How was your investment advice in 2013?

Every year we have provided investment advice, we gain more confidence in our investment philosophy.

As 2013 comes to an end, we are more confident than ever in our investment advice and our approach to providing advice to our clients.

As 2013 began, the focus was on the fiscal cliff (remember that?). There was uncertainly and concern about the economy. Expectations were certainly not for double digit stock market gains.

We have always remained focused on providing long term advice for our clients. We don’t make predications and guess which stock or market sector will outperform. We have structured our clients’ portfolios to be truly globally diversified, with minimal costs and very tax-efficient. And this has worked.

As 2013 ends, we are confident in the continuing economic recovery and in our strategy. We were thrilled that Eugene Fama, one of the academics who did the initial research which provided the basis for our investment strategy, was recognized with the Nobel Prize in Economics this year.

We are positive and optimistic, which is a key to investment success. We recognize that there will be down months and down years. But with good planning and conversations with our clients, they will be prepared for such time periods.

The transition from one year to another one is a time to reflect. It is a time to evaluate what went well and what did not. It is a time to think about how each of us can improve, and how you can improve your financial situation.  Should you be evaluating your relationship with your current advisor? (or how well you do it yourself?)

Have you actually tracked your financial performance? How did you do in 2011? 2012? 2013?  Did you track it against a globally diversified benchmark? Did your financial advisor help you move other matters forward, such as estate planning or insurance coverage?

For many, change can be difficult. Starting new relationships can be very positive. However, you need to take the initiative, to have the courage to take the first step.

We wish everyone a healthy and prosperous 2014.

 

 

Target security breach: What you should know

If you shopped at Target stores between November 27 and December 15, 2013, and paid with a credit or debit card of any type, you need to be concerned about the Target security breach. You should actively monitor your accounts over the coming weeks and months.

Target-logo

Based on Target’s public statements, they have resolved the security breach and you should not be concerned about shopping there now and using a credit or debit card.

If you did shop at Target during the above period, and used a credit or debit card, you should be diligent about monitoring the future activity of the specific card(s) that you used during those visits.

  • If you paid with a Target Red credit card, you should monitor your Target credit card account online, at least weekly.
  • If you paid with any type of debit card (Target or any other bank debit card), then you should monitor that account activity. You should monitor the bank account which that account is tied to, to verify that there are no unauthorized withdrawals, now or in the future.
  • If you paid at Target with another credit card (such as an American Express card or Chase Visa, for example), then you need to monitor those credit card accounts going forward.

The Target security breach was related to the scanner devices used when you swiped your card. Based on statements by Target and other security experts, there is not a concern that social security numbers were taken.  Names, the account numbers and the expiration dates on the respective cards is the information that was “taken.”  The main concern is that duplicate cards will be illegally produced and used in the future.

Our recommendation is to regularly monitor any affected account that is tied to a card that was used at Target during this time period.

  • If you do find improper usage, report it immediately to the respective bank or credit card company.
  • Any improper activity is more likely to appear in the future, than to have already occurred.
  • Consumers are generally not responsible for fraudulent card activity,  so you will be reimbursed by the financial institution or Target, especially if you timely report any improper activity.
  • There is no way to know how many card holders will actually be affected by the Target security breach.

A few banks have taken steps already.  Chase is limiting debit card purchases and ATM withdrawals. If you used a Chase card at Target during the affected time period, you should have received an email from them directly. Chase is planning to issue new cards to all affected customers over the next two weeks. As of this time, Target is not planning to issue new RedCard debit or credit cards. Target is likely to provide credit reporting monitoring to affected card holders in the future.

The Target security breach did not involve Target.com, their online website. It only affected Target retail stores where cards can be swiped.

For further information directly from Target, click here.

Other recommendations:

Do not provide your social security number or any account number  in response to an email from what looks like a financial institution. For example, I recently received an email from Chase, that looked very much like it was from Chase, but was not. Whoever sent the email had created it to appear very similar to a Chase email notification.  Also, do not click on links within emails from financial institutions or be careful if you do. You can always originate an email yourself, call the company or go the company’s website yourself. That is safer than clicking on a link provided in an email that is sent to you from what you think is a financial  institution.

See this blog post, Truly Free Credit Reports, for information on checking your credit report. This is a good practice to do at least annually. However, I don’t think this is the best preventative measure in regards to the Target security breach.

If you have any questions about these matters, please contact our office. We are always striving to provide you and your family with financial security.

 

Stock Market and Interest Rates: What We Think Now

Many major US stock market indexes are at or near all time highs. Today’s November jobs report continues the trend of steady but not spectacular job growth. The unemployment rate continues to decline.

Our commentary and information can be helpful to provide you with important perspectives.

In general, we take a long term view of the stock market and do not react to singular events such as a jobs report.

What does the current economic news mean for you as an investor?

Summary:

Today’s news is positive, as the more employment improves, the better the overall economy will be. That should translate into greater corporate earnings, which is good for stocks. A better economy should cause interest rates to rise to more normalized levels over time. This is good for individual bond holders and those whose portfolios are heavily allocated to fixed income investments, who desire more interest income.

Interest Rates:

For this article, short term rates are defined as maturities less than 3 years and mid-long term rates are defined as the 10 year Treasury bill.  For short term rates, the Fed has stated that these will continue to remain very low, likely below 1-2% for a long time. Today’s jobs report and the next Fed meeting will not significantly change short term interest rates.

For longer term interest rates, it is likely that these will continue to increase, as they have done throughout much of 2013, though not in a straight line. The focus will be on upcoming Federal Reserve meetings and how/whether they adjust the quantitative easing program (QE).  Under QE, the Fed purchases $85 billion of bonds monthly, as a way to hold down long term interest rates.  It is likely that the Fed will begin to decrease their monthly bond purchasing in the near future, from the $85 billion level.

The Fed has dual goals, to increase employment and to keep inflation around 2% annually. For the Fed to be reducing the QE program, the economy would be improving and more workers are being hired.  From a societal standpoint, this would be good.  As QE bond buying is reduced, or anticipated to be reduced, long term interest rates are likely to rise.  Some may be surprised by how quickly or how dramatically this could happen.  Earlier in 2013, the 10 year interest rate was 1.6 -1.7%. In late October it was 2.5%. Today, it is around 2.9%.  These are big changes in relative terms.

While the Fed has consistently been incorrect in their future economic predictions (providing even more evidence that the best, brightest and most informed cannot consistently make reliable economic forecasts over time), they feel inflation is under control and is “persistently below its 2% objective.”  These comments and the limited growth of employment indicate that the Fed will be slow and moderate in ending the QE program.

Stock Market:

We feel that the economy is steadily improving and the stock market is reflecting the resiliency that we have discussed many times over the past few years. Corporations continue to increase earnings and cash flow, are making huge stock buybacks and refinancing their balance sheets to take advantage of low interest rates.

Your attitude towards the stock market has to reflect your emotional perspective and factors such as your time frame for investing.  This is like a glass half full or half empty opinion. Which do you have?

We have a long term positive focus. We look at historical data and facts to determine our investment strategy. The economy has improved much better than many people recognize. Data such as housing starts, car sales, home prices and employment growth have all been positive.

There will always be some economic or political concerns.  The annual federal deficit has reduced dramatically, but the overall federal debt is still a concern. The new healthcare law is a great worry for many. Instability in the Middle East is always a concern.  What unknown event could occur that impacts the market or the economy?

 

We welcome the opportunity to discuss the current economic information with you and its impact on your portfolio. We strive to help you achieve a sense of financial comfort and security. We help you to organize, manage and grow your resources, so you don’t have to worry about the Fed or labor statistics.