Category Archives: Investing and fiduciary requirements

401(k) statistical update

In the March 2013 edition of Benefits Selling they reported a host of interesting data:

34% of assets are in Fixed Income, Stable Value or money market accounts, with the rest in stock holdings.

Newly Hired Participants in their 20’s are not 51% in balanced/Target-Date Funds.

The average Account balance for the 24 million participants has risen from $43,215 in 2001 to $58,991 in 2011.  This is a reduction from 2007 (no surprise here) from $65,454.

Disturbingly, 26% of participants in their 50’s and 60’s have balances of less than $10,000.

21% of all participants who could take a loan, have a loan outstanding.

Four Lessons from the IRS Plan Audit Webinar today

I participated today in a conference call with the IRS.  They reported on the recent plan audit questionnaire that they performed and it had a number of interesting findings.  There are now more than 500,000 401k plans in the US covering some 60 million participants.  The IRS sent out a large number of plan questionnaires, and 98% responded to them;  the 2% that did not respond, got audited!  LESSON ONE- Respond to their requests!

 

They looked at all areas of the plan and found concerns in  a couple of areas.  One they highlighted was LOAN COMPLIANCE.  As it turns out, during the bad economy of the last 5 years, many companies allowed more loans than their plan document allowed (They found one person had 8 loans, even though the plan document only allowed 2).  Some companies that did not allow loans had loans on the books.  LESSON TWO- you must follow your plan document.

Another Loan issue that they are looking at very closely currently is Loan Repayment.  Employees must repay the loans in a timely manner, in accordance with the written agreement they signed to take out the loan.  The questionnaires found a number of problems surrounding this.  LESSON THREE-  When an employee fails to pay as agreed, the entire amount of the loan becomes taxable to that employee.

Testing and Top-Heavy plans was another issue.  They found that many of the plans tested too late to fix any issues they found, and 20% of top-heavy plans did not do the proper correction in time.  LESSON FOUR – You have to get your census in quickly.  Testing must be done by March 15.

They found that 15% of plans reported suspension, reduction or termination of matching contributions in the last 4 years.  48% of the plans are currently Safe-Harbor or SIMPLE plans.  Only 6% of plans also maintained a Defined Benefit Plan.

For plans with Automatic Contribution Arrangements, (The employee is automatically enrolled at 3% unless they change their election) Only 7% of the employees lowered or stopped the contribution.  29% elected an amount of deferral that was higher than the default rate.

 

A new tool will be available – the Questionnaire self-Audit Tool, or QSAT, later this year.  This tool can help plan sponsors to find, fix and avoid costly mistakes.

 

Reassessing Retirement Assumptions

What makes financial sense for some baby boomers may not make sense for you. – Reeve
There is no “typical” retirement. Many baby boomers want one and believe that they will have one, and
their futures may indeed unfold as planned. For others, the story will be
different. Just as there is no routine retirement, there are no rote financial
moves that should be made before or during this phase of life, and no universal
truths about the retirement experience.

Here are some commonly held assumptions – suppositions
that may or may not prove true for you, depending on your financial and
lifestyle circumstances.
#1. You should take Social Security as late as possible. Generally speaking, this
is a smart move. If you were born in the years from 1943-1954, your monthly
benefit will be 25% smaller if you claim Social Security at 62 instead of your
“full” retirement age of 66. If you wait until 70 to take Social Security, your
monthly benefit will be 32% larger than if you had taken it at 66.1
So why would anyone apply for Social Security benefits in their early 60s? The fact is, some seniors really need the
income now. Some have health issues
or the prospect of hereditary diseases influencing their choice. Single
retirees don’t have a second, spousal income to count on, and that is another
factor in the decision. For most people, waiting longer implies a larger
lifetime payout from America’s retirement trust. Not everyone can bank on
longevity or relative affluence, however.

#2. You’ll probably live 15-20 years after you retire. You may live much longer, especially if
you are a woman. According to the Census Bureau, the population of Americans 100
or older grew 65.8% between 1980 and 2010, and 82.8% of centenarians were women
in 2010. The real eye-opener: in 2010, slightly more than a third of America’s
centenarians lived alone in their own homes. Had their retirement expenses lessened
with time? Doubtful to say the least.2

#3. You should step back from growth investing as you get older. As many investors age,
they shift portfolio assets into investment vehicles that offer less risk than
stocks and stock funds. This is a well-regarded, long-established tenet of
asset allocation. Does it apply for everyone? No. Some retirees may need to
invest for growth well into their 60s or 70s because their retirement savings
are meager. There are retirement planners who actually favor aggressive growth
investing for life, arguing that the rewards outweigh the risks at any age.

#4. The way most people invest is the way you should invest. Again, just as there is
no typical retirement, there is no typical asset allocation strategy or
investment that works for everyone. Your time horizon, your risk tolerance, and
your current retirement nest egg represent just three of the variables to
consider when you evaluate whether you should or should not enter into a
particular investment.
#5. Going Roth is a no-brainer. Not necessarily. If you are mulling a Roth IRA or Roth 401(k) conversion,
the big question is whether the tax savings in the end will be worth the tax
you will pay on the conversion today. The younger you are – roughly speaking –
the greater the possibility the answer will be “yes”, as your highest-earning
years are likely in the future. If you are older and at or near your peak
earning potential, the conversion may not be worth it at all.
#6. A lump sum payout represents a good deal. Some corporations are offering current and/or
former workers a choice of receiving pension plan assets in a lump sum payout
instead of periodic payments. They aren’t doing this out of generosity; they
are doing it because actuaries have advised them to lessen their retirement
obligations to loyal employees. For many pension plan participants, electing
not to take the lump sum and sticking with the lifelong periodic payments may
make more sense in the long run. The question is, can the retiree invest the
lump sum in such a way that might produce more money over the long run, or not?
The lump sum payout does offer liquidity and flexibility that the periodic
payments don’t, but there are few things as economically reassuring as
predictable, recurring retirement income. Longevity is another factor in this
decision.

#7. Living it up in your 60s won’t hurt you in your 80s. Some couples withdraw much more than they
should from their savings in the early years of retirement. After a few years,
they notice a drawdown happening – their portfolio isn’t returning enough to
replenish their retirement nest egg, and so the fear of outliving their money
grows. This is a good argument for living beneath your means while still
carefully planning and budgeting some “epic adventures” along the way.
Your retirement plan should be created and periodically revised with an
understanding of the unique circumstances of your life and your unique
financial objectives. There is no such thing as generic retirement planning, and
that is because none of us will have generic retirements.

Reeve Conover can be reached at 877-423-9990, or Reeve@ReeveWillKnow.com

This material was prepared by MarketingLibrary.Net Inc., and does
not necessarily represent the views of the presenting party, nor their affiliates.
All information is believed to be from reliable sources; however we make no
representation as to its completeness or accuracy. Please note – investing
involves risk, and past performance is no guarantee of future results. The
publisher is not engaged in rendering legal, accounting or other professional
services. If assistance is needed, the reader is advised to engage the services
of a competent professional. This information should not be construed as
investment, tax or legal advice and may not be relied on for the purpose of
avoiding any Federal tax penalty. This is neither a solicitation nor
recommendation to purchase or sell any investment or insurance product or
service, and should not be relied upon as such. All indices are unmanaged and
are not illustrative of any particular investment.

 

Citations.

1 – www.forbes.com/sites/janetnovack/2011/02/15/the-big-decision-when-to-take-social-security/
[2/15/11]

2 – money.usnews.com/money/retirement/articles/2013/01/07/what-people-who-live-to-100-have-in-common
[1/7/13]

 

 

 

 

1st Quarter 2013 Financial Review

THE MONTH IN BRIEF

Offhand, when was the last month in which stocks didn’t
advance? That would be October, and if it seems like a distant memory, credit
the Federal Reserve, a decent Q1 earnings season, and a prevalent optimism that
is hard to dismiss. The S&P 500 pushed higher during the month to settle at
a new record close of 1,597.57 on April 30 – even after an abysmal March jobs
report and some soft indicators at home and abroad. It was a bad month for commodities
investors, with the big headline being gold’s lapse into a bear market on April
12. There was better news out of Europe, if not out of China. The real estate
market continued to improve, the usual monthly volatility in the pace of home
sales aside.1,2,3

DOMESTIC ECONOMIC HEALTH

The most stunning news of April came early in the month,
when the Labor Department said that the economy had generated but 88,000 new
jobs in March. Sure, the jobless rate fell to 7.6%, but that was only because fewer
Americans were looking for work – the labor force participation rate hit a
34-year low of 63.3%. Of course, the Labor Department often
greatly revises these monthly hiring figures.4

Was manufacturing growth tapering off? The
Institute for Supply Management’s manufacturing PMI came in at 50.7 in April, below
the disappointing March reading of 51.3. ISM’s March service sector PMI declined
to a still-encouraging 54.4 in April from its 56.0 March reading. Construction
spending was down 0.7% in March, while overall durable goods orders lessened by
5.7%. Retail sales dipped 0.4% in March (the poorest month since last June). Given
indicators like these, perhaps it wasn’t surprising that the federal
government’s initial estimate of Q1 GDP was 2.5% – not the 3.0% or better
growth that many economists had assumed they would see.5,6,7,8

Consumer spending beat expectations with a 0.2%
gain in March, with colder weather being the biggest factor: inflation-adjusted
spending on utilities rose by the largest monthly amount since October 2001. Gas
prices had fallen 4.4% in March, and inflation also lessened: the overall Consumer
Price Index went south 0.2% and the overall Producer Price Index retreated 0.6%;
the core PPI rose 0.2%, the core CPI 0.1%.8,9,10

The Conference Board’s April consumer confidence
poll soared to a 5-month peak of 68.1 in April from its 61.9 mark for March. The
University of Michigan’s final April consumer sentiment index reached 76.4,
surprising to the upside – economists polled by Briefing.com had expected a
final April reading of 72.4.1,7,11

GLOBAL ECONOMIC HEALTH

Would China’s apparent economic recovery amount to an
illusion? Its official GDP reading for Q1 was 7.7%, down from 7.9% in Q4.
Additionally, its HSBC PMI reading fell to 50.5 in April, a two-month low.
Economists worried that its GDP would be closer to 7% than 8% in coming
quarters. This disappointment provided another hit to the global commodities
market, signaling reduced demand for gold and other resources in the PRC.12

While the banking crisis in Cyprus had cooled, eurozone
unemployment had hit 12.1% in March, and Germany’s manufacturing PMI showed
contraction in April (49.2). However, these last two developments seemed to
increase the odds of the European Central Bank lowering its benchmark interest
rate (which was at 0.75% as April ended). Ten-year bond yields in Italy and
Spain were respectively at 4.1% and 4.3% as the month wrapped up, a far cry
from the danger zone they entered last summer; the yield on Spain’s 10-year
note fell for an eighth straight month. Italy’s political stalemate ended after
two months, with new prime minister Enrico Letta receiving a parliamentary vote
of confidence.11,13,14,15

WORLD MARKETS

Many marquee indices fared well in April. The gainers included the Global Dow
(+3.27%), the MSCI World Index (+2.90%), the MSCI
Emerging Markets Index (+0.44%), the Nikkei 225 (+11.80%), the Sensex (+3.55%), the S&P/ASX 200 (+4.52%), the FTSE 100 (+0.29%), the CAC 40 (+3.36%), the DAX (+1.52%) and the
Euro STOXX 50 (+0.99%). In the loss column for April, we find the TSX Composite
(-2.30%), the IPC All-Share (-4.11%), the Bovespa (-0.78%) and the Shanghai Composite
(-2.62%).i COmposite : the TSX
Composite (-2.30%), the  gan’2,16

COMMODITIES MARKETS

It wasn’t all bad in April: natural gas futures rose 9.0%, cocoa futures gained
9.1%, and wheat futures rose 6.3%. Now for the bad news: gold fell 7.8% last
month to an April 30 COMEX close of just $1,474.00. Silver cratered 14.6% in
April; copper fell 6.4%, platinum 4.3% and palladium 9.2%. Corn (-6.5%) and
soybeans (-0.4%) both lost ground for a third consecutive month. NYMEX crude dipped
3.9% in April to end the month at $93.46 a barrel while RBOB gasoline futures dropped
9.8%. The U.S. Dollar Index lost 1.52% in
April, settling at 81.72 on April 30.11,17,18,19

REAL ESTATE

The pace of existing home sales was 10.3% better in March
2013 than it was in March 2012, according to the National Association of
Realtors; the Census Bureau reported an 18.5% year-over-year improvement in the
pace of new home purchases.  The February
S&P/Case-Shiller Home Price Index showed its best overall 12-month gain
since May 2006 (+9.3%). NAR also noted pending home sales at a 3-year peak in
March, with the annual gain at 7.0%. Existing home sales did decline 0.6% in March;
new home sales rose 1.5%.11,20,t in the sales pace at 18.5%.3,21

What happened to mortgage rates in April? We saw
notable declines. Freddie Mac’s March 28 Primary Mortgage Market Survey had the
average interest rate for the 30-year FRM at 3.57%; it was at 2.76% for the 15-year FRM, 2.68%
for the 5/1-year
ARMs and 2.62% for the 1-year ARM. In the last April survey
(April 25), the numbers were as follows: 30-year FRM, 3.40%; 15-year FRM, 2.61%; 5/1-year
ARM, 2.58%; 1-year ARM, 2.62%.22

LOOKING BACK…LOOKING FORWARD

The NASDAQ and S&P are now on 6-month winning streaks – the longest win streaks they
have realized in the current bull market. The DJIA advanced for a fifth straight
month in April. Here are the settlement prices from April 30: DJIA, 14,839.80; S&P, 1,597.57, NASDAQ, 3,328.79; Russell 2000,
947.46. (The RUT actually lost 0.43% for April.)1,2

Hopefully, we won’t see domestic economic indicators falter in May and June, as was the
case in 2011 and 2012. Overseas indicators (growth and manufacturing in China,
the lingering recession in Europe) may not promise much, however. On a positive
note, the Fed is still printing plenty of money and sticking to its
accommodative monetary policy, which has boosted stocks of late more than any
other factor. The undeniable psychological lift from the Fed’s open-ended
easing hasn’t worn off, and investor morale is still high. The market doesn’t
seem to be

THE MONTH IN BRIEF

Offhand, when was the last month in which stocks didn’t
advance? That would be October, and if it seems like a distant memory, credit
the Federal Reserve, a decent Q1 earnings season, and a prevalent optimism that
is hard to dismiss. The S&P 500 pushed higher during the month to settle at
a new record close of 1,597.57 on April 30 – even after an abysmal March jobs
report and some soft indicators at home and abroad. It was a bad month for
commodities investors, with the big headline being gold’s lapse into a bear
market on April 12. There was better news out of Europe, if not out of China.
The real estate market continued to improve, the usual monthly volatility in
the pace of home sales aside.1,2,3

 

DOMESTIC ECONOMIC HEALTH

The most stunning news of April came early in the month,
when the Labor Department said that the economy had generated but 88,000 new
jobs in March. Sure, the jobless rate fell to 7.6%, but that was only because fewer
Americans were looking for work – the labor force participation rate hit a
34-year low of 63.3%. Of course, the Labor Department often
greatly revises these monthly hiring figures.4

 

Was manufacturing growth tapering off? The
Institute for Supply Management’s manufacturing PMI came in at 50.7 in April, below
the disappointing March reading of 51.3. ISM’s March service sector PMI
declined to a still-encouraging 54.4 in April from its 56.0 March reading.
Construction spending was down 0.7% in March, while overall durable goods
orders lessened by 5.7%. Retail sales dipped 0.4% in March (the poorest month
since last June). Given indicators like these, perhaps it wasn’t surprising
that the federal government’s initial estimate of Q1 GDP was 2.5% – not the
3.0% or better growth that many economists had assumed they would see.5,6,7,8

 

Consumer spending beat expectations with a 0.2%
gain in March, with colder weather being the biggest factor: inflation-adjusted
spending on utilities rose by the largest monthly amount since October 2001.
Gas prices had fallen 4.4% in March, and inflation also lessened: the overall
Consumer Price Index went south 0.2% and the overall Producer Price Index
retreated 0.6%; the core PPI rose 0.2%, the core CPI 0.1%.8,9,10

 

The Conference Board’s April consumer confidence
poll soared to a 5-month peak of 68.1 in April from its 61.9 mark for March.
The University of Michigan’s final April consumer sentiment index reached 76.4,
surprising to the upside – economists polled by Briefing.com had expected a
final April reading of 72.4.1,7,11

 

GLOBAL ECONOMIC HEALTH

Would China’s apparent economic recovery amount to an
illusion? Its official GDP reading for Q1 was 7.7%, down from 7.9% in Q4.
Additionally, its HSBC PMI reading fell to 50.5 in April, a two-month low.
Economists worried that its GDP would be closer to 7% than 8% in coming
quarters. This disappointment provided another hit to the global commodities
market, signaling reduced demand for gold and other resources in the PRC.12

 

While the banking crisis in Cyprus had cooled, eurozone
unemployment had hit 12.1% in March, and Germany’s manufacturing PMI showed
contraction in April (49.2). However, these last two developments seemed to
increase the odds of the European Central Bank lowering its benchmark interest
rate (which was at 0.75% as April ended). Ten-year bond yields in Italy and
Spain were respectively at 4.1% and 4.3% as the month wrapped up, a far cry
from the danger zone they entered last summer; the yield on Spain’s 10-year
note fell for an eighth straight month. Italy’s political stalemate ended after
two months, with new prime minister Enrico Letta receiving a parliamentary vote
of confidence.11,13,14,15

WORLD MARKETS

Many
marquee indices fared well in April. The gainers included the Global Dow
(+3.27%), the MSCI World Index (+2.90%), the MSCI
Emerging Markets Index (+0.44%), the Nikkei 225 (+11.80%), the Sensex (+3.55%), the S&P/ASX 200 (+4.52%), the FTSE 100 (+0.29%), the CAC 40 (+3.36%), the DAX (+1.52%) and the
Euro STOXX 50 (+0.99%). In the loss column for April, we find the TSX Composite
(-2.30%), the IPC All-Share (-4.11%), the Bovespa (-0.78%) and the Shanghai Composite
(-2.62%).i COmposite : the TSX
Composite (-2.30%), the  gan’2,16

 

COMMODITIES MARKETS

It
wasn’t all bad in April: natural gas futures rose 9.0%, cocoa futures gained
9.1%, and wheat futures rose 6.3%. Now for the bad news: gold fell 7.8% last
month to an April 30 COMEX close of just $1,474.00. Silver cratered 14.6% in
April; copper fell 6.4%, platinum 4.3% and palladium 9.2%. Corn (-6.5%) and
soybeans (-0.4%) both lost ground for a third consecutive month. NYMEX crude
dipped 3.9% in April to end the month at $93.46 a barrel while RBOB gasoline
futures dropped 9.8%. The U.S. Dollar Index lost 1.52% in
April, settling at 81.72 on April 30.11,17,18,19

 

REAL ESTATE

The pace of existing home sales was 10.3% better in March
2013 than it was in March 2012, according to the National Association of
Realtors; the Census Bureau reported an 18.5% year-over-year improvement in the
pace of new home purchases.  The February
S&P/Case-Shiller Home Price Index showed its best overall 12-month gain since
May 2006 (+9.3%). NAR also noted pending home sales at a 3-year peak in March,
with the annual gain at 7.0%. Existing home sales did decline 0.6% in March;
new home sales rose 1.5%.11,20,t in the sales pace at 18.5%.3,21

 

What happened to mortgage rates in April? We saw
notable declines. Freddie Mac’s March 28 Primary Mortgage Market Survey had the
average interest rate for the 30-year FRM at 3.57%; it was at 2.76% for the 15-year FRM, 2.68%
for the 5/1-year
ARMs and 2.62% for the 1-year ARM. In the last April survey
(April 25), the numbers were as follows: 30-year FRM, 3.40%; 15-year FRM, 2.61%;
5/1-year ARM, 2.58%; 1-year ARM, 2.62%.22

 

LOOKING BACK…LOOKING FORWARD

The
NASDAQ and S&P are now on 6-month winning streaks – the longest win streaks
they have realized in the current bull market. The DJIA advanced for a fifth straight
month in April. Here are the settlement prices from April 30: DJIA, 14,839.80; S&P, 1,597.57, NASDAQ, 3,328.79; Russell 2000,
947.46. (The RUT actually lost 0.43% for April.)1,2

 

%
CHANGE
YTD 1-MO
CHG
1-YR
CHG
10-YR
AVG
DJIA +13.25 +1.79 +12.31 +7.50
NASDAQ +10.24 +1.88 +9.27 +12.73
S&P 500 +12.02 +1.81 +14.28 +7.42
REAL
YIELD
4/30
RATE
1
YR AGO
5
YRS AGO
10
YRS AGO
10 YR TIPS -0.64% -0.30% 1.50% 2.16%

 

Sources: online.wsj.com, bigcharts.com, treasury.gov – 4/30/132,23,24

Indices are unmanaged, do not incur fees or expenses, and cannot be
invested into directly.

These returns do not include dividends.

 

Hopefully,
we won’t see domestic economic indicators falter in May and June, as was the
case in 2011 and 2012. Overseas indicators (growth and manufacturing in China,
the lingering recession in Europe) may not promise much, however. On a positive
note, the Fed is still printing plenty of money and sticking to its
accommodative monetary policy, which has boosted stocks of late more than any
other factor. The undeniable psychological lift from the Fed’s open-ended
easing hasn’t worn off, and investor morale is still high. The market doesn’t
seem to be

THE MONTH IN BRIEF
Offhand, when was the last month in which stocks didn’t advance? That would be October, and if it seems like a distant memory, credit the Federal Reserve, a decent Q1 earnings season, and a prevalent optimism that is hard to dismiss. The S&P 500 pushed higher during the month to settle at a new record close of 1,597.57 on April 30 – even after an abysmal March jobs report and some soft indicators at home and abroad. It was a bad month for commodities investors, with the big headline being gold’s lapse into a bear market on April 12. There was better news out of Europe, if not out of China. The real estate market continued to improve, the usual monthly volatility in the pace of home sales aside.1,2,3

DOMESTIC ECONOMIC HEALTH
The most stunning news of April came early in the month, when the Labor Department said that the economy had generated but 88,000 new jobs in March. Sure, the jobless rate fell to 7.6%, but that was only because fewer Americans were looking for work – the labor force participation rate hit a 34-year low of 63.3%. Of course, the Labor Department often greatly revises these monthly hiring figures.4

Was manufacturing growth tapering off? The Institute for Supply Management’s manufacturing PMI came in at 50.7 in April, below the disappointing March reading of 51.3. ISM’s March service sector PMI declined to a still-encouraging 54.4 in April from its 56.0 March reading. Construction spending was down 0.7% in March, while overall durable goods orders lessened by 5.7%. Retail sales dipped 0.4% in March (the poorest month since last June). Given indicators like these, perhaps it wasn’t surprising that the federal government’s initial estimate of Q1 GDP was 2.5% – not the 3.0% or better growth that many economists had assumed they would see.5,6,7,8

Consumer spending beat expectations with a 0.2% gain in March, with colder weather being the biggest factor: inflation-adjusted spending on utilities rose by the largest monthly amount since October 2001. Gas prices had fallen 4.4% in March, and inflation also lessened: the overall Consumer Price Index went south 0.2% and the overall Producer Price Index retreated 0.6%; the core PPI rose 0.2%, the core CPI 0.1%.8,9,10

The Conference Board’s April consumer confidence poll soared to a 5-month peak of 68.1 in April from its 61.9 mark for March. The University of Michigan’s final April consumer sentiment index reached 76.4, surprising to the upside – economists polled by Briefing.com had expected a final April reading of 72.4.1,7,11

GLOBAL ECONOMIC HEALTH
Would China’s apparent economic recovery amount to an illusion? Its official GDP reading for Q1 was 7.7%, down from 7.9% in Q4. Additionally, its HSBC PMI reading fell to 50.5 in April, a two-month low. Economists worried that its GDP would be closer to 7% than 8% in coming quarters. This disappointment provided another hit to the global commodities market, signaling reduced demand for gold and other resources in the PRC.12

While the banking crisis in Cyprus had cooled, eurozone unemployment had hit 12.1% in March, and Germany’s manufacturing PMI showed contraction in April (49.2). However, these last two developments seemed to increase the odds of the European Central Bank lowering its benchmark interest rate (which was at 0.75% as April ended). Ten-year bond yields in Italy and Spain were respectively at 4.1% and 4.3% as the month wrapped up, a far cry from the danger zone they entered last summer; the yield on Spain’s 10-year note fell for an eighth straight month. Italy’s political stalemate ended after two months, with new prime minister Enrico Letta receiving a parliamentary vote of confidence.11,13,14,15

WORLD MARKETS
Many marquee indices fared well in April. The gainers included the Global Dow (+3.27%), the MSCI World Index (+2.90%), the MSCI Emerging Markets Index (+0.44%), the Nikkei 225 (+11.80%), the Sensex (+3.55%), the S&P/ASX 200 (+4.52%), the FTSE 100 (+0.29%), the CAC 40 (+3.36%), the DAX (+1.52%) and the Euro STOXX 50 (+0.99%). In the loss column for April, we find the TSX Composite (-2.30%), the IPC All-Share (-4.11%), the Bovespa (-0.78%) and the Shanghai Composite (-2.62%).i COmposite : the TSX Composite (-2.30%), the gan’2,16

COMMODITIES MARKETS

It wasn’t all bad in April: natural gas futures rose 9.0%, cocoa futures gained 9.1%, and wheat futures rose 6.3%. Now for the bad news: gold fell 7.8% last month to an April 30 COMEX close of just $1,474.00. Silver cratered 14.6% in April; copper fell 6.4%, platinum 4.3% and palladium 9.2%. Corn (-6.5%) and soybeans (-0.4%) both lost ground for a third consecutive month. NYMEX crude dipped 3.9% in April to end the month at $93.46 a barrel while RBOB gasoline futures dropped 9.8%. The U.S. Dollar Index lost 1.52% in April, settling at 81.72 on April 30.11,17,18,19

REAL ESTATE
The pace of existing home sales was 10.3% better in March 2013 than it was in March 2012, according to the National Association of Realtors; the Census Bureau reported an 18.5% year-over-year improvement in the pace of new home purchases. The February S&P/Case-Shiller Home Price Index showed its best overall 12-month gain since May 2006 (+9.3%). NAR also noted pending home sales at a 3-year peak in March, with the annual gain at 7.0%. Existing home sales did decline 0.6% in March; new home sales rose 1.5%.11,20,t in the sales pace at 18.5%.3,21

What happened to mortgage rates in April? We saw notable declines. Freddie Mac’s March 28 Primary Mortgage Market Survey had the average interest rate for the 30-year FRM at 3.57%; it was at 2.76% for the 15-year FRM, 2.68% for the 5/1-year ARMs and 2.62% for the 1-year ARM. In the last April survey (April 25), the numbers were as follows: 30-year FRM, 3.40%; 15-year FRM, 2.61%; 5/1-year ARM, 2.58%; 1-year ARM, 2.62%.22

LOOKING BACK…LOOKING FORWARD
The NASDAQ and S&P are now on 6-month winning streaks – the longest win streaks they have realized in the current bull market. The DJIA advanced for a fifth straight month in April. Here are the settlement prices from April 30: DJIA, 14,839.80; S&P, 1,597.57, NASDAQ, 3,328.79; Russell 2000, 947.46. (The RUT actually lost 0.43% for April.)1,2

% CHANGE

YTD

1-MO CHG

1-YR CHG

10-YR AVG

DJIA

+13.25

+1.79

+12.31

+7.50

NASDAQ

+10.24

+1.88

+9.27

+12.73

S&P 500

+12.02

+1.81

+14.28

+7.42

REAL YIELD

4/30 RATE

1 YR AGO

5 YRS AGO

10 YRS AGO

10 YR TIPS

-0.64%

-0.30%

1.50%

2.16%


THE MONTH IN BRIEF
Offhand, when was the last month in which stocks didn’t advance? That would be October, and if it seems like a distant memory, credit the Federal Reserve, a decent Q1 earnings season, and a prevalent optimism that is hard to dismiss. The S&P 500 pushed higher during the month to settle at a new record close of 1,597.57 on April 30 – even after an abysmal March jobs report and some soft indicators at home and abroad. It was a bad month for commodities investors, with the big headline being gold’s lapse into a bear market on April 12. There was better news out of Europe, if not out of China. The real estate market continued to improve, the usual monthly volatility in the pace of home sales aside.1,2,3

DOMESTIC ECONOMIC HEALTH
The most stunning news of April came early in the month, when the Labor Department said that the economy had generated but 88,000 new jobs in March. Sure, the jobless rate fell to 7.6%, but that was only because fewer Americans were looking for work – the labor force participation rate hit a 34-year low of 63.3%. Of course, the Labor Department often greatly revises these monthly hiring figures.4

Was manufacturing growth tapering off? The Institute for Supply Management’s manufacturing PMI came in at 50.7 in April, below the disappointing March reading of 51.3. ISM’s March service sector PMI declined to a still-encouraging 54.4 in April from its 56.0 March reading. Construction spending was down 0.7% in March, while overall durable goods orders lessened by 5.7%. Retail sales dipped 0.4% in March (the poorest month since last June). Given indicators like these, perhaps it wasn’t surprising that the federal government’s initial estimate of Q1 GDP was 2.5% – not the 3.0% or better growth that many economists had assumed they would see.5,6,7,8

Consumer spending beat expectations with a 0.2% gain in March, with colder weather being the biggest factor: inflation-adjusted spending on utilities rose by the largest monthly amount since October 2001. Gas prices had fallen 4.4% in March, and inflation also lessened: the overall Consumer Price Index went south 0.2% and the overall Producer Price Index retreated 0.6%; the core PPI rose 0.2%, the core CPI 0.1%.8,9,10

The Conference Board’s April consumer confidence poll soared to a 5-month peak of 68.1 in April from its 61.9 mark for March. The University of Michigan’s final April consumer sentiment index reached 76.4, surprising to the upside – economists polled by Briefing.com had expected a final April reading of 72.4.1,7,11

GLOBAL ECONOMIC HEALTH
Would China’s apparent economic recovery amount to an illusion? Its official GDP reading for Q1 was 7.7%, down from 7.9% in Q4. Additionally, its HSBC PMI reading fell to 50.5 in April, a two-month low. Economists worried that its GDP would be closer to 7% than 8% in coming quarters. This disappointment provided another hit to the global commodities market, signaling reduced demand for gold and other resources in the PRC.12

While the banking crisis in Cyprus had cooled, eurozone unemployment had hit 12.1% in March, and Germany’s manufacturing PMI showed contraction in April (49.2). However, these last two developments seemed to increase the odds of the European Central Bank lowering its benchmark interest rate (which was at 0.75% as April ended). Ten-year bond yields in Italy and Spain were respectively at 4.1% and 4.3% as the month wrapped up, a far cry from the danger zone they entered last summer; the yield on Spain’s 10-year note fell for an eighth straight month. Italy’s political stalemate ended after two months, with new prime minister Enrico Letta receiving a parliamentary vote of confidence.11,13,14,15

WORLD MARKETS
Many marquee indices fared well in April. The gainers included the Global Dow (+3.27%), the MSCI World Index (+2.90%), the MSCI Emerging Markets Index (+0.44%), the Nikkei 225 (+11.80%), the Sensex (+3.55%), the S&P/ASX 200 (+4.52%), the FTSE 100 (+0.29%), the CAC 40 (+3.36%), the DAX (+1.52%) and the Euro STOXX 50 (+0.99%). In the loss column for April, we find the TSX Composite (-2.30%), the IPC All-Share (-4.11%), the Bovespa (-0.78%) and the Shanghai Composite (-2.62%).i COmposite : the TSX Composite (-2.30%), the gan’2,16

COMMODITIES MARKETS

It wasn’t all bad in April: natural gas futures rose 9.0%, cocoa futures gained 9.1%, and wheat futures rose 6.3%. Now for the bad news: gold fell 7.8% last month to an April 30 COMEX close of just $1,474.00. Silver cratered 14.6% in April; copper fell 6.4%, platinum 4.3% and palladium 9.2%. Corn (-6.5%) and soybeans (-0.4%) both lost ground for a third consecutive month. NYMEX crude dipped 3.9% in April to end the month at $93.46 a barrel while RBOB gasoline futures dropped 9.8%. The U.S. Dollar Index lost 1.52% in April, settling at 81.72 on April 30.11,17,18,19

REAL ESTATE
The pace of existing home sales was 10.3% better in March 2013 than it was in March 2012, according to the National Association of Realtors; the Census Bureau reported an 18.5% year-over-year improvement in the pace of new home purchases. The February S&P/Case-Shiller Home Price Index showed its best overall 12-month gain since May 2006 (+9.3%). NAR also noted pending home sales at a 3-year peak in March, with the annual gain at 7.0%. Existing home sales did decline 0.6% in March; new home sales rose 1.5%.11,20,t in the sales pace at 18.5%.3,21

What happened to mortgage rates in April? We saw notable declines. Freddie Mac’s March 28 Primary Mortgage Market Survey had the average interest rate for the 30-year FRM at 3.57%; it was at 2.76% for the 15-year FRM, 2.68% for the 5/1-year ARMs and 2.62% for the 1-year ARM. In the last April survey (April 25), the numbers were as follows: 30-year FRM, 3.40%; 15-year FRM, 2.61%; 5/1-year ARM, 2.58%; 1-year ARM, 2.62%.22

LOOKING BACK…LOOKING FORWARD
The NASDAQ and S&P are now on 6-month winning streaks – the longest win streaks they have realized in the current bull market. The DJIA advanced for a fifth straight month in April. Here are the settlement prices from April 30: DJIA, 14,839.80; S&P, 1,597.57, NASDAQ, 3,328.79; Russell 2000, 947.46. (The RUT actually lost 0.43% for April.)1,2

% CHANGE

YTD

1-MO CHG

1-YR CHG

10-YR AVG

DJIA

+13.25

+1.79

+12.31

+7.50

NASDAQ

+10.24

+1.88

+9.27

+12.73

S&P 500

+12.02

+1.81

+14.28

+7.42

REAL YIELD

4/30 RATE

1 YR AGO

5 YRS AGO

10 YRS AGO

10 YR TIPS

-0.64%

-0.30%

1.50%

2.16%


Sources: online.wsj.com, bigcharts.com, treasury.gov – 4/30/132,23,24

Indices are unmanaged, do not incur fees or expenses, and cannot be invested into directly.

These returns do not include dividends.

Hopefully, we won’t see domestic economic indicators falter in May and June, as was the case in 2011 and 2012. Overseas indicators (growth and manufacturing in China, the lingering recession in Europe) may not promise much, however. On a positive note, the Fed is still printing plenty of money and sticking to its accommodative monetary policy, which has boosted stocks of late more than any other factor. The undeniable psychological lift from the Fed’s open-ended easing hasn’t worn off, and investor morale is still high. The market doesn’t seem to be

Hopefully, we won’t see domestic economic indicators falter in May and June, as was the case in 2011 and 2012. Overseas indicators (growth and manufacturing in China, the lingering recession in Europe) may not promise much, however. On a positive note, the Fed is still printing plenty of money and sticking to its accommodative monetary policy, which has boosted stocks of late more than any other factor. The undeniable psychological lift from the Fed’s open-ended easing hasn’t worn off, and investor morale is still high. The market doesn’t seem to be

5 Signs You’re A Borrowing Junkie

Richard Barrington, Contributor
Is addiction too strong a word for America’s dependence on debt?
Given that addiction means needing something so powerfully that it
overwhelms rational thought, the description fits the borrowing habits
of many Americans too well.Here are some facts about this borrowing
addiction:
  • In the 67 calendar years since World War II, U.S. consumer credit outstanding has decreased for just two years.
  • Adjusted for inflation, U.S. consumer credit outstanding has increased by more than 3,000% during that period.
  • This total debt now stands at about $2.8 trillion, or $11,547.51 for every adult in the United States.

 

    That debt burden is often much worse than the average because some
    Americans take on a disproportionate share of the total debt. These are
    the people who may be addicted to debt. Are you one of them? Here are five signs you might be:
1. You regularly make only the minimum payment on your credit cards. Credit
card companies allow their customers to make monthly payments that are
only a small percentage of the debt outstanding. They’re not doing it to
be nice. Minimum payment amounts are designed to keep you borrowing
money for as long as possible, so you pay the maximum amount of
interest. If you think you are managing your credit card debt well
simply because you routinely make the minimum payments, you are fooling
yourself.

2. You consider yourself skilled at juggling your credit card balances. Credit
card companies facilitate this behavior by offering special rates on
balance transfers. However, while reducing the interest you pay is a
good move, balance transfers
should be part of a strategy to pay down debt, not sustain it. It may
be an especially false economy if you don’t watch out for balance
transfer fees.

3. You are regularly rolling over loans. Loans are
fine as temporary financial measures, but if borrowing becomes a
permanent staple of your lifestyle, you’ll never get around to saving
any money.

4. You always take the maximum term on loans. Consumers
are typically presented with a choice of how long a loan’s repayment
term will be. Taking the longest term available may make your monthly
payment lower, but it also means you will pay more interest over the
life of the loan. Opting for shorter-term loans can help keep your
borrowing in check.

5. You borrow beyond the useful life of a purchase. Borrowing for a mortgage
or a car generally makes sense because these are assets you will get to
use for many years to come, so it makes sense to also take years to pay
them off. However, the more you find yourself borrowing for things like
vacations or consumer electronics that don’t have such a long lifespan,
the more you are building an unsustainable lifestyle.

To a large extent, historically low interest rates have encouraged
people to become more addicted to borrowing. Ironically though, those
same low interest rates
make this an especially dangerous time to expand your borrowing habit —
it can mean that you are building a borrowing-dependent lifestyle that
you won’t be able to afford when rates rise to more normal levels.

As with any addiction, it is usually better to quit over-borrowing of
your own accord, rather than wait for circumstances to force you to go
cold turkey.

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Reeve Conover is a Registered Representative. Securities offered through Cambridge Investment Research, Inc., a Broker/dealer member FINRA/SPIC. Cambridge and Conover Consulting are not affiliated. Licensed in SC, NC, NY, CT, NJ, and CA.
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