October, 2016

More than three months after British voters elected to extricate their economy from the European Union, Brexit still hasn’t actually happened.  What’s going on? 

Apparently nothing more than a careful process designed to minimize damage on both sides of the English Channel.  British Prime Minister Theresa May recently announced a target of late first quarter 2017 as the time she and Parliament will finally pull the trigger and invoke Article 50 of the EU’s Lisbon Treaty.   

When that happens, it will, by contract, start two years of negotiations on exactly what the economic relationship between Britain and mainland Europe will become.  At the same time, however, May says she plans to introduce “Great Repeal” legislation next year that will convert all existing EU laws into U.K. legislation.  Parliament will also have to repeal the European Communities Act of 1972. 

But will there actually BE a Brexit?  A group of over 1,000 British barristers have signed a letter pointing out that the Brexit referendum was nonbinding, and that the prime minister cannot make such a significant decision without consulting Parliament.  It’s possible that until Parliament affirms the extrication from the European Union, it won’t legally take place.  London’s High Court is expected to issue a ruling on Parliament’s role in Brexit on October 13, but an appeal is expected no matter what the ruling—sending the case to the U.K. Supreme Court to be heard in mid-December.

It may be helpful to remember that May herself advocated remaining in the European Union prior to assuming her current leadership position.  There is speculation that her uncompromising timeline on Brexit is simply a way to reassure voters that she has heard their message.  Then she can work for a so-called “soft Brexit,” where the country will control its borders via liberal work quotas, and there will be little changed in terms of trade and finance. 

Meanwhile, despite the dire predictions, there has been no British recession as a result of the unexpected vote, and little has changed in regard to London’s status as Europe’s leading financial center. 

Sincerely, 

Edward J. Kohlhepp, Jr., CFP®, MBA
President  

Edward J. Kohlhepp, CFP®, ChFC, CLU, CPC, MSPA

Founder & CEO

http://www.facebook.com/pages/Kohlhepp-Investment-Advisors/143204745739600

Please contact us whenever there are any changes to your financial situation, personal situation or investment objectives.

This material was prepared by BobVeres.com., and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. Please note - investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.

Sources: 

http://www.bloomberg.com/news/articles/2016-10-02/may-to-pull-brexit-trigger-by-march-as-u-k-to-enshrine-eu-laws

https://www.ft.com/content/a859227e-88bf-11e6-8cb7-e7ada1d123b1?ftcamp=published_links%2Frss%2Fcomment%2Ffeed%2F%2Fproduct

http://www.reuters.com/article/us-britain-eu-may-speech-idUSKCN1220LM

September 2016

Who’s going to win the U.S. Presidential election in November?  If history is a reliable guide, it will be the candidate who raises the most money during the campaign season.  The last time the candidate who raised the most money lost was Gerald Ford vs. Jimmy Carter in 1976.  Ever since, the money determined the winner.

The accompanying chart tells the story, and the first thing you notice is how much more money the recent Presidential campaigns raised (and spent) than those back in the 1960s through 1990s.  The Obama campaigns greatly outraised the McCain and Romney candidacies, and George W. Bush outraised Al Gore and John Kerry in their electoral contests. 

So far, the Clinton campaign is outraising Team Trump by a 3:1 margin. 

Sincerely, 

Edward J. Kohlhepp, Jr., CFP®, MBA

President  

Edward J. Kohlhepp, CFP®, ChFC, CLU, CPC, MSPA

Founder & CEO

http://www.facebook.com/pages/Kohlhepp-Investment-Advisors/143204745739600

Please contact us whenever there are any changes to your financial situation, personal situation or investment objectives.

This material was prepared by BobVeres.com., and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. Please note - investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.

Source:   

August 8, 2016

The 2016 Olympic games are just beginning, and of course all you’re hearing about is pollution, crime, unfinished facilities, Zika and cheating Russian athletes.  Chances are, the games will go off without a hitch and be highly-entertaining, despite some of the challenges that the athletes will face in their housing and venues.  But once the games are over, the nation of Brazil is likely to experience a familiar dose of economic trauma. 

Why?  A recent study by the Council on Foreign Relations looked at the economics of different Olympic games, and found that the costs inevitably outweigh the benefits.  Part of the problem is enormous cost overruns; when nations bid for the games, they typically underestimate the cost of constructing stadiums, fields, apartments for the athletes, safe transportation and security.  The accompanying chart shows just how much these cost estimates fell short of the actual price tag; note the Beijing and Sochi games, which cost $45 billion and $51 billion respectively.  Building appropriate venues for the games in Athens, Greece actually led to a government bankruptcy. 

If those facilities could be recycled into popular tourist destinations, the expense might be justified.  But the report found that the more typical situation is a lot of so-called “white elephants”—expensive facilities that have limited post-Olympics use.  Beijing’s famous “Bird’s Nest” stadium cost $460 million to build and now sits unused.  The entire city of Sochi, Russia stands idle.   

The Rio Olympics are estimated to cost $20 billion for infrastructure alone, even after plans to overhaul the city’s sewage system were cancelled due to cost overruns.  Estimates suggest that the city will attract only a fraction of the anticipated 480,000 (International Olympic Committee estimate) to 600,000 (Brazilian Ministry of Tourism estimate) visitors, which means that the already-compromised fiscal situation in Brazil will get worse at some point after the games have left town.  And don’t expect the sewage situation to be cleaned up once the visitors have departed. 

Meanwhile, it is getting more expensive simply to bid on hosting the games.  When you add up the cost of drawing up construction plans, hiring consultants, organizing the way the event will be run and the necessary travel expenses, a bid can cost as much as $150 million—as it did when Tokyo made its 2016 bid.  The city of Toronto recently backed out of bidding on the 2022 games, due to an estimated $60 million in bidding expenses—and of course that doesn’t count the rumored under-the-table payments to IOC executives. 

That leaves two countries still in the running for the 2022 Winter Games: Kazakhstan and China.  It may not be a coincidence that neither country has to worry about pesky voters and citizens claiming that the costs are not justified by the benefits. 

Sincerely,

Edward J. Kohlhepp, Jr., CFP®, MBA
President  

Edward J. Kohlhepp, CFP®, ChFC, CLU, CPC, MSPA

Founder & CEO

http://www.facebook.com/pages/Kohlhepp-Investment-Advisors/143204745739600

Please contact us whenever there are any changes to your financial situation, personal situation or investment objectives.

This material was prepared by BobVeres.com., and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. Please note - investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.

Sources:

 http://riotimesonline.com/brazil-news/rio-business/ioc-predicts-480000-tourists-in-rio-2016/

 http://www.cfr.org/brazil/economics-hosting-olympic-games/p38148?cid=soc-twitter-in-economics_hosting_olympics-080216

Since 1998, Kohlhepp Investment Advisors has helped hundreds of individuals and families meet their financial and personal goals, whether funding a college education, traveling the world, or playing enough golf to fix that persistent slice off the tee. Our family-owned firm provides customized planning solutions and is a trusted advisor for all financial matters.

Today, we are announcing an exciting milestone in our history. Ed Kohlhepp, Jr. has been named President of Kohlhepp Investment Advisors, a position he assumed on January 1, 2016. Previously the firm’s Senior Vice President, Ed, Jr. now will oversee day-to-day operations of the firm.

Ed, Jr. joined Kohlhepp Investment Advisors in 2000, just two years after our founding, and has been an integral part of our success over the years. He earned his MBA degree from Penn State University that same year.  A Certified Financial Planner professional, Ed also holds securities, life, health and variable annuity licenses and is a member of the Financial Planning Association. 

If you already know Ed, Jr., you probably know that he has a strong affinity for Vikings, as a result of a long-ago study-abroad stint in Norway. While he promises not to wear the horned Viking helmet in the office, he does possess the Viking spirit of courage and enthusiasm – important attributes for business leadership.

Working side by side with his father for 15 years, Ed shares the vision on which the company was founded: the desire to make a difference in the lives of others by helping them realize their dreams through financial planning.

We thank you for trusting us with your financial dreams over the years, and we look forward to continuing to work together to help make those dreams a reality for many more years to come.

Sincerely,

Edward J. Kohlhepp, CFP®, ChFC, CLU, CPC, MSPA

Founder & CEO

 
Edward J. Kohlhepp, Jr., CFP®, MBA
President 

 August 2016

The Social Security Administration has tightened security in order to prevent hackers and identity thieves.  Now, when you log into your Social Security Administration account, you do what you’ve always done: give your user name and password.  Then you receive a security code sent by text message, and type in that code to complete your login procedure.  In the cybersecurity trade, this is known as multifactor authentication.   

The result is better security, and a big hassle for some users.  On the first day, Verizon customers weren’t getting their security codes; the problem has since been fixed.  Many older Americans don’t text on their phones, which means they’ll either have to learn or do without their SSA account.  At the same time, multifactor authentication doesn’t prevent cyber criminals from fraudulently creating an online account in your name, and siphoning away your benefits.   

Your response?  If you don’t already have an account with the Social Security Administration, now would be a good time to open one, before a thief decides to do it for you.  (Here’s a direct link: https://secure.ssa.gov/RIL/SiView.do)  And if you aren’t into texting, now is a good time to get familiar with that feature of your smart phone.  If you’re having trouble, ask a teenager for some quick tech support. 

Sincerely,

Edward J. Kohlhepp, Jr., CFP®, MBA
President 

Edward J. Kohlhepp, CFP®, ChFC, CLU, CPC, MSPA

Founder & CEO

http://www.facebook.com/pages/Kohlhepp-Investment-Advisors/143204745739600

Please contact us whenever there are any changes to your financial situation, personal situation or investment objectives.

This material was prepared by BobVeres.com., and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. Please note - investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.

 Source: 

http://time.com/money/4434100/social-security-website-two-factor-authentication/?xid=tcoshare

August 2016

Here’s an interesting trivia question: what animal kills more human beings every year than any other?  The shark?  The lion?  Rhino? 

The answer is the mosquito, and the statistics are not even close.  Over 400,000 people were killed last year by mosquito-borne malaria.  Mosquitos carry four different encephalitis viruses, plus the West Nile virus—and most recently, the Zika outbreak that is threatening attendees at the Rio Olympics. 

But that begs a question: why do we tolerate this annoyance—and killer—in our midst?  Scientists who once relied on DDT and other crude chemical poisons now have powerful genetic eradication tools at their disposal, which make it possible to create infertile males who are released to mate with healthy females—and eliminate a generation of offspring.  Rinse, lather, repeat and suddenly a species has been removed from the local area.  An experiment in the Cayman Islands resulted in a 96% reduction in the mosquito population. 

There are several reasons why scientists are hesitating.  The first is that only 200 out of roughly 3,000 varieties of mosquito actually bite humans and animals, and only a few of those are capable of carrying deadly diseases.  Mosquitos are important pollinators in many ecosystems, and they represent an important part of the food chain.  Moreover, even the species that annoy you don’t do it for most of their lives.  Only female mosquitos seek out blood, and only because they need extra nutrition in the time right before they lay their eggs.   

Many of us live in climates where the mosquitos don’t carry dangerous diseases.  If you live in a moist, tropical environment, or plan to visit one, then your best bet is to use a repellant that contains one of the active ingredients recommended by the Centers for Disease Control and Prevention: DEET (Off!; Cutter, Sawyer, Ultrathon), Picaridin (Cutter Advanced, Skin So Soft Bug Guard, Autan), Oil of lemon eucalyptus (Repel), para-menthanediol, or IR3535 (SkinSmart).  And be thankful that you live in a country where malaria has largely been eradicated.   

Sincerely,

Edward J. Kohlhepp, Jr., CFP®, MBA
President 

Edward J. Kohlhepp, CFP®, ChFC, CLU, CPC, MSPA

Founder & CEO

http://www.facebook.com/pages/Kohlhepp-Investment-Advisors/143204745739600

Please contact us whenever there are any changes to your financial situation, personal situation or investment objectives.

This material was prepared by BobVeres.com., and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. Please note - investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.

Sources:   

http://rense.com/general28/mosded.htm

 http://www.cdc.gov/features/stopmosquitoes/

 https://www.washingtonpost.com/news/speaking-of-science/wp/2016/08/01/dear-science-why-cant-we-just-get-rid-of-all-the-mosquitoes/?tid=sm_tw

 What does history tell us – and should we value it? 

July 21, 2016

As an investor, you know that past performance is no guarantee of future success. Expanding that truth, history has no bearing on the future of Wall Street.  

That said, stock market historians have repeatedly analyzed market behavior in presidential election years, and what stocks do when different parties hold the reins of power in Washington. They have noticed some interesting patterns through the years, which may or may not prove true for 2016. 

Do stocks really go through an “election cycle” every four years? The numbers really don’t point to any kind of pattern. (Some analysts contend that stocks follow a common pattern during an election year; more about that in a bit.)

In price return terms, the S&P 500 has gained an average of 6.1% in election years, going back to 1948, compared to 8.8% in any given year. The index has posted a yearly gain in 76% of presidential election years starting in 1948, however, as opposed to 71% in other years. Of course, much of this performance could be chalked up to macroeconomic factors having nothing to do with a presidential race.¹   

Overall, election years have been decent for the blue chips. Opening a very wide historical window, the Dow has averaged nearly a 6% gain in election years since 1833. Across that same time frame, it has averaged a 10.4% gain in “year three” – years preceding election years.² 

Many election years have seen solid advances for the small caps. The average price return of the Russell 2000 is 10.9% in election years going back to 1980, with a yearly gain occurring 78% of the time.¹ 

Do stocks respond if a particular party has control of Congress? A little data from InvesTech Research will help to answer that.  

InvesTech studied S&P 500 yearly returns since 1928 and found that the S&P returned an average of 16.9% in the two years after a presidential election when the White House and Congress were controlled by the same party. In the 2-year stretches after a presidential election, when Congress was controlled by the party that didn’t occupy the White House, the price return of the S&P averaged 15.6%. When control of Congress was split – regardless of who was President – the S&P only returned an average of 5.5% in those 2-year periods.²  

Could stock market performance actually influence the election? An InvesTech analysis seems to draw a correlation, however mysterious, between S&P 500 performance and whether the incumbent party retains control of the White House. 

There have been 22 presidential elections since 1928. In those 22 years, the incumbent party won the White House 86% of the time when the S&P advanced during the three months preceding Election Day. When the S&P lost ground in the three months prior to the election, the incumbent party lost the White House 88% of the time. Of course, other factors may have been considerably more influential in these elections, such as a given president’s approval rating and the unemployment rate.²   

Annual returns aside, is there a mini-cycle that hits stocks in the typical election year? Some analysts insist so, with the cycle unfolding like this: stocks gain momentum during primary season, rally strongly as the presumptive nominees appear and party conventions occur, and then go sideways or south in November and December.³ 

There might be something to this assertion, at least in terms of S&P 500 performance. A FactSet/Wall Street Journal analysis shows that, in election years starting in 1980, the S&P has advanced an average of 4.9% in the period between when a presumptive nominee is declared and Election Day. After Election Day in these nine years, it declined about half a percent on average.³    

How much weight does history ultimately hold? Perhaps not much. It is intriguing, and some analysts would instruct you to pay more attention to it rather than less. Historical “norms” are easily upended, though. Take 2008, the election year that brought us a bear market disaster. The year 2000 also brought an S&P 500 loss. While a presidential election undoubtedly affects Wall Street every four years, it is just one of many factors in determining a year’s market performance.¹

Sincerely,  

Edward J. Kohlhepp, Jr., CFP®, MBA
President  

Edward J. Kohlhepp, CFP®, ChFC, CLU, CPC, MSPA

Founder & CEO

http://www.facebook.com/pages/Kohlhepp-Investment-Advisors/143204745739600

Please contact us whenever there are any changes to your financial situation, personal situation or investment objectives.

This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. Please note - investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.

Citations.

1 - marketwatch.com/story/2016-predictions-what-presidential-election-years-mean-for-stocks-2015-12-29 [12/29/15]

July 11, 2016 

In the wake of the so-called “Brexit” vote in the United Kingdom, and the possibility (though not the certainty) that the U.K. will leave the European Union, you're likely reading a lot of alarmist stories about the vote’s impact on the U.S. and your portfolio. 

Don’t believe half of what you read. 

Here are some of the most alarming headlines, and the reality behind them. 

1) The Brexit vote has already caused a stronger dollar, which will hurt U.S. exports. 

True, the dollar gained dramatically against the British pound, which means exporters to the U.K. might be more than a little bit less competitive than they were a couple of weeks ago.  But the U.K. only accounts for 0.5% of total U.S. exports.  And there is no reason why the dollar should appreciate in strength against the euro, yen or other global currencies simply because the U.K is less likely to remain in the European Union. 

2) The confusion around Brexit will cause turmoil in the stock market because, well, investors hate uncertainty. 

When was the stock market NOT in turmoil over one thing or another? When have investors NOT hated uncertainty?  We’ve been uncertain about the Fed raising interest rates for the better part of two years, and also about how long interest rates will continue falling, credit and stock market problems in China and Japan’s economic woes for two and a half decades.  Let’s just add Brexit to the list and move on to the next so-called “crisis.” 

3) Brexit signals the imminent collapse of the European Union.  

Remember this prediction a year or two down the road, and realize that sometimes ‘journalists’ should be renamed ‘alarmists.’  The reality is that the U.K. vote has forced the bureaucrats in Brussels to come face-to-face with the unrest caused by their costs and their stifling policies.  There are already indications that the EU members will come together and make decisions that would head off other “leave” movements in France, Spain, Italy and Greece.  In fact, in the next few weeks, we will almost certainly see the EU relax one of its rules and allow the Italian government to recapitalize its ailing banking system with public funds.  Would that have happened pre-Brexit?  It's doubtful. 

4) Brexit will force the Fed to rethink raising interest rates in the U.S. economy, for fear it would trigger additional market volatility, and a concern that the U.S. might slip into a recession. 

Lower interest rates for a few months longer is a BAD thing?  And it’s not unexpected; after all, the Fed entered the year with a firm plan to raise rates four times, and then, pre-Brexit, scaled the plan back to one rate rise.   

We may have to live with low interest rates for another year.  Somehow we'll survive. 

5) U.S. investment in the U.K. will decline. 

It’s true that if the U.K. does apply for exit under Article 50 of the Lisbon Treaty, U.S. companies that have significant operations on British soil, primarily to take advantage of tariff-free exporting to the EU nations, might start checking out office space in Frankfurt or Dublin.  But there’s plenty of time to make that transition.  After the U.K. sorts out its government, it may notify the EU that it’s leaving, and after that, even the most optimist estimate suggests that the full details of leaving, and any new tariff regime, are at least two years down the road.  Nor is it a sure thing that there WILL be higher taxes on exports from the U.K. to the continent. 

The main point here is that there is a lot of alarmist speculation and short-term thinking about a long-term phenomenon that will require years to play out.  People who sold in a panic (including a lot of Wall Street traders) right after the Brexit news hit the Internet have egg on their face and real losses in their portfolios.  The news media seems to want more of the same. 

Sincerely, 

Edward J. Kohlhepp, Jr., CFP®, MBA
President 

http://www.facebook.com/pages/Kohlhepp-Investment-Advisors/143204745739600 

Please contact us whenever there are any changes to your financial situation, personal situation or investment objectives.

This material was prepared by BobVeres.com., and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. Please note - investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.

Sources: 

http://money.cnn.com/2016/06/24/investing/brexit-impact-on-american-global-economy/index.html 

http://www.nytimes.com/2016/06/25/upshot/how-brexit-will-affect-the-global-economy-now-and-later.html?_r=0

June 24, 2016

Thursday’s vote by the British electorate to end its 43-year membership in the European Union seems to have taken just about everybody by surprise, but the aftermath could not have been more predictable. The uncertainty of how, exactly, Europe and Britain will manage a complex divorce over the coming decade sent global markets reeling.   London’s blue chip index, the Financial Times Stock Exchange 100, lost 4.4% of its value in one day, while Germany’s DAX market lost more than 7%. The British pound sterling is getting crushed (down 14% against the yen, 10% against the dollar).

Compared to the global markets, the reaction among traders on U.S. exchanges seems muted; down roughly 3% in mid-day trading on Friday, though nobody knows if that’s the extent of the fall or just the beginning.

The important thing to understand is that the current market disruptions represent an emotional roller coaster, an immediate panic reaction to what is likely to be a very long-term, drawn out, ultimately graceful accommodation between the UK and Europe. German companies are certainly not 7% less valuable today than they were before the vote, and the pound sterling is certainly not suddenly a second-rate currency. When the dust settles, people will see that this panicky Brexit aftermath was a buying opportunity, rather than a time to sell. People who sell will realize they were suckered once again by panic masquerading as an assessment of real damage to the companies they’ve invested in.

What happens next for Britain and its former partners on the continent? Let’s start with what will NOT happen. Unlike other European nations, Britain will not have to start printing a new currency. When the UK entered the EU, it chose to retain the British pound—that that, of course, will continue. Stores and businesses will continue accepting euros.

On the trade and regulatory side, the actual split is still years away. One of the things you might not be hearing in the breathless coverage in the press is that the British electorate’s vote is actually not legally binding. It will not be until and unless the British government formally notifies the European Union of its intention to leave under Article 50 of the Treaty of Lisbon—known as the “exit clause.” If that happens, Article 50 sets forth a two-year period of negotiations between the exiting country and the remaining union. Since British Prime Minister David Cameron has officially resigned his post and called for a new election, that clock probably won’t start ticking until the British people decide on their next leader. For the foreseeable future, despite what you read, the UK is still part of the Eurozone.

After notification, attorneys in Whitehall and Brussels would begin negotiating, piece by piece, a new trade relationship, including tariffs, how open the UK borders will be for travel, and a variety of hot button immigration issues. Estimates vary, but nobody seems to think the process will take less than five years to complete, and current arrangements will stay in place until new ones are agreed upon. 

An alternative that is being widely discussed is a temporary acceptance of an established model—similar to Norway’s. Norway is not an EU member, but it pays EU dues, and has full access to the single market as if it was a member. However, that would require the British to continue paying EU budget dues and accept free movement of workers—which were exactly the provisions that voters rejected in the referendum.

Meanwhile, since the Brexit vote is not legally binding, it’s possible that the new government might decide to delay invoking Article 50. Or Parliament could instruct the prime minister not to invoke Article 50 until the government has had a chance to study further the implications. There could even be a second referendum to undo the first.

 The important thing for everybody to remember is that the quick-twitch traders and speculators on Wall Street are chasing sentiment, not underlying value, and the markets right now are being driven by emotion to what is perceived as an event, but is really a long process that will be managed by reasonable people who aren’t interested in damaging their nation’s economic fortunes. Nobody knows exactly how the long-term prospects of Britain, the EU or American companies doing business across the Atlantic will be impacted by Brexit, but it would be unwise to assume the worst so quickly after the vote. 

But you can bet that, long-term, everybody will find a way to move past this interesting, unexpected event without suffering—or imposing—too much damage. Meanwhile, hang on, because the market roller coaster seems to have entered one of those wild rides that we all experience periodically.

Sincerely,

http://www.facebook.com/pages/Kohlhepp-Investment-Advisors/143204745739600

Please contact us whenever there are any changes to your financial situation, personal situation or investment objectives.

https://www.yahoo.com/news/brexit-shows-global-desire-throw-142925862.html

https://www.washingtonpost.com/opinions/global-opinions/after-brexit-what-will-and-wont-happen/2016/06/24/c9f7a2f6-39f1-11e6-8f7c-d4c723a2becb_story.html

http://www.businessinsider.com/global-market-brexit-reaction-2016-6

www.ft.com/cms/s/0/f0c4f432-371d-11e6-9a05-82a9b15a8ee7.html#ixzz4CVixCz25

http://www.ft.com/cms/s/0/f0c4f432-371d-11e6-9a05-82a9b15a8ee7.html?ftcamp=traffic/partner/brexit/dianomi/row/auddev#axzz4CVide1Sz

http://www.newser.com/story/227149/brexit-now-what-happens-welcome-to-article-50.html

June 22, 2016

On Thursday, British voters will finally decide whether their country will continue to be part of the European union—albeit with its own currency and immunity from certain rules—or leave the EU altogether. The vote will be momentous for Europe as a whole, a test of whether the union can hold together in the face of myriad challenges like the Syrian refugee crisis, disparities in wealth and economic health between north and south, and debt problems like those posed by Greece and, worryingly, Spain and Italy. There are strong anti-EU parties in Germany, the Netherlands, Greece, Spain and Italy which would certainly be emboldened if Britain were to vote to secede from the EU.

How will the vote go? British Prime Minister David Cameron is strongly in favor of staying in the EU, as is much of his Conservative government, the Labour Party, the Liberal Democrats and the Scottish National Party. Ironically, if there is a “Brexit,” then the Scottish people might vote to exit Britain and join the EU on their own.

On the other side, less than half the Conservative members of Parliament are in favor of exiting the EU, along with members of the UK Independence Party and many lower-wage workers who view EU membership as an attack on British sovereignty.

What’s at stake? With an “exit” vote, British companies could lose access to the consolidated European market for duty-free trade and financial services. Some analysts think that London would be unable to function as Europe’s de facto financial center if Britain were no longer a part of Europe’s union. And U.S. companies have long seen Britain as the gateway to free trade with the 28 nations in the European Union, which explains why American corporations and Wall Street firms have donated substantial sums to the “stay” campaign. Britain could lose American investment and manufacturing jobs that would move across the channel to mainland Europe.

Add it all up, and the International Monetary Fund has predicted that a Brexit would reduce British economic growth by up to 5.6 percent in the next three years, partly driven by a sharp decline in the British currency. Meanwhile, you may have noticed that the global investment markets have become noticeably choppier in the runup to the vote. The uncertainty created by a British “leave” vote would create still more volatility, which is why Fed Chairperson Janet Yellen has mentioned the referendum overseas as having an influence on the decision of whether or not to raise interest rates in the U.S.

Who will win? The vote is expected to be close, but recently, the oddsmakers in Britain have given 73% odds on a “stay” vote. Another voting machine, the global currency markets, have driven a two-day rise in the value of the British pound that is the seventh-largest since 1971—a clear sign that the most sophisticated global investors expect the European Union to stay intact.

Edward J. Kohlhepp, Jr., CFP®, MBA
President  

Please contact us whenever there are any changes to your financial situation, personal situation or investment objectives.

This material was prepared by BobVeres.com., and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. Please note - investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.

Sources: 

https://www.washingtonpost.com/news/wonk/wp/2016/06/18/how-brexit-could-hurt-america/

http://www.ft.com/fastft/2016/06/21/pounds-two-day-jump-among-biggest-on-record/http://www.nytimes.com/interactive/2016/world/europe/britain-european-union-brexit.html?_r=0

http://www.ft.com/fastft/2016/06/21/pounds-two-day-jump-among-biggest-on-record/

June, 2016

You’ve probably heard that the Bureau of Labor Statistics () Employment R for the month of May was disappointing. Economists who follow job growth in the U.S. economy were expecting 123,000 new jobs to be created. The actual number, according to the BLS, was 38,000—the smallest gain since September of 2010.

What’s going on?  How worried should we be? Is an 85,000 shortfall in job growth, in a single month, telling us that the U.S. economy is about to plunge into a deep recession?

As it turns out, the investment markets largely shrugged off the surprising number—for a variety of reasons. First of all, a strike affecting 35,000 Verizon employees was somehow factored into the data, so unless all the striking workers are never coming back to work, a real count would have put the job-adding number at around 73,000. Second, the employment data comes with a huge asterisk: these are estimates with a margin of error of 100,000 jobs. That means we won’t actually know how many jobs were created until sometime in the future.

Third: despite the low job creation figure, the Bureau of Labor Statistics also told us that the unemployment rate is dropping, currently to 4.7%, the lowest rate since November 2007. How can that be? BLS statistics say that people are leaving the workforce at a faster rate than previously, but the economy has also been adding 180,000 to 200,000 jobs almost every month for the past five years. Is it possible that it has finally given a job to most of the people who want one? 

As evidence, the BLS has reported that hourly earnings by workers are up 3.2% for the first five months of 2016, which suggests that workers have a bit more pricing power than they did, say, last year. That suggests that we are experiencing a tighter labor market, not one where jobs are falling off the table and many people are too discouraged to apply for a job.

Finally, the uncertainty over jobs has almost certainly delayed the rise in interest rates that had, before the report, been widely expected from the U.S. Federal Reserve Board in June or July. You can expect the Fed to be more cautious about adding any costs to the economy until its economists can get a handle on what that odd job statistic means for the overall health of U.S. businesses. That would give the economy a slight boost, and might lead to higher jobs growth figures in the future.

Sincerely,

 

 

Edward J. Kohlhepp, Jr., CFP®, MBA
President 

Edward J. Kohlhepp, CFP®, ChFC, CLU, CPC, MSPA

 

Founder & CEO

 

 

 

 

 

 

http://www.facebook.com/pages/Kohlhepp-Investment-Advisors/143204745739600

 

Please contact us whenever there are any changes to your financial situation, personal situation or investment objectives.

This material was prepared by BobVeres.com., and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. Please note - investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.

Sources:

http://thereformedbroker.com/2016/06/03/wall-street-stunned/?utm_source=dlvr.it&utm_medium=twitter

http://www.businessinsider.com/wall-street-on-may-2016-jobs-report-2016-6

http://www.businessinsider.com/us-jobs-report-may-2016-2016-6

http://www.forbes.com/sites/samanthasharf/2016/06/03/jobs-report-u-s-adds-just-38000-jobs-in-may-unemployment-rate-down-to-4-7/?linkId=25155735#22a015b216da

https://www.washingtonpost.com/news/wonk/wp/2016/06/03/what-just-happened-with-jobs-in-america/?tid=sm_tw

http://www.ft.com/fastft/2016/06/03/us-markets-shake-off-grim-jobs-report/

May 2016

The big question in Europe this year is how the British people will vote on June 23. Will they vote to leave the European Union (what’s being called the “Brexit”) or decide to continue to be part of the 28-nation economic alliance? 

What’s at stake? It’s hard to know, exactly. Great Britain already maintains its own currency, separate from the euro, so the vote will be about whether the country continues to pay into the EU budget and adhere to the eurozone’s regulations. Norway is also living outside the EU, yet it contributes to the budget, adheres to the regulations and seems to get most of the benefits of membership—and thereby offers a way for Britain to exit and still maintain all the trappings of membership. The uncertainty over the seven years that would be required to transition out of membership would be over how, exactly, a new relationship would be structured.

The eurozone is suffering from high unemployment, low economic growth and a disparity between the richer (UK, Germany, Scandinavia) and poorer (Greece, Spain) nations. All European Union members are governed by policies created by the European Commission and the European parliament, and subject to the dispute resolution powers of the European Court of Justice. British voters might decide they don’t like the shared sovereignty and ties to the economic problems.

Naturally, there is a lot of lobbying on both sides in the runup to the vote. Economists seem to be uniformly against a Brexit, pointing out the obvious: that it would be hard for London to continue its role the financial capitol of Europe if its nation is not actually a part of the European Union. They point out that, unlike Greece, Britain already controls its own currency, and it is not a part of the passport-free zone, which is shorthand for having control over its own policies in regard to the Middle Eastern refugee crisis.

Those in favor of Brexit say that Britain would be freer to enter into trade deals with other countries (think: China) than it is today, and of course there is a lot of nationalist sentiment about reducing foreign influence over British affairs.

Who will win? The most recent polls show 46% of British voters will cast a ballot to leave the EU, vs. 44% who will vote to remain—and 10% who say they don’t know how they’ll vote. A little more than a month from the actual Brexit election, there appears to be plenty of time for either side to continue pressing their case.

http://www.facebook.com/pages/Kohlhepp-Investment-Advisors/143204745739600

Please contact us whenever there are any changes to your financial situation, personal situation or investment objectives.

Sources:

http://www.ft.com/intl/cms/s/2/70d0bfd8-d1b3-11e5-831d-09f7778e7377.html#axzz40tXOLR6p

http://www.ft.com/intl/cms/s/2/e7b2d4d4-daea-11e5-98fd-06d75973fe09.html#axzz48O9tGx46

April 14, 2016

Dear Valued Client,

You may have seen recent media coverage regarding a new fiduciary rule approved by the U.S. Department of Labor (DOL). This regulation will affect our business and the financial industry as we work under a new set of rules and disclosure requirements, but it should not dramatically impact the most important thing to us, which is our relationship with you. 

 We want you to know that we are working with our broker-dealer, Cambridge Investment Research, Inc., and its team of legal, fiduciary, and retirement experts as they are in the process of reviewing the details of the DOL rule. Given the DOL rule was posted with over 1,000 pages, we are expecting this to take a reasonable period of time to properly understand how this affects you as an investing client and us as your financial advisor, as well as the full scope of impact across the retirement industry. 

While the full details are unclear at this early stage, we are anticipating a “phased” implementation approach to the rule with some of the final rule’s changes taking effect in April 2017, and other requirements going into full effect on January 1, 2018. This phased implementation is appreciated so we can work together to decide what is in your best interests in terms of your investing and financial goals, while observing relevant requirements of this new DOL rule. At this point, Kohlhepp Investment Advisors, Ltd. and Cambridge’s policies or processing of business related to retirement plans or IRA accounts have not changed. If you have any questions about our current fiduciary status or the rules under which we currently operate, please ask! 

Remember: As CERTIFIED FINANCIAL PLANNER™ practitioners, we DO have a fiduciary responsibility to you. 

This simple commitment states: We believe in placing your best interests first.

Therefore, we are proud to commit to the following five principles:

•          We will always put your best interests first.
•          We will act with prudence; that is, with the skill, care, diligence, and good judgment of a professional.
•          We will not mislead you, and We will provide conspicuous, full and fair disclosure of all 
       important facts.
•          We will avoid conflicts of interest.
•          We will fully disclose and fairly manage, in your favor, any unavoidable conflicts.

We greatly value our relationship and plan to provide you with periodic updates as insight on the new rule becomes clear and applicable to your investing interests and goals.

Sincerely,

Edward J. Kohlhepp, Jr., CFP®, MBA
President 

Edward J. Kohlhepp, CFP®, ChFC, CLU, CPC, MSPA

Founder & CEO

 

 

http://www.facebook.com/pages/Kohlhepp-Investment-Advisors/143204745739600

 

Please contact us whenever there are any changes to your financial situation, personal situation or investment objectives.

 

April, 2016

Leaked information tells the story of prominent world leaders who avoided taxes or looted their country’s treasuries in order to squirrel away not only money, but expensive yachts, luxury homes, ownership of a candy company and investments in construction companies. The Prime Minister of Iceland has already resigned as a result of the leaked client files of a Panamanian-based law firm that specializes in creating secret tax havens.

What, exactly, are we to make of the Panama Papers leak?

The sometimes shocking revelations that are making their way into news outlets is the result of a hack into the files of a giant Panamanian law firm known as Mossack Fonseca, which had apparently become the world’s go-to resource for kleptocrats and tax avoiders who wanted to hide assets away in shadowy offshore shell corporations. 

The hackers ultimately sent 11.5 million records to the German newspaper Suddeusche Zeitung, which promptly shared the massive data trove with the various news organizations that are members of the International Consortium of Investigative Journalists. Their analysis is far from complete, but what we know so far is what you probably already suspected: the leaders of certain countries like the Ukraine, Syria, Saudi Arabia and Russia have been squirreling away state resources into their own secret personal accounts, while prominent leaders in less corrupt nations have been quietly funneling money into offshore havens to avoid having to pay their fair share of taxes. And this activity has apparently been going on for decades.

Nobody should be terribly surprised that close associates of Russian president Vladimir Putin—including cellist Sergei Roldugin, along with brothers Arkady and Boris Rotenberg—are connected to more than $2 billion in shadowy assets, some of which found their way back into Russia’s TV advertising business.   The Rotenbergs are also proud owners of seven British Virgin Islands-based companies that, in turn, control investment assets around the world. 

Nor was the world astonished to learn that two cousins of embattled Syrian President Bashar Assad have been filtering tens of millions of dollars worth of the country’s oil revenues through numerous offshore accounts. Former Iraqi interim prime minister Ayad Allawi managed, in his brief kleptocratic term in office, to secret away assets in a Panama-registered company called I.M.F. Holdings and a British Virgin Islands company called Moonlight Estates Ltd.

The embattled people of Ukraine are doubtless outraged to discover that Ukranian President Petro Poroshenko is sole owner of a British Virgin Islands firm that secretly controls a European candy factory, auto plants, a TV channel, a chocolate business and a shipyard. And one wonders why Saudi Arabian king Salman Bin Abdulaziz Bin Abdulrahman Al Saud would want to hide assets offshore in several British Virgin Islands companies that hold $34 million in mortgages for luxury homes in London, and a fancy yacht that he uses for pleasure cruises.

The most immediate fallout from the released files is the resignation of the Prime Minister of Iceland, Sugmundur Gunnlaughsson, after it was revealed that the Panamanian law firm had secreted $4 million of bonds in his name through a British Virgin Islands shell company—assets he had never gotten around to revealing to the nation’s tax collector.

The list of offshore cheats also includes the former Prime Minister of the nation of Georgia, Argentine President Mauricio Macri, former Jordanian Prime Minister Ali Abu Al-Ragheb, former Qatari Prime Minister Hamad Bin Jassim Bin Jaber Al Thani, and some people whose names you might recognize: soccer player Lionel Messi and the late father of UK Prime Minister David Cameron, who apparently avoided British taxes for 30 years on his investment fund by employing accounts based in the Bahamas but incorporated in Panama. 

High-ranking Chinese and Spanish officials, and six members of the British House of Lords also made the list.

As the hacked files are sifted through for more revelations, it reminds us that, while data security issues are a huge nuisance for all of us, they not an unalloyed evil. Hacked files can sometimes lead to greater social transparency, and help us spot the people who cheat or steal, some of whom, by strange coincidence, happen also to be among the world’s wealthiest individuals. But, if these assets are frozen by international monetary authorities, perhaps not for long. 

http://www.facebook.com/pages/Kohlhepp-Investment-Advisors/143204745739600

Please contact us whenever there are any changes to your financial situation, personal situation or investment objectives.

Sources:

http://www.usatoday.com/story/news/world/2016/04/04/panama-papers-list/82607516/

http://www.cnn.com/2016/04/04/world/panama-papers-explainer/index.html

April, 2016

Chances are, you’re underestimating the amount of progress we’re going to make in technology, medicine and a host of other things. Why? Because your brain, and mine, and everyone else’s, thinks linearly, rather than exponentially. We are living in an age of exponential change in things like computing power and speed, decoding and finding medical uses for the human genome, adoption of the Internet mobile technology and various social media sites, self-driving cars and many other things that were not even on your radar ten years ago.

According to an article at Singularity Hub, our brains are wired to predict the future based on the past. If we’re walking down a road, and taking steps a meter in length, we assume that it will take 30 steps to travel 30 meters. This progress is relatively easy to predict, and this linear thinking would have worked pretty well for evaluating the growth of our economy and its various technologies until fairly recently.

But now think about exponential growth, where each step we take is twice as long as the previous one. Our first step is a meter, the next one is two, and by step number 30, you will have traveled a billion meters—a distance equal to 26 trips around the Equator. This kind of rapid change is very difficult for our minds to wrap themselves around, but it accurately describes the evolution of many of the technologies and medical services that we enjoy today.

One of the hardest things to adjust to, the article tells us, is how things seem to appear out of nowhere. Think: mobile device apps, or the iPhone itself, or the exponential growth of information available on the Internet. That’s because exponential growth seems to happen overnight. When you double the length of each of those steps, you’re traveling 125 million miles at step 28, which is as much as all of the previous steps combined. Your next step is 250 million miles, again as much as all previous steps, and then you step 500 million miles, and you have traveled a full billion. If this were technology, those last two steps may see the advent of something completely unexpected and far beyond whatever came before.

Individuals and companies can’t predict exactly what will happen. But we can prepare for a future that moves so quickly that it seems out of control, and know that it’s actually the result of steady progress where a lot of previous steps built on each other invisibly but exponentially. We can allow ourselves to be pleasantly surprised by what the world brings us in the next ten or 20 years in the form of new therapies, new conveniences and access to more and better information—because changes are coming faster than our humble minds can predict, whether we decide to adjust to them or not.

http://www.facebook.com/pages/Kohlhepp-Investment-Advisors/143204745739600

Please contact us whenever there are any changes to your financial situation, personal situation or investment objectives.

Source:

March, 2016

Most people have seen bogus emails purported to be from the executors of the estate of Nigerian princes or other obscure foreign notables who want to give them millions of dollars, and sometimes they get bogus calls telling them they can win a lottery sweepstakes or receive debt relief.

But apparently one of the most effective and dangerous telephone scams these days involves what appears to be a call from the Internal Revenue Service. The phone rings, and a very aggressive person on the other end of the line tells you that you owe money to the IRS. This debt, you are told, must be paid promptly through a pre-loaded debit card or wire transfer. If you refuse to cooperate (as, of course, you should), you’re threatened with arrest, suspension of a driver’s license or revocation of a business license. In the case of recent immigrants, the caller may also threaten deportation.

In the most sophisticated calls, the scammer may know (and recite) the last four digits of your Social Security number, and may even use electronic spoofing to make it appear on your phone’s caller ID that the calling number comes from IRS headquarters. A bogus follow-up email may be sent to support the bogus call, or sometimes a follow-up call from an individual who is pretending to be from the local police or the Department of Motor Vehicles.

The goal, of course, is to scare you out of your wits—enough so that you’ll make a payment so the federal authorities will go away and leave you alone. In all, the IRS says that 5,000 victims have collectively paid over $26.5 million to bogus IRS scammers.

A more recent version of the scam involves a less aggressive phone call from somebody pretending to be an IRS agent, who says he or she wants to verify your tax information so your forms can be processed. The scam artists say they’re looking at your tax return, and need a few additional pieces of information. The goal is to get you to give up personal information such as your Social Security number, bank numbers or credit card information that can then be used for identity theft scams.

The IRS has assured the public that it never, ever asks for credit card information over the phone, and it never requests prepaid debit card or wire transfer payments. It never asks for you to divulge personal information by phone or email, or demands payments without giving you an opportunity to appeal the amount they say you owe.

If you receive a call that threatens police action and demands immediate payment, that is a certain indication that the caller does not represent the IRS. Generally taxpayers who have a legitimate tax issue are contacted by mail.

If you receive one of these bogus calls, you can report the incident to the Treasury Inspector General at 800-366-4484. And if you get an email that purports to be from the IRS, make sure you don’t click on any attachments. Instead, forward the email, in its entirety, to This email address is being protected from spambots. You need JavaScript enabled to view it. .

Sincerely,

Edward J. Kohlhepp, Jr., CFP®, MBA
President 

Edward J. Kohlhepp, CFP®, ChFC, CLU, CPC, MSPA

Founder & CEO

http://www.facebook.com/pages/Kohlhepp-Investment-Advisors/143204745739600

Please contact us whenever there are any changes to your financial situation, personal situation or investment objectives.

Sources: 

http://www.ktvn.com/story/31465469/irs-says-scammers-changing-tactics-again

https://www.irs.gov/uac/Newsroom/IRS-Repeats-Warning-about-Phone-Scams

https://www.irs.gov/uac/Newsroom/IRS-Warns-of-Pervasive-Telephone-Scam

This material was prepared by BobVeres.com., and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. Please note - investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.

February 19, 2016

There’s no question that we experience emotional pain and anxiety when our portfolios are losing money due to market downturns. Behavioral scientists tell us that we feel losses twice as keenly as positive returns.

But that doesn’t tell us what we really want to know, which is: other than selling at the wrong time and locking in losses, how do we make these downturns less painful?

Economist Richard Thaler conducted a stock market experiment that offers us all some insight. He asked people to select one of two investment options, one heavier weighted in stocks with higher returns and higher volatility, the other with fewer stocks, lower returns and less bouncing around. Half of the people were shown how that investment would have panned out eight times in the next year, while the other half were only shown the result once a year. In other words, some were looking at the stock market roller coaster eight times as often as the others.

You can probably guess the result: those who saw their results eight times a year only put 41% of their money into stocks. Those who saw the results just once a year invested 70% in stocks. The more often you look at your portfolio, in good times and bad, the more pain and anxiety you are likely to experience, and the more cautious you tend to be.

In a recent blog post, a market analyst looked at all the bear markets and bull markets going back to 1928, and found something interesting. The bull market rallies, on average, delivered 57% returns, while bear markets, on average, took away 24% of the market’s value. The bull runs lasted, on average, 474 days, while bear market drops were more intense, compressed into an average of just 232 days before the next upturn.

In other words, the significant declines were only about half as large as the market gains, but they were much faster, lasting about half as long as the slow, incremental rises that are habitual to bull runs. And this was also true at the extremes. On average, gains of 40% or more actually generated an average 84.9% return, while the losses of 20% or more were down, on average, 37.2%. Those significant bull runs lasted, on average, almost two years: 713 days. The most severe downturns lasted, on average, less than a year: 359 days.

Combine these statistics, and you come to a few simple conclusions: bull markets don’t attract a lot of attention, and move more gradually than the eye-catching downturns. Bull markets, over time, generate twice the upside as bear markets do downside. And the best way to avoid the mental anguish of these occasional sharp downturns is to spend less time looking at your overall returns. You miss the two steps forward, and most importantly, you also miss the more traumatic one step backward.

Sincerely,  

Edward J. Kohlhepp, Jr., CFP®, MBA
President 

http://www.facebook.com/pages/Kohlhepp-Investment-Advisors/143204745739600

Please contact us whenever there are any changes to your financial situation, personal situation or investment objectives.

Source:

February, 2016

After the recent downturn in the U.S. and global stock markets, you can be pardoned if you wished that the markets were a bit tamer. Wouldn’t it be nice to get, say, a steady 4% return every year rather than all these ups and downs?

Be careful what you wish for. There are at least three reasons why you should hope the markets continue scaring investors half out of their wits.

1) The very fact that stock downturns scare people is one reason why stocks deliver a higher return than bonds. Economists call it the “risk premium;” which can be roughly translated as: people are not willing to pay as much for an investment that will periodically frighten them to death as they would pay for an investment that delivers a less exciting investment ride. Over their history, stocks have been a fairly consistent bargain relative to less volatile alternatives, which is another way of saying that they’ve delivered higher long-term returns than bonds and cash.

3) Market downturns give an advantage to those who are willing to practice disciplined rebalancing among different asset classes. Basically, that means that when stocks go down, any new cash goes disproportionately into stocks to bring them back up to their former share of the overall portfolio. This, too, allows you to buy extra shares when the prices are low, and can also boost long-term returns.

There’s no question, the downward plunge on the stock market roller coaster is scary. It’s hard to maintain your discipline when the voice in the back of your brain is telling you to bail out on the bouncy trip before somebody gets hurt. 

But unless this is the first time in history that the market goes down and stays down forever, we will ultimately look back on the decline and see a buying opportunity, rather than a great time to sell and jump to the sidelines. The patient, disciplined, long-term investor should see market volatility as one of your best friends and allies in your journey toward retirement prosperity.

Remain patient!

Sincerely,

http://www.facebook.com/pages/Kohlhepp-Investment-Advisors/143204745739600

Please contact us whenever there are any changes to your financial situation, personal situation or investment objectives.

This material was prepared by BobVeres.com., and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. Please note - investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.

How deep will this correction ultimately be? 

                                                                                                                                                                              January 22, 2016                       

January may prove to be the worst month for stocks in eight years. The S&P 500 just corrected for the second time in five months, and some investors think the bull market may be ending.^1,2 

Bull markets do end, and the current one is nearly seven years old, the third longest in history. If a bear market is truly on the horizon, it may not last very long – the 12 bear markets recorded since the end of World War II have averaged 367 days in duration.²    

How far would stocks have to fall for a bear market to begin? Should the S&P close at 1,708 or below, you would have an “official” bear market on Wall Street – a 20% fall of that index from its most recent peak. Right now, the S&P is above 1,800.^2,3    

While the S&P, Dow Jones Industrial Average, and Nasdaq Composite have all corrected this month, the damage to the small caps has been worse. The Russell 2000 is now in a bear market, off more than 20% from its June 2015 high. On January 20, the MSCI All-Country World index went bear, joining the Nikkei 225, TSX Composite, Hang Seng, and Shanghai Composite.^2,4  

Where is the bottom? We may not be there just yet. For the market to stabilize or rebound, institutional investors must accept (or at least distract themselves from) three realities that have been hard for them to stomach...     

Oil prices may remain under $50 all year. Earlier this month, the Wall Street Journal asked 12 investment banks to project the average crude oil price across 2016. Their consensus? West Texas Intermediate crude will average $48 in 2016; Brent crude will average $50. Oil price forecasts are frequently off the mark, however – and if the oil glut persists, prices may take months to regain those levels. Saudi Arabia and Russia are not cutting back output, as they want to retain market share. With embargoes being lifted, Iran is set to export more oil. U.S. daily oil output has fallen by only 500,000 barrels since April.⁵ 

China’s manufacturing sector may never again grow as it once did. Its leaders are overseeing a gradual shift from a robust, manufacturing-centered economy to a still-booming economy built on services and personal consumption expenditures. The nation’s growth rate has vacillated between 4%-15% since 1980, but for most of that time it has topped 8%. In 2015, the Chinese economy grew only 6.9% by official estimates (which some observers question). The International Monetary Fund forecasts growth of just 6.3% for China in 2016 and 6.0% in 2017. Stock and commodity markets react quickly to any sputtering of China’s economic engine.⁶       

The Q4 earnings season looks to be soft. A strong dollar, the slumping commodities sector, and the pullback in U.S. stocks have all hurt expectations. A note from Morgan Stanley struck a reasonably positive chord at mid-month, however, stating that “a lowered bar for earnings should be cleared” and that decent Q4 results could act as “a catalyst to calm fears.”⁷  

What developments could help turn things around this quarter? OPEC could cut oil output, Chinese indicators could beat forecasts, and corporate earnings could surprise to the upside. If these seem like longshots to you, they also do to economists. Still, other factors could emerge.    

Central banks could take further action. Since China’s 6.9% 2015 GDP came in below projections, its leaders could authorize a stimulus. The European Central Bank could increase the scope of its bond buying, and the Federal Reserve could hold off on tightening further in the first half of the year. If this month’s Fed policy statement notes that Fed officials are taking extra scrutiny in light of recent events, it could be reassuring. Any statement that could be taken as “second thoughts” about raising interest rates would not be reassuring.⁶ 

U.S. GDP could prove better than expected. The Atlanta Fed thinks the economy grew 0.6% in Q4 and Barclays believes Q4 GDP will come in at 0.3%; if the number approaches 1%, it could mean something for investors. Moving forward, if the economy expands at least 2.5% in Q1 and Q2 (which it very well might), it would say something about our resilience and markets could take the cue. Other domestic indicators could also affirm our comparative economic health.⁸    

While the drama on Wall Street is high right now, investors would do well not to fall prey to emotion. As Jack Bogle told CNBC on January 20, “In the short run, listen to the economy; don’t listen to the stock market. These moves in the market are like a tale told by an idiot: full of sound and fury, signaling nothing.”⁹ 

Sincerely, 

Edward J. Kohlhepp, CFP®, ChFC, CLU, CPC, MSPA

Edward J. Kohlhepp, Jr., CFP®, MBA

http://www.facebook.com/pages/Kohlhepp-Investment-Advisors/143204745739600

Please contact us whenever there are any changes to your financial situation, personal situation or investment objectives.

This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. Please note - investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.

Citations.

1 - bostonherald.com/business/business_markets/2016/01/market_analyst_believes_stocks_will_rebound_after_correction [1/14/16]

2 - jillonmoney.com/will-stock-correction-lead-to-bear-market/ [1/16/16]

3 - foxbusiness.com/markets.html [1/20/16]

4 - cnbc.com/2016/01/20/msci-global-stock-market-index-hits-bear-market.html [1/20/16]

5 - tinyurl.com/h6ry47n [1/12/16]

6 - bbc.com/news/business-35349576 [1/19/16]

7 - usnews.com/news/articles/2016-01-14/will-corporate-earnings-be-the-stock-markets-savior [1/14/16]

8 - money.cnn.com/2016/01/19/news/economy/global-fears-federal-reserve-rate-hike/ [1/19/16]

9 - cnbc.com/2016/01/20/investing-legend-jack-bogle-stay-the-course.html [1/20/16]

January 8, 2016

Have your long-term financial goals changed in the last three days?

Are American companies less valuable because investors in China are panicking?

Is there any reason to think that because Chinese investors are panicking, that Chinese companies are less valuable today than they were a few days ago?

These are the kinds of questions to ponder as you watch the U.S. stock market catch a cold after China sneezed. In each of the first four trading days of the year, China closed its markets due to a rapid fall in share prices—a move which may have made the panic worse, since it made investors fear being trapped in stocks that are seen as dropping in value. It’s unclear exactly how or why, but the panic spread to global markets, with U.S. stocks falling 4.9% to mark the worst first-of-the-year drop in history. 

For long-term investors, the result is much the same as if you went to the grocery store and discovered that the prices had fallen roughly 5% across the board. At first, you might think this is a great bargain. But then you might wonder whether the prices will be even lower tomorrow or next week. One thing you probably WOULDN’T worry about is whether prices will eventually go back up; you know they always have in the past after these sale events expire.

Will they? The truth is, nobody knows—and if you see pundits on TV say with certainty that they know where the markets are going, your first impulse should be to laugh, and your second should be to check their track record for predicting the future. Without a working crystal ball, it’s hard to know whether the markets are entering a correction phase which will make stocks even cheaper to buy, or whether people will wake up and realize that they don’t have to share the panic of Chinese investors on this side of the ocean. The good news is there appears to be no major economic disruption like the Wall Street derivatives mess that triggered the 2008 downturn. The best, sanest investors will once again watch the markets for entertainment purposes—or just turn the channel.

Stay tuned!

Edward J. Kohlhepp, CFP®, ChFC, CLU, CPC, MSPA

Edward J. Kohlhepp, Jr., CFP®, MBA

http://www.facebook.com/pages/Kohlhepp-Investment-Advisors/143204745739600

Please contact us whenever there are any changes to your financial situation, personal situation or investment objectives.

This material was prepared by BobVeres.com., and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. Please note - investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.

Sources:

Wall Street rallies as interest rates rise for the first time since 2006. 

December 18, 2015 

U.S. monetary policy officially changed course Wednesday. Federal Reserve officials voted to raise the federal funds rate by a quarter of a percentage point, ending an unprecedented 7-year period in which it was held near zero. Nearly ten years had passed since the central bank had adjusted interest rates upward.¹  

The Federal Open Market Committee voted 10-0 in favor of the rate hike. It also raised the discount rate by a quarter-point to 1.0%.¹     

Addressing the media after the FOMC announcement, Federal Reserve chair Janet Yellen shared the central bank’s viewpoint: “With the economy performing well, and expected to continue to do so, the committee judged that a modest increase in the federal funds rate target is now appropriate, recognizing that even after this increase, monetary policy remains accommodative.”² 

Equities started Wednesday with minor gains, then advanced further. The Dow Jones Industrial Average, S&P 500, and Nasdaq Composite respectively advanced 1.28%, 1.45%, and 1.52% Wednesday. The yield on the 2-year Treasury hit a 5-year high of 1.021%. Gold rose $15.20 to close at $1,076.80 on the COMEX.^3,4 

As a December rate increase was widely expected, the real curiosity concerned the following press conference. Would Janet Yellen offer any hints about monetary policy in 2016? 

She offered one: she said she doubted that any interest rate hikes in 2016 would be “equally spaced.” Aside from that remark, no new insights emerged; Yellen reemphasized that the Fed does not plan to raise rates aggressively.² 

Investors gained more insight from the Fed’s latest dot-plot chart, which expresses the Federal Open Market Committee’s opinion on where the benchmark interest rate will be at near-term intervals. The new dot-plot forecasts four rate hikes during 2016, with the federal funds rate climbing toward 1.5% by the end of next year (the median projection is 1.4%).⁵ 

The dot-plot revealed benchmark interest rate targets of 2.4% for the end of 2017 and 3.3% for the end of 2018, slightly lower than the previously stated targets of 2.6% and 3.4%.⁵

That corresponds with the consensus of analysts surveyed by CNBC. Their expectation was for three quarter-point rate hikes across 2016, taking the federal funds rate toward 1%.⁶

Some analysts wonder if the next rate hike might occur at the FOMC’s March meeting. Nothing could be gleaned about that from Yellen’s press conference or the new FOMC announcement.⁶  

With more tightening seemingly ahead, what is in store for the market? Bears may want to wait before making any gloomy pronouncements. While rising interest rates are commonly assumed to impede a bull market, this is not always the case. In fact, the S&P 500 advanced 15% during the last round of tightening (2004-06).⁷  

Could higher interest rates decrease inflation pressure? That is a distinct possibility, and that would hurt wage growth and business growth. The Fed would like to see inflation in the vicinity of 2%, yet the Consumer Price Index is up only 0.5% in the past 12 months, held in check by a 14.7% annualized retreat in energy prices and a 24.1% annualized fall in gas prices. On the other hand, the Core CPI (minus food and energy prices) is up 2.0% in the past year.⁶    

The Fed may have made just the right move at the right time. If it had waited until 2016 to tighten, a collective “uh-oh” might have been heard from pundits and analysts, with comments along the lines of “Does the Fed know something about the economy that we do not?”  

As JPMorgan Private Bank chief U.S. investment strategist Kate Moore told CNNMoney this week, “Keeping interest rates at zero is enforcing the idea that the U.S. economy is fragile.” Years of easing certainly helped the stock market over the last 5 years or so.^2,7      

Ultimately, the central bank felt the time had come for tightening. At Wednesday’s press conference, Yellen commented that data had led the Fed to raise rates – it had not made its move in response to any shifts in public opinion. “Consumers are in much healthier financial condition” than they once were, she remarked. The rate hike certainly expresses confidence in the economy, which could strengthen further in 2016.² 

Sincerely,

http://www.facebook.com/pages/Kohlhepp-Investment-Advisors/143204745739600

Please contact us whenever there are any changes to your financial situation, personal situation or investment objectives

This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. Please note - investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.

Citations.

1 - marketwatch.com/story/federal-reserve-lifts-interest-rates-for-first-time-since-2006-2015-12-16 [12/16/15]

2 - blogs.marketwatch.com/capitolreport/2015/12/16/live-blog-and-video-of-the-fed-interest-rate-decision-and-janet-yellen-press-conference/ [12/16/15]

3 - cnbc.com/2015/12/16/us-markets-fed.html [12/16/15]

4 - reuters.com/article/usa-bonds-idUSL1N1452HC20151216 [12/16/15]

5 - marketwatch.com/story/federal-reserve-dot-plot-still-signals-4-interest-rate-hikes-in-2016-2015-12-16 [12/16/15]

6 - latimes.com/business/la-fi-federal-reserve-rate-hike-20151216-story.html [12/16/15]

7 - money.cnn.com/2015/12/15/investing/stocks-markets-fed-rate-hike/ [12/15/15]

November, 2015

Most of us watched news coverage of the multiple terrorist acts against the city of Paris, France, with a mixture of horror and dread. The horror was our usual response to terrorism, the feeling that arises when we ask ourselves: how can people think this way? And when we realize that, somehow, there ARE people who think that way, which is so far from our own reality that the realization triggers deep emotions somewhere far on the opposite end of the spectrum from inspirational. 

The dread, of course, comes from the realization that these attacks could have, and might still, happen here—that is, wherever we happen to be sitting, whatever concert venue or restaurant we might be planning to visit.

Hard on these emotions comes outrage, and that helps illustrate something that is seldom realized about terrorism. In a recently published book entitled The Better Angels of Our Nature, author Steven Pinker points out that terrorism is far from a new phenomenon. After the Roman conquest, resistance fighters in Judea—who called themselves zealots—would stab unguarded Roman officials whenever the opportunity arose. In the 11th century, Shia muslims launched furtive assassinations on officials who practiced a different version of their belief system. For 200 years, a cult in India strangled tens of thousands of people traveling through their country. The assassination of President William McKinley was executed by a particularly ugly breed of of terrorist known at the time as anarchists. Most of us remember days when London and Belfast were routinely rocked by Irish Republican Army terror strikes. And in the U.S., the Weather Underground of the 1960s had a terrible habit of setting off explosives in public places. 

The book lists many other instances of terrorist organizations, but all of them prove a point: eventually, each of these groups will go too far, provoke the consciousness of the general public in the wrong way, and turn sympathy to their cause into outrage. Pinker cites statistics that show that virtually zero terrorist organizations ever accomplish their aims, and they tend to die out after their most visible credibility-destroying “success.” One has only to think of the fate of Al Qaeda after 9/11 as an example of a terrorist organization whose relevance declined to near zero in the messy aftermath.

No doubt, the ISIS leaders who planned the attacks on Paris believed that this bloodletting would cause all Western nations to recoil in fear, and back off of their military efforts to contain the new caliphate, in order to placate the caliphate so it wouldn’t strike again. You and I know that this is pure nonsense. The inevitable outcome will be a new resolve, a hardening, a coming-together of the Western nations in a display of solidarity with France. Countries that were inclined not to get involved in the Middle Eastern messiness are now motivated to sign on for an international military campaign that will contain and perhaps hopefully completely destroy ISIS. Leaders who feared that their citizens would revolt at the thought of military intervention can now count on the support of their outraged voters. The next year or two will almost certainly reveal the ISIS attacks on Paris to have been a fatal mistake for those who dream of an Islamic, Sharia-governed caliphate in Syria and Iraq.

Today (Monday), you will see the world’s investment markets open lower, and probably close lower, as the horror of the events in Paris are translated into uncertainty about the world we live in—and, therefore, the safety of our assets, reflected in our stocks. The markets always respond reflexively and negatively to threats to our safety.

But as the year proceeds through its last few weeks, the smart money always tells us that these downturns are temporary. Fears that global enterprises are somehow worth less because blood was spilled overseas will prove to be overblown. More importantly, after the events in Paris, the object of our horror and fear—the terrorist organization known as ISIS—is about to confront an opponent more powerful than its leaders have the ability to imagine: the resolve of the Western nations. At the same time, it will have to endure the disgust and repudiation of moderate members of the muslim faith, in the Middle East and elsewhere.

The world changed over the weekend, but not in a way that affects the value of your investments. The change will be felt most powerfully in the failed dreams of a caliphate whose leaders have made a grave and awful miscalculation, who are destined to pay dearly for their malicious stupidity.

Sincerely,

Please contact us whenever there are any changes to your financial situation, personal situation or investment objectives

Sources: This material was prepared by BobVeres.com., and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. Please note - investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.

October 8, 2015

By October 2015, the majority of credit and debit cards in the United States will be equipped with EMV-chip technology. EMV has already been implemented around the world to make payment cards more secure, but its safety net has significant limitations.

EMV, which stands for Europay, MasterCard, and Visa, technology promises to make your use of credit and debit cards safer than ever but the chips are not a cure-all when it comes to fraud. You may already have an EMV card, but you still need to be careful, understanding when and whether you are protected.

What is an EMV card?

EMV cards are equipped with a small computer chip that creates a unique code every time the card is used this code cannot be used again. Current credit and debit cards contain a magnetic strip that produces the same code every time it is used, making these cards easy to duplicate.

There are two types of EMV cards, “chip and PIN” and “chip and signature.” Chip and PIN cards require you to place your card in the chip enabled terminal and then enter your PIN to finish the transaction. Your card is not ejected from the terminal until the transaction is complete. Chip and signature works the same way, but rather than entering your PIN, you must sign to complete the purchase.

Chip and PIN cards are considered the more secure option, but the majority of EMV terminals in the U.S. will only be able to accommodate chip and signature transactions. This option is more secure than the magnetic strip cards, but requiring a PIN would cut down on fraud even further. Merchants and banks were concerned that requiring consumers to enter a PIN for each transaction would be too time consuming and would turn people off from using their cards.

How do you use your new card?

Most U.S. banks and credit card companies have already started issuing EMV cards to their customers. Research and consulting firm Aite Group estimates that 70 percent of credit cards and 40 percent of debit cards in the U.S., 1.1 billion cards total will support EMV by the end of this year.

If you have received a new card with a small chip on the front, you have an EMV card. While you may be prepared to make the EMV switch, many merchants are not. You’ll notice that your EMV card still has a magnetic strip on the back. This is to allow you to use the card in old magnetic stripe systems until all merchants have upgraded their systems.

In a store or restaurant that is still using the old payment systems, you would swipe your card as you normally do and carry out the transaction from there. The EMV technology would not be used in these situations. However, if you use your card at a merchant with a chip enabled terminal, you would “dip” your card in the machine (like you do at an ATM) and the terminal will ask for your PIN or your signature. You can then remove your card from the payment terminal.

The liability switch

The introduction of EMV cards has also changed the liability for fraudulent transactions. Currently, the bank or payment processor is responsible for reimbursing the consumer in all cases. After the Oct. 1, 2015, deadline, the liability will depend on the transaction. For example, if you use an EMV card at a merchant that has not upgraded their payment systems to accept EMV cards, the merchant will be liable for fraudulent charges rather than the bank. But if your bank or credit card company failed to issue you a new card and you use your old card at a merchant with EMV enabled terminals, the card issuer is still liable.

How will EMV cards lessen fraud?

As previously mentioned, these new cards contain micro-processing chips, making them dynamic, rather than static like older cards. The chip communicates with the payment terminal and creates a new transaction code for every purchase. Therefore, your card cannot be duplicated and used.

If you were to use your EMV card at a store that has been breached, your credit card data on file cannot be used to create a counterfeit card. The one time transaction code will be stored, but that code will not work again. So while EMV cards will not stop data breaches from occurring, they will protect your personal information and thereby reduce the profit that thieves currently make from duplicating and selling physical cards in the underground market.

But they won’t stop everything

You may still be in trouble, though, if your physical card is lost or stolen. Because the majority of U.S. payment terminals will only ask for your signature (rather than a secure PIN), a thief could successfully use your physical card by forging your signature. Furthermore, EMV cards will not protect you during online transactions. Because you are not entering your card in an EMV terminal for online payments, the chip technology is not being used. Therefore, if a hacker can get your payment card data from your online purchase (card number, expiration date, and security code) they can continue to make fraudulent online purchases. Similarly, if a thief is able to get your credit card number from a data breach, he would be able to successfully use the card online. EMV cards will decrease the amount of counterfeit cards being created but won’t do much to stop stolen card fraud or online fraud.

Making the switch to EMV cards is a step in the right direction but it isn’t the cure all for our fraud problem. The chip and signature cards being introduced in the United States don’t fully protect you from fraudulent charges. You must continue to take precautions to keep your accounts safe.

You should sign up for text or email notifications for your new EMV card. By doing so, you will receive a notification every time your card is used. If you see a charge you did not make you can quickly resolve the fraud with your bank or credit card company.

You should also continue to monitor your statements carefully. In many cases a thief will test your card with small charges first, so be on alert for any transaction you did not make.

Edward J. Kohlhepp, CFP®, ChFC, CLU, CPC, MSPA

Edward J. Kohlhepp, Jr., CFP®, MBA

 

   

http://www.facebook.com/pages/Kohlhepp-Investment-Advisors/143204745739600

 

 

 

 

 

Please contact us whenever there are any changes to your financial situation, personal situation or investment objectives. 

 

 

 

 

Source: http://www.horsesmouth.com/areyouusinganemvcardhowsafeisit

September 2015

Chances are, these days you’re sneaking a peak at the investment markets, probably more than once a day. They’ve certainly been providing their share of excitement: down 4% one day, up more than 2% the next day or two, and who knows what’s causing the turmoil?

In August, the direction was mostly down, turning what had been tentative gains for the year into (as yet) relatively modest losses. And there wasn’t a lot of value in diversification. Large cap, midcap and small cap U.S. stock indices all dropped between 5.5% and 6%, real estate fell about the same and foreign stocks dropped roughly 7% over the same time period. Commodities did worse.

Analysts are scrambling to tell us why, one day, the markets are down sharply, and then come up with a reason why, the next day, they’re back up again. One long-term trader remarked, watching these swings, that the fact that the Dow can fall 1,000 points and then recover 700 in the space of four hours is prima facie evidence that there is no rational explanation for what’s going on. We hear that the weakness in the Chinese economy, or its stock market, are causing U.S. stocks to somehow be less valuable, but does anybody really believe that?

Meanwhile, the doomsayers are predicting catastrophe—which is not well-defined, but seems to mean that U.S. companies will be 30% to 50% less valuable in a few weeks than they are today. Their solution? Buy gold! It’s helpful to remember that $10 invested in gold in 1926 would be worth $615 today.  Ten dollars invested in the stock market would be worth $55,000. 

Perhaps the most interesting analysis came from Jason Zweig, who writes an investment column for the Wall Street Journal. He said that this would never happen, but what if there were a Ben Graham TV channel, which provided market commentary based on the teachings of the father of value investing? You’d have the host coming on to announce some great news: stocks today are unexpectedly on sale, selling, on average, 4% cheaper than they did yesterday. Will this great news continue, or should we take advantage of the buying opportunity while it lasts?

The guest that day offers his hope that the markets will continue their downward rally, making stocks even cheaper to buy. But he’s not optimistic, given the fact that stocks seem to get relentlessly more expensive over time, and have been doing this, with some regularity, since the early 1800s. Still, one can hope for a sustained downturn that would provide a chance to buy at prices even lower than they are today.

The host and guest console themselves with the thought that finally, for the first time in seven years, we may finish out the year with an opportunity to buy stocks for less than they cost on January 1. 

We may not get that lucky, and the markets may continue their bull run. Nobody knows what you’re going to see the next time you check the investment tables, or what will happen between now and the end of the year—except this: the actual value of American and global companies won’t be affected by the mood swings of investors who lurch between an inclination to buy and an inclination to sell. Whatever those underlying values are, the markets will eventually return to them, however much of a bargain the market decides to offer us between now and then.

Sincerely,

http://www.facebook.com/pages/Kohlhepp-Investment-Advisors/143204745739600 

Please contact us whenever there are any changes to your financial situation, personal situation or investment objectives

This material was prepared by BobVeres.com., and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. Please note - investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.

http://www.wilshire.com/Indexes/calculator/

http://www.russell.com/indexes/data/daily_total_returns_us.asp

http://www.standardandpoors.com/indices/sp-500/en/us/?indexId=spusa-500-usduf--p-us-l--

http://www.tradingeconomics.com/united-states/unemployment-rate

http://quicktake.morningstar.com/Index/IndexCharts.aspx?Symbol=COMP

International indices: http://www.mscibarra.com/products/indices/international_equity_indices/performance.html

August 25, 2015

Some of the most entertaining times to be a long-term investor are those periods when short-term investors are looking over their shoulders for an excuse to sell. They’re convinced that the market is going to go down before they can get out, and so they jump on any bad news that comes across their Bloomberg screen.

And, of course, last Friday was a marvelous time to see this in action. With all the economic drama playing out in the world, there were plenty of opportunities to panic. The Greek Prime Minister has resigned! Sell! China devalued its currency a few days ago by 2%! Head for the hills! Chinese stocks are tanking yet again! Get out of American stocks while you can! The Fed might raise short-term interest rates from zero to very nearly zero! It’s the end of the world!

Of course, a sober analyst might wonder whether a change in governance in a country whose GDP is a little less than half the market capitalization of Apple Computer Corp. is really going to move the needle on the value of U.S. stocks—especially now that Greece seems to have gotten the bailout it needs to stay in the Eurozone. Chinese speculators are surely feeling pain as the Shanghai Composite Index goes into free-fall, but most U.S. investors are prohibited from investing in this tanking market. If the market value of PetroChina, China Petroleum & Chemical and China Merchants Bank are less valuable today than they were a week or a month ago, does that mean that one should abandon U.S. stocks? Does it mean that American blue chips are somehow less valuable?

What makes this dynamic entertaining—and sometimes scary—is the enhanced volatility around very little actual movement. You see the market jump higher and faster, lower and faster, but generally returning to the starting point as people realize a day or two later that the panic was an overreaction, and so was the false exuberance of realizing that the world isn’t going to come to an end just because we’re paying less at the gas pump than we were last year. Despite all the jitters investors have experienced over the past nine months, despite the drop on Friday, the S&P 500 is only down about 4% for the year, and was in positive territory as recently as August 19.

If you want a broader, more rational picture of our current economic situation, read this analysis by a long-term trader who now refers to himself as a “reformed broker” in Fortune magazine: http://fortune.com/2015/08/20/american-economy-worries/ He talks about the “terrible news” that it hasn’t been this cheap to fill your gas tank in over a decade, and businesses that rely on energy to manufacture their goods are now forced to figure out what to do with the excess capital they’re not spending on fuel.

Oh, but it gets worse. American corporations are struggling under the burden of enormous piles of cash they don’t have a use for. They may have no choice but to return some of that money back to shareholders in the form of record dividends. Of course, you read about the risk to corporate profit margins. It seems that unemployment is so low that wages for American workers are going up, and that could raise consumption and demand for products and services.

Meanwhile, contributions to 401(k) and other retirement plans are up dramatically; housing starts and the construction sector are booming, America’s biggest global economic competitor (China) is reeling, and the Federal Reserve might decide that it no longer has to keep short-term interest rates low because the emergency is over and the economy has recovered. The author apologizes (tongue in cheek) for bringing us all this terrible news, but hey, we can always sell our stocks and get out until conditions improve.

Right?

Nobody would be surprised if the U.S. stock market suffered a 10% or even a 20% short-term decline, this year, or perhaps next year. But what can you do with that information? Nobody would have been surprised if this had happened at any point in the long bull market since March 2009, and nobody can predict whether Friday was a signal that the market will take a pause, or if this week will bring us another wave of short-term euphoria measured mostly in sighs of relief. And if you don’t know when to sell in this jittery market, how will you know when to buy back? 

These short-term swings provide entertainment, but very little useful information for a mature investor. If you aren’t entertained by watching people sell in a panic and then panic-buy their way back in when they realize things aren’t as dire as the headlines made them out to be, then you should probably watch a movie instead.

If you are nervous give us a call. The end of summer is supposed to be a peaceful, relaxing time. Turn off the TV and enjoy the weather.

Edward J. Kohlhepp, Jr., CFP^®, MBA

http://www.facebook.com/pages/Kohlhepp-Investment-Advisors/143204745739600 

Please contact us whenever there are any changes to your financial situation, personal situation or investment objectives

This material was prepared by BobVeres.com., and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. Please note - investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.

August 24, 2015

China’s stock market appears to be back in free-fall, despite the Chinese government’s efforts to control stock prices and stem the panic. The chief culprit appears to be leverage: investors last year and in the first half of this year borrowed billions in order to buy stocks on margin, offering little or no collateral except the shares themselves. As prices fall and stock values drop below the level of debt, it triggers margin calls from the lenders, which forces investors to sell at any price, further depressing prices, causing more margin calls in a downward spiral whose bottom is not easy to see from here.

A recent report said that the volume of these margin loans dropped by 6%, or $23 billion over the past week or so, which implies that there is still $383 billion more that could be called over the next months or years, an alarming 9% of the roughly $4 trillion in total market value on the Shanghai market. 

But leverage is only part of the problem. The CSI Information Technology Index, a mix of high-tech names in China similar to the Nasdaq in the U.S., is still trading at around 75 times earnings, while Nasdaq’s PE is closer to 30. If the two indices were to normalize, it would imply that Chinese stocks could drop an additional 60% in value before the current bear market has run its course—and that’s assuming the debt situation doesn’t cause the market to overshoot on the downside.

One complication in the situation is the fact that, since late last year, foreign investors have been allowed to invest directly in Shanghai-listed stocks. Savvy market traders with years of experience in these death spiral events have been making program trades which bet on further drops. Chinese regulators recently suspended 34 U.S.-based hedge fund accounts from trading, including the Citadel Fund, and short selling is now totally forbidden.

Meanwhile, the economic fundamentals in China aren’t looking good. The Caixin China Manufacturing Purchasing Manager’s Index recently fell to levels which indicate economic contraction, and industrial output is at the weakest level since November of 2011. You don’t often see a market rally when an economy is sliding into recession, so at these valuations, you aren’t likely to find many bulls left in the Shanghai China shop.

Beware of investing in China!

Sincerely,

http://www.facebook.com/pages/Kohlhepp-Investment-Advisors/143204745739600

Please contact us whenever there are any changes to your financial situation, personal situation or investment objectives

Sources:

This material was prepared by BobVeres.com., and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. Please note - investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.

http://fortune.com/2015/08/03/china-looks-for-scapegoats-in-continued-stock-market-decline/http://fortune.com/2015/06/29/china-stocks-crash-into-bear-territory-as-margin-calls-bite/

http://www.ft.com/intl/fastft/242222/china-overtake-japan-stock-market-cap

August 17, 2015

You’ve probably read that the island territory of Puerto Rico formally defaulted on its municipal debt obligations over the weekend—an unsurprising event that has been expected by insiders for more than three months. What did surprise everybody was the fact that the Puerto Rican Public Finance Corporation (PFC) found a way to make a partial payment on its $58 million in interest obligations—even if the amount was only $628,000.

Going forward, the situation is rather bleak. The Moody’s credit rating service has noted that, according to the debt contracts, interest payments can only be made if and when the PFC has appropriated funds for them. Since the PFC has not done so, there appears to be no legal requirement for Puerto Rico to pay the debt, or any legal recourse for bond holders.

A number of mutual fund companies are probably wishing that they had read these contracts more closely before buying a big chunk of the territory’s $70 billion in debt on behalf of their shareholders. Puerto Rican muni bonds were once considered to be the Swiss army knife of the muni world, since they qualify as tax-exempt in all 50 U.S. states and therefore can be placed into any state-specific muni fund portfolio. They also paid significantly higher interest than most states were offering—between 9% and 21% right before the default on 20-year issues, as high as 5% on 2-year notes. The national averages among all U.S. states are closer to 2.85% and 1%, respectively. 

How much of the default are you, personally, on the hook for? Very little to none at all unless you’re invested in broker-sold Oppenheimer funds. Oppenheimer manages nine of the ten funds with the greatest exposure to these daredevil investments—$5.1 billion according to the Morningstar mutual fund analysis service. The other fund with high exposure is the Franklin Double-Tax Free Income Fund, which currently has about 60% of its shareholders’ money tied up in the Puerto Rican fiasco. Ten of Wells Fargo’s 14 municipal bond funds have also wagered on Puerto Rico’s debt, as have 20 of Eaton Vance’s 27 muni funds.

As mentioned, the default is not exactly a shock. Puerto Rican bonds, once sold as high-rated paper, have been sliding down the ratings scale for years, causing losses for investors all along the journey. A $5 million class action lawsuit was filed against the brokerage firm UBS as far back as 2013, alleging that older investors were urged to take out loans in order to load up on risky Puerto Rican bond funds that brokers touted as safe and secure. An estimated $500 million was ultimately borrowed to buy into the mess, and investors in those funds suffered at least $1.66 billion in losses when the suit was filed—two years before the recent downgrade.

Meanwhile, the Vanguard and BlackRock organizations eliminated their small positions in the territory late last year. 

Sincerely, 

Edward J. Kohlhepp, CFP^®, ChFC, CLU, CPC, MSPA 

Edward J. Kohlhepp, Jr., CFP^®, MBA

Please contact us whenever there are any changes to your financial situation, personal situation or investment objectives 

Sources:

August 12, 2015

While negotiations on Greek debt continue to be mired in uncertainty, the Greek banking system is taking a daily pounding. And you can understand why. If Greek representatives were to suddenly walk away from the table and leave the Eurozone, the country would have to print its own currency (Drachmas), which would almost certainly be worth less against the Euro from day one.   In order to pay its creditors, the Greek government might have to keep the presses working overtime, which means that the poor Greek citizen who left his money in a Greek bank would watch helplessly as his Euros were automatically exchanged for a currency that would be at least 30% less valuable. Better to take the Euros out now and keep them under the mattress until the negotiations work themselves out.

This may be a wise strategy for individual Greeks, but it’s terrible for a banking system that relies on deposits in order to make loans and, more basically, remain solvent. Meanwhile, Greek negotiators are trying to stave off German demands for austerity, arguing that the country has already experienced the worst recession in Eurozone history, and stocks have fallen to roughly the level they were at in 1990. If the past five years of austerity has produced this kind of results, they argue, then perhaps a different strategy is in order. 

Will you be affected? For most U.S. investors, the Greek tragedy is simply a spectacle to tell your grandchildren about. Greece will survive, eventually the money will come out from under the mattresses, and Europe as a whole might find a way to be more accommodating when one of its own gets into financial trouble.

Sincerely,

Edward J. Kohlhepp, CFP^®, ChFC, CLU, CPC, MSPA

Edward J. Kohlhepp, Jr., CFP^®, MBA

http://www.facebook.com/pages/Kohlhepp-Investment-Advisors/143204745739600 

Please contact us whenever there are any changes to your financial situation, personal situation or investment objectives

Sources: This material was prepared by BobVeres.com., and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. Please note - investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.

http://news.yahoo.com/greek-banking-stock-plunge-again-debt-crisis-dominates-082744811--business.html

http://www.huffingtonpost.com/jakob-von-uexkull/from-greek--to-euro-crisi_b_7926532.html

How to Freeze Your Credit:

• To do so, you will need to contact all three of the credit bureau agencies—Experian, Equifax, and TransUnion.
• You will need to freeze your file at all three agencies to be properly protected.
• Prices for a credit freeze vary per state, but usually cost about $10 at each bureau. You will need to pay an additional $10 to unfreeze your file when opening a new line of credit. Freezing your credit can cost up to $30 all together, but that is much less expensive and stressful than dealing with a stolen identity.
• If you are a proven identity theft victim, the freeze and unfreeze fees are waived in all states.

Credit Bureau Contact Information:

It seems like every day the headlines are full of new stories of cybersecurity breaches and some type of new hacking threat. Below are some recent statistics and information with links to additional articles and more security tips.

67,168: The number of security incidents reported by federal government agencies in 2014. That's 7,000 more than 2013 and almost 20,000 more incidents than in 2012. A security incident is not necessarily a breach that exposes personal information, however 27,624 of the incidents reported in 2014 did.

2015 on track to be most breached year, according to the Identity Theft Resource Center. As of June 30, 2015, 400 data breaches had been reported with 117,576,693 records at risk.

Do you know the safest ways to share your credit card information? Nerd Wallet recently released a guide to help you protect your information online, through the mail, and over the phone. In general, sharing your credit card information over secure websites and text messages carry the lowest risk. Learn more here.

We strongly recommend a credit freeze, and if you need assistance, more cybersecurity tips and information, please contact us. This will help protect your credit and identity from being used fraudulently.

Sincerely,

Edward J. Kohlhepp, CFP®, ChFC, CLU, CPC, MSPA

http://www.facebook.com/pages/Kohlhepp-Investment-Advisors/143204745739600

Source: Horsesmouth, LLC

July 1, 2015

Any way you look at it, the standoff between the nation of Greece and the leaders of the European Union is a mess. But it may not be quite the problem that the press is making it out to be.

In case you haven’t been following the story, the gist of it is that the Greek government, over a period of years that included the time it hosted the Summer Olympics, issued more bonds than, in retrospect, it could possibly pay back. The total debt outstanding peaked at somewhere around $340 billion, which is actually more than the $242 billion in goods and services that the entire Greek economy produces in a year.   You’ve no doubt heard about a series of bailouts organized by the European Union, the International Monetary Fund and other groups which have collectively extended loans and extensions amounting to $217 billion to date. As you can see from Figure 2, on the right-hand side, roughly $4 billion in payments are due in July and more than $3 billion in August, after which time the payment schedule becomes somewhat more forgiving through 2022.

There are three problems with this picture. First, it has become apparent that Greece doesn’t have the money to make the July and August payments. Second, in return for additional debt relief, the various creditors are asking that the Greek government do more than just balance its budget (which it has). Their demands seem a bit harsh and somewhat picky when they’re organized in a list: Greece would have to reduce pension payments to current and retired workers by 40%, raise the retirement age to 67 in 2022 rather than 2025, phase out supplemental bonuses for poorer retirees in 2017 rather than 2018, and cut back on early retirement immediately. (The proposals also include additional taxes on consumers but not businesses.) 

And third: the newly-elected Greek government, led by Alexis Tsipras of the Syriza party, ran on a platform of rejecting any further budget concessions and compromises. This turned out to be an extremely successful political strategy: the party won 149 out of the 300 seats in the Greek Parliament in what is regarded as a rousing popular mandate.

Negotiations predictably broke down, and now the Syriza leaders are asking the Greek citizens to vote on whether they will accept or reject the austerity measures that the EU creditors are demanding. Polls suggest that the voters would like to keep their country in the Eurozone but that they oppose any additional budget reductions. In other words, nobody knows how the referendum will end. If the citizens of Greece reject austerity, it will present the European Union with a difficult choice: back down and continue to help Greece ease out of the crisis (which would be politically difficult to sell, especially to German voters), or deny the concessions that Greece needs, and effectively force Greece out of the Eurozone.

If the latter happens, then the future becomes a bit murky. Greek banks have been shut down in advance of the July 5 vote, strongly suggesting that Greek leaders, holding a “no” vote, would no longer use the euro as its currency. They would print drachmas, which, in those frozen bank accounts, would replace euros at par. The drachmas would immediately lose value on the international markets, which would allow Greece to undercut its competitors in the export markets. Meanwhile, Greece could default on all or portions of its debt, and offer to pay drachmas instead.

Who loses in this scenario? Everybody. The European banks holding Greek debt, and private investors, are the obvious losers. But closer to home, any Greek citizen who didn’t get his/her money out of the bank before the freeze will have to accept a haircut on the deposits, as drachmas will inevitably be worth less than euros.

At the same time, many Greek banks are holding massive amounts of Greek government debt, which they need as collateral for European Central Bank loans that are keeping THEM (the banks) afloat. Alternatively, Greece could offer everyone 50-70 cents on the dollar in debt repayments, and would probably get mostly takers from creditors who would like to put this whole saga behind them.

Do YOU lose in any of these scenarios? If either side blinks, then the situation goes back to business as usual. If Greek voters agree to give the EU what it wants, then some economists believe that the Greek economy will go into a steep recession, but your personal exposure to Greek companies is almost certainly minimal, and the problem will be temporary.

If Greek voters vote “no,” the EU negotiators remain intractable and Greece leaves the Eurozone, then you can expect breathless and sometimes scary headlines and short-term turmoil in European stocks, with some investors panicking and others uncertain. But the smart money says that the Eurozone is strong enough to sustain the loss of one of its smallest economies, and Greece, too, will survive. 

The irony, which nobody seems to have noticed, is that after accepting many of the earlier austerity measures, the Greek government is actually running a budget surplus without the debt payments—something U.S. citizens can only dream of. If the additional austerity measures do, eventually, get put in place, the subsequent recession would reduce tax receipts and push Greece back into deficits again. 

Edward J. Kohlhepp, CFP^®, ChFC, CLU, CPC, MSPA

 

 

http://www.facebook.com/pages/Kohlhepp-Investment-Advisors/143204745739600

Please contact us whenever there are any changes to your financial situation, personal situation or investment objectives

Sources: This material was prepared by BobVeres.com., and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. Please note - investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.

http://confluenceinvestment.com/assets/docs/2015/daily_Jun_29_2015.pdf

http://www.zerohedge.com/news/2015-02-03/who-owns-greek-debt-and-when-it-due

http://www.washingtonpost.com/blogs/wonkblog/wp/2015/06/25/europe-strikes-back-it-seems-to-be-trying-to-push-greece-

March, 2015

You may have read last week that the U.S. stock market took a tumble based on what would seem like really good news: that the U.S. unemployment rate is falling faster than anybody expected. If you’re scratching your head, you’re not alone.

First, let’s focus on the good news and what it may mean. At the beginning of 2015, there were 3 million more Americans at work than the year before. The unemployment rate had fallen to 5.5%—a level that economists at the International Monetary Fund had projected that the U.S. wouldn’t achieve until 2018 at the earliest. 

Then came the U.S. Bureau of Labor Statistics report for February, which showed a seasonally-adjusted increase of 295,000 jobs (nonfarm payroll employment), well ahead of projections. As you can see from the chart, America has not only pulled out of the long unemployment slump triggered by the Great Recession; it is now creating jobs faster than at any time since 2000, roughly equal to the go-go economy of the late 1990s. The government report noted that there are 1.7 million fewer unemployed persons today than there were at this time last year. More importantly, perhaps, there are 1.1 million fewer people in the “long-term unemployed” category, which is now down to 2.7 million overall.

How can this be considered bad news for U.S. stocks? There are three possible explanations. First, the labor markets may be creeping toward that place where businesses have to compete for talent and pay their workers higher wages. When payrolls go up, it eats into corporate profits. There is little direct evidence this is happening yet—overall, wages are up just 2% in the past year, roughly even with inflation. But there are reports that small business employers have more unfilled job openings than at any time since April 2006. Meanwhile, the average workweek is inching up, which suggests that companies need people at their desks longer than they did before. 

If the unemployment rate hits 5.4%—which could happen this Spring—then our economy will have reached what Federal Reserve economists consider to be “full employment.” This, of course, does not mean what those words actually say; it is a coded way of saying that the balance of negotiating power will have started to shift from employers to workers.

Reason number two is bond rates. While stocks were tumbling last week, bond yields were moving in the opposite direction in what was described as the biggest one-day selloff since November 2013. The yields on 10-year Treasuries rose from 2.11% to 2.239% in a single day. As bonds become more competitive with stocks, demand for stocks goes down—and so do stock prices. Interestingly, the stocks with the highest dividends tended to be the biggest losers in the selloff, suggesting that some investors who were temporarily relying on stocks for income are shifting back to bonds.

But perhaps the biggest reason for the market’s angst is concern about the next move by Federal Reserve Board. Fed chairperson Janet Yellen has made it clear that the health of the U.S. labor market will factor into her decision on when to finally allow short-term interest rates to rise. The good unemployment news could accelerate that schedule; at the worst, it probably confirms the current unofficial timetable of graduated rise beginning in June. For the impact that would have, go back to reason number two.

How credible are these three concerns? Should we be worried? It’s helpful to remember that higher employment means more money in the pockets of consumers, which can trigger a virtuous circle of more spending, more corporate revenues, a healthier economy. We’ve learned from past experience that the stock market is easily spooked by shadows and headlines, by good news as well as bad news. Bond rates are still pretty low compared with historical numbers, and the possible threat of higher payrolls is not exactly the same as seeing them show up in the actual workforce. (Remember those 2.7 million long-term unemployed workers still searching for any kind of a paycheck.) 

Short-term traders, who measure their investment horizon on the second hand of their watch, can panic if they want to. Those of us who measure our investment horizon with a calendar should be celebrating another milestone in the U.S. economy’s long and fitful recovery.

Sincerely,

Edward J. Kohlhepp, CFP^®, ChFC, CLU, CPC, MSPA

Edward J. Kohlhepp, Jr., CFP^®, MBA

http://www.facebook.com/pages/Kohlhepp-Investment-Advisors/143204745739600

Please contact us whenever there are any changes to your financial situation, personal situation or investment objectives

This material was prepared by BobVeres.com., and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. Please note - investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.

                                                                                                                                                                                  March, 2015

Most people think of the major stock indexes as a stand-in for a certain sector or category. The S&P 500 represents large companies, the Russell 2000 tells you what small capitalization stocks are doing, and the Dow represents broad economic sectors. You see tables showing the return of these indices over decades of time, and you might assume that they are made up of the same stocks during that time period, instead of trading in and out of stocks like a mutual fund.

But in fact, all of these indices are somewhat actively-managed, in the sense that they move stocks in and out of the index on a regular basis. This became news when the Dow Jones Industrial Average decided to add the biggest company in the world—Apple—to its mix of 30 stocks, replacing AT&T. The Dow has changed slowly but regularly over time; of the 12 stocks in the index when it was announced in 1907, only General Electric remains on the list. Only four companies remain from the 1935 list: GE, DuPont, ExxonMobil and Procter & Gamble. 

Since 2010, some notable names were dropped: The New York Times Company, Tribune Co, Office Depot, Eastman Kodak, Qwest Communications, Bethelehem Steel, Owens-Illinois, Novell, Radio Shack, National Semiconductor, Janus Capital Group, Sara Lee Corp, Sears Holding Corp., H. J. Heinz, Sprint Nextel, Advanced Micro Devices, J.C. Penney, Abercrombie & Fitch, U.S. Steel Corp., and Safeway, Inc. 

How will substituting Apple for AT&T affect the Dow? Since the Dow is weighted according to the share price of each stock, we can expect movements in Apple stock to greatly affect how the Dow performs going forward. When Visa International undergoes its anticipated four-for-one stock split, Apple’s $100 shares will become the biggest component of the Dow, and a $10 drop or rise could lead to a 100-point movement in the overall index. A $33 stock like AT&T would have been far less likely to rise or fall by that dollar amount.

Bigger picture, when you look at the long-term performance of an index, remember that this is not achieved with the same mix of stocks throughout that history. The indices may “trade” more slowly than most mutual funds, but they’re turning over their portfolios over time as well.

Sincerely,   

Edward J. Kohlhepp, CFP®, ChFC, CLU, CPC, MSPA

Edward J. Kohlhepp, Jr., CFP®, MBA

 

 

http://www.facebook.com/pages/Kohlhepp-Investment-Advisors/143204745739600 

Please contact us whenever there are any changes to your financial situation, personal situation or investment objectives. 

 

http://www.investmentnews.com/article/20150306/FREE/150309932/apple-joining-dow-could-leave-clients-overexposed-to-tech-giant?NLID=daily&NL_issueDate=20150306&utm_source=Daily-20150306&utm_medium=in-newsletter&utm_campaign=investmentnews&utm_term=text

http://beginnersinvest.about.com/od/marketsexchangeindices/a/dow-jones-industrial-average.htm?utm_term=what%20stocks%20are%20in%20the%20dow%20jones&utm_content=p1-main-1-title&utm_medium=sem&utm_source=msn&utm_campaign=adid-0ab65503-ca11-4a7d-b1d6-cd786bfd6d2c-0-ab_msb_ocode-22879&ad=semD&an=msn_s&am=broad&q=what%20stocks%20are%20in%20the%20dow%20jones&dqi=how%2520many%2520stocks%2520in%2520the%2520dow%2520jones%2520industrial%2520average%253F&o=22879&l=sem&qsrc=999&askid=0ab65503-ca11-4a7d-b1d6-cd786bfd6d2c-0-ab_msb

http://en.wikipedia.org/wiki/List_of_S%26P_500_companies

http://en.wikipedia.org/wiki/Dow_Jones_Industrial_Average

This material was prepared by BobVeres.com., and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. Please note - investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.