Archives for July 2009

Fascinating (and somewhat scary) Boomer Factoids

  • The rising savings rates in the boomer population will drain $400 billion out of consumer spending for the foreseeable future.
  • The boomer’s were such an integral part of the spending culture that the group (79 million) accounted for 47% of national spending before the credit and real estate bubble burst, yet was responsible for just 7% of national savings.
  • The boomers were responsible for 78% of the spending growth in the economy from 1995 to 2005.
  • The peak year for spending in the boomer community was 54; whereas for the generation ahead of them (a thriftier bunch), the peak was 47.
  • The share of boomers aged 54 to 63 who say they are “financially unprepared for retirement” comes to 69%.


Source: BusinessWeek

An Update From Brian Wesbury

Back in February I posted notes from Brian Wesbury’s economic forecast. Brian was very bullish at the time:

“Brian believes we are in a V-shaped bottom of a panic that began in September of 2008. He forecasts that the next 12-18 months are gonna rock n’ roll. He predicts that we will have an opportunity to make a lot of money in the stock market and in business. He is expecting a massive rally in the stock market that will last 12-15 months.”

So far, Brian’s call has been on target. Tech Ticker recently interviewed Brian, and he is still bullish. Check out these videos for his latest thoughts:

Stocks Are Cheap! Bull Sees Dow 10,000 By Year-End

Wesbury: The Economy Is Much Stronger Than the Media Says

Raise Rates Now! Fed Risks “Major Bout of Inflation,” Economist Warns

Brian’s optimistic view is refreshing. From all our reading, it seems that these days it is rare to find a bull as optimistic as Brian.


Who’s Saving for Your Retirement?

2016 – The projected year in which Social Security will begin to incur cash flow deficits, as outlays exceed revenues. Year of trust fund exhaustion – 2037.

2017 – Projected year in which Medicare’s Hospital Insurance Trust Fund reserves will be exhausted.

Raise your hand if you’d like to depend on Social Security to fund your retirement. Not me! For those who are in the accumulation phase of life, do you need help knowing how much to save and what to invest in? Our firm can help.


Source: Journal of Financial Planning

7 Key Personal Finance Guidelines


  • Save at least 15% of your income for long-term goals.


  • Look at refinancing when rates are one percentage point lower than your current rate.


  • Invest no more than 5% of your portfolio in your company stock or any single stock.


  • To figure out how big a nest egg you’ll need, insert your ideal annual income into this formula: ______ x 30. (Subtract any pension or Social Security income you’ll get first.)


  • Keep discretionary spending (clothes, dining out, movies) under 20% of your take-home pay.


  • Keep your debt-to-income ratio under 30%.


  • To determine how much of your portfolio should be in stocks, do this math: 110 – Your Age = % in Stocks.



In Case You’re Ever on Jeopardy…

  • 1 out of every 5 people in the world live in China
  • 1 out of every 11 people in the US live in California
  • The US is the world’s largest economy as measured by Gross Domestic Product (GDP).
  • Japan is the world’s 2nd largest economy by GDP.
  • California would be the 7th largest if it were a country.


What’s a Trillion?

WASHINGTON – The federal deficit has topped $1 trillion for the first time ever and could grow to nearly $2 trillion by this fall, intensifying fears about higher interest rates, inflation and the strength of the dollar.

The deficit has been widened by the huge sum the government has spent to ease the recession, combined with a sharp decline in tax revenues. The cost of wars in Iraq and Afghanistan also is a major factor.

The Treasury Department said Monday that the deficit in June totaled $94.3 billion, pushing the total since the budget year started in October to $1.09 trillion. The administration forecasts that the deficit for the entire year will hit $1.84 trillion in October.

So what’s a trillion?

  • A trillion is a million times a million or a thousand billion.
  • A trillion is the combined capitalization of Google, Apple, Microsoft and Intel plus enough to buy an iPhone for everyone in China and India.
  • A trillion is enough to give $325.50 to everyone in the USA each year for the next 10 years.



In Agreement

“Most of the market research these days asks the same question: Is this the market bottom? To answer that question, they look at historical valuations and try to extrapolate from them. And most of the time that is the right approach.

However, right now we are going through major and unpredictable changes in the financial landscape. As a result, “Is this the bottom?” is the wrong question. The question we should be asking is, “In this new world, how do the historical variables morph, and what are the unintended consequences of government policy?”” – Mohamed El-Erian, CEO and co-chief investment officer, PIMCO


Our firm has been, and will continue to be actively researching the answer to that question. In research, shortcuts only put you further behind. We are consistently reflecting our research and best thinking into our client’s portfolios.


Source: Fortune

Monday Links

Here are a few links from some of my reading last week:

Economy, Markets & Investing

Financial Planning

  • Michael Jackson had a will. Do you? [Joe Sangl]


  • Russell’s Rule. Be wary of the analyst who has been correct on the market over the years. He is coming ever-closer to being terribly wrong. Keep an eye on the smart analyst who has been wrong over the years. He is about to make a great call. There are no geniuses on Wall Street, ‘only geniuses for a while.’” – Richard Russell. By the way, in case you missed it, here’s my prediction for 2009.

I hope you had a great Independence Day weekend! And remember, freedom isn’t free! I’m so thankful for those who have fought and made sacrifices for our freedom.


Roth IRA Conversions

If you are retired or have a low taxable income you might benefit from converting some IRA money to a Roth IRA this year. To be eligible for a Roth conversion, your adjusted gross income must be below $100,000.

If you have an adjusted gross income above $100,000, then next year you will have a chance to convert. Starting in 2010, the existing $100,000 income test for converting a traditional IRA to a Roth IRA will no longer apply. Another benefit to converting in 2010 is that taxpayers can elect to defer the related income and spread the income equally over the next two years,
2011 and 2012.

A Roth IRA conversion is potentially a big deal. Many IRAs have declined in value over the past year and converting while the account value is down gives you an opportunity to pay less taxes on the conversion.

Before making a conversion you should talk to your tax advisor to make sure you are eligible and that it is in your best interest.

For further reading:


Q2-2009: The Best Quarter For Stocks Since 2003

Stocks just finished their best quarter since 2003! Here are the details:

Dow Industrials

  • Up 838 points this quarter, or 11%, to close at 8447.
  • First up quarter since Q3-2007.
  • Biggest quarterly percentage gain since Q4-2003.
  • Up 29% from the 12-year low hit on March 9th.
  • Down 40% from its all-time high on October 9, 2007.
  • Down 4% for the year-to-date.

Nasdaq Composite

  • Up 306 points this quarter, or 20% to close at 1835.
  • Breaks a losing streak of 3 consecutive quarters.
  • Biggest quarterly percentage gain since Q2-2003.
  • Up 16% for the year-to-date.

S&P 500

  • Up 121 points this quarter, or 15% to close at 919.
  • Breaks a losing streak of 6 consecutive quarters.
  • Biggest quarterly percentage gain since Q4-1998.
  • Up 2% for the year-to-date.

Commodities also rallied during the quarter:

  • Oil closed at $69.89, up nearly 41% for the quarter, and 57% for the year-to-date.
  • Gold closed just above $927, flat for Q2, and up 5% for the year-to-date.
  • Silver closed Q2 up 5%.
  • Copper rose 23% in the quarter, putting it up 62% for the year-to-date.