After an ugly day like we had yesterday, we should expect the market to stabilize a bit. It's very rare for the market to drop by more than 1.5% three days in a row.
After the worst day so far this year on Thursday, when we sold off on large volume and declining stocks far outpaced advancing stocks, it is reasonable to look for some sort of bounce. It's just the nature of the market. However, the action over the past two days is a bad sign and indicative that something has changed in the market.
Market participants have enjoyed small pullbacks over the past few years with little fear of a steep decline because they could always count on a friendly Fed and its unending supply of liquidity. However, we may not be able to count on the Fed (at least that is the perception) to keep on buying bonds and this adds real risk to the idea of a quick recovery in the markets. The liquidity has been the main driver of the markets over the past few years.
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As we mentioned last week, it was odd to see so many sectors and asset classes declining without pause. We stated that it was either a correctional rotation out of certain sectors and asset classes into other sectors/asset classes, or it is foreshadowing a change in market behavior. We now know it was foreshadowing a possible change in market behavior.
While it's impossible to predict what the market will do over the next week or month, we can always hedge against various outcomes. One way to do this is to raise some cash to protect against downside risk. Cash also allows one to take advantage of opportunities created by the increased volatility.
It's possible this could be just your run-of-the-mill correction in the global markets; with the markets eventually finding a floor and recovering to new highs. It's also possible that global markets, driven mainly by central bank liquidity, are realizing that maybe they can't make it on their own.
Friday, June 21, 2013
Friday, June 14, 2013
Underneath the Surface
As volatility in the global markets has increased, we are witnessing unprecedented declines in various sectors and asset classes - all at the same time. While the broad markets in the U.S. are only about 5 % off of their highs, many areas of the market have fallen much further. While the decline can be partially attributed to the possibility the Fed may end quantitative easing (which many don't believe will happen soon), it doesn't explain it completely. The dollar for example should be rising, not falling if the Fed is planning to curb its fiscal program.
Since a picture is definitely worth a thousand words we have posted several charts below. These charts are of various sectors over the past few months. Pay special attention to the last few weeks on the right side of each chart.
Either these is a correctional rotation out of certain sectors and asset classes into other sectors/asset classes, or it be foreshadowing a change in market behavior.
Since a picture is definitely worth a thousand words we have posted several charts below. These charts are of various sectors over the past few months. Pay special attention to the last few weeks on the right side of each chart.
Either these is a correctional rotation out of certain sectors and asset classes into other sectors/asset classes, or it be foreshadowing a change in market behavior.
Commodities
Copper
Dollar
Emerging Markets
Emerging Markets Debt
Japan
Real Estate
Bonds
Friday, June 7, 2013
Maximize Social Security Benefits
Would you like to maximize the Social Security benefits your spouse gets at the same time you maximize the benefits you will receive? The answer is most likely yes!
You may be able to using a Social Security procedure known as "file and suspend" If you are married and have reached your full retirement age (FRA), you can simultaneously file for Social Security, then request that your benefits be suspended until you reach age 70. After you have suspended benefits, then your spouse could apply to begin receiving Social Security benefits based upon your earnings record.
In some instances where one spouse has not worked for pay, or earned considerably less income than the other, the benefit the spouse would receive could be higher than the benefit the spouse would receive under his or her own work record.
Here is an example of how "file and suspend" works. Let's assume Stan and his wife Julia have both reached age 66. He is eligible for a monthly $2,000 benefit, while Julia, if she were to file for Social Security, would get $500 a month based on her work record. Henry decides to invoke his file-and-suspend option. At the same time or shortly thereafter, Julia can file to receive her spousal benefits based on Henry's earnings. Those benefits will be $1,000, 50% of what Henry was eligible to receive at 66. In other words, because Henry has taken the file-and-suspend option Julia's benefits immediately jump by $500 a month.
If you reach your full retirement age and delay collecting your benefits until age 70, your eventual benefit will grow by 8% each year between ages 66 and 70 according to the social security administration.
Under this scenario, when Henry finally starts collecting his benefits at age 70, he would find that his monthly check would be $2,640, not the $2,000 he would have received at age 66.
Although filing for Social Security and then suspending payments can be financially beneficial, it won't increase benefits for all couples. The file and suspend option isn't helpful when one spouse worked for the Federal or state government and is receiving a pension.
It won't work in instances where two spouses earned similar amounts over their careers. If the husband files-and-suspends his spouse would get 50% of his benefits—but that 50% would yield a monthly check that would be lower than the one she would be eligible for under her own earnings record.
Also, obviously, you should consider your health before deciding to postpone your Social Security benefits. If you are in good health and have a history of longevity in your family, this may be a great option. Conversely, if you are not in good health and/or need the cash flow, file and suspend may not be the best strategy.
File and suspend involves delaying full benefits so you need to have access to funds to be able to make up the difference you would have received if you were collecting full benefits at FRA.
If you are about to turn 66 keep in mind that you don't have to rush to make a decision about file and suspend immediately. You can use that option later. Conversely, if you have invoked your file and suspend option, but then find you do need your Social Security check before you turn 70, you can immediately reinstate getting your benefits.
Information on file and suspend may be found at the link below:
http://www.ssa.gov/retire2/suspend.htm
You may be able to using a Social Security procedure known as "file and suspend" If you are married and have reached your full retirement age (FRA), you can simultaneously file for Social Security, then request that your benefits be suspended until you reach age 70. After you have suspended benefits, then your spouse could apply to begin receiving Social Security benefits based upon your earnings record.
In some instances where one spouse has not worked for pay, or earned considerably less income than the other, the benefit the spouse would receive could be higher than the benefit the spouse would receive under his or her own work record.
Here is an example of how "file and suspend" works. Let's assume Stan and his wife Julia have both reached age 66. He is eligible for a monthly $2,000 benefit, while Julia, if she were to file for Social Security, would get $500 a month based on her work record. Henry decides to invoke his file-and-suspend option. At the same time or shortly thereafter, Julia can file to receive her spousal benefits based on Henry's earnings. Those benefits will be $1,000, 50% of what Henry was eligible to receive at 66. In other words, because Henry has taken the file-and-suspend option Julia's benefits immediately jump by $500 a month.
If you reach your full retirement age and delay collecting your benefits until age 70, your eventual benefit will grow by 8% each year between ages 66 and 70 according to the social security administration.
Under this scenario, when Henry finally starts collecting his benefits at age 70, he would find that his monthly check would be $2,640, not the $2,000 he would have received at age 66.
Although filing for Social Security and then suspending payments can be financially beneficial, it won't increase benefits for all couples. The file and suspend option isn't helpful when one spouse worked for the Federal or state government and is receiving a pension.
It won't work in instances where two spouses earned similar amounts over their careers. If the husband files-and-suspends his spouse would get 50% of his benefits—but that 50% would yield a monthly check that would be lower than the one she would be eligible for under her own earnings record.
Also, obviously, you should consider your health before deciding to postpone your Social Security benefits. If you are in good health and have a history of longevity in your family, this may be a great option. Conversely, if you are not in good health and/or need the cash flow, file and suspend may not be the best strategy.
File and suspend involves delaying full benefits so you need to have access to funds to be able to make up the difference you would have received if you were collecting full benefits at FRA.
If you are about to turn 66 keep in mind that you don't have to rush to make a decision about file and suspend immediately. You can use that option later. Conversely, if you have invoked your file and suspend option, but then find you do need your Social Security check before you turn 70, you can immediately reinstate getting your benefits.
Information on file and suspend may be found at the link below:
http://www.ssa.gov/retire2/suspend.htm
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