Moxie for October 1, 2015
Submitted by Hilpan Moxie Wealth Management, Inc. on October 3rd, 2015Funny Money Quote of The Day:
“October: This is one of the particularly dangerous months to invest in stocks. Other dangerous months are July, January, September, April, November, May, March, June, December, August, & February." - Mark Twain
MUCH ADO ABOUT NOTHING
Good Employment Numbers
The much anticipated August employment numbers made for a surprisingly mediocre report. Nonfarm payrolls came in below consensus at 173,000. Private payrolls increased only 140,000, the smallest gain in five months. But the best parts of the report were a rise in average hourly earnings and a gain in aggregate hours worked. Putting the two together, labor-wage income over the past year is running about 5 percent, and since there’s no inflation, that will sustain real consumer spending. Good News.
Just Not Good Enough
But earlier in the week the ISM manufacturing report was soft. (Remind me why the ISM is important). It is a sign that business spending will remain the weakest part of the economic recovery. Weaker numbers coupled with trouble overseas, especially in China, along with the collapse of oil and energy tipped the stock market south (For a more sensationalized headline we also could have said: endure the worse correction since 2011, but we're not here to sell news).
So The FED Did Nothing
September was supposed to be the month the U.S. central bank finally came off its zero-interest rate policy, but instead, Fed Chairperson Janet Yellen opted to hold steady for at least one more month. (What does the FED do again?)
SUMMARY FOR WHAT ALL THE PUNDITS SAY
An Economist Says:
With little to nothing to calm the obsessive monetary confusion that is so bothersome to the marketplace, Supply Side Economist and New-Senate candidate, Larry Kudlow urged the Fed to adhere to a more rules-based system citing best practices from former Fed chairman(s) Peter Volcker and Alan Greenspan.
An Investor Activist Says:
Corporate Raider Carl Icahn too, cautioned the Fed not to yield in the face of uncertainty. Over the course of a 15 minute video, titled: "Danger Ahead," the real life Gordon Gekko laid out his concerns about low rate, asset bubbles, herding behavior, financial engineering, fake earnings, ineffective leadership and high corporate taxes.
A Wealth Manager Says:
The Big Picture's Barry Ritholtz positioned it best:
"Do these reasons for delaying a Fed interest rate increase -- the jobs report, falling oil, a lack of inflation pressures, volatility, a China slowdown and even a possible recession -- convince you? If not, then what factors might dissuade the Fed from raising rates? I must admit that I don't see any and can name quite a few reasons to increase rates 25 basis points."
YOUR Financial Planner Says:
Skim through Kudlow, Icahn, and Ritholtz and you'll own "Fed Talk" in spades. And with your new found fiscal bravado (I'm especially of a fan Kudlow- Run Larry Run!) show your objective dissent and mention that the Global Economy is doing the exact opposite. Jim Yong Kim, head of World Bank, favors a looser monetary policy, echoing the policies of the Bank of England (BOE), the Bank of Japan (BOJ), and the European Central Bank (ECB), all who have recently used quantitative easing (What is Quantitative Easing?).
LATEST ON "THE DONALD"
Looks Like a Solid Tax Plan
GOP presidential Donald Trump unveiled his tax plan Monday, offering few details but enough broad strokes to get a sense of how it would work. Tax brackets would be simplified and also reduced with the top tax rate going from nearly 40% to 25% percent. But some 50% of lower-income tax payers would pay no taxes, up from 40% currently.
Just Don't Call it "Trump's Plan"
Jimmy Kimmel wanted to see exactly how many people would support Trump if they didn’t know he’d (maybe) had some good ideas, so he sent a reporter out to the street to share The Donald’s tax plans—cut the corporate tax, abolish estate tax, not tax anyone making under $25,000 a year—with the public. But he did it with a twist: First, he had someone ask a bunch of people how they felt about both Clinton and Trump, and then, once the subjects had happily agreed that they’d vote for Hillary over Donald, his team laid out Trump’s new plans as if they were Clinton’s, to some overwhelming support.
DO. THIS. NOW.
Schedule Your Review
"With three-quarters of the calendar year done, we'll be hitting the floor running in October: reviewing cash flow, benefits, RMDs, and all things balance-sheet oriented. This past quarter is also an opportune time to refresh our perspective with our "Emotions Can Cost Money" piece. Finally, we'll tie it all together when updating the Financial Planning Report (FPR). Looking forward to speaking with all of you soon!"
- Don Douglas Hilario, CFP®