Moxie for September 1, 2015
Submitted by Hilpan Moxie Wealth Management, Inc. on September 1st, 2015FUNNY MONEY QUOTE OF THE DAY:
“The safest way to double your money is to fold it over and put it in your pocket.” – Kin Hubbard
A ROTTEN AUGUST
8 LETTER WORD FOR DOWN
The month of August gave Wall Street Pundits more practice to say 'down' in over a hundred different ways. And so The Dow cratered as much as 1,089 points in the first six minutes of trading before paring losses as traders said mutual funds and other investors began stepping in to buy up beaten down stocks. More than 13.9 billion shares changed hands, making Monday the largest volume day since August 2011. Nervousness led to a rocky day on Wall Street with all three major indexes down nearly four percent.
IT'S NOTHING
Though the stock market pulled back 7% from August 21-24, the month's final week rallied over 50% from the market lows. Thus, some wise words to live by: “Stay the course. Don’t panic.” Yet, here we are, the famous index is down, even today. In the simplest terms and most convenient of definitions: it's nothing. As Joshua Kennon, a modern Benjamin Graham practitioner, previously said: "It's almost insulting to call this a stock market crash in the first place."
WHAT HAPPENS IN CHINA, DOES NOT STAY IN CHINA
THE STORY
No one knows what’s really going on with China. What's clear, though, is that China is in the middle of a months-long market crash where the government has tried -- and so far failed -- to stop. One way China tried was by letting the value of its currency, the yuan, deliberately fall. This was meant to make Chinese goods cheaper in the hopes that people would buy more of them. But poor communication to global investors tainted these public moves and increased suspicions that China's economy might be far worse than it is. Hint: it is.
AND THIS AFFECTS US HOW?
Whether China's intervening policy proves to be a better path to prosperity -- which it isn't and Larry Kudlow had a field day ranting about this last week -- is not the issue. But companies like: Yum, Colgate, Coca Cola, Medtronic, and/or Apple are; and these blue-chips enjoy revenue overseas. Needless to say, our economy has proven to be more resilient than any other in the world.
WHAT GOT LOST IN THE HEADLINES
GROWING US ECONOMY
Last Thursday, the 2nd quarter of the US economy grew to 3.7%, almost double than what was expected. The GDP report, which was released in the wake of a global stock market sell-off, should assure investors and cautious Fed officials that the United States is in good shape to weather the growing strains in the world economy.
RISE IN CONSUMER SPENDING
Personal income data for the month of July which accounts for 70 percent of economic activity, got off to a good start in the third quarter as strong momentum from the second quarter rolled into the third.
EXISTING HOME SALES INCREASING
An increase in existing home sales for July solidifies what has been an impressive growth in activity during this year's peak buying season.
COMING UP THIS WEEK
FED SPEAK
Big Time US Data is on deck this Friday. The August employment numbers report will be released - just what the Fed needs! Remind me what the Fed is again? The recent market volatility and China add plenty more to the plate of the Fed. Majority opinion is to postpone a rate hike until December; but NO ONE knows for sure.
DO. THIS. NOW.
BACK TO SCHOOL SEPTEMBER
Learn to love the Coverdell Education and 529 Savings Plans. You should really do it. To help hammer this home, let's consider Loyola Marymount University (LMU). Annual cost to attend is about $55,000 per year. And I get it, your kid is Good Will Hunting smart and a scholarship is in the cards. But you should still do it. So until eighteen years of age rounds the corner, contributing 5-6k annually to a tax-deferred account, earning average returns in the stock market can come out to $220k- 4 years of tax-free tuition, boom! Not a bad plan B. You should really do it - third time is a charm.