Filed under: Economic Recovery, Housing Market Trends, Norhill Wealth Strategies Report, Retirement Investing, Senior Investing, Slow recovery | Tags: economic indicators, Economic Outlook, home sales, housing market, markets updates, Norhill Wealth Strategies Report, Warren Elkin
Mixed news for housing market
The scorching heat wave that set record temperatures across much of the nation didn’t extend to the economy, which remains tepid at best according to the latest readings. There was a rise in the Conference Board’s index of leading economic indicators and a bump in new residential construction. However, existing-home sales dropped for the third straight month as President Barack Obama and congressional leaders continued to negotiate over an increase in the nation’s debt limit.
Leading indicators advance
The index of leading economic indicators rose 0.3% in June, less than May’s 0.8% jump but still an encouraging sign that April’s -0.3% reading represented temporary factors and was not part of a larger trend. Compared to June 2010, the index was about 6% higher. Five indicators rose in June, with real money supply the largest contributor, followed by interest rate spread. Stock prices were the largest detractor, along with consumer expectations. The coincident index, which measures current economic activity, inched ahead 0.1%. The indexes are a compilation of indicators that can provide insight into both current and future activity in the broader economy.
Tumble continues for existing home sales
Sales of existing homes fell 0.8% in June to an annualized rate of 4.77 million. The monthly decline-the third straight-was unexpected but attributed to a rise in canceled contracts and the tough economy. Sales were down 8.8% compared to June 2010, when the first-time home buyer tax credit was still in effect. Most of the decline was the result of condominium sales, which dropped 7%. Single-family home sales were unchanged. Across the regions, sales rose slightly in the Midwest, were stable in the South, and fell in the Northeast and West. Compared to a year ago, the median existing-home price was up 0.8%, to $184,300.
The economic week ahead
Next week’s slate of economic news is a bit heavier. Reports on consumer confidence and new-home sales are scheduled for Tuesday, followed by durable goods and the Federal Reserve’s Beige Book nationwide survey of economic activity on Wednesday, and employment costs and real gross domestic product on Friday.
Markets Update
Warren Elkin of Norhill Financial is your safe money strategist. When it comes to your hard earned dollars, he can keep your money secure as it grows. Warren Elkin can be reached toll free at 877-476-5051- or by email at elkininc@aol.com. To learn more about him check out www.warrenelkin.com.
Filed under: Consumer Spending, Economic Outlook, Housing Market Trends, Industrial Production | Tags: Construction Spending, Consumer spending, economic downturn, manufacturing trends, Market Updates, Norhill Wealth Strategies Report, Warren Elkin
Uncertainty deepens consumer angst
As the economic news turned grim in recent weeks, confidence dipped and consumers gripped their wallets more tightly, as illustrated by the past week’s economic reports. Despite the week’s bleak economic news, the stock market recorded impressive results.
Consumers curb discretionary spending
Despite a 0.3% increase in personal income, consumer spending was flat for the month of May, following a rise of 0.3% in April. Analysts report that the high prices of gas and food have caused consumers to cut back on nonessential purchases. The personal savings rate in May increased slightly to 5.0% from 4.9% the previous month. April’s personal income and personal spending growth rates were both revised downward to 0.3% from initial estimates of 0.4%.
Construction spending down
Construction spending fell 0.6% in May to an annual rate of $753.5 billion. The decline was led by a 2.1% decrease in private residential construction spending. Outlays on public projects also fell (-0.8%), as states and the federal government spent less on building highways, streets, and educational structures. A modest rebound in private nonresidential construction spending (+1.2%), following a 1.8% drop in April, was not enough to offset the weakness in private residential and public construction activity.
Manufacturing on the rise
The manufacturing index, as reported by the Institute for Supply Management (ISM), ended the 2nd quarter with signs of strength. The index jumped more than expected in June, climbing to 55.3 from 53.5 in May. All 5 components of the index-production, new orders, inventories, supplier deliveries, and employment-increased for the month. Imports and new export orders both declined in June.
The economic week ahead
The Labor Department’s monthly assessment of the employment situation (Friday) will be next week’s big news. Other news will include the latest on the nation’s factory orders (Tuesday), the ISM nonmanufacturing index (Wednesday), and consumer credit (Friday).
Markets Update
For the week ended July 1, the S&P 500 Index rose 5.6% to 1,340 (for a year-to-date total return of about 7.6%). The yield of the 10-year U.S. Treasury note rose 34 basis points to 3.22% (for a year-to-date decrease of 8 basis points).
Warren Elkin of Norhill Financial is your safe money strategist. When it comes to your hard earned dollars, he can keep your money secure as it grows. Warren Elkin can be reached toll free at 877-476-5051- or by email at elkininc@aol.com. To learn more about him check out www.warrenelkin.com.
Filed under: Economic Recovery, Norhill Financial, Norhill Wealth Strategies Report | Tags: Economic Outlook, financial planning, GDP, Norhill Wealth Strategies Report
Some interesting facts as we go through the holiday weekend…
The percentage split between up and down trading days on the S&P 500 over the last 50 years (1961-2010) is 53/47. The YTD split (through 6/24/11) is 55/45. The S&P 500 is an unmanaged index of 500 widely held stocks that is generally considered representative of the US stock market (source: BTN Research).
2. SIX MONTHS –
The second half of the year (i.e., July – December) has outperformed the first half of the year (i.e., January – June) for the S&P 500 on a total return basis during 8 of the last 10 years (source: BTN Research).
3. WILL I HAVE ENOUGH? –
More than half of the Americans surveyed in mid-April 2011 (58%) are worried about their ability to maintain their current standard of living into and throughout their retirement years. In the first quarter 2002, only 35% of Americans worried about this issue (source: Gallup).
4. IT’S FREE, ISN’T IT? –
71% of 803 participants in 401(k) plans that were surveyed in December 2010 incorrectly believed that their pre-tax retirement plan was run without incurring any fees, i.e., at a zero cost to the plan participants (source: AARP).
5. ALMOST HALF FOR OUR CARS –
Americans consume 18.8 million barrels of oil a day. 48% of our daily oil consumption is in the form of gasoline that we purchased at the pumps to drive our cars and light trucks. 10 years ago that consumption was at only 25%. (source: Energy Information Administration).
6. HELPING BORROWERS
608,615 homeowners have received a permanent modification to their home mortgage as of 4/30/11 through the government’s “Making Home Affordable Program” (MHAP). Another 843,479 homeowners started the process to obtain a mortgage modification but have dropped out of the program since it began in February 2009. MHAP was designed to assist 3-4 million US mortgage holders. The program is scheduled to run until 6/30/11 (source: MHAP).
7. LONG TIME, NO CHANGE –
With the Federal Open Market Committee voting 10-0 last Wednesday (6/22/11) to keep short-term interest rates unchanged for a 20th consecutive meeting, it has now been 2 ½ years since the Fed voted to cut interest rates on 12/16/08 (source: Federal Reserve).
8. YOU WANT THE LOAN? –
The 17 Eurozone finance ministers voted on Monday 6/20/11 to delay the # 5 tranche until 7/03/11 that is to be paid to Greece (worth 12 billion euros) from its original 110 billion euro loan (that was approved in May 2010). This next tranche is predicated upon the Greek government approving additional spending cuts, tax hikes and the sale of state-owned assets. The # 5 tranche, which would bring the total of the 2010 loan paid out to 65 billion euros (out of the 110 billion euros that have been committed), was to have been paid on Wednesday 6/29/11 (source: BTN Research).
9. JOIN THE GROUP –
Greece was not part of the original 11 countries that began using the euro on 1/01/99, but was the first country to be added when it became member # 12 on 1/01/01. Since Greece joined, 5 additional countries have signed on to use the euro. Estonia was the # 17 country added when they joined on 1/01/11 (source: European Central Bank).
10. LOWEST IN A LONG TIME –
Outstanding credit card debt in the United States as of 4/30/11 was $790 billion, the lowest month end total in our country since the sum was $787 billion as of 8/31/04 or more than 6 ½ years ago (source: Federal Reserve).
11. SOURCE OF REVENUE –
43 US states do not collect sales tax for online retail sales. The state of California has estimated that it would collect $200 million a year if it was to collect sales tax for its online sales (source: The Charlotte Observer).
12. RED INK –
With just 4 months to go in fiscal year 2011 (i.e., the 12 months ending 9/30/11), the Obama White House is estimating tax revenues of $2.17 trillion and outlays of $3.82 trillion for the entire year, resulting in a deficit of $1.65 trillion, equal to $4.5 billion of debt created per day (source: Office of Management and Budget).
13. STILL LONG –
Although the average processing time for a hearing decision regarding a request to receive disability benefits from Social Security was 354 days (approximately 1 year) as of May 2011, the average wait time was an even longer 532 days (approximately 1 ½ years) in August 2008 (source: Social Security).
14. ONCE A QUARTER –
The average American makes 4 visits a year to utilize the services of medical doctors, medical specialists and emergency rooms (source: National Health Care Surveys).
Filed under: Consumer confidence, Consumer Spending, Economic Outlook, Norhill Wealth Strategies Report, Slow recovery | Tags: Construction Spending, consumer confidence, Economic Recovery, Good and Bad news for jobless, Gross Domestic Product, Norhill Wealth Strategies Report, Slow growth, Warren Elkin
Slowing Growth
Last Week’s Report on GDP growth was a paltry 1.8%, far below the 3% growth the government expected. Federal Reserve Chairman Ben Bernanke, in spite of the news, still projects the US growth rate of 3.1 to 3.3% for 2011. If that holds, equities should continue advancing for the balance of 2011. Commodities moderated last week in what looked like the beginning of a bubble burst. As the Fed intervenes, the US will see a more bubble-based economy, moving from bubble to bubble, from boom to bust.
The economic support of QE2 is about to come to an end. This is likely why the commodity bubble no longer has as much inflation. In spite of this, the US dollar, while still low, is likely to slowly strengthen over the coming year. Food and oil prices will stay high until the dollar improves. While India and China are currently consuming more raw material than 10 years ago, as well as more food and oil, prices for these commodities will stay high at least for the next 12 months.
Your Investment Behavior Is Your Worst Enemy
According to Shlomo Bernartz at the Center for Behavioral Finance, there are more factors at play in the stock market than just fear and greed. Overconfidence is as strong an urge in investors as fear or greed causing investors to think they can outperform the market. In one study of 66,465 individual investors over a six-year period, the average investor who turned over 75% of their portfolio each year reduced net performance by 3.7% below the underlying index. Those who turned over their portfolios more than twice per year suffered a 10.3% reduction in net performance. Not only did this occur for self-directed investors, but also brokers who convinced their clients to frequently churn their account.
In one study on Behavioral Heuristics, it was shown that individual investors often pick stocks and investments in the news. It could be the launch of a new product, large one-day moves up or down in the market, or even a scandal involving a CEO. But stocks with PR tended to draw more inflows of capital then the less celebrated investments. In still another study, investors sold outperforming stocks 75% more often than under-performing ones. The logic was to lock in gains by selling a good performer, and keep the dogs until they improved. This is another reason why individual investors keep poor performing portfolios and rarely gained wealth or even matched index performance.
For the jobless, a mix of good news and bad
Two reports issued this week offered contrasting (and somewhat contradictory) assessments of the unemployment situation. On the positive side, the number of payroll jobs created in April was surprisingly high. The overall unemployment rate, however, inched upward in April instead of staying flat, as had been expected. The week’s other reports painted a mixed, but generally encouraging, picture
Payrolls expand, but the jobless rate rises
Nonfarm payrolls expanded in April, adding a higher-than-expected 244,000 jobs. Growth came from the private sector, which added 268,000 jobs; by contrast, government payrolls dropped by 24,000 as fiscally stressed state and local governments continued to shed staff. The April unemployment rate also surprised economists by edging up to 9.0% instead of holding steady at 8.8%, as most had anticipated. This was the first increase in the jobless rate since November 2010. Another indication of a still-soft labor market: Average hourly earnings just barely rose for the month. Compared with April 2010, they’re only 1.9% higher.
Productivity growth slows in the 1st quarter
Nonfarm business productivity-or output per hour-was up 1.6% in the first three months of 2011, a markedly slower pace than the 2.9% increase posted in the previous quarter. At the same time, unit labor costs increased 1%, up from a 1% decline in the fourth quarter of 2010, but still considered relatively low. The slowdown in productivity suggests that businesses are finding it harder to make do with their existing labor force as the economy continues to recover. The figures also suggest that as demand continues to grow, firms will need to hire more workers, which will be made easier by the relatively low level of unit labor costs.
A bit of good news for home builders
Private residential construction spending rose 2.6% in March, to $229.1 billion. It’s probably too soon to talk of a real rebound in the housing market, though, as the increase was driven largely by a boom in renovation projects for existing homes. The vast inventory of unsold homes continues to weigh on the beleaguered housing sector, with no sustained turnaround in sight. Spending on all construction (including commercial, utility, and government projects) was up a better-than-expected 1.4% in March, to $768.9 billion.
The economic week ahead
No major reports are due Monday or Tuesday. The latter part of the week will bring the latest figures on consumer and wholesale inflation, international trade, retail sales, and business inventories.
For the week ended May 6, the S&P 500 Index fell 1.7% to 1,340 (for a year-to-date total return-including price change plus dividends-of about 7.2%). The yield of the 10-year U.S. Treasury note fell 13 basis points to 3.19% (for a year-to-date decrease of 11 basis points).
Warren Elkin of Norhill Financial is your safe money strategist. When it comes to your hard earned dollars, he can keep your money secure as it grows. Warren Elkin can be reached toll free at 877-476-5051- or by email at elkininc@aol.com. To learn more about him check out www.warrenelkin.com.
Filed under: Consumer confidence, Consumer Spending, Economic Outlook, Economic Recovery, Foreign Market, Gross Domestic Product, Housing Market Trends, Norhill Wealth Strategies Report, Slow recovery | Tags: economic week ahead, financial advice, housing market, Inflation, investment advice, investments, Market update, Norhill Wealth Strategies Report, Slow economic recovery, Slow growth, Warren Elkin
Emerging Market Unrest
Recent Political Upheaval in the Middle East has raised fears that could have an adverse impact on emerging markets stock prices. While the long-term outlook remains strong, the recent surge in global food and commodity prices has increased concerns that the central banks in developing countries including China, India and Brazil will continue to raise interest rates to combat inflation. This will in turn hurt economic growth as well as US exports.
Worldwide Inflation
Food accounts for roughly 50% of the consumer price index (CPI) in the US. But food accounts for roughly 30% of the CPI in both Brazil and China. In India, food accounts for 47% of CPI inflation. In fact the Central Bank of India has raised interest rates eight times in the past year. While this will have a dampening effect on inflation, it will also decrease economic growth.
While food prices, as measured by the United Nations food and agricultural organizations food price index, have risen 37% in the last year. Oil has increased 27%, and cotton 149%. The Fed has expressed very little concern over inflation pegging core inflation, non-oil and food, at only 2.8%. But as one audience member said to a New York Federal Reserve Board conference, “I can’t eat an iPad”. This was in response to a board member mentioning technology prices have decreased significantly.
QE2
The international monetary fund, IMF, reported recently that the US and Japan face particular challenges in stabilizing their rapidly escalating ratios of debt to GDP. The IMF predicts the US net debt to GDP ratio will reach 86% by 2016, up from 64.8% last year. Japan will reach 164%, up from 117% last year. In comparison France and England will reach a peak of 80.6% in 2013and then gradually declining. The German ratio will peak in 2012 at only 54.7%. If the US ratio does not change soon, borrowing will be crowded out by the US government making capital even more difficult to come by for private industry. This will have a long-term dampening effect on the US economy and maintain unemployment at over 8%.
Nothing easy about this rocky recovery
The U.S. is on the mend from the recession and financial crisis, but while the repairs are evident, the workers aren’t yet ready to pack their tools and take down the scaffolding. The economic situation is serious enough that Fed Chairman Ben Bernanke held the first-ever news conference for the Federal Market Open Committee (FOMC) in addition to releasing a customary statement. Overall, the economic news this week was mixed. Real gross domestic product (GDP) grew at a slower pace in the first quarter than it did in the fourth quarter of 2010. Consumer confidence and the housing market are slowly improving, but still not at levels considered healthy. The stock market surged on good news and shrugged off the bad.
Fed continues course, adjusts forecast
After meeting earlier this week, the Fed amended some of its key forecasts but left its monetary policy unchanged. The central bank voted to keep the target federal funds rate in the 0% to 0.25% range, as it has since December 2008, “for an extended period,” and complete its $600 billion purchase of Treasuries by June. The economic recovery is proceeding at a moderate pace and overall conditions in the labor market are improving gradually,” the Fed’s statement said. The Fed slightly lowered its forecast for economic growth this year and raised its outlook for inflation, which is expected to decline again in 2012 and 2013. It also modified its view on employment, which it sees falling a bit more than earlier projected.
New-home sales limp ahead
Sales of new homes increased more than forecast in March, but the shaky housing industry still remains a glaring trouble spot of the economy. New-home sales rose 11.1% from February to an annual rate of 300,000, and numbers for February and January were both revised higher. Still, sales are down 21.9% from a year ago–when the federal homebuyer tax credit was in effect–as builders deal with competition from foreclosures and the glut of existing homes on the market. Median sale prices climbed 2.9% to $213,800 from February but are 4.9% lower than March 2010. Also, the months of supply dropped to 7.3 from 8.2. Northeast sales were the healthiest, followed by the West and Midwest. Sales in the South dipped slightly.
Personal spending growth slows
Consumer spending rose 0.6% in March, backing off a bit from the previous month. Higher costs for energy and food triggered much of the growth as “real” spending-which removes the effects of price changes-was up just 0.2%. Spending on services outweighed spending on durable goods. Meanwhile, personal income increased 0.5%, a slight improvement. Rental, dividend, and transfer income–the latter from unemployment payments–drove the gains, and wages and salaries climbed more modestly.
The economic week ahead
A fresh batch of data is due next week. Monday brings releases on construction spending and the Institute for Supply Management’s manufacturing index. The wave of reports continues with factory orders Tuesday, the ISM non-manufacturing index Wednesday, and productivity and costs Thursday. News on employment and consumer credit is scheduled Friday.
Indices are unmanaged, do not incur fees or expenses, and cannot be
invested into directly. These returns do not include dividends.
Filed under: Consumer confidence, Consumer Spending, Gross Domestic Product, Industrial Production, Inflation, Norhill Wealth Strategies Report, Safe Investments, Warren Elkin | Tags: business inventories, consumer prices, economic week ahead, Financial consultant, imports and exports decline, Inflation, Market Updates, moderate growth, Norhill Wealth Strategies Report, retail sales, Warren Elkin
Indices are unmanaged, do not incur fees or expenses, and cannot be
invested into directly. These returns do not include dividends.
Filed under: Consumer confidence, Economic Outlook, Economic Recovery, Gross Domestic Product, Inflation, Norhill Wealth Strategies Report, Retirement Investing | Tags: credit demand, Economic crosswinds, economic week ahead, Inflation, Market Updates, Norhill Wealth Strategies Report, service sector slows, Warren Elkin
Warren Elkin of Norhill Financial is your safe money strategist. When it comes to your hard earned dollars, he can keep your money secure as it grows. Warren Elkin can be reached toll free at 877-476-5051- or by email at elkininc@aol.com. To learn more about him check out www.warrenelkin.com.
Filed under: Consumer confidence, Economic Outlook, Economic Recovery, Gross Domestic Product, Norhill Wealth Strategies Report, Warren Elkin | Tags: Construction Spending, consumer confidence, Economic Recovery, Gross Domestic Product, Norhill Wealth Strategies Report, Warren Elkin
Economic Week in Review
Jobs up, other signals mixed
Two closely watched gauges of the labor market–the unemployment rate and non-farm payrolls–registered better-than-expected readings for March, indicating the economic recovery is gaining momentum. By contrast, other reports hinted at signs of weakness.
The jobless rate drops to a two-year low
The unemployment rate for March dipped to 8.8% from 8.9% in February, a level last seen in March 2009, while non-farm payrolls increased in March by 216,000 from a month earlier. Both statistics were better than expected. The job figures were among the latest indicating that the economic recovery is gaining momentum. The job gains came from the private sector, especially in the business/professional, healthcare, and leisure/hospitality arenas. The public sector continued to shed jobs as states and local governments struggled with the financial aftermath of the Great Recession.
Personal spending jumps but rising prices take a toll
Consumer spending accelerated in February, rising 0.7% (more than double the January rate), the largest increase since October. Spending rose even as the growth in personal income slowed from its sharp uptick in January, when it got a one-time boost from a program to reduce Social Security taxes in 2011. Real disposable personal income, which is adjusted for inflation and current taxes, was pinched by rising food and gas prices and declined 0.1%.
Consumer confidence drops from a three-year high
The Conference Board’s index of consumer confidence fell sharply in March, to 63.4, after climbing to a three-year high of 72.0 one month earlier. Driving the decline was a plunge in consumer expectations about future conditions, especially among younger survey respondents. Consumers’ views of future business conditions deteriorated the most, followed by a more pessimistic outlook about the job market, incomes, and inflation. By contrast, consumers felt better about current business conditions, although this was tempered somewhat by their assessment of the current job market. Buying plans fell sharply.
Construction spending declined more than forecast
Spending on private and public construction fell in March, producing a 1.4% drop in total construction spending from a month earlier and continuing a three-month decline. Analysts had expected a shallower monthly decline. A 3.7% decrease in residential construction spending lay behind the private sector’s decline; non-residential construction, such as power and utility facilities, increased. The decline in public-sector construction was expected given the financial stress that states and municipalities are facing.
The economic week ahead
ISM’s service-sector index, to be released on Tuesday, will fill out the picture of March business activity that started with the publication this past week of its manufacturing-sector index. Also on tap: the minutes of the Federal Open Market Committee’s March 15 meeting (Tuesday) and the Fed’s latest report on consumer credit (Thursday).
Warren Elkin of Norhill Financial is your safe money strategist. When it comes to your hard earned dollars, he can keep your money secure as it grows. Warren Elkin can be reached toll free at 877-476-5051- or by email at elkininc@aol.com. To learn more about him check out www.warrenelkin.com.
Filed under: Economic Recovery, Gross Domestic Product, Housing Market Trends, Norhill Wealth Strategies Report, Warren Elkin | Tags: Economic Recovery, Gross Domestic Product, Market trends, Norhill Wealth Strategies Report, Warren Elkin
Markets UpdateFor the week ended March 25, the S&P 500 Index rose 2.7% to 1,314 (for a year-to-date total return-including price change plus dividends-of about 4.9%). The yield of the 10-year U.S. Treasury note rose 18 basis points to 3.46% (for a year-to-date increase of 16 basis points).
 Warren Elkin of Norhill Financial is your safe money strategist. When it comes to your hard earned dollars, he can keep your money secure as it grows. Warren Elkin can be reached toll free at 877-476-5051- or by email at elkininc@aol.com. To learn more about him check out www.warrenelkin.com. |
Norhill Wealth Strategies 