Now What: A Guide to Retirement During Volatile Times

Market sell off has investor’s concerned

After the brisk market rally we experienced two weeks ago, the tables turned dramatically last week as many asset classes experienced their worst week in years. The Dow tumbled 6.4%, the S&P 500 fell 6.5%, and the Nasdaq slid 5.3%. Even gold shed nearly 10% over the course of the week for its biggest drop on a percentage basis in 28 years.

In conjunction with persistent concerns about European debt and a weakening U.S. economy, the presumed trigger for the panic was that the Fed's Open Market Committee (FOMC) launched “Operation Twist” on Wednesday. The move, designed to bring interest rates down and stimulate the housing market, scarcely proved to reassure investors. “Operation Twist” calls for the Fed to sell short-term securities (maturing in three years or less) from its sizeable $1.7 trillion holdings of government debt and use the $400 billion raised to buy longer-term mortgage-backed securities maturing in six to 30 years.

At the same time, the Fed accompanied its announcement with a lukewarm (at best) assessment of the economy. While stating that they continue to expect some pickup in the pace of recovery over coming quarters, they cited “significant downside risks to the economic outlook, including strains in global financial markets.”
While the stock market has undeniably taken a big hit, and investor confidence has been badly shaken, few things fundamentally changed from two weeks ago. In essence, market participants reacted to renewed concerns that policymakers aren’t doing enough to stabilize the global economy.

Notably, the Group of 20 major economies, including the United States, European Union, and China, issued a statement Thursday saying that it stands committed to "take all necessary actions to preserve the stability of banking systems and financial markets as required."

It is likely that we will continue to experience a period of volatility as investors wait to see if the words of policymakers lead to tangible actions.

ECONOMIC CALENDAR: Monday – New Home Sales Tuesday – S&P Case-Shiller HPI, Consumer Confidence Wednesday –Durable Goods Orders, EIA Petroleum Status Report
Thursday – GDP, Jobless Claims, Pending Home Sales Friday – Personal Income and Outlays, Chicago PMI, Consumer

Sentiment
Notes: All index returns exclude reinvested dividends, and the 5-year and 10-year returns are annualized.
Sources: Yahoo! Finance, MSCI Barra. Past performance is no guarantee of future results.
Indices are unmanaged and cannot be invested into directly. N/A means not available.

HEADLINES:

Last week, the government released the latest census report showing the poverty rate rose to a 17-year high. A whopping 46.2 million people (or 15.1% of the U.S. population) live in poverty, and 49.9 million live without health insurance.
BP is preparing its rigs and workers to resume full drilling operations in the Gulf of Mexico, seeking to end a 17-month production slump following the worst U.S. oil spill.

The International Monetary Fund annual meetings wrapped up in Washington on Sunday with no immediate consensus on the solution. Participants said they were waiting for the ratification of the action plan agreed on July 21 by the Eurozone, particularly by the German Bundestag this week, before starting serious negotiations on increasing the rescue fund’s firepower or asking for a bigger write-down in private sector holdings of Greek debt.

For the first time in months, retail gasoline prices have fallen below $3 a gallon in places, including parts of Michigan, Missouri, and Texas. And the relief is likely to spread thanks to a sharp decline in crude-oil prices. The national average for regular unleaded gasoline is $3.51 per gallon, down from a high of $3.98 in early May. Last week's plunge in oil prices could push the average to $3.25 per gallon by November, analysts say.

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Introducing Ken’s new book: Can I Retire?

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If you would like a Free Copy, please email us your name and address


Excerpts from the book:


“Where you go and what you do after you retire all depends on the individual. Whether its travel, volunteering, spending time with family or friends, there’s no end to what you can do once you’ve retired. As long as you’ve planned and prepared for it as best you can by budgeting, consulting with advisors, investing and comparing plans, then your golden years should be both merry and bright.” – Ken Mahoney

A lot of people make the mistake of embarking on their retirement years without their family’s support, or without thinking it through all the way. That’s the first mistake they make, and one that can cost them a smooth transition into retirement. Don’t be one of the people who make so many mistakes during their first year of retirement and spend several more years just making up their losses, which, with the benefit of hindsight, they could have avoided.

While many books discuss retirement in terms of accumulating wealth, it is equally important to consider how you see yourself in retirement – where you would like to live, what activities you would like to pursue and the associated costs. Once you understand what you want in terms of lifestyle, I think you'll start looking forward to answering the question, “Can I retire?”

Can I retire? Most people today make that decision predicated on their financial situation. But there are other components of retirement I would like you to consider. Most importantly, I would like you to consider having purpose in your life during retirement. The transition of going from working to retirement or from structured to non-structured can be difficult. So it’s important to “transfer” the structure of the “work world” to your own new structure of retirement.


What people are saying about Can I Retire?

This review is from: Can I Retire? (Your Personal Guide To Retirement) (Paperback)
I'm 46 years old and need to be thinking about my "golden years." From what I can see, they aren't always golden for retirees, especially not financially. I want to plan now and yet I wasn't sure where to begin. Can I Retire? (Your Personal Guide To Retirement) was exactly what I needed right now. It helps me get a feel not only for the sum I'll have to live on but also enables me to plan around contingencies such as problems in the future, health situations, and so on. I NEVER would have taken into account all the factors that go into retirement with this book. I do feel kind of smothered by what is in store for me now that I am working out my plan, but I would much rather feel like a "dummy" now than when I'm 65 and have nothing!!! NOW I have time to actually WORK MY PLAN and that's what I'm going to do.

This review is from: Can I Retire? (Your Personal Guide To Retirement) (Paperback)
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This review is from: Can I Retire? (Your Personal Guide To Retirement) (Paperback)
I loved the book. It was filled with smart, practical ideas that anybody can do in preparation for retirement. I recommend the book to anyone young or old, looking for ways to be smart about their money before and after retirment

Ten years later

by ken | 07:41 in |

Ten Years Later

For most of us, 9/11 feels like yesterday. For a younger generation, Sunday’s services etched a memory of that day onto minds too young to recall it. Three-thousand-six-hundred and fifty-two days have since passed, but as New York City Mayor Michael Bloomberg so poignantly stated, “We can never un-see what happened here.” While most Americans wish they never had to witness the events of that defining day, they are equally determined never to forget them.

The 10th anniversary closed a decade that witnessed two wars, massive changes in national security, the Great Recession, and most recently, the death of the elusive terrorist who masterminded the attack. And no longer is ground zero merely a reminder of what was, but a symbol of rebirth. With the breathtaking National September 11 Memorial now open and the yet-to-be-finished Freedom Tower rising 961 feet above the street where 2,983 lost their lives, history remembers the resilience of the human spirit.

The financial world also stands changed by the events of September 11. Once the physical financial center of the country, the area near ground zero has become largely an upscale residential neighborhood. Pre 9/11, tourists could visit the New York Stock Exchange and stand in a galley to watch the trading, but not anymore. Even though the building itself sustained no damage when the Twin Towers fell, the exchange has since been considered a target and the visitor center remains closed. On the floor of the exchange, traders must now go through security barriers and x-ray machines under the watch of armed officers – something those who have flown on a commercial airliner since 9/11 can relate to.

While Sunday marked a day of reflection and tears for many of us, and while both the tragedy and heroism of 9/11 will long be remembered, Americans will move forward this week. Concerns surrounding Europe’s debt crisis will rear their ugly heads again, and headlines about stock market volatility will doubtless be featured in the news. And when they are, we would all do well to keep things in perspective and be thankful for the life we enjoy, even if it has been altered by the events of September 11th, 2001.

HEADLINES:
Moments of silence were observed in New York City Sunday on the 10th anniversary of the terror attacks that destroyed the World Trade Center and killed nearly 3,000 people. "Ten years have passed since a perfect blue sky morning turned into the blackest of nights. Since then, we have lived in sunshine, and in shadow," said New York City Mayor Michael Bloomberg.

China’s record imports and a rebound in lending signaled strength that offers a bright spot in a global economy contending with Europe’s debt crisis and weakening U.S. job gains. Government reports in the past two days showed that shipments from abroad jumped 30% and new local-currency loans were a more-than-forecast 548.5 billion yuan ($86 billion).

The average price for regular gasoline at U.S. filling stations rose 5.76 cents to $3.6669 a gallon last week.

Bank of America Corp. is preparing to slash 40,000 or more jobs and close 10% of its branches nationwide. The details of the plan were not officially announced, but the information was disclosed by three Bank of America executives who have been briefed on the plan but were not authorized to speak publicly.

Unemployment and the stock market explained

The big news last week centered on the August jobs report, which was disappointing to say the least. Non-farm payrolls were unchanged in August but down 58,000 including revisions to June/July. The consensus expected a gain of 68,000. The unemployment rate remained unchanged at 9.1%.

U.S. stocks tumbled 2% on Friday in reaction to the news, as headlines showing zero jobs growth in August fueled investor concerns. And while the August numbers are certainly not attractive, there are a few underlying factors we would like to draw your attention to.

One of the reasons August’s numbers were so weak has to do with the Verizon strike, now over, that temporarily sidelined 46,000 workers. Were it not for that strike, private payrolls would have been up 62,000 including revisions. As it stands, workers on strike are counted as unemployed when they go on strike and are added as newly employed when they go back to work. Now that they have returned to work, a future employment report will show an increase of 46,000. It’s strange how the system works isn’t it?

There was also some positive news in Friday’s report. Civilian employment, an alternative measure of jobs that includes start ups, increased 331,000 in August, which is very encouraging. In general, when new businesses are starting up and hiring workers, it means the wheels of capitalism are turning in the right direction.

If you only look at the totals, it’s easy to say there was no employment growth in August, which is how most of the headlines read. But if you take time to look below the surface, a more balanced picture emerges. Much of August’s weakness can likely be attributed to financial turmoil in Europe, large swings in the stock market, and lawmaking that has brought much uncertainty to the hiring arena.

Although recession fears are still lingering, recent reports on auto sales, manufacturing and consumer spending suggest that the economy is still growing, albeit slowly. We believe future jobs reports will reflect that.

ECONOMIC CALENDAR: Monday – U.S. Holiday: Labor Day Tuesday – ISM Non-Mfg Index Wednesday – Beige Book
Thursday – BOE Announcement, ECB Announcement, International Trade, Jobless Claims, EIA Petroleum Status Report
Data as of 09/02/2011 1-Week YTD 1-Year 5-Year 10-Year
Standard & Poor's 500 -0.24 -6.65 7.69 -2.09 0.36
Dow -0.39 -2.91 8.92 -0.39 1.30
NASDAQ 0.02 -6.50 12.7 2.62 3.74
MSCI EAFE 0.08 -9.42 2.35 -2.58 2.14
10-year Treasury Note (Yield Only) 2.19 N/A 2.63 4.73 4.82

Notes: All index returns exclude reinvested dividends, and the 5-year and 10-year returns are annualized.
Sources: Yahoo! Finance, MSCI Barra. Past performance is no guarantee of future results.
Indices are unmanaged and cannot be invested into directly. N/A means not available.

HEADLINES:
Bank of America Corp. and 16 other big banks have been hit with multiple accusations of securities-law violations and negligence in a series of lawsuits tied to more than $50 billion in mortgage securities. The lawsuits, filed late Friday by the Federal Housing Finance Agency, accuses lenders of selling bad mortgage securities to government-sponsored housing companies Fannie Mae and Freddie Mac.

The euro came under significant pressure in European trading Tuesday, pulling down other sentiment-sensitive currencies, such as the pound and Australian dollar, with it. A steady flow of negative newsflow out of the euro zone pushed it down about 0.6% – a big move for a major currency – against the dollar.

Though oil prices fell to near $88 a barrel Friday, crude has jumped about 16% since August 9th, bolstered by signs industrial production in the U.S. continues to expand. The Institute for Supply Management said Thursday that U.S. manufacturing grew for the 25th straight month while analysts had expected a contraction.
About 70,000 households and businesses along the Eastern Seaboard who lost power during Irene remain without it a week after the storm.