Market Watch: All Eyes on Russia As Ruble Crumbles

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December 16, 2014

As the U.S. stock market opened Tuesday trying to avoid another day in the red, a new obstacle appeared overseas.

The Russian ruble continued to tumble Tuesday morning, following its worst session in 15 years Monday. Even a late-night action by the Central Bank of Russia (CBR) to raise interest rates failed to halt the slide.

While Americans slept Monday night, the CBR was hiking interest rates from 10.5 percent to an astounding 17 percent to try to reverse the ruble’s freefall. The ruble rebounded to about 60.00 against the U.S. dollar, but according to CNBC fell to a new record-low of 73.17 by this morning.

Of course, the X-factor in all of this is oil prices, as investors acknowledged that if the price of oil—Russia’s main export—continues to fall, there will be little that any central bank policy can do to help the situation. The Russian economy, already predicted to fall into recession in 2015, now faces what many experts feel is a ‘panic’ situation. Late in the day on Tuesday came news that President Barack Obama is likely to sign a bill approving additional sanctions against Russia by the end of the week, suggesting that this crisis is far from over.

On Wall Street, the markets moved lower off news of Russia’s troubles and further declines in oil this morning. The Dow moved into technical ‘pullback’ territory (defined as a reduction of at least 5% from previous highs) while the S&P 500 moved dangerously close to that level.

Here were the final numbers from Wall Street on Tuesday:

Dow Jones Industrial Average: 17,068.87 (-111.97)

NASDAQ: 4547.83 (-57.32)

S&P 500: 1972.74 (-16.89)

Market Watch: Worst Week of 2014 on Wall Street

By

Phil Cannella

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December 12, 2014

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The continued fall of oil prices was the big story on the markets this week. It was Wall Street’s worst week of 2014, and the Dow’s worst week in three years, as it dropped 683 points!! Lower gasoline prices may be keeping more money in your pockets, but oil has started taking its toll on Wall Street! Let’s look at our week in review…

Monday, stocks started down as the markets finally felt serious effects from declining oil prices. Oil has been in steep decline since mid-August, but as it reached a new low of $63 dollars per barrel Monday, stocks were slammed throughout the day, particularly in the energy sector. For the day, the Dow was down 106 points.

Tuesday, markets continued downwards as part of a global rout. It wasn’t a good day for the market in the U.S., but it was MUCH worse overseas. Chinese equities saw a 5 percent decline, while political strife led to an 11 percent nosedive in Greece. With global concerns in focus, the Dow dropped 57 points for the day.

Wednesday, stocks had their worst day in almost two months, as oil continued its downturn, nearing the $60 dollar per barrel mark many had identified as a “panic” point. Low oil prices are great for consumers at the pump, but evidently not such a hit on Wall Street, as the Dow dropped 268 points for the day.

Thursday, stocks bounced back on word of strengthening retail numbers, and investors were all too happy to embrace any good news after the 431-point drop of the first three days of the week. However, late in the day oil prices fell BELOW the $60 dollar per barrel benchmark, slowing the market’s momentum. The Dow was up 63 points for the day.

Friday, oil prices continued their decline, and stocks followed suit, dropping the Dow more than 200 points before noon! Consumer reports trended positive, but it wasn’t enough to stem the tide. When all was said and done, it was the Dow’s worst day of the fall season as it fell 315 points on the day.

Dow Jones Industrial Average: 17,280.83 (-3.78% this week)

NASDAQ: 4,653.60 (-2.66% this week)

S&P 500: 2,002.33 (-3.52% this week)

Market Watch: Concerns in China Send Markets Lower

By

Phil Cannella

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December 9, 2014

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Monday was a rough day for U.S. markets, but it appears this morning as though that may be just the start of a disastrous week for equities.

Tuesday saw a global rout on stocks around the world, as the eight largest indexes in Europe all dropped at least 2 percent. But it was nothing compared to China, where the Shanghai Composite Index tanked by 5.3 percent. The sell-off came after banks toughened collateral rules for short-term loans, indicating the Chinese economy is slowing at a faster pace than expected.

Within 90 minutes of the opening bell, U.S. markets clearly reflected the global fears:

Dow Jones Industrial Average: 16658.85 (-1.08%)

S&P 500: 2039.68 (-1.00%)

NASDAQ: 4697.14 (-0.92%)

And it’s not over yet. Concerns continued over dropping oil prices, plus statements on federal budget and consumer confidence numbers are due later this week. It’s shaping up to be an interesting holiday season on Wall Street.

How’s Your Retirement Literacy?

By

Phil Cannella

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December 5, 2014

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Would you rather be confident—but ultimately wrong—or admit you need the specialized expertise that could save your retirement?

It’s not unusual to see studies showing a lack of retirement know-how among working Americans. But researchers figured when they narrowed the pool of respondents to those currently in or near retirement age, the results would improve.

So imagine the disappointment of experts at the American College of Financial Services in Bryn Mawr, Pa. They recently conducted a ‘retirement literacy’ poll of over 1,000 people between the ages of 60-75 years old—and found that only 20% could muster a passing grade.

Those who participated in the survey were asked 38 questions on what experts consider ‘retirement literacy basics.’ The inquiries covered topics including Social Security, life expectancy, IRAs and life insurance.

“I wouldn’t say we’re surprised by the results,” admitted Jamie Hopkins, Assistant Professor of Taxation at the American College. “In general, we know that people lack knowledge when it comes to retirement income and planning. But we did hope that this particular group might fare a little better on the test.”

In this recent, exclusive interview for The Crash Proof Retirement Show, Jamie Hopkins discussed his passion for preparing individuals for their retirement.

[click Play button above to hear a clip from Phil Cannella’s interview with Jamie Hopkins]

But as he indicates, this is not the first report to raise concerns about Americans’ readiness for their golden years. But with the prevalence of company-approved 401(k) plans and IRAs in today’s world, more and more people are ‘on their own’ when it comes to retirement.

“The one thing that was really surprising to me was the confidence people expressed,” said Professor Hopkins. “We had people respond to these questions, and they were confident in their knowledge—but in reality, they didn’t know. They were getting the answers wrong.”

“A lot of Americans—of all ages—didn’t have the best financial role models,” personal finance guru Lynette Khalfani-Cox told USA Today. “Nor do we get any formal training or teaching in the area of investments, Social Security, long-term care and related topics. It’s very difficult for the average 60-year-old to stay on top of the stock market, to fully understand the variety of annuities offered in the marketplace, and to also navigate issues like life insurance, taxes and medical insurance planning.”

Jamie Hopkins added that the survey underlines the clear need for Americans to begin their retirement-specific education at a younger age. He also pointed to financial advisors as a group who could do a better job in this area.

In another clip taken from his recent interview on The Crash Proof Retirement Show, Professor Hopkins shared his personal advice for retirement preparedness.

[click Play button above to hear a clip from Phil Cannella’s interview with Jamie Hopkins]

For Professor Hopkins, who serves as the Assistant Director of the New York Life Center for Retirement Income, the results of this latest poll proves that the specialized knowledge of Retirement Phase Advisors is paramount to improving the retirement literacy of Americans.

“People just aren’t armed with the knowledge they need on insurance, Social Security and annuities,” he summarized. “They need access to someone who does understand, someone who can show them what they don’t know.”

22 Percent of Americans Would ‘Rather Die’ Than Retire Poor

By

Phil Cannella

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December 1, 2014

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A recent study conducted by Wells Fargo illustrates just how nervous—and unprepared—the everyday American is for retirement.

In the Wells Fargo Middle Class Retirement Survey, some 22 percent of middle-class Americans indicated that they would prefer to ‘die early’ over living well into retirement without the means to preserve their standard of living. Moreover, almost half of respondents said they won’t have enough money to live on should they stop working.

For the purposes of this survey, ‘middle-class’ was defined as households with incomes between $50,000 and $100,000. There is no single statistical definition of middle class in the United States, but most economists agree that a household earning $100,000 would be, at the very least, the high end of middle class. According to the Huffington Post, the current United States median household income is $51,900.

Given the difficulty of defining middle class—and the fact that the figures used in this survey are high estimates—the following statistics carry even more weight:

19 percent of middle-class Americans have no retirement savings whatsoever
30 percent think that Social Security will be their primary source of retirement income
34 percent say they are not currently saving for retirement
Perhaps the scariest figure of all—41 percent of Americans between ages 50-59 are not saving for retirement

Based on these numbers, it’s easy to conclude that most middle-class retirees will be unable to match their current standard of living in retirement—if they retire at all. The median amount of money saved for retirement across all age groups was around $20,000.

The numbers get worse, however, when you narrow your focus to people between the ages of 50-59. People in that age bracket reported saving a median amount of $78 monthly for retirement—that’s less than $1,000 per year. This is despite the fact that they clearly realize this amount won’t be nearly enough—the median response to “how much money do you expect to need in retirement?” was $250,000.

Additionally, while 48 percent of respondents said they would not have enough money to live the lifestyle they prefer in retirement, that number jumps to 71 percent of people between ages 50-59. One in three people ages 40 and older replied that they ‘get depressed’ when thinking about the reality of their lives in retirement.

Add it all up, and your result is almost one-quarter of Americans saying they would prefer death to a lower standard of living in their golden years. Hopefully, future generations will heed these warnings and start saving earlier in life—but for now, it’s apparent that middle-aged people in this country are in the midst of a legitimate retirement crisis.

Market Highs Fail to Impact Consumer Sentiment

By

Phil Cannella

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November 26, 2014

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Wall Street has plenty to be thankful for this Thanksgiving. Stocks continue to break records, even as the recent rally slows considerably. On Monday, the S&P 500 broke its all-time high for the 43^rd time in 2014.

But Tuesday morning’s economic reports cast a cloud over the market. The good news came first, as GDP grew at a slightly-better-than expected 3.9 percent in the third quarter. Hours later, however, the Consumer Confidence Survey came in at 88.7—down markedly from a 94.1 reading in October. The rating was the lowest figure since June.

Maybe the most troubling part of the report was the fact that the results completely blindsided analysts and experts, who had projected a 96.0—which would have been the highest rating in seven years. Instead, they received the lowest rating in months.

The news couldn’t have come at a worse time, with the unofficial kickoff to the holiday season just days away. A recent Gallup survey indicated that a slight increase in holiday spending was expected in 2014, with the average American spending $720 on Christmas shopping—as opposed to $704 last year. The survey described this potential outcome as an ‘OK’ result for retailers—but this survey was released before the disappointing consumer figures.

Results from the poll are available from as far back as 1999. Gallup conducts its poll by randomly selecting just over 1,000 Americans and asking them how much they plan to spend this holiday season. But Gallup conducts the poll twice—once in October, and once in November.

A closer look at the survey reveals even more troubling figures. The double polls (October/November) have taken place since 2006. Interestingly, people have scaled back their expectations in eight out of the nine years—meaning their projected spending was higher in October than in November. On average, the projected spending amount dropped $56 in that one-month interval over the nine-year period.

Record highs on Wall Street did nothing to impact consumer sales projections this year, as responses to the November survey were down $61 from an average of $781 per shopper in October.

Looking back at 1999, the first year of available survey results, shoppers expected to spend $857 on Christmas gifts that year. 15 years later, that figure still stands as the second-highest projection over the life of this survey—just behind 2007, when shoppers predicted they’d spend an average of $866 each, right before the Great Recession hit and turned everything upside-down.

The next year, 2008, had the lowest projected spending total at $616—a drop of exactly $250 per shopper in just one year’s time. Six years later, projections haven’t even recovered half of that deficit.

This week’s double dose of disappointing consumer analysis further illustrates the illusion of stock market highs, and the continued disconnection between Wall Street statistics and Main Street sales. Record highs, as usual, have done nothing to put more money in the average consumer’s pocket.

Taking Obama To Court

By

Phil Cannella

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November 24, 2014

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Capitol Hill was rocked late last week by news that House Republicans were pursuing legal action against the Obama administration. The president’s use of executive authority pertaining to both healthcare and immigration was the motivation for the lawsuit, according to Speaker John Boehner (R-Ohio).

“Time after time, the president has chosen to ignore the will of the American people and rewrite federal law on his own without a vote of Congress,” Boehner said in a statement. “That’s not the way our system of government was designed to work.”

The action was filed Friday afternoon in U.S. District Court. While the lawsuit is not pertinent to immigration, the fact that it was filed the morning after Obama announced sweeping changes to immigration policies—via further executive action—suggests that decision might have been the last straw.

“If the president can get away with making his own laws, future presidents will have that ability as well,” continued Boehner. “The House has an obligation to stand up for the Constitution, and that is exactly why we are pursuing this course of action.”

What are executive actions?

An executive order, essentially, is a formal directive from the President to the rest of the federal government. These orders, like other forms of laws, can be struck down by the judicial branch or by Congress.

By comparison, an executive action is more of a ‘wish-list’ item; a vague term that can be used to describe anything a President does. Think of executive actions as personal priorities.

That’s part of what makes Obama’s initiative from last week so complicated. In announcing that up to 5 million undocumented residents would be granted temporary legal status in the United States, President Obama took executive action—but never signed an official order. That places the onus on Congress to pass a law restricting or reversing Obama’s action—a measure Obama challenged Speaker Boehner to take.

“Pass a bill,” Obama demanded on ABC’s This Week. “Congress has a responsibility to deal with these issues and there are some things that I can’t do on my own.”

But is it constitutional? There is nothing in the United States Constitution that explicitly allows executive orders. And as we’ve discussed, executive action is an informal concept. The closest language appears in Article II, Section 1, Clause 1 and reads, simply:

The executive Power shall be vested in a President of the United States of America.

However, that executive power is defined in the Constitution as a responsibility to “execute the instructions of Congress” which has the exclusive power “To make all laws which shall be necessary and proper for carrying into execution the foregoing powers.”

Even those Americans who support immigration reform don’t seem to believe such action should be unilateral on the President’s part. The Washington Post reported that some 57 percent of those surveyed agreed with creating a law that provides a path to citizenship for undocumented residents. However, only 38 percent approved of Obama’s executive action as a means of achieving this.

VOTE: Are Obama’s Executive Actions Unconstitutional?

The mid-term elections held earlier this month were seen as a sweeping rejection of President Obama’s policies, to which the President replied, “the American people have sent a message, and I hear you.”

President Obama may have heard the voters, but he doesn’t appear to be listening.

Are Regulators Too Cozy with Banks?

By

Phil Cannella

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November 21, 2014

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This morning, the Senate will hold a hearing on the topic of regulatory capture—a term used to describe the often-observed tendency of government officials to become a little too close to the institutions they’re supposed to be regulating.

The impending case made yesterday’s announcement from the Federal Reserve all the more interesting. The Fed declared that they will be launching an internal review of their own processes related to the supervision of United States financial institutions.

The official release from the Board of Governors of the Federal Reserve System declares that at the request of the Board, the Inspector General will be examining two pivotal aspects of the Fed’s review methods:

Whether there are adequate methods for decision-makers at the relevant Reserve Banks and at the Board to obtain all necessary information to make supervisory assessments and determinations;
Whether channels exist for decision-makers to be aware of divergent views among an examination team regarding material issues.

At the same time, the Board plans to assess its own readiness to supervise these powerful institutions. Their review will determine:

Whether the decision-makers at the Board receive the information needed to ensure consistent and sound supervisory decisions regarding the supervision of the largest, most complex banking organizations
Whether adequate methods are in place for those decision-makers to be aware of material matters that required reconciliation of divergent views related to supervision of those firms.

Friday’s hearing will address similar concerns, in the wake of Senator Jack Reed’s (D-RI) introduction of a bill that would require a Presidential appointment and Senate confirmation for future presidents of the New York Federal Reserve.

“If the Governors of the Federal Reserve System are required to be confirmed by the Senate, then the President of the Federal Reserve Bank of New York, who played a central and perhaps more powerful role in overseeing taxpayer dollars during the financial crisis, should also be subject to the same public confirmation process,” said Reed.

William Dudley, the current President and CEO of the Federal Reserve Bank of New York, will be on hand to testify at today’s hearing.

The hearing will also review findings relevant to the case of Carmen Segarra, a former NY Fed examiner. Ms. Segarra was fired in 2012 after refusing to cave to pressure to alter some of her findings from an investigation of Goldman Sachs. According to the New York Times, Segarra secretly recorded approximately 46 hours’ worth of conversations with her peers—meetings that she believes contain pivotal moments that led to her termination.

It remains to be seen what will come of Friday’s hearing as it relates to big banks, regulation, or Carmen Segarra’s experience. Chances are that this hearing will be another step in a long process that’s been ongoing since the inception of the Dodd-Frank Act. But as the new Congress prepares to take office at the beginning of 2015, it’s apparent that financial regulation will be near the top of their ‘to-do’ list.

10 Facts About Long Term Care

By

Phil Cannella

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November 19, 2014

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November marks Long Term Care Awareness Month. Long term care insurance helps individuals cover the expenses of extended hospital stays or moving into assisted living.

With that in mind, Retirement Media Inc. identified the Top 10 Little-Known Facts About Long Term Care Insurance:

Most people associate long-term care insurance exclusively with the elderly. But over 1/3 of long-term care policies are purchased by someone under the age of 65. This coverage is important for all ages.
Long-term care insurance was originally known as nursing home insurance. But today, it can cover everything from home health care to assisted living and even adult day care.
Many health insurance policies do not offer coverage for nursing home stays or assisted living. In addition, they won’t pay for assistive equipment or home modifications and adaptations (such as making your home wheelchair-accessible.
Approximately 60% of people over age 65 will require some sort of extended-stay or long-term care in their lifetimes.
About 40% of people currently receiving long-term care in the United States are between the ages of 18 and 64.
It pays to buy long-term care insurance earlier in life. The costs are usually more economical, plus once a change in health occurs, coverage may not be available.
Many Americans mistakenly believe that Medicare covers all of their long-term care needs. However, most Medicare coverage plans are limited and still require large, out-of-pocket expenditures.
According to Medicare.gov, Medicare Part A (Hospital Insurance) only covers skilled nursing care in a skilled nursing facility “under certain conditions for a limited time.” In many case, the ‘conditions’ are following a hospital stay of greater than three days, and ‘a limited time’ is usually 20 days. Starting on the 21^st day, you are responsible for at least a portion of the costs.
If you leave the skilled nursing facility for more than 30 days, you require another extended hospital stay (again, generally 3+ days as an inpatient) to re-qualify for additional care.
If your doctor or healthcare provider recommends additional services, or more frequent service than Medicare provides, those expenses will have to be paid entirely out of pocket.

Take advantage of this National Long Term Care Awareness Month to educate yourself about the benefits of long-term care insurance, and afford yourself peace of mind for the holiday season and beyond.

Over Half of Americans Disapprove of Obamacare

By

Phil Cannella

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November 18, 2014

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As the Affordable Care Act—or Obamacare—enters its second period of open enrollment, many Americans are already disillusioned with President Obama’s initiative to reform the nation’s healthcare system.

56 percent of those surveyed say they disapprove of the program, the highest disapproval rating since such polling began in late 2012. Only 37 percent indicated that they agree with or approve of the program.

These numbers are sharply down since just one year ago, when some 46% of Americans said they approved of the Act. But late in 2013, many Americans received notice that their current healthcare policies were being cancelled—in stark contrast to Obama’s now-infamous quote, “if you like your healthcare plan, you can keep it.”

(President Obama later clarified that what he’d meant was that Americans could keep their healthcare plans—if those plans didn’t change once the Affordable Care Act was passed.)

The timing for these low approval scores couldn’t be worse for the President, as they come on the heels of midterm elections earlier this month. Those elections went strongly in favor of the Republicans, who now control both houses of Congress. Party leaders have already begun discussing actions that could lead to the repeal of the unpopular law.

While President Obama’s veto power could make repeal difficult, it’s not just Republicans who have issues with the Affordable Care Act. Granted, some 74 percent of Democrats claim they approve of Obama care, as compared to only 8 percent of Republicans. But people who self-identify as Independent approve of the law at only a 33 percent rate. The law has never been particularly popular among these impartial voters, with approval rates fluctuating between 31 and 41 percent since 2012, according to Gallup.

Even at the time of the law’s inception, public opinion was split roughly 50/50 between approval and disapproval. But since sweeping reforms took effect at the beginning of this year, public opinion has plummeted to its current all-time low. Even the President himself has expressed regrets and acknowledged he’s considering reforming or modifying the law in some areas.

https://www.youtube.com/watch?v=OpVE4URj5E4&feature=youtu.be

Thus far, officials claim the open enrollment period is moving smoother than last year. But states like Washington and Maryland have experienced delays due to ongoing system glitches. What’s more, applying for the program doesn’t necessarily mean that users ultimately will enroll. The administration has a long way to go in gaining the public’s trust in Obamacare.

Market Watch: All Eyes on Russia As Ruble Crumbles

Market Watch: Worst Week of 2014 on Wall Street

Market Watch: Concerns in China Send Markets Lower

How’s Your Retirement Literacy?

22 Percent of Americans Would ‘Rather Die’ Than Retire Poor

Market Highs Fail to Impact Consumer Sentiment

Taking Obama To Court

Are Regulators Too Cozy with Banks?

10 Facts About Long Term Care

Over Half of Americans Disapprove of Obamacare

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