delayed until March 1, 2013. This means there will be another battle in Washington in the near future.
Unfortunately, despite a favorable reaction in the financial markets, we still have out-of-control spending on the federal level, and it seems that politicians are unable to handle these issues in a positive way. Right now, the U.S. is borrowing 40 cents of every dollar we spend, which is obviously unsustainable, and the biggest risk of 2013.
What do you want to hear? We have received 20 or so emails so far, and we would love to get more. We want to improve, to be helpful to you and your portfolio, and to answer your needs through our podcast and blog. If you have questions, comments or suggestions, please send them to askdoug(at)dougfabian(dot)com, and let us know what you think!
We also wanted to highlight some of the feedback we’ve already gotten. One thing that we keep hearing is this:
People want to hear more about ETFs. It seems obvious that our readers and listeners want us to talk about exchange traded funds, explain what they are and how they work, and so we will endeavor to do a better job of that as we continue in our podcast and blog efforts. We will also continue to share watch lists and advice, but, despite the requests, we are not going to give specific buy and sell lists here on the blog or the podcast, as that would not be fair to our paid subscribers. However, if you’d like to sign up for one of our paid services, check our newsletters out here, or give our offices a call and talk to one of our advisers at 888-300-3684
Another concern we heard a lot of was this:
Many people feel that we have been too political on the blog and podcast. We’d like to explain why – because politics affects your investments. We think that the level of deficit spending in Washington is worrisome, and that it is the fault of both political parties. We think it’s obvious that government spending and entitlement spending are out of control, and that politicians in general have not been honest with the American people.
For every dollar that we spend at the federal level, we are borrowing 46 cents of that dollar, which is a dangerous path that could easily be the end of our country as we know it. As a nation, we need to get our act together and our financial house in order. Unfortunately, that’s just a reality of the times we live in – we know it’s not always fun to talk about, but we will do our best to give nonpartisan, common sense analysis, and we’ll continue to talk about it, because it will impact your financial life.
Again, please send us your thoughts, comments, questions and suggestions to askdoug(at)dougfabian(dot)com. We are looking forward to hearing from you and continuing to improve our blog and podcast.
This is a podcast summary. For more complete details, listen to our full podcast here, and don’t forget to pass this blog on to other friends and investors who might benefit from our perspective. Plus, if you haven’t already, please take some time this week to check out our recent teleseminar for in-depth information on post-election investing and our outlook on the markets.
The fiscal cliff continues to loom, but surprisingly, the markets are taking all of this uncertainty very well. The two things that investors need to pay attention to in these negotiations are:
dividend taxes
capital gains taxes
No matter what happens in the fiscal cliff negotiations, however, taxes are going up, and we advise everyone to talk to their CPA and be prepared for tax liabilities to come. Stay informed and aware of what’s going on in the markets, and tune into our podcast every week for analysis and information for your investments.
2013 is just around the corner, so we are looking forward already to a new year and new challenges here at Fabian Wealth Strategies. If you’re a regular reader of this blog or listener to the podcast, we have a favor to ask of you – let us know how we can improve! What should we be covering, what topics would you like to hear more about, or what concerns, interests or questions do you have that we could address better? Leave a comment on this post or send an email to askdoug(at)dougfabian(dot)com to let us know your thoughts, and thank you for being a part of our audience every week.
Now for the economic news: again, we’re not going to try to predict the outcome of the fiscal cliff, but right now we’re in a stalemate. Treasury Secretary Geithner was on all the Sunday shows this weekend, telling the American people that House Republicans need to agree to tax increases in order to avoid the fiscal cliff. Meanwhile, the Republicans in Congress continue to push back, insisting on less spending before tax increases. Either way, it’s going to be an interesting few weeks as this all shakes out, and we are watching this news closely and will keep you informed on what happens and how it’s likely to affect your portfolio.
Tomorrow, we’re going to update you on Central Bank action and what the Federal Reserve is up to. In the meantime, we’d like to point you to a great resource, John Hilsenrath at the Wall Street Journal, who often has the inside story on Fed action and strategy. His articles are a valuable asset as you navigate your investments and the unusual central bank action of the last couple of years.
As far as general economic news is concerned, on the positive side: housing numbers are improving, U.S. GDP is at 2% growth. On the negative side: manufacturing is contracting, there are still concerns about the economic affects of the damage from Sandy, and we expect a new statement from the Fed on December 12, so we will be watching the news closely until then.
Bonds are continuing to do very well. The chances of high interest rates or inflation (which of which would hurt bond prices) are very slim, and we encourage investors to not panic about your bond allocation, but stay secure, knowing that this is still a strong place for your money.
However, as we have stressed all year, we urge investors to be cautious – this is not a time to add a lot of equity exposure to your portfolio. There is uncertainty in the markets right now, but we are committed to helping you make the best possible decision for your money. If you have questions or concerns, please email them to us at askdoug(at)dougfabian(dot)com.
This is a podcast summary. For more complete details, listen to our full podcast here, and don’t forget to pass this blog on to other friends and investors who might benefit from our perspective. Plus, if you haven’t already, please take some time this week to check out our recent teleseminar for in-depth information on post-election investing and our outlook on the markets.
Traditionally, the stock market is strong around holidays, specifically at Thanksgiving. That happened this year as well, even with only a half-day of trading on Friday. However, the fiscal cliff talks are coming up in Washington, and these will certainly affect the markets. Just yesterday, the White House released a report saying that fiscal cliff negotiations will slow down the economy. However, as we’ve said before, there’s no reason to speculate about what might happen with such a complex issue, so we advise investors to not get caught up in speculation or panic, but be smart, aware and ready for action with your portfolios.
We are still seeing a very strong bond market. Many people worry that bonds are largely over-allocated in portfolios, but we are not worried about that in our clients right now. In this economic climate, we don’t see a reason for interest rates to go up, and we think the bond market is OK for now. We see that bond-like securities are still in very good shape – if you are concerned about your bond allocation, or if you have further questions about the bond market, please email your questions to askdoug(at)dougfabian(dot)com. Also of note – recently, we talked about how commodities have been weak, but they surged this week, so that’s something to keep an eye on as the markets change.
This is a podcast summary. For more complete details, listen to our full podcast here, and don’t forget to pass this blog on to other friends and investors who might benefit from our perspective. Plus, if you haven’t already, please take some time this week to check out our recent teleseminar for in-depth information on post-election investing and our outlook on the markets.
