That Was The Week That Was–4th Week May

 

Back to The 1950s ?

  Larry Kudlow Could Be Right.The CNBC Commentator said on May 23rd that we may never see true normalization of interest rates (4%). His guess means: No Boom and No Bust. All post-war recessions were preceded by an inverted Treasury yield curve, where short rates are higher than long rates. The back to the 1950s part of Kudlow’s thesis, from Eisenhower to JFK, short rates averaged between 1-2%, inflation was roughly 1.5%, the dollar was tied to gold, long Treasuries ranged 2-3%, and real growth was only 2.5%. The Fed is right to go slow with rate hikes, Kudlow said. Low rates back in the 50s were not a bad thing. ‘The trick is to avoid Ike’s (Eisenhower) mistakes of over-taxing and over-regulating the economy. CNBC.com 5/23/2015

 

 

WHAT AM I READING? Can’t Understand Your Account Statement?

I had a customer who’d call me and complain about everything. It was always something different. One time he called and fumed that his account wasn’t making any money, and didn’t I realize he was living on a pension, social security, a part-time job and income off his investments; and how in the world did I expect him to continue to accept these below average returns. And when he calmed down I asked him to explain his ire and he said his statement showed he only made 1 1/2% on his investments and that was inexcusable. It was then that I explained what he was looking at was his portfolio estimated yield and not his total return. He grumbled something that wasn’t close to an apology and said that the company should make things clearer, and hung up.   Reading an investment statement. I admit, is a challenge. If for example you take money out of your account, sell a security and reinvest some but not all of the selling proceeds, you may have to put on your Einstein cap to calculate where you are. If you miss something, fear not, at the end of the year all the investments you purchased are shown on your statement, along with those that you sold plus dividends, capital gains and interest earned. If you have investment activity every month you will get a statement every month. If not you will get a quarterly statement. In most cases your account statement will be accurate to the third decimal point. Once in a great while there will be a discrepancy. About 20-some years back a married couple opened identical investment accounts with identical amounts. The statements came back but one showed the investment value was for a penny more than the other. The couple were adamant in wanting to know why the difference. The reason is one account bought at a slightly different time than the other. It took a few hours to explain but eventually I  gave a penny to one and called it a day. Call me if you have questions on your account statement and I’ll try to answer.

 Hey, Mister and Misses Middle-Class! You wonder why a  Cadillac costs $50,000 today and back in the 1970s cost only $12,000? Why the home you paid $125,000 could sell for $250,000? You wonder why you make more money today than you ever dreamed possible? Why social security retirement benefits are four times higher than your original starting salary? You wonder why and you still feel broke? You’re going feel more pain when… $15 AN HOUR MINIMUM WAGE becomes law of the land. Get used to it ‘cause it’s coming. If you’re an old poop like me you remember when starting out wages for teachers, lawyers and doctors, (yes, doctors), were $500-$600 an month! I’m talking less than a generation ago. It’s hard for me to get my tiny brain around $15 an hour minimum, but I do get it. I also get the fact that we won’t be seeing a Happy Meal anytime soon for a buck, or a nickel cup of coffee. This new minimum wage minimum will impact every industry. And the $15 minimum wage to employers will be more like $20 an hour with taxes, insurance and what not added in. Once it becomes law some people will lose their jobs so that others will earn the new minimum. If the Fed wanted to see inflation they’ll get it. Eventually the middle-class will end up paying for the pay hikes through higher costs on everything from insurance to food. We even may make more money because of the new minimum wage but the new raise won’t go as far. Prepare yourself for maybe a $5 apple and $25 burger, because sure as a future $30 an hour minimum wage those days are coming.

 I am always surprised to hear how much money people pay renting a home or apartment. With mortgage rates so low people who own homes and have a mortgage are enjoying the lowest interest rates ever. Not so with rental property. Rents in April rose at their fastest pace since 2013, outpacing home values. reported Zillow Rent Index. Right now renters spend more than a quarter of their monthly income. Home buyers are expected to pay 15 % of their monthly income on on property payments versus 30% for renters. MarketWatch.com 5/21/2015

 

Made me smile…

New Yorker, May  25, 2015

 

Canola fields Canada Getty Images

Hard Ground in Canada Makes Canola Oil a Valuable Resource. Deep fried foods are expected to increase in price as a drought in Canada is in trouble. According to MSN.com this is the worse year for Canola since 2010. MSN 5/25/2015

 

  We don’t have a job crisis in this country we have a job skills crisis.- On the Frank Beckmann Show on WJR, guest commented that uber skilled engineers, software designers, teachers and others who have ‘best’ skills and talents have no problem with jobs. Our education system is broke.  WJR-AM Radio 5/27

and here’s a chart from Friday’s WSJ to illustrate the point…

 REAL ESTATE UP

Getty Images

Existing Home Sales  Hit 9-Year High. NAR Pending Homes Sales Index rose 3.4% in April to a level of 108.7. An index of 100 represents an average level of activity.

 

Don’t Be A Slacker- Do Your Part!  MFS Chief Investment Strategist James Swanson said the market is ‘fairly priced’ and there is little chance of a valuation bubble. He also said that the consumer could become a major factor in helping the economy and the stock market grow at a faster pace. Erik Weisman MFS chief economist said the reason for this year’s market ‘tepid’ pace is the consumer. The consumer could be doing more. The economy shows no signs of problems such as overspending and too much credit. Economies have problems when they have excesses and I don’t see any excess, he said.  Financial Advisor Magazine May 28 2015

Questions call Paul @ 586 295 0430 or write him at pstanley@westminsterfinancial.com. Share this blog with someone who cares about their money.

SECURITIES OFFERED THROUGH WESTMINSTER FINANCIAL SECURITIES, INC. MEMBER FINRA/SIPC.