Financial Floyd Blogspot

Good Afternoon, The Holiday Season is supposed to be a season of giving and generosity, but according to reports from Reuters , the President is considering firing Fed Chairman Powell. This has been a negative week for news and this announcement doesn't make it any better. During this week the following things happened: 1. The major stock market indices (Dow Jones Industrial Average and S&P 500) continued their slide, creating the possibility that we will have the worst December since 1931 (The Great Depression) 2. The Federal Reserve raised interest rates another 25 basis points and signaled that they would do two rate raises in 2019 3. The Government ended the week with a partial shut-down because of the inability to pass a new spending budget While none of these events are positive, they are bumps in the road. On the other hand, the discussion of possibly firing the Fed Chairman should raise some eyebrows. The Federal Reserve is apart of the Government but is ...

Good Morning/Afternoon, The Holiday Season is upon us but the stock market has been taken over by the Grinch. The news and articles over the past couple of weeks have been negative but yesterday Bloomberg produced an article that presented a more balanced tone and was very informative. A couple of points from the article that stood out were: 1. The 4th quarter has been horrible for stocks this year 2. Investment professionals think that the markets both domestically and internationally are too pessimistic 3. Potential Tradewars, Fed tightening and Brexit (the UK leaving the European Union) are still present within the market throughout the year What was intriguing about this article is that context matters. The author points out that Wall Street typically leans bullish and that as a whole the economist polled have a horrible track record at predicting recessions. I've been more cautious this year because I did not see the headwinds subsiding and the data released by governm...

Good Morning, Life is a cruel teacher that gives the exam first then teaches the lesson. Unfortunately for GM, it has never truly recovered from bankruptcy and on Monday they announced that they would be laying about 15,000 people and closing a couple of manufacturing plants. The lessons from the decline of this American Stallworth should not be overlooked as it provides more in-depth insight to trends that are impacting our daily lives/future opportunities.Various news outlets have been reporting on their recent anoncement, but the insight provided by Reuters , Marketwatch , and Washington Post provide some good but overlapping points. What stands out about from these articles are: 1. Within the next decade , around 75% of GM sales will come from five vehicle lines . The consolidation that GM is going through is a result of sales collapsing for some of their product lines (mainly sedans) but highlights how they failed to be efficient with their plants....

Good Morning, With the market currently being in a downward trend, the question of a recession has been more prevalent within the news. One of the leading indicators used to determine if we are heading into a recession is based upon the inversion of the yield curve. Bloomberg wrote an article late last week about this topic and a couple main takeaways were: 1. To entice people to buy longer-dated bonds, interest rates must be higher. The issue comes when short-term rates are higher than longer-term rates, which creates an inversion of the yield curve 2. Recessions usually begin 6 to 24 months after the yield curve inverts 3. The yield curve right now is normal and not inverted While the yield curve isn't inverted, there are other leading indicators which are pointing toward an economy that is starting to inch down that hill. A couple of the other leading indicators which have been experiencing problems are: 1. Housing starts (building permits, new private housi...

Good Afternoon, Today is Singles Day (11/11) in China which is the most significant  shopping day in the world. According to TicToc (Bloomberg) this day does more sales than the first five days between Thanksgiving and Cyber Monday. For those either invested in Alibaba or interested in the Chinese economy, this might serve as an indication of how the tariffs are impacted companies and consumers. Either way, it is something to follow! #financialliteracy #tictoc #bloomberg #alibaba #singlesday #1111 #china #tradewar #tariffs #financialfloyd #phillyfinance https://twitter.com/tictoc/status/1061475338264420352

Good Morning, Yesterday Marketwatch reported that the Federal Reserve met and decided to not raise short-term interest rates this quarter. The biggest takeaway from the article was that the Fed was pleased with the economy and job growth rate, but is still keeping an eye on inflation. Now there is a likely chance that the Federal Reserve can raise short-term interest rates. What this means for investors is that the Federal Reserve will continue to keep considering raising rates (next meeting in December, and their current rate of increase has been done in 25 bps increments) until it sees that the inflation is in line with their goal. The current economy has taken some losses and come down from record highs due to: 1. Increased volatility 2. Concern about dim future growth prospects in 2019 3. Global markets slowing down during the year This domestic bull market is over eight years and just like everything, all good things must come to an end. The biggest issue with this year ...

Good Morning, The IRS released some news last week that retirement savings amounts would be increasing for some plans. Forbes wrote a concise article and highlighted vital changes such as: 1. The maximum contribution amount for Traditional IRAs and 401-Ks increase to $6,000 and $19,000 2. Catch- Up Contributions limits for those age 50 or higher are not changing 3. Solo 401-K (SEP IRA) goes up to $56,000 For those that are currently saving or just starting to save this is great news because we can save more money for our retirement. In a recent post, I did an example of how much someone would need to save, which I will not rehash but will provide a link ( click here ). In my view, the changes made by the IRS overall are a net positive. https://www.forbes.com/sites/davidrae/2018/11/01/irs-announces-new-bigger-retirement-plan-contribution-limits-for-2019/#7202ea263a31 #financialliteracy #retirementplanning #savings #IRS #IRA #401k #forbes #financialfloyd #philly finance...

Good Morning, Halloween marked the 10 year Anniversary of Bitcoin. CNBC produced an article commemorating the achievement but made some points worth considering: 1. Per the title, the early investors were the real winners as they experienced Bitcoin go from nothing to 20k then back down to 6.2k. 2. Payment efficiency and security have been an issue 3. There are a plethora of direct and indirect competitors Bitcoin had a lot of potential but to date has fallen short. It was initially created to be a medium to transfer value from one person to another anonymously. Before the price went parabolic in 2017 it had already had some adopters in the retail channels, but some of those companies have stopped accepting it. The difficulty of use, no type of FDIC organization to provide insurance, and payment system competition have stifled its projected growth. Even if it never achieves its potential at the minimum it brought blockchain to the forefront which is changing t...

Good Morning, On Monday, the Wall Street Journal published an article about Credit Card Spending Limits being limited. From the article, the following points stood out: 1. Discover and Capital One are tightening lending standards 2. There are currently no signs of problems with people paying their balances 3. Discover has cut back personal loans Credit card limits are a leading indicator of how these companies view the market. If you observe them less willing to extend credit to people (usually starts with the below prime borrowers), then it signals that they are more worried about deterioration within the current economic environment. The article touches upon how consumers have taken on record levels of debt, and these debts will be facing a headwind due to rising interest rates. While this does not signal us falling off a cliff, it does provide more information about how others are viewing this market/economy. If these companies are shedding risk and preparing for a tur...

Good Morning, I ran across an article on CNBC yesterday that summarizes a report done by the Stanford Center of Longevity which highlights how people need to either double or triple their retirement savings a year. While this is a good article that sheds light on the lack of savings, it is hard to quantify based on the article using percentages, so I thought providing an example would be a better frame of reference. Let's say I want to retire by 68 years old and plan on spending $60k a year in retirement for 30 years, based on a conservative investment return of 4% a year, on day 1 of retirement I need about $1.04 Million . Now based on my current age (38), and not having a dollar in my retirement, using the same investment return assumption (4%), I would need to save $18.5k for 30 years. Based on this example the inputs that matter are: Number of years (in retirement and working) Amount needed yearly in retirement Investment return assumption Starting amount Thi...

Good Morning, Over the past couple of days, various news sites have posted about Initial Public Offerings (IPOs), because Uber is supposed to be going public next year. Bloomberg  published an article yesterday about IPOs and the possibility of a bubble. A couple takeaways from this article were: 1. Some of the big tech companies have frothy valuations that are remarkably higher than the average company in the S&P500 2. Tesla which went public in 2010 has failed to make a profit and some of the most recent tech IPOs continue this trend 3. This is similar to the dot.com bubble of the late 90's early 2000's While this article paints a gloomy picture, it does highlight that fundamentals (and more importantly profit) matter. When taken into context of what we have seen domestically since September 20, in a falling market, companies that do not earn money carry a higher risk (i.e., Tesla, Snapchat, Pot Stocks, etc.). Also, the companies coming public now are not like th...

Good Morning, Yesterday marked the 30th Anniversary of Black Monday. On October 19, 1987, the market (Dow Jones Industrial Average) crashed 22.6% in one day. MarketWatch published an article about what happened that day and how dissimilar it is to our current situation. A couple points that I found interesting in the article were: 1. The Fed Funds Rate (starting point for interest rates) was at 7.25% versus 1.125% (at the end of 2017) 2. Inflation (which has been non-existent for us currently) was 3.9% vs. 1.7% 3. The gain since the last Bull Market is similar to today, but the time length from the end of the last Bull Market was 60 months in 87' versus 103 months at the end of 2017 4. From 8/25/1987 to 10/16/1987, the market (DJIA) was down 16%, but for the market was up last quarter and this month the market (S&P500) is down around 5% This article was great with providing a comparison but did not highlight how at this time program trading...

(repost from Tuesday 10/16/2018 Facebook page ) Good Morning, Tomorrow Canada will be the second country to legalize Marijuana, and over the past couple of weeks, these stocks have seen exponential growth. There has been a ton of chatter, but not a lot of useful information around it. This weekend, The New York Times released an article highlighting this law change. This is a lengthy article but some good points are: 1. The country is trying to figure out the parameters around it 2. Analyst expect the industry to reach $5 Billion (6.5 Billion CAD) by 2020 3. Government and Corporate interest will impact the opportunities around it 4. Question marks surround how the illegal market will be absorbed or alienated While these new stocks have a ton of good news pushing them higher, there has been minimal mention of the financial viability of these firms or how governments impact regulation. As a personal investor while it is great to hear all the stories, at the end of the day prof...

(report from 10/12/2018) Good Morning, The stock market has taken a beating all week and based on the attached CNBC article President Trump blames the Federal Reserve. While entertaining, this is a lot deeper than assuming that rising rates caused the collapse. A couple of points worth considering are: 1. 2017 saw synchronized growth, but 2018 has been different as the US has shaken off the February pull back while the rest of the world has stayed lower 2. Volatility has been low despite all the political events which should have increased it 3. IMF downgraded growth for 2019 across a majority of nations The most prominent theme that people have missed is that trade and politics matter. The trade war (which Pence quietly called a Cold War) with China has been primarily ignored within domestic markets, but the reality is starting to set in that companies and consumers will still be impacted. The article mentioned a higher dollar, but what this does is increase the cost of for...

(repost from 10/9/2018) Good Morning,  It looks like the IMF is cutting global growth across the board. According to the projections, it seems that initial projections were "overly optimistic." Based on the article by CNBC the biggest takeaways from the post are: 1. The Trade War concerns between the US and China with looming unknowns around the tariffs 2. Uncertainty around NAFTA and the EU (Brexit) continue to loom 3. Emerging Market countries growth expectations have been downgraded due to trade concerns While it has been a surprisingly good year for the equity markets, the market has been in the red for the past couple of days. The IMF report is not mentioning anything new but brings to light how badly the markets were not considering the uncertainty of political risk in a more connected world than in the past. If anything the news around what could push the market higher has started to dampen. . . . . #financialliteracy #imf #nafta #eu #us #china #cnbc ...

(repost from 10/1/2018) Good Morning, It looks like we have a new NAFTA deal (now called the United States Mexico Canada Agreement) ahead of the October 1st deadline. The CNN article below highlighted a couple of points: 1. Canada will open up its dairy market to the US which is similar to what it has done with the European Union and others 2. The auto manufacturing portion impacts Mexico the most From the initial news and information about the deal, not much has changed, but it does open the door for more changes. Canada kept an essential dispute resolution in the document and received assurances that new tariffs on automobiles won't impact their country. What has not been mentioned is Mexico made a bulk of the concessions on the automobile industry which might end up increasing the cost of cars . #financialliteracy #nafta #usmca #economics #dairy #automibiles #unitedstates #mexico #canada #cnn #tariffs #tradewar #financialfloyd #phillyfinance https://www.cnn.com/20...

(repost from 9/27/2018) Good Morning, Yesterday, the Federal Reserve raised interest rates again this year. The CNNMoney article below covered a couple points worth paying attention to: The Fed does not see tariffs having an impact on the economic data at this time There is some uncertainty with doing another rate increase in the fourth quarter (earlier this year the Fed was split on whether it should do three or four raises), but they plan on doing three increases next year, and one in 2020 Trade tensions between the US and China are a headwind for 2019 growth which is forecasted to be 2.5% (currently we are on track for 3.1% GDP growth) This article lays out expectations for the Fed to raise close to another 1% over the next 2 years which would push interest rates higher. The impact of this will be higher interest rates payments on variable loans, higher interest rate payments for the government, and this will slow down our hot economy. The Federal Reserve is dependent on ...