Hagen Financial Network, Inc.

Monday, November 02, 2015

Keep your eyes on the data - and more in today's PEEK of the WEEK Financial Newsletter from Hagen Financial Network

Peek of the Week

November 2, 2015

The Markets

Keep your eyes on the data.

There was much to be said for U.S. stock markets’ performance during October. Both the Dow Jones Industrial Average and the Standard & Poor’s 500 Index delivered their best monthly performance in four years, according to Barron’s.

Any celebration of strong market performance was cut short when the Commerce Department’s estimate of third quarter U.S. gross domestic product (GDP) growth was released last week. GDP was in positive territory, up 1.5 percent for the period, but growth fell short of second quarter’s 3.9 percent, according to the BBC.

The primary reason for the decline was falling inventories. During third quarter both individuals and companies were worried about a possible slowdown in global growth. The Economist reported one reason companies may have reduced inventories is because they feared demand for goods would not be strong if the world economy weakens. That didn’t prove out as sales of American goods and services grew by 3 percent during the third quarter. When inventories are excluded, U.S. GDP growth was 2.9 percent, which many experts would say is pretty healthy growth.

Consumer spending comprises a much bigger part of U.S. GDP (68 percent) than does private investment by businesses and financial institutions (17 percent). Consumer spending numbers also were released last Friday and showed a 0.1 percent increase, which was smaller than many had expected. Experts cited by BloombergBusiness suggest that number could move higher if wages improve. The Economist concurred:

“…if the American consumer defies firms’ gloomy forecasts and continues to spend, investment will eventually return. There is good reason to believe that will happen. In cash terms, disposable personal income grew at an annualized pace of 4.8 percent, helped by cheap fuel. Consumers are more confident about their personal finances than at any time since 2007, according to the University of Michigan’s latest survey.”

Stay tuned. Information about U.S. jobs will be released next week. In theory, each piece of data should help investors gain a better understanding of what’s happening economically.

Data as of 10/30/15	1-Week	Y-T-D	1-Year	3-Year	5-Year	10-Year
Standard & Poor's 500 (Domestic Stocks)	0.2%	1.0%	4.3%	13.8%	11.9%	5.6%
Dow Jones Global ex-U.S.	-0.7	-3.2	-5.3	2.9	0.4	1.8
10-year Treasury Note (Yield Only)	2.2	NA	2.3	1.7	2.6	4.6
Gold (per ounce)	-1.6	-4.8	-5.0	-12.7	-3.4	9.3
Bloomberg Commodity Index	0.0	-16.2	-25.9	-15.0	-10.0	-6.2
DJ Equity All REIT Total Return Index	-0.7	1.7	6.2	11.4	11.8	7.7

S&P 500, Dow Jones Global ex-US, Gold, Bloomberg Commodity Index returns exclude reinvested dividends (gold does not pay a dividend) and the three-, five-, and 10-year returns are annualized; the DJ Equity All REIT Total Return Index does include reinvested dividends and the three-, five-, and 10-year returns are annualized; and the 10-year Treasury Note is simply the yield at the close of the day on each of the historical time periods.

Sources: Yahoo! Finance, Barron’s, djindexes.com, London Bullion Market Association.

Past performance is no guarantee of future results. Indices are unmanaged and cannot be invested into directly. N/A means not applicable.

most Americans agree. In a recent newsletter, Jeremy Grantham of GMO, a global investment management firm, discussed research on wealth inequality conducted by Duke University Professor of Psychology and Behavioral Economics, Dan Ariely, and Professor of Business Administration at the Harvard Business School, Michael Norton. Grantham wrote:

“The title of the article pretty much says it all: “Americans want to live in a much more equal country (they just don’t realize it)”. The guts of the data is a survey of over 5,000 Americans, carefully selected to be a balanced representation of the population. They were first asked how equal they believed a society should be in income and capital, and then asked how equal they believed it was in real life… Self-identification as Republican or Democrat made surprisingly little difference. The exhibit’s real shocker is the actual distribution of wealth, which is far worse than the participants believed and far, far worse than they believed to be fair.”

Study participants were given a choice of three wealth distribution models and the directive to “imagine that if you joined this nation, you would be randomly assigned to a place in the distribution, so you could end up anywhere in this distribution, from the very richest to the very poorest.”

So, what did Americans want?

Overall, study participants chose imperfect wealth distribution over perfect wealth distribution. However, more than 90 percent of Republicans and more than 90 percent of Democrats preferred a model with more equal distribution of wealth (11 percent in the poorest quintile, 21 percent in the second poorest, 15 percent in the next, 36 percent in the second richest, and 18 percent in the richest quintile) than the actual wealth distribution in the U.S. at the time (84 percent in the poorest quintile, 11 percent in the second poorest, 4 percent in the next, 0.2 percent in the second richest, and 0.1 percent in the richest quintile). Estimates of ideal wealth distribution were relatively similar across gender and income levels, as well.

Weekly Focus – Think About It

“I think the American Dream used to be achieving one's goals in your field of choice – and from that, all other things would follow. Now, I think the dream has morphed into the pursuit of money: Accumulate enough of it, and the rest will follow.”

--Buzz Aldrin, American engineer and former astronaut

Best regards,

Leif M. Hagen

Leif M. Hagen, CLU, ChFC

LP Financial Advisor

Securities offered through LPL Financial Inc.,

Member FINRA/SIPC.

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* This newsletter was prepared by Peak Advisor Alliance. Peak Advisor Alliance is not affiliated with the named broker/dealer.

* The Standard & Poor's 500 (S&P 500) is an unmanaged group of securities considered to be

representative of the stock market in general. You cannot invest directly in this index.

* The Standard & Poor’s 500 (S&P 500) is an unmanaged index. Unmanaged index returns do not reflect fees,

expenses, or sales charges. Index performance is not indicative of the performance of any investment.

* The 10-year Treasury Note represents debt owed by the United States Treasury to the public. Since the U.S.

Government is seen as a risk-free borrower, investors use the 10-year Treasury Note as a benchmark for the long-term bond market.

* Gold represents the afternoon gold price as reported by the London Bullion Market Association.

The gold price is set twice daily by the London Gold Fixing Company at 10:30 and 15:00 and is expressed in U.S. dollars per fine troy ounce.

* The Bloomberg Commodity Index is designed to be a highly liquid and diversified benchmark for the commodity futures market. The Index is composed of futures contracts on 19 physical commodities and was launched on July 14, 1998.

* The DJ Equity All REIT Total Return Index measures the total return performance of the equity subcategory of the Real Estate Investment Trust (REIT) industry as calculated by Dow Jones.

* Yahoo! Finance is the source for any reference to the performance of an index between two specific periods.

* Opinions expressed are subject to change without notice and are not intended as investment advice or to predict future performance.

* Economic forecasts set forth may not develop as predicted and there can be no guarantee that strategies promoted will be successful.

* Past performance does not guarantee future results. Investing involves risk, including loss of principal.

* You cannot invest directly in an index.

* Consult your financial professional before making any investment decision.

* Stock investing involves risk including loss of principal.

* To unsubscribe from the “Peek of the Week”, please reply to this email with “Unsubscribe” in the subject line, or write us at: Hagen Financial Network, Inc. 4640 Nicols Road, Suite 203; Eagan, MN 55122.

Sources:

http://www.barrons.com/articles/stock-market-climbs-8-for-october-1446268758?mod=BOL_hp_we_columns (or go to http://peakclassic.peakadvisoralliance.com/app/webroot/custom/editor/11-02-15_Barrons-Stock_Market_Climbs_8_Percent_for_October-Footnote_1.pdf)

http://www.bbc.com/news/business-34667254

http://www.economist.com/news/business-and-finance/21677351-output-growth-slowed-sharply-october-americans-are-still-spending-americas?zid=295&ah=0bca374e65f2354d553956ea65f756e0 (or go to http://peakclassic.peakadvisoralliance.com/app/webroot/custom/editor/11-02-15_TheEconomist-Americas_Economy_is_Stronger_than_Sluggish_GDP_Figures_Suggest-Footnote_3.pdf)

http://www.bloomberg.com/news/articles/2015-10-30/consumer-spending-in-u-s-rose-less-than-forecast-in-september

https://www.gmo.com/docs/default-source/public-commentary/gmo-quarterly-letter.pdf?sfvrsn=16 (or go to http://peakclassic.peakadvisoralliance.com/app/webroot/custom/editor/11-02-15_GMO_Quarterly_Letter-2nd_Qtr_2015-Footnote_5.pdf)

http://www.people.hbs.edu/mnorton/norton%20ariely%20in%20press.pdf

http://www.theatlantic.com/business/archive/2012/08/americans-want-to-live-in-a-much-more-equal-country-they-just-dont-realize-it/260639/

http://www.brainyquote.com/quotes/quotes/b/buzzaldrin679973.html?src=t_american

Monday, October 26, 2015

IT’S IMPORTANT TO ASK THE RIGHT QUESTIONS - that and more in today's PEEK of the WEEK news!

Peek of the Week

October 26, 2015

The Markets

Central banks were at it again – and markets loved it.

Last week, European Central Bank (ECB) President Mario Draghi surprised markets when he indicated the ECB’s governing council was considering cutting interest rates and engaging in another round of quantitative easing. The Economist explained European monetary policy was heavily tilted toward growth before the announcement:

“The ECB is already delivering a hefty stimulus to the Euro area, following decisions taken between June 2014 and early 2015. It has introduced a negative interest rate, of minus 0.2%, which is charged on deposits left by banks with the ECB. It has also been providing ultra-cheap, long-term funding to banks provided that they improve their lending record to the private sector. And, most important of all, in January it announced a full-blooded program of quantitative easing (QE) – creating money to buy financial assets – which got under way in March with purchases of €60 billion ($68 billion) of mainly public debt each month until at least September 2016.”

Despite these hefty measures, recovery in the Euro area has been anemic, and deflation remains a significant issue. According to Draghi, Euro area QE is expected to continue until there is “a sustained adjustment in the path of inflation.” Europe is shooting for 2 percent inflation, just like the United States.

The People’s Bank of China (PBOC) eased monetary policy last week, too. On Monday, data showed the Chinese economy grew by 6.9 percent during the third quarter, year-over-year. Projections for future growth remain muted, according to BloombergBusiness. On Friday, the PBOC indicated it was cutting interest rates for the sixth time in 12 months.

U.S. markets thrilled to the news. The Dow Jones Industrial Average, Standard & Poor’s 500 Index, and NASDAQ were all up more than 2 percent for the week. Many global markets delivered positive returns for the week, as well.

Data as of 10/23/15	1-Week	Y-T-D	1-Year	3-Year	5-Year	10-Year
Standard & Poor's 500 (Domestic Stocks)	2.1%	0.8%	6.4%	13.7%	11.9%	5.6%
Dow Jones Global ex-U.S.	0.6	-2.5	-3.3	3.2	0.4	2.0
10-year Treasury Note (Yield Only)	2.1	NA	2.3	1.8	2.6	4.5
Gold (per ounce)	-1.7	-3.2	-5.8	-12.1	-2.8	9.6
Bloomberg Commodity Index	-2.6	-16.2	-25.4	-15.4	-9.8	-6.4
DJ Equity All REIT Total Return Index	1.2	2.4	8.1	11.6	11.7	7.9

Sources: Yahoo! Finance, Barron’s, djindexes.com, London Bullion Market Association.

Past performance is no guarantee of future results. Indices are unmanaged and cannot be invested into directly. N/A means not applicable.

it’s important to ask the right questions. A recent article in The Economist examined the “gig” economy. You know, people selling crafts online, offering their services as taxi drivers, renting their cars and spare bedrooms for short periods. Some folks even rent space on their driveways to commuters. It’s that old American ingenuity and, as it turns out, it’s difficult to quantify.

Analysts expected this employment revolution to be reflected in self-employment statistics. However, the self-employment rate in the United States has declined during the past two decades, according to Pew Research.

Why would self-employment be falling when more people appear to be offering services independently? The Wall Street Journal suggested several possibilities: 1) The gig model might not be prevalent even though some headline-grabbing companies rely on it; 2) It’s possible gig companies operate in industries that have always depended on independent contractors; or 3) people who do this work may report they are employees of the firms they work for rather than independent contractors.

The Economist concurred with the last, suggesting that people do not consider their gigs to be work. If that’s the case, then governments may not be asking the right questions when they try to assess the situation. A British survey that focused its queries on alternative employment found that about 6 percent of respondents participated in the gig economy.

Does it matter? Should anyone be concerned the dimensions of this segment of the economy are relatively unknown? The Economist suggests it is important:

“Measuring the gig economy matters. To get a clear picture on living standards, you need to understand how people combine jobs, work, and other activities to create income. And, this gets to the crucial question of whether the gig economy represents a positive or negative development for workers. All this makes it important for official agencies to have a go at measuring it.”

What’s the solution? The Wall Street Journal suggested the U.S. Congress might want to reconsider funding the U.S. survey of Contingent and Alternative Employment Arrangements. The last time it was conducted was 2005.

Weekly Focus – Think About It

“The function of education is to teach one to think intensively and to think critically. Intelligence plus character – that is the goal of true education.”

--Martin Luther King, Jr., Civil rights activist

Best regards,