Morningstar 2016 529 Ratings

Source for an interactive version of this map.

Rally! Rally! Rally?

Source: Bloomberg

As Lu Wang wrote October 14, 2016 for Bloomberg:

One ominous signal that marked trading in 2015 has begun to reassert itself, a pattern in which the benchmark index hovers near a 52-week high while the proportion of stocks that are similarly elevated dwindles.

On a more positive note for the market listen to Barry James, President and CIO James Investment Research, speak during this Bloomberg radio interview (Listen from minute 7 until 10). Their indicators are starting to look a bit better for stocks and they are increasing their stock allocation for their James Balanced Golden Rainbow Fund from 47% to 52%. This is a tactical fund focused on growth and capital preservation and can allocate between 20% and 80% to stocks. Wise investing my friends.

Please consult a qualified financial advisor before making any investment decisions. This blog is for educational purposes only and does NOT constitute individual investment advice.

The One Monthly Payment Killing Your Wealth

Jeff Rose wrote this for Forbes as a contributor:

According to a recent State of the Automotive Finance Study from Experian, the average new car payment reached $499 per month last quarter. Worse, the average new car loan is 68 months long! Like my man Dave Ramsey says, it’s entirely preposterous when you really think about it.

Have you ever imagined what you could do with an extra $499 per month? Let’s face it; probably not. These days, we blame everything but our car payments for our inability to get ahead.

We blame our employers for not giving us the raises we deserve, or our parents for not educating us enough. We blame health insurance premiums, the price of groceries, the housing market, and even the price of gas. But, do we ever throw shade at our car payments? Heavens no.

Somewhere along the line, we’ve become socially conditioned to believe a huge car payment is a fact of life. We tell ourselves that everyone has a car payment, and that it’s normal and okay. And heck, if we’re going to have a car payment, we might as well get the car we want, right?

This kind of thinking is so widespread it’s practically an epidemic. The thing is, it’s also absolutely wrong….and it’s killing our wealth.

He ends with this:

If you work hard and still can’t get ahead, your car payment might be the culprit of your money woes. Before you head to the dealership, you should ask yourself if that new car smell is worth losing out on $179,640 the next thirty years – or up to $820,483 in investment returns. Chances are, it’s not even close.

Source: Jeff Rose, CFP

September 2016 Market Update

Now that we have the first U.S. Presidential debate behind us and we have worked through most of September (historically one of the worst months for the market), let's take a look at the S&P 500.

The S&P 500 chart turned extremely cautious in September 2015 when the simple moving average, using monthly charts, showed the 5-month average fell below the 12-month average. The market bottomed in February 2016 and the S&P 500 saw bullish confirmation in May 2016 when the 5-month simple moving average on the market increased above the 12- month average. So the price action remains positive, but what about valuation and sentiment?

The CNNMoney Fear & Greed Index registers this morning with a reading of fear. This measure has been decreasing since a peak in the spring of 2016.

Below is the Shiller PE ratio:

Valuation on the S&P 500 continues to flash a warning sign to investors. The Current P/E on the S&P 500 shows a level near 25, currently 24.99, which illustrates an overvalued market. Let’s review the Shiller PE Ratio that is reading 26.80 (long-term mean of 16.70, median 16.05). This also shows that the market is overvalued. So price action is positive, investor sentiment is growing more fearful, and valuation continues to give investors a warning sign. S&P 500 earnings peaked in 2014, this also creates a warning as the market usually follows earnings.

This backdrop leads me to a few questions: What is the upside for passive indexers from this level? Is 2200 the hard ceiling on this market? If the earnings recession continues, when will the growth slowing situation start to impact the market? I see limited upside on this market unless market conditions change. A 10% increase from 2160 on the S&P moves the market to 2376 and a 10% decrease takes the market to 1944. Friends, do you see this market breaking 2193 and ultimately closing above 2200 this year? Remember this is where we are in the market since 1971:

As long as momentum is able to supersede fundamentals we need to invest with what the market is giving us. We can look at moving averages again at the end of October to see if the momentum can continue, but remember that adding long-term money to this market is an expensive proposition. The main benefit of investing in this market remains that the dividend rate is currently higher than the yield on 10-year treasury bonds (unfortunately this benefit is little help if a correction hits the market). Wise investing my friends.

Please consult a qualified financial advisor before making any investment decisions. This blog is for educational purposes only and does NOT constitute individual investment advice.

Transamerica Center for Retirement Studies 17th Annual Retirement Survey

The current household savings in all retirement accounts among Baby Boomer workers is $147,000 (estimated median). It should be noted that many Baby Boomers were already mid-career when 401(k) plans were first introduced. Therefore, they have not had a full 40-year time horizon to save in 401(k) plans.

The 17th Annual Transamerica Retirement Survey finds that 45 percent of Baby Boomers are expecting a decrease in their standard of living when they retire, 83 percent of Generation X workers believe that their generation will have a harder time achieving financial security than their parents’ generation, and just 18 percent of Millennials are very confident about their future retirement. Approximately half of workers across all three generations plan to work at least part-time during their retirement. This vision of working during retirement is changing the landscape of retirement.

Research Report

TRCS Press Release

TIAA Survey Finds IRA's Owned by Only a Third of Americans

One-third (33 percent) of American adults have an IRA, with 18 percent currently contributing to their account. Employed individuals are more likely to have an IRA (25 percent) than those who are not employed (11 percent) or retired (8 percent).

Source: The Fifth Annual TIAA IRA Survey

Retirement Fears Over 50

Source: Marketwatch