While reminiscing and laughing at the 40th Anniversary Celebration of Saturday Night Live this week, I was reminded of how time flies. The skits, the characters, and the catchphrases of SNL surely defined our society, recorded our history, and bridged our generations with comedy. At the time of 9-11, there was a particularly poignant moment with SNL creator-producer Lorne Michaels and NYC Mayor Rudy Giuliani. With NYPD and NYFD officials gathered around, the mayor told Michaels that the show must go on. “Can we be funny?” Michaels asked. The mayor replied, “Why start now?”
Following weak performances in January, the equity markets have bounced back nicely in February. The NASDAQ and S&P 500 indices hit high points this past week while the DOW closed in on its record high of 18,103. {The DOW was 823 when SNL debuted on October 11, 1975.} The leading sectors thus far in 2015 have been Telecom, Materials, and Healthcare. Catching colds from the freezing northwest, Technology, Utilities, and Financials have been under the weather so far this year. A 10-year Treasury pays 1.95%…no wonder stocks and ETFs with dividends are generally doing well. Commodities such as gold, oil, and natural gas are all lower than a year ago.[1]
What’s ahead? As you know, I don’t make predictions…especially about the future. Surely, more volatility is on the horizon. With the foregone conclusion of an interest rate hike this year, investors should prepare for some down times. If you’re in it for the long haul, it’s hard to argue with investing in biotech, real estate, healthcare, and technology. Apple’s latest record high price gives the company a value of over $725 Billion. What’s next, $1 Trillion? The developments in medical devices, genomics, and pharmaceuticals are simply astounding and too numerous mention. The NASDAQ Biotechnology Index recently reached an all-time peak of 3444. Real estate has been making a come-back too. With loan rates at their lows and investment properties filling up, money is coming back into bricks and mortar. “We expect single-family housing starts to expand and hit 800,000 in 2015. Multi-family starts are expected to be up 4% this year to 370,000.”[2]
“Are my accounts insured if they are hacked?” This question came to me from a client concerned about cyber security. With the recent data breaches at Anthem-Blue Cross, Target, Neiman Marcus, and Home Depot, we should be extremely cautious. Here’s the published statement from Charles Schwab: “We want you to have the highest level of confidence. We offer you this simple guarantee: Schwab will cover 100% of any losses in any of your Schwab accounts due to unauthorized activity.”
Tax filing is around the corner. If you haven’t already received your 1099 forms, March 2nd is the very last day for companies to mail these to you. If you have a meeting with your accountant or you’re filing your own taxes, most of the information about taxable dividends and capital gains can be found on your December 2014 statement. Please don’t hesitate to get in touch with us if you are missing data. We can send it to you or email it to your accountant; usually the same day. Income tax brackets are slightly wider in 2015. Dividends, AMT exemption rates, itemized deduction levels and the Social Security wage base are all higher this year. An excellent accountant should be a sounding board, offer you ideas and projections as well as crunch the numbers. If you don’t have an accountant with these qualities…get one.
You’ve probably heard the expression “cash is king”. It is believed to have originated from a Volvo executive following the global markets crash of 1987. Today, cash is rather a pauper. With an average interest rate of less that ½ of 1% at the bank, it behooves investors to find decent returns elsewhere. We’ve found good yields in dividend and preferred stocks and ETFs, real estate investment trusts (REITs), high-yield bonds, and other publicly traded investments. Of course, these securities have their measure of insecurity and risk…and they can be easily converted to cash.
Do you remember your very first car or truck? Perhaps it was a graduation gift, a hand-me-down…or maybe you saved up your own money to buy it? No doubt, a feeling of freedom and ownership came over you when you sat in the driver’s seat and grabbed the steering wheel for the first time. If you picked out your own car, or purchased it yourself, there must have been considerations: price, style, dependability, speed, color and roominess. Choosing investments can be a similar experience; one size does not fit all. If you can determine your risk, your time frame, any tax concerns, income requirements, sector, size, amount, etc…then you have the ingredients for an informed decision. When the choice is a good one, the investment grows. If not, then you can trade it in for something that might be better for you. Sometimes the investment produces profits beyond expectations…as a classic automobile can become even more valuable over time.
“The market gets whipped around because there are always a lot of things to worry about, but ultimately fundamentals win,” said Phil Orlando, who helps oversee $400 billion as chief equity market strategist at Federated Investors. “That’s why the stock market has nearly tripled over the last six years.”
We’re very sorry for you Northeasterners with all the terrible weather. It feels like summer outside on the West Coast. Here’s hoping spring comes early for you…and your investments continue to bloom.
Today’s the day.
Mitch Fisher, CFP, President
[1] J.P. Morgan 2/9/15 [2] Kiplinger’s February 2015