PEEK OF THE WEEK
January 8, 2018
Leif Hagen & Donna Roberts
The Markets
Whoosh! Bang! Flash! Fizz! Whistle!
U.S. stock markets delivered
their own version of fireworks to celebrate the New Year. During the first week
of 2018, the Dow Jones Industrial Average hit a new all-time high, moving above
25,000 for the first time ever. The NASDAQ Composite and Standard & Poor’s
500 Indices also rose to new highs.
2018 is off to an impressive
start, but let’s pause for a moment and take a look back at 2017. It was a
memorable year for global markets, but there are other reasons it was
interesting, too. Here are the highlights of a few of The Economist’s most popular articles during the year:
·
The world’s most valuable resource is no longer
oil, but data (May 6). One-half of the
most valuable companies in the world are American technology firms. Some,
including The Economist, are
concerned about tech companies’ market power and dominance of consumer data.
·
The
world’s most dangerous cities (March 31). Despite a declining murder rate,
San Salvador remained the world’s most dangerous city, as measured by homicides
per 100,000 during 2016 (the latest figure available). Acapulco ranked second.
Several cities in the United States made the list including St. Louis,
Baltimore, Detroit, and New Orleans.
·
Governments
may be big backers of the blockchain (June 1). Blockchain may seem
complicated and difficult to understand, but it may become a part of everyday
life. “…a blockchain expert at the Massachusetts Institute of Technology argues
that governments will drive its adoption – an ironic twist for something that
began as a libertarian counter model to centralized authority. Backers say it
can be used for land registries, identity-management systems, health-care
records, and even elections.”
·
The death
of the internal combustion engine (August 12). Rapidly changing battery
technology and electric motors, in tandem with self-driving systems and ride
sharing, may mark the beginning of the end for the internal combustion engine.
It’s a change that is likely to disrupt markets and industries. The silver
lining may prove to be less traffic and improved air quality.
·
How to
keep cool without costing the earth (February 11). Scientists at the
University of Colorado in Boulder have “…invented a film that can cool
buildings without the use of refrigerants and, remarkably, without drawing any
power to do so. Better yet, this film can be made using standard roll-to-roll
manufacturing methods at a cost of around 50 cents a square meter.”
There is a theme that appears to
run through many of these articles. They explore new ways of doing things, such
as cooling buildings and transporting people. The articles discuss the growing
value of consumer data, which many people provide to companies for free, as
well as technologies that may allow people to protect and monetize their data
in the future (blockchain).
These new developments may be
part of a process called creative destruction, which is a process of innovation
that includes the introduction of new products and services that may eclipse
existing ones. You don’t have to look far to find examples. Just think about
the evolution of movie rentals, photography, or phones during the past couple
decades.
Creative destruction was
introduced in 1942 in Joseph Schumpeter’s book, Capitalism, Socialism and Democracy. He believed it was the
essential fact about capitalism. More recently, MIT Professor Ricardo Caballero
wrote, “Over the long run, the process of creative destruction accounts for
over 50 percent of productivity growth.”
It seems, as
Schumpeter suggested, we live in a gale of creative destruction.
Data as of 1/5/17
|
1-Week
|
Y-T-D
|
1-Year
|
3-Year
|
5-Year
|
10-Year
|
Standard & Poor's 500
(Domestic Stocks)
|
2.6%
|
2.6%
|
20.9%
|
10.7%
|
13.4%
|
6.8%
|
Dow Jones Global ex-U.S.
|
2.8
|
2.8
|
25.4
|
7.8
|
5.0
|
0.4
|
10-year Treasury Note (Yield
Only)
|
2.5
|
NA
|
2.4
|
2.0
|
1.9
|
3.8
|
Gold (per ounce)
|
1.6
|
1.6
|
11.9
|
3.2
|
-4.4
|
4.4
|
Bloomberg Commodity Index
|
-0.3
|
-0.3
|
0.5
|
-5.4
|
-8.6
|
-7.3
|
DJ Equity All REIT Total
Return Index
|
-2.1
|
-2.1
|
4.2
|
5.4
|
9.0
|
8.3
|
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.
did
you forget your 401(k) account? Leaving one job and starting another is often exciting. As a new hire, you
may be inundated with meeting new co-workers, figuring out the coffee
situation, understanding expectations, demonstrating your value, and completing
form after form.
Often, people who are starting new jobs forget about the
workplace retirement plan accounts they’ve left behind with a previous
employer. If you’re one of them, it’s a good idea to give that account some
thought. Generally, there are four ways to manage workplace retirement savings.
You can:
1.
Leave the
money in the former employer’s plan. If you leave the money behind, any
growth will continue to be tax-deferred or tax-free, depending on whether you
made Traditional or Roth plan contributions. However, if the plan has a minimum
balance requirement, accounts with less than $5,000 may be transferred to an
IRA and accounts with less than $1,000 may be cashed out, creating a tax
consequence.
2.
Roll the
money into your new employer’s retirement plan. It may be helpful to have
all of your qualified retirement savings in one place. If your new employer’s
plan accepts rollovers without too long a wait, this may be an option. Many
people fail to take this option because completing the paperwork and
coordinating the process can be challenging.
3.
Roll plan
assets into an IRA. Former plan participants may choose to rollover their
401(k) plan savings to a Traditional or Roth IRA. Typically, they can move
Traditional plan assets to Traditional IRAs, Roth plan assets to Roth IRAs, or
Traditional plan assets to Roth IRAs. If they choose the latter, there will be
tax consequences. It’s important to understand IRA assets are typically only
protected in the case of bankruptcy, while 401(k) plan assets are protected
from all creditors, in general.
4.
Take a
cash distribution. You also can choose to have the savings you’ve
accumulated distributed as cash. While this gives you immediate access to the
money, Traditional contributions and Roth earnings are taxable, and 20 percent
may be withheld for tax purposes. Also, participants typically owe a 10 percent
penalty tax, if they are younger than age 59½. Roth contributions may be
exempted if certain criteria are met.*
If you are changing jobs, or you’ve left retirement savings
behind with a former employer, and would like to discuss how to manage those
assets, please give us a call. 401(k) plan savings are an important part of
many retirement plans. Both qualified retirement plans and IRAs typically
involve fees, expenses, and services that should be compared when considering a
qualified plan rollover.
* Generally, Roth IRA contributions are exempt after the
account is at least five years old and the account owner is age 59½.
Weekly
Focus – Think About It
“I offered a definition of bubble that I thought represents
the term’s best use: A situation
in which news of price increases spurs investor enthusiasm which spreads by
psychological contagion from person to person, in the process amplifying
stories that might justify the price increase and bringing in a larger and
larger class of investors, who, despite doubts about the real value of the
investment, are drawn to it partly through envy of others’ successes and partly
through a gambler’s excitement.”
–Robert Shiller, American Nobel Laureate and
Professor of Economics [14]
Leif M. Hagen
Leif M. Hagen, CLU, ChFC
LP Financial Advisor
Securities offered through LPL Financial Inc., Member FINRA/SIPC.
P.S. Please feel free to forward this commentary
to family, friends, or colleagues.
P.S.S. Also,
please remind your friends and family members becoming Medicare eligible that
we offer Medicare insurance and Part D options with NO COST to work with Leif as
their agent
For more information and resources visit our website at www.HagenFN.com
For more information and resources visit our website at www.HagenFN.com
For Medicare supplement and part D information and
resources, please visit MEDICAREforSENIORS.info
Please FOLLOW and “LIKE US” on FACEBOOK.com/HagenFN
Please Read our Blog @ http://HagenFinancialNetwork.blogspot.com
Please Follow our Tweets on Twitter.com/SafeLeif
Check out this: http://www.MedicareForSeniors.info
* 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:
https://www.barrons.com/articles/dow-25-000-how-high-can-it-go-1515213968 (or go to https://s3-us-west-2.amazonaws.com/peakcontent/+Peak+Commentary/01-08-18_Barrons-Dow_25000-How_High_Can_It_Go-Footnote_1.pdf)
https://www.economist.com/news/top-ten-articles-2017 (or go to https://s3-us-west-2.amazonaws.com/peakcontent/+Peak+Commentary/01-08-18_TheEconomist-The_Economists_Ten_Most_Popular_Articles_of_2017-Footnote_2.pdf)
https://www.economist.com/news/business/21722869-anti-establishment-technology-faces-ironic-turn-fortune-governments-may-be-big-backers (or go to https://s3-us-west-2.amazonaws.com/peakcontent/+Peak+Commentary/01-08-18_TheEconomist-Governments_May_Be_Big_Backers_of_the_Blockchain-Footnote_3.pdf)
https://www.economist.com/news/science-and-technology/21716599-film-worth-watching-how-keep-cool-without-costing-earth (or go to https://s3-us-west-2.amazonaws.com/peakcontent/+Peak+Commentary/01-08-18_TheEconomist-How_to_Keep_Cool_Without_Costing_the_Earth-Footnote_4.pdf)
https://books.google.com/books?id=ytrqJswoRCoC&printsec=frontcover&dq=schumpeter+creative+destruction&hl=en&sa=X&ved=0ahUKEwjI3vzTj8TYAhXn34MKHflSA6MQ6AEINjAD#v=onepage&q=essential%20fact&f=false (or
go to https://s3-us-west-2.amazonaws.com/peakcontent/+Peak+Commentary/01-08-18_Schumpeter-Excerpt_from_Capitalism_Socialism_and_Democracy-Footnote_6.pdf)
https://books.google.com/books?id=ytrqJswoRCoC&printsec=frontcover&dq=schumpeter+creative+destruction&hl=en&sa=X&ved=0ahUKEwjI3vzTj8TYAhXn34MKHflSA6MQ6AEINjAD#v=onepage&q=gale&f=false (or go to https://s3-us-west-2.amazonaws.com/peakcontent/+Peak+Commentary/01-08-18_Schumpeter-Excerpt_from_Capitalism_Socialism_and_Democracy-Footnote_8.pdf)
https://www.nobelprize.org/nobel_prizes/economic-sciences/laureates/2013/shiller-lecture.pdf (or go to https://s3-us-west-2.amazonaws.com/peakcontent/+Peak+Commentary/01-08-18_RobertShiller-Speculative_Asset_Prices-Footnote_11.pdf)
