2013 Insights

November 2013

Are you thinking about going back to school for an M.B.A?  Stanford’s two-year program costs nearly $120,000 but its graduates earn $99,700 more than other top schools in their first five years after graduation according to Forbes magazine.  Runner-ups for 2nd and 3rd place are the University of Chicago’s Booth School and Harvard.  Forbes bases their ranking on actual return-on-investment; other ranking systems include additional metrics and generally Harvard Business School tops various lists most often.  However, there are some that think an M.B.A. is not the ticket to the top spot like it might have been years ago.  Be realistic – how long will it take you to break even and then see a real return on your investment.  Will it be worth not only the financial investment, but the personal time commitment?

October 2013

The impasse in Washington has markets trending lower but not panicking – at least not in the early days of October.  We expect the standoff between the two sides to continue until the very last moment like it did at the beginning of the year.  As we get closer to the possibility of government “default” we’ll likely see markets taking bigger swings.  Some pundits will claim this is a major blow to the economy and we’re heading for another recession and others will say this is a buying opportunity.  If you have a long-term plan in place, you know how to handle this.

September 2013

As we move closer to implementation of the Affordable Care Act, aka Obamacare, we are seeing a major shift in corporate retiree health care plans with some big-name companies like IBM and GE planning to move their retirees to insurance exchanges.  This is akin to the big shift from pensions to 401(k)s that occurred in the 1980s and we can anticipate many more companies taking this approach. This is likely an unintended consequence of the act and may increase cost to taxpayers unless and until the insurance and health care industries get more competitive.

August 2013

The Wall Street Journal recently had an op-ed written by a recent graduate that finished college without any debt, thanks to her parents’ urging.  One of her goals was to minimize the number of credits she was paying for at the premium rate.  Her suggestions on how to do this were to take college-level courses in high school, attend community college for general classes, and take CLEP tests for subjects in which the student is already proficient.  She also worked a variety of jobs and while it was difficult at times, she felt it was worth it to be debt-free at graduation.

July 2013

Gold has lost some of its luster.  In April gold suffered its biggest 1-day loss after a fairly steady decline since last summer.  Gold hit its peak in 2011 reaching nearly $1,900 per ounce and is now down under $1,300 per ounce.  See our 2nd quarter newsletter for more about gold, interest rates, bonds and gift taxes.

June 2013

When will the Fed raise interest rates?  Last year Fed chairman Bernanke said he would hold rates steady until the jobless rate fell below 6.5%.  He anticipates it will take until the end of 2015 to reach that goal.   Some members of the Federal Reserve Board believe rates should go up before that time since the economy has been steadily improving.  Either way, we anticipate a relatively slow rise in the interest rate; a dramatic increase would hurt the housing market recovery.

May 2013

The stock market has reached new highs this year, a welcome change for investors.  Some say the rise is just a sugar high due to the Federal Reserve’s easy money policy while others point out that corporate earnings and balance sheets are very strong and the fundamentals support stock prices.  The economy is growing and housing finally seems to be improving.  There is always a risk when investing which is why financial planners stress diversifying your portfolio and having an ample emergency fund.

April 2013

Small investors are starting to let go of some of the fear that gripped them during the 2008-2009 financial crisis.  More money has been moving to the stock market as it has been rising nicely and those who stayed the course have recovered and even seen some gains now.  Some of this shift is likely due to the Fed’s easy money policy and artificially low interest rates, pushing people to take some risk with their money instead of have it sit idling, earning practically nothing. But that’s not all – the economy is recovering and has been since mid-2009; it’s just been a very slow recovery.  Corporations that made big cuts during the recession are making bigger profits, aiding the stock prices.  And now that the election is over and a number of critical policy items are more or less settled, business finally have more clarity about how to prepare for the associated costs.

March 2013

Early March saw the Dow hit a new record, breaking the previous record set on October 9, 2007.  Momentum may well carry the market higher before facing a correction, which is considered a 10% drop from the recent high.  Trying to time the market is generally an exercise in futility.  The last bull market that started with a record-breaking high lasted for a year and the Dow went up 21%.

February 2013

Baby boomers are asking more questions about retirement.  That’s good because it lets us know they are thinking seriously about not only how they going to pay their living expenses, but also more sophisticated questions like what is the most tax-efficient way to draw down my assets?   When should I start taking Social Security benefits?  How is my pension taxed?  And of course – will my money last at least as long as I do?  If you’d like to get a better understanding of these kinds of retirement issues, call or email us to schedule a complimentary introductory meeting.

January 2013

The economy is still chugging along like a train with a very heavy load – you know, the kind you hate to get stopped by.  The markets have been doing well though, up in the double digit range for 2012.  Some of this is due to the Fed’s low interest rate policy which encourages investment in anything but cash or CDs.  The Fiscal Cliff is patched for now with the American Taxpayer Relief 2012 law.  For an overview on the changes – and what stays the same, see: http://nestbuilderfinancial.wordpress.com/