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Span, Beer, Jell-o and Kool-Aid Seeing Double Digit Growth
As consumers are cutting back on all sorts of goods, Spam is among a select group of thrifty grocery items that are selling steadily. Pancake mixes and instant potatoes are booming. So are vitamins, fruit and vegetable preservatives and beer, according to data from October compiled by Information Resources, a market research firm. “We’ve seen a double-digit increase in the sale of rice and beans,” said Teena Massingill, spokeswoman for the Safeway grocery chain, in an e-mail message. “They’re real belly fillers.” Kraft Foods said recently that some of its value-oriented products like macaroni and cheese, Jell-O and Kool-Aid were experiencing robust growth. And sales are still growing, if not booming, for Velveeta, a Kraft product that bears the same passing resemblance to cheese as Spam bears to ham. Source: Bloomberg.com. Read Full Story.
Obama Plans To Create 2. Million Jobs By 2011
President-elect Barack Obama aims to create 2.5 million jobs by January 2011, and he wants to get it through Congress quickly and sign it soon after taking office. The plan centers on creating jobs by rebuilding roads and bridges and modernizing schools while developing alternative energy sources and more efficient cars. This is welcome news considering the Labor Department recently reported that claims for unemployment benefits jumped to 542,000. That marked the highest level since July 1992 and provided fresh evidence of a rapidly weakening job market that is expected to get even worse next year. Source: Businessweek.com. Read Full Story.
The Cost Of A GM Collapse
According to a forecast from IHS Global Insight Inc. in Lexington, Massachusetts, a GM collapse alone would cost the government as much as $200 billion for costs associated with unemployment insurance and other programs after millions of auto-related job losses. A GM shutdown would cost jobs among suppliers as well as at the automaker itself, pushing the U.S. unemployment rate next year to 9.5 percent, compared with current projections of as high as 8.5 percent due to the weakened economy. Federal, state and local governments would lose $108.1 billion in tax revenue over three years in the event of a 50 percent reduction in U.S. automaker operations, according to a Nov. 4 report by the Center for Automotive Research in Ann Arbor, Michigan. Source: Blomberg.com. Read Full Story.
$250 Billion Mortgages Set To Reset in 2009
A new report from Demos, a public policy research group in New York, points out that millions of mortgages are ticking toward a possible explosion. The report, citing data from First American CoreLogic, a real estate research firm, says $250 billion in loans will reset in 2009 and $700 billion in 2010 and after. If left on their own financially, many of these borrowers will be forced into foreclosure. Source: NYTimes.com. Read Full Story
Tags: 2009, Double Digit Growth, Financial FYI, GM Collapse The Five Most Important Financial Things They Don't Teach You In School, Jobs Plan, Jobs Report, Kool-Aid, Mortgages, Obama, Robert Laura, Spam
Financial FYI: Interesting Financial News, Statistics, and Research.
Thinking About Changing Jobs or Careers?
The average employee now changes jobs 7 to 10 times in a career, with at least two or three of those moves being jumps to a completely different kind of business. Source: money.cnn.com Full Story
Anxious About Your Job And Retirement Savings?
One-third of Americans are worried about losing their jobs, half fret they will be unable to keep up with mortgage and credit card payments, and seven in 10 are anxious that their stocks and retirement investments are losing value, according to an Associated Press-Yahoo News poll of likely voters released Monday. Source: Yahoo.com Full Story
Municipalities and Bankruptcy, Is Your City Going Under?
According to a study by the law firm Mintz Levin, since the bankruptcy laws were written in 1934, there have been fewer than 600 filings for Chapter 9, which provides for the reorganization of municipalities. That’s about how many private sector Chapter 11 filings occur, on average, every two weeks. Source: money.cnn.com Full Story
20 milion People Unemployed
The global financial crisis will add at least 20 million people to the world’s unemployed, bringing the total to 210 million by the end of next year, the U.N. labor agency said Monday. Source: money.cnn.com Full Story
Health Care Costs Increase 9% For 2009
For 2009, nearly half of companies plan to push more health-care costs onto employees, often in less than transparent ways, according to HR consulting firm Mercer. There will be higher premiums, of course - on average, 8% higher, says Hewitt - but also increased deductibles and co-insurance. The bottom line is that workers’ total health-care spending will average $3,830, 9% more than in 2008, Hewitt estimates. Source: money.cnn.com Full Story
The Price Of Eggs In China
The average retail price of a dozen eggs, which had been stable for the better part of a decade, soared to $2.20 per dozen after climbing from $1.63 in 2007 and $1.30 in 2006, according to the Bureau of Labor Statistics. Egg producers blame the increase on surging feed and fuel costs while restaurateurs have filed a lawsuit on charges of price fixing. This is one of six separate suits facing the egg industry. Source: Businessweek.com Full Story
Stock Market Sale
Analysts at research firm Morningstar calculate a “fair value” for each of the approximately 2000 stocks they track. On average, those stocks now trade at about 72% of that fair value estimate, after hitting a low of 64% on October 10. That’s as low as the figure has gone since Morningstar began tracking it in 2001. The research firm has more five-star-rated stocks now than ever. Source: money.cnn.com Full Story
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Tags: 20 Million Unemployed, Anxious About Retirement Savings, Changing Jobs, Financial FYI, FinancialFYI.com, Health Costs Spending Up 9% For 2009, Municipalities Filing Bankruptcy, stock market sale
Investing & Politics: The 2008 Presidential Election & Your Portfolio
By Robert S. Laura, AAMS, CMFC, CRPC
The question on every investor’s mind is “What impact will each candidate and their party have on the performance of the stock market?”
In looking at elections past, market reaction to election results appear to work moderately in favor of Republicans. During the last 15 elections, the S&P 500 stock index rose an average of 2.25 percent in years when Republicans captured the presidency (nine times). Conversely, during the six times the Democrats won, markets gained an average of 1.31 percent from Election Day to the end of the election year (1).
Historically, during the same 15 elections, the average S&P 500 return for the year following a Presidential election dramatically underperformed that of an election year. Returns for the S&P 500 during post-election years averaged just 3.06% as compared to an election year average of 9.29% (2).
So What Can You Expect?
Expect continued volatility and broad market fluctuations leading up to election day. The stock market doesn’t like uncertainty and this year’s presidential election seems to be providing plenty of that. But as predictions about the election turn into concrete answers, expect the market to move in a more consistent direction.
The sectors that investors should watch carefully include healthcare, energy, financial, and defense.
Healthcare has been at the forefront of political debates for the last 20 years. With the Democrats, expect a universal health care plan that may negatively impact private hospitals, pharmaceutical companies, and the health insurance industry in general. Senator Obama has vowed to overhaul the medical insurance industry and introduce more competition for prescription drugs, including international competition. While this would be a welcome relief to many patients, it will impact the industry’s margins and profitability. Look for companies that are able to leverage technology to improve care and operational costs.
The energy sector will likely see the most change. Both camps have discussed initiatives that focus on reducing our dependence on expensive oil imports. This will inevitably open up opportunities for companies providing alternative sources of energy. Under the Democrats, this will likely translate into shifts towards alternative energy and fuels including solar energy. Obama opposes lifting the moratorium on oil drilling, focusing instead on the need for renewable energy sources. McCain on the other hand, supports lifting the moratorium, obviously opening the door for drilling firms. Expect both candidates to create and extend federal policy that reduces our dependency on expensive foreign oil.
In the financial sector, McCain would like to make President Bush’s tax cuts permanent and perhaps cut rates further. Democrats want tax cuts aimed at the rich to expire, which has the financial sector worried about the future of the estate tax as well as taxes on dividends and capital gains. Hedge funds could also be subject to higher taxes under a Democratic president.
In the defense sector, expect spending and the allocation of tax payer dollars to the military to increase under a Republican President, as they favor a stronger military presence around the world. With the Democrats, expect a downward shift in spending as plans for troop withdrawal and a move toward more technology-advanced companies comes into play.
In the long run, the agenda that either candidate will bring to the office of President may have a major impact on a broad range of issues that will affect investors directly and indirectly. Success in translating many of those agenda items into action, of course, is linked directly to whether or not the House and Senate are controlled by the president’s party. When one party is in control sweeping changes can typically be made more quickly than if the balance of power is divided between the executive and legislative branches.
The Reality of Presidential Elections And Your Portfolio
The one thing that can be said is that over time, investments in the stock market have prevailed regardless of who holds political office. The data makes for interesting coffee or cocktail conversations, but investment decisions should be based on more than a one-time event like a presidential election.
Robert Laura is a senior bank executive, a professional financial speaker, the author of Financial Karma and The Five Most Important Things They Don’t Teach You In School. He maintains the FinancialFYI.com website for interesting financial news, statistics, and research and is the creator of the webs first and only behavior based money management program, My Financial Reflection.com.. He can be contacted at rl@robertlaura.com
(1) Nola.com, What To Expect From An Investing Standpoint Because Of The Fall Election, by John Gin, August 8, 2008
(2) The Street.com, Four Ways To Play Trade A Presidential Election, by Scott Rothbort, June 12, 2008
Tags: Add new tag, defense, energy, Financial FYI, financials, healthcare, politics andinvesting, presidential election and yor portfolio, Robert Laura, stock market performance and election results
What’s Happening To The Stock Market?
By Robert Laura, AAMS, CMFC, CRPC
Like many of you I received my 401(k) statement this weekend and much to my chagrin, I wasn’t moving closer to retirement. So I spent some time doing some research on the market conditions we are currently experiencing.
As many of you know we recently entered a “Bear Market.” This is commonly defined as a 20% drop from a market high. Back in October 9, 2007 the Dow Jones Industrial Average peaked at 14,167. Then on June 27th, 2008 it dipped below the 20% mark.
The good news is that once the decline reaches the arbitrary 20% mark, based on history, the market has suffered most of its losses. In fact, by the time the market was down the requisite 20%, the average bear market was 74% complete(1). While this may mean there’s some additional issues to deal with, statistically speaking the worst may be over.
In my opinion the real danger of a bear market is the impact it can have on individual investors. Bear markets can last anywhere from 3 months, as evidenced by the 1987 downturn, or as painfully long as the 21 month bear of 1973. This can wear on the psyche of investors who decide to exit the market at the worst possible time, the bottom.
Fortunately, bear markets are only half of the cycle, and represent the much smaller half of it. Since 1950, the nine bull market advances following a bear market lasted four times longer with an average gain of 165.7% (2). Additionally, ever since Harry Truman trumped Thomas Dewey in the 1948, the Standard & Poor’s 500-stock index has averaged a 9.69% gain during Presidential election years, which gives me a reason to see the investment glass as half full (3).
The reality is, every bear market is different. They are a common part of the investment process as evidenced by the approximately 11 bear markets from 1940 (4). Furthermore, even superstar investors like Warren Buffet whose Berkshire Hathaway shares are off 21% from its peak, aren’t immune to a market downturn.
It’s common for investors to be concerned during economic downtimes, but it’s more important that they be aware of the factors affecting their portfolio. Find a financial professional to educate you on events driving the market right now, such as how bond funds typically perform in an environment of increasing interest rates; what sectors of the economy may be best suited for withstanding a long-term bear market; and which companies are likely to be on the front end of a recovery. The biggest risk you face, in both a good and bad stock market cycles, is remaining uneducated.
|
Bear Market Beginning |
Bear Market Ending |
% Change |
| May 1946 | May 1947 | -28.47% |
| June 1948 | June 1949 | -20.57% |
| August 1956 | October 1957 | -21.63% |
| December 1961 | June 1962 | -27.97% |
| February 1966 | October 1966 | -22.18% |
| November 1968 | May 1970 | -36.06% |
| January 1973 | October 1974 | -48.20% |
| November 1980 | August 1982 | -27.11% |
| August 1987 | December 1987 | -33.51% |
| March 2000 | September 2001 | -36.77% |
| January 2002 | July 2002 | -31.90% |
(1) Barrons, The Bears Back, by Randall Forsyth and Vito Racanelli, July 7th, 2008, p.17
(2)Fool.com, The Next Bear, By Doug Short
(3)businessweek.com, Playing politics with your portfolio, by Chris Farrell, June 7th, 2008.
(4) Bespoke Investment Group, via Barrons as referenced above
(5)Table Source: Bespoke Investment Group, via Barrons as referenced above
Robert Laura is the senior bank executive, professional financial speaker, the author of Financial Karma and The Five Most Important Things They Don’t Teach You In School, and maintains the FinancialFYI.com website for interesting financial news, statistics, and research. He can be contacted at rl@robertlaura.com
Tags: Bear Market, losing money in your investments, Robert Laura, should I get out of the stock market, Stock Market, What is A bear Market, whats happening to the stock market
Financial Deja Vu
During the savings-and-loan crisis of 1990 and the Long-Term Capital Management crisis of 1998, financial stocks dropped 50% and 32%, respectively, from their highs. Over the next two years, these stocks rose 50% from the bottom. Source: Fool.com. Full Story.
Medical Credit Cards
Are you ready for a medical credit cards? Unlike regular consumer credit cards medical credit cards can only be used for health-care expenses. Companies like GE Money and Citigroup are using these cards to help both consumers deal with soaring out-of-pocket medical costs and a resource-strapped medical community to get paid. Already, doctors and hospitals endure $60 billion annually in unpaid medical bills, according to management consulting firm McKinsey. And that figure is expected to climb. In 2005, consumers spent $250 billion in out-of-pocket medical expenses, according to McKinsey. By 2015 it’s estimated to grow to $420 billion. There are some danger though: By using one of these credit cards, patients convert their medical debt, which doesn’t typically show up on a credit report unless it goes to collection, into revolving consumer debt. That moves the debt onto the patient’s credit report - which could have broader repercussions should bills be late. Also, once a bill is paid for with a credit card, the account with the medical provider is closed. That means patients can no longer negotiate or question the cost of their care with their doctor or hospital, warns Nora Johnson, a vice president with the nonprofit agency Medical Billing Advocates of America. Source: SmartMoney.com. Full Story.
Another Bank Failure
Aug. 22, Kansas bank Columbian Bank and Trust Co. became the ninth U.S. financial institution to fail during the current credit market difficulties. Source: Businessweek.com. Full Story.
BMW: Top Leased Car
Four out of the top 10 most commonly leased vehicles in the U.S. auto industry are BMWs, according to J.D. Power & Associates’. According to PIN data, the flagship BMW 7 Series sedan is No. 1 on the list of most leased vehicles, at 85.3% lease penetration. That is, 85.3% of the 7 Series customers from Jan. 1 through Aug. 10 leased their cars. The rest took out a loan or paid cash. That’s an extraordinarily high percentage of leasing, compared to industry standards. For the whole U.S. industry, leasing accounted for only about 19.7% of retail volume in July vs. 53.8% loans and 26.5% cash. Source: Businessweek.com. Full Story.
2012 Olympic Budget
The British have a budget of just over $17 billion to deliver the 2012 Olympic Games in London, compared with the $44 billion that Chinese authorities spent on the Beijing Games. An estimated $1.3 billion of London’s $17 billion budget will be spent on upgrading the city’s 100-year-old underground and rail system. A further $407 million is earmarked for Olympic policing, a 15% budget increase since the city won the right to host the Games back in 2005. Source: Businessweek.com. Full Story.
College Education Up 439%
After adjusting for financial aid, the amount families pay for college has skyrocketed 439% since 1982. Source: Money.cnn.com. Full Story.
Presidential Fundraising
Obama raised more than $105 million in the first six months of the year, compared with Senator John McCain’s $76 million, according to the Center for Responsive Politics. In July, Obama’s fund-raising nearly doubled that of his rival, generating $51 million. In campaign filings with the Federal Election Commission, candidates need not report whether the money comes from online donations, mailed-in checks, or personally delivered cash. But Obama’s campaign said earlier this year that as much as 88% of donations stemmed from online sources. Source: Businessweek.com. Full Story.
US Home Prices Fall… Again
National U.S. home prices fell a record 15.4% in the second quarter compared with last year, according to a report out Tuesday. The latest S&P/Case-Shiller national home price index showed no signs that the pace of home-price declines is easing. The loss was even larger than the record 14.2% drop posted in the first three months of 2008. Source: Money.cnn.com. Full Story.
Uninsured Americans
Americans without health insurance will spend $30 billion out of pocket on medical care this year, according to a new report by George Mason University and the Urban Institute. The government will pay about 75% of an additional $56 billion in health costs - or $42 billion - for the uninsured. The rest is covered by private physicians, community groups and hospitals. Source: Money.cnn.com. Full Story.
Analyst Recommendations Off 40%
A recent report by Patrick Cusatis and J. Randall Woolridge of Pennsylvania State University found that Wall Street analysts consistently overestimated the future earnings growth rates of the companies they covered. By a lot. I mean, by a whole lot. The researchers compared average forecasted annual EPS growth against the actual results over the time horizon of the forecast and found, over both short runs and long runs, analysts are overestimating the earnings growth of the companies they so closely track by a mind-blowing margin. On the five-year horizon, actual EPS growth clocked in almost 40% below analysts’ estimates. Source: Fool.com. Full Story.
Looking for Inside Salary Information?
Websites like Glassdoor.com, Salary.com, and Payscale.com use either direct user or salary ranges to give you a firsthand look at how well companies pay their employees.
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Tags: 2012 Olympic Budget, Another Bank Failure, College Education Up 439%, Financial Deja Vu, Medical Credit Cards, Presidential Fundraising, Top Leased Car, U.S. Home Prices Fall Again, Uninsured Americans, Wall Street Analysts Off 40%