Oil Plunge and Janet’s “Considerable” Dilemma

Considerable adjective: large in size, amount, or quantity “Considerable” is the word of the week, as all eyes move from plunging oil markets to the Federal Reserve. This week, central bank officials gather for their last policy confab of the year. With bond buying now done and the economy expanding, the big question is: how might the Fed alter its policy statement to prepare investors for the inevitable increase in short-term interest rates?

Previously, the Fed has said that it would leave rates at near zero for a “considerable time,” but with the labor market improving and the economy gaining strength, there’s a case to be made to shift that language to a word of phrase that might equate to a shorter period of time. Analysts at Capital Economics have turned back the clock by a decade to see what terminology officials’ used ahead of the tightening cycle that began in 2004. “Back then the Fed went from saying that low rates would be maintained for a ‘considerable period’; to the FOMC would be ‘patient’ in removing accommodation; and then to accommodation will be removed at a ‘measured’ pace.”

Here’s how the Fed’s words translated into time:

• Considerable: 6 - 10 months
• Patient: 2 - 5 months
• Measured: one month

OK, so remember back in March when Fed Chair Janet Yellen had that woops moment at her first presser? That’s when she let it slip out that the Fed would raise rates “something on the order of around six months” after QE ended. Since QE concluded at the end of October, something on the order of six months would bring us to April 2015. Conveniently, there is a policy meeting on April 28-29, 2015 so that might be a fine time to start the process.

HOLD YOUR HORSES! The recent acceleration of the oil market sell-off may put a wrinkle on the “considerable” to “patient” exchange. While the 46 percent drop in crude oil from the June highs amounts to about $100 per month savings for US consumers, there are some analysts who believe that crashing oil is the canary in the coal mine for the global economy.

Until the last week or so, most have thought that the oil story was one part increased supply and one part tepid demand, but what if the balance is tipping in the wrong direction? In that case, falling oil has more to do with a big slow down in Chinese, European and Japanese economies than with the growth of U.S. production. In fact, that weakening growth prompted OPEC to predict that demand for its oil will hit a 12-year low next year.

If the world is really slowing down, then can the U.S. remain an outlier of growth for much longer? Investors answered that question with a “NO WAY” last week and sold stocks to underscore the point. After all, if you’re sitting atop healthy gains for the year (the S&P 500 is still up 8.3 percent YTD) and you think the globe is slowing, a reasonable response is to lighten up on your equity positions and see how things unfold. The Federal Reserve may also opt to maintain the status quo on its wording, at least until the first meeting of 2015.

MARKETS: The Grinch stole the Santa Claus rally, at least for a week! Despite seeing the worst week of 2014, the S&P 500 remains within 4 percent of its all-time high.

• DJIA: 17,280, down 3.8% on week, up 4.2% YTD (worst week since Sep 2011)
• S&P 500: 2075, down 3.5% on week, up 8.3% YTD (worst week since May 2012)
• NASDAQ: 4653, down 2.7% on week, up 11.4% YTD
• Russell 2000: 1152, down 2.5% on week, down 1% YTD
• 10-Year Treasury yield: 2.08% (from 2.31% a week ago)
• January Crude Oil: $57.81, down 12% on week (lowest close since May 2009; down 46% from June peak)
• February Gold: $1,190.40, up 2.7% on week
• AAA Nat'l average price for gallon of regular Gas: $2.56 (from $3.24 a year ago)

THE WEEK AHEAD:

Mon 12/15:

8:30 Empire State Manufacturing

9:15 Industrial Production

10:00 Housing Market Index

Tues 12/16:

8:30 Housing Starts

FOMC Policy Meeting begins

Weds 12/17:

8:30 Consumer Price Index

2:00 FOMC Policy Decision/Statement

2:30 Janet Yellen Press Conference

Thurs 12/18:

8:30 Weekly Jobless Claims

10:00 Philadelphia Fed Survey

10:00 Leading Indicators

Fri 12/19:

10:00 State Unemployment

10:00 Kansas City Fed Manufacturing

#197 The Birthday Show

What better way to celebrate my birthday week than to hang with my radio/podcast family! Thanks for all of the warm wishes and the great questions, starting with VJ from CT, who is gearing up to purchase his first house. (Here's the New York Times calculator that I spoke about during the show!) After reviewing details of his financial life, we were able to find the right price tag, without sacrificing other financial obligations.

• Download the podcast on iTunes
• Download the podcast on feedburner
• Download this week's show (MP3)

Joe is considering whether to move out of a variable annuity and into a portfolio of index and exchange-traded funds. By doing so, he would lose a guarantee of 6 percent return inside the annuity, but he would also likely save $5,000 annually.

What a delight to have my pal Dan Forbes, CFP® join the program. Dan is the owner of Forbes Financial Planning in East Greenwich, RI where he specializes in working with individuals and small businesses. He was named a Certified Financial Planner Board of Standards Ambassador in 2011 and you may even recognize him from the Board’s 2014 media campaign in 2014. Dan was my intern back in the day and even then, I knew he was destined for bigger things! We discussed some year-end ideas, what to do about bond investments and why the fiduciary standard is so important. If you would like a copy of Dan’s year-end checklist, send him an e-mail at: dforbes@forbesplanning.com.

Thanks to Jackson, who asked about owning an account as tenants in common, which gave me the chance to draw a distinction between that ownership structure and joint tenants with rights of survivorship.

Thanks to everyone who participated and to Mark, the BEST producer in the world. Check out Mark's first-producing credit for this CBS Evening News segment that aired recently. If you have a financial question, there are lots of ways to contact us:

• Call 855-411-JILL and we'll schedule time to get you on the show LIVE 

• Send an email: askjill@jillonmoney.com 

• Tweet us: @jillonmoney and @MTalercio

8 Year-End Tax Planning Tips 2014

Before you shutdown for the holidays, remember that just a few hours spent reviewing your financial life, may help boost your bottom line – and put a dent in your holiday shopping bills! Here are eight ideas to consider, which could minimize taxes before we ring in 2015. 1. Sell winners in taxable accounts. In 2014 married tax filers with taxable income up to $73,800 (singles up to $36,900) still have a zero percent tax rate on long-term capital gains and qualified dividends. If you are at the zero percent capital gains rate now, but expect your income to be higher later, you may want to realize capital gains today at the lower rate. Your taxable income includes the gain, so make sure that you factor that in when you make your decision.

2. Sell losers. If you have investment losses in a taxable account, now is the time to use those losers to your advantage. You can sell losing positions to offset gains that you have taken previously in the year, to minimize your tax hit. If you have more losses than gains, you can deduct up to $3,000 of losses against ordinary income. This is particularly useful, since your ordinary income tax rate is higher than your capital gains tax rate. If you have more than $3,000 of losses, you can carry over that amount to future years.

3. Avoid getting soaked by a wash sale. If you are starting to clean up your non-retirement accounts to take losses, don't get soaked by the "Wash Sale" rule. The IRS won't let you deduct a loss if you buy a "substantially identical" investment within 30 days, what's known as a wash sale. To avoid the wash sale, wait 31 days and repurchase the stock or fund you sold, or replace the security with something that is close, but not the same as the one you sold...hopefully something cheaper, like an index fund.

4. Bunch itemized deductions. Many expenses can be deducted only if they exceed a certain percentage of your adjusted gross income (AGI). Bunching itemized deductible expenses into one year can help you exceed these the 2 percent AGI floor for miscellaneous expenses. To exceed bunch professional fees like legal advice and tax planning, and unreimbursed business expenses such as travel and vehicle costs.

5. Mail your checks for deductible purchases. Procrastinator alert! If you're the type of person who waits until the last minute for everything, take note: To qualify for write-offs of charitable contributions and business expenses, your payments must be postmarked by midnight December 31. The IRS says just writing "December 31" on the check does not automatically qualify you for a deduction; and pledges aren't deductible until paid. Donations made with a credit card are deductible as of the date the account is charged.

6. Fully fund your college savings 529 plan. If you find yourself with a little extra year-end cash, or grandma asks what she can do for your kids, consider a 529 plan. Money saved in these programs grows tax-free and withdrawals used to pay for college sidestep taxes, too. You can invest up to $14,000 in 2014 without incurring a federal gift tax and many states offer state tax deductions for the contributions.

7. Give appreciated stock or fund shares to charity. Get in the holiday spirit, with the help of Uncle Sam. One way to lower your tax bill in April is to donate appreciated securities, like stocks, bonds or mutual funds, to a charity. If you itemize deductions, you'll write off the current market value (not just what you paid for them) and escape taxes on the accumulated gains. The low cost basis does not impact the receiving charity, as long as it is a tax-exempt organization.

8. Use your gift tax exclusion. You can give up to $14,000 to as many people as you wish in 2014, free of gift or estate tax. If you combine gifts with a spouse, you can give up to $28,000 per beneficiary, per year.

5 Year-End Retirement Tips for 2014

With just weeks to go before the end of the year, here are five potential money-making/money saving retirement moves to consider. 1. Fully fund employer-sponsored retirement plan contributions. Unlike IRA’s, the deadline for funding 401 (k), 403 (b) or 457 plans is December 31. This year, the limit is $17,500 per employee. If you over the age of 50, you can make an extra $5,500 as a “catch-up contribution”. Remember that a contribution into your employer-sponsored plan is an “above-the-line deduction,” which means that it is taken before you calculate your Adjusted Gross Income. I love above the line deductions because they are allowed in full -- many other deductions are phased out for high earners.

2. Consider converting Traditional IRA into a Roth IRA. A conversion requires that you pay the tax due on your retirement assets now instead of in the future. Whether or not a conversion makes sense for you depends on a number of factors, the most important of which is whether or not you can pay the tax due with non-retirement funds. If you have money available to pay the tax due, some advantages of conversion are: paying the tax at a lower tax rate, if you think that your tax bracket will rise in the future; eliminating the tax on future growth of assets; reducing future Required Minimum Distributions (RMD’s); and reducing the taxable amount of Social Security benefits. If you already converted your account this year, you may want to reexamine it. If the value went down, you have until your extended filing deadline to reverse the conversion. That way, you may be able to perform a conversion later and pay less tax.

3. Be aware of new IRA rollover rules.Starting in 2015, new rules apply for withdrawing and rolling over money from an IRA. Next year, you can only roll over an account once every 365 days (note: the rule specifies "every 365 days," not once a calendar year). The rule applies to IRA-to-IRA rollovers where the owner takes custody of the money him or herself. The rule does not apply to rollovers from employer plans to IRAs or to "trustee to trustee" transfers.

4. Take Required Minimum Distributions (RMDs). Generally, once you turn 70 ½, you must begin withdrawing a specific amount of money from your retirement assets (there are some exceptions). Remember, money that you have previously contributed to these accounts bypassed taxation - RMD’s ensure that the government taxes those funds. The penalty for not taking your RMD is steep -- 50 percent on the shortfall!

A few notes about RMDs: Even if you have multiple individual retirement accounts, you don't have to take the RMD out of each individual account. You are allowed to take one RMD from any of your retirement accounts, based on your age and the total value of the accounts. Also, filing a joint return doesn't mean you can take the entire amount for both spouses from one spouse's account - RMDs are calculated for each individual. Finally, if you inherit an IRA, check before year's end to see if you need to take an RMD on behalf of the deceased.

5. Consider a Qualified Charitable Distribution (QCD). Since its enactment in 2006, one way to sidestep the taxation on your RMD is to make a Qualified Charitable Distribution, which allows you to gift up to $100,000 directly from your IRA to a charity without having to include the distribution in your taxable income. However, you swap having to claim the income for making a charitable deduction. Not only does a QCD help avoid taxation, it also means that the extra income is not included in other tax formulas for Social and Medicare Part B premiums or for the Pease limitation on itemized deductions. As of this writing, lawmakers have not yet extended the QCD and while experts believe that it will be extended, you should be careful. If you choose to make a QCD, remember that the money must go directly to the charity, not to a private foundation or a donor-advised fund.

Best Year for Job Creation Since 1999

Holy Smokes: The government’s November jobs report was waaaaay better than analysts’ expectations. The economy added 321,000 jobs, the biggest gain since January 2012, and the unemployment rate remained at a six-year low of 5.8 percent. The consensus estimate was for 230,000, with a range of about 150,000 to 275,000. Additionally, revisions to the previous two moths amounted to 44,000 more jobs than originally reported. This year, there have been ten consecutive months, where employment has been over 200,000, the longest such period of gains since a 19-month streak from 1993-1995. Additionally, November was the 50th consecutive month of job gains – a record. Most importantly, with this report, 2014 is on track to become the best year for job creation since 1999! (Cue the Prince music, please.)

OK, maybe not so fast. Just talk to anyone who is working or looking for a job and you may hear a different song (Perhaps Dolly Parton’s “9 to 5”). The biggest complaint is that wage growth is stagnant. In November, average hourly wages increased by 0.4 percent, nudging up the 12-month increase to 2.1 percent.

Annual wage growth has remained between 1.9 to 2.2 percent since 2012. In a normal expansion, increases are closer to 3 percent. According to the Financial Times, this is not a US-centric problem. “Wages have flatlined in the developed world as workers fait to benefit from an uneven global economic recovery.”

The wage issue is not surprising, because it is a longer-term issue. Globalization and technological innovation started to put pressure on wages in the 1990’s; then the Great Recession and the slow growth recovery accelerated the trend; and finally, in past recessions, companies cut wages and then subsequently raised them amid upturns. But in the past three recessions, Corporate America minimized wage cuts and instead let workers go to keep remaining workers happy. Because companies kept wages intact, the Federal Reserve Bank of San Francisco says that we should probably expect slower overall wage growth in this expansion.

Other parts of the labor market that are improving, but still remain problematic include the high number of Americans (6.9 million) who are working part-time because they couldn’t find full-time work; the 2.8 million people who have been unemployed for more than six months; and labor force participation rate (the percentage of those over the age of 16 who are either working or looking for work) remains near levels last seen in the late 1970s; and the broad unemployment rate, which includes involuntary part-time workers and people marginally attached to the labor force, is at a still-high 11.4 percent.

While the November jobs report is not cause for widespread euphoria, it is certainly a welcome piece of data…you’ll have to decide which song to invoke to mark the occasion.

One more positive news item: It is expected that Congress will pass an omnibus spending bill this week, which should keep most of the Federal government open for business and funded until the end of the current fiscal year (September 2015). However, it would only fund the Department of Homeland Security until March 2015, allowing Congressional Republicans to revisit immigration reform next year, when they control both the Senate and the House of Representatives.

MARKETS:

• DJIA: 17,958, up 0.7% on week, up 8.3% YTD
• S&P 500: 2075, up 0.4% on week, up 12.3% YTD
• NASDAQ: 4780, down 0.2% on week, up 14.5% YTD (first weekly drop in 7)
• Russell 2000: 1182, up 0.8% on week, up 1.6% YTD
• 10-Year Treasury yield: 2.31% (from 2.17% a week ago)
• Jan Crude Oil: $65.17, down 1.5% on week (lowest since July 2009; down 33% YTD)
• Dec Gold: $1,190.40, up 1.2% on week
• AAA Nat'l average price for gallon of regular Gas: $2.69 (from $3.26 a year ago)

THE WEEK AHEAD:

Mon 12/8:

Tues 12/9:

7:30 NFIB Small Optimism

10:00 Job Openings & Labor Turnover Survey

Weds 12/10:

Lending Club IPO

Thurs 12/11:

8:30 Weekly Jobless Claims

8:30 Import/Export Prices

8:30 Retail Sales

10:00 Business Inventories

Fri 12/12:

8:30 Producer Price Index

9:55 Consumer Sentiment

#196 Small Caps, Student Loans, Inflation

The holiday music is back, putting callers into a jolly mood for the first show of December! Thanks to Steve from CA, who asked about whether or not to add a small company stock index to his $825,ooo portfolio. Small stocks are defined as those with market capitalizations (number of shares outstanding, times the stock price) of less than $2 million and while they can be more volatile than larger stocks, over time, investors have been rewarded by owning them.

• Download the podcast on iTunes
• Download the podcast on feedburner
• Download this week's show (MP3)

Check out this chart from Dimensional Fund Advisors, which shows how lucrative small caps have been over time:

In addition to Steve's allocation question, we also answered investment questions from Alan, Kevin and Diane. Bryan's question about student loans was certainly unique, which "Splashing Around in Debt" was needed a strategy to pay down cheap housing debt as he approaches retirement.

Wade is worried about hyper-inflation, but with oil prices down 30 percent since the summer, it is hard to make the case runaway price increases are coming any time soon.

David was kind of enough to send us more information about Social Security calculators that can be helpful in determining your future benefits. Here is the link: http://www.ssa.gov/oact/anypia/anypia.html

Thanks to everyone who participated and to Mark, the BEST producer in the world. Check out Mark's first-producing credit for this CBS Evening News segment that aired recently. If you have a financial question, there are lots of ways to contact us:

• Call 855-411-JILL and we'll schedule time to get you on the show LIVE 

• Send an email: askjill@jillonmoney.com 

• Tweet us: @jillonmoney and @MTalercio

Will OPEC Decision Halt the Santa Claus Rally?

While you were enjoying your Thanksgiving meal, the 12 members of the Organization of the Petroleum Exporting Countries (OPEC) announced that the cartel would hold its output target at 30 million barrels per day. The decision caused a steep sell off in Brent crude oil (the global benchmark) on the ICE Futures Europe. When U.S. markets opened on Friday, investors dumped West Texas Intermediate crude on the New York Mercantile Exchange and futures plunged 10.2 percent to $66.15 a barrel, the lowest settlement since September 2009. Both oil benchmarks are experiencing their worst losing streaks since the financial crisis in 2008, with 18 percent losses for the month of November. As previously mentioned in this space (Peak Oil Pukes), sinking oil and gas prices should help consumers, but the savings has not yet created overall cheer. Last week, the Conference Board said that its consumer confidence index dropped to a four month low in November. But Capital Economics notes “this fall needs to be taken into context alongside the sharp rise earlier in the year.” In fact, confidence is still close to seven-year highs.

What has been driving confidence this year has been the steady improvement in the jobs situation. Through October, the economy has added 2.225 million private sector jobs and 2.285 million total jobs in 2014. The November jobs report, which is due this Friday, is expected to show that the economy added 220,000 jobs. If that happens, 2014 will be the best year for private employment since 1999, according to Calculated Risk.

The unemployment rate is expected to remain at 5.8 percent, which puts it close to the Federal Reserve’s estimate of the longer-term, normal rate of unemployment of 5.2 percent to 5.5 percent. But with wages still up only 2 percent year over year, the central bank is likely to keep interest rates at 0 to 0.25 percent until next year.

Despite lots of energy and attention, the initial reports from retailers about the big holiday weekend may tell us less about the economy than the jobs report. Analysis from the New York Times found that while the holiday season is important for retailers, it “matters only a little bit” for the overall economy. The reason is clear: consumers would spend a certain amount of money in any two months. When stripping out the normal expenditures, “for the last two months of the year, Americans are on track to spend $106 billion more than they would if these were any old months.” Not that you would sneeze at $106 billion, but compared to the $17.6 trillion US economy, it’s not nearly as important as the elusive 3 percent increase in wages that we have seen in previous expansions.

MARKETS: Will investors be treated to a “Santa Claus Rally”? The old Wall Street chestnut predicts stocks do well during the period just after Thanksgiving through the end of the year. Over the past five years, the S&P 500 has gained an average of 2.5 percent during December. But OPEC's decision to maintain current production levels could weigh on energy stock prices, curtail energy company profits and limit the near-term upside in markets.

• DJIA: 17,828, up 0.1% on week, up 2.5% on month, up 7.6% YTD
• S&P 500: 2067, up 0.2% on week, up 2.5% on month, up 11.9% YTD
• NASDAQ: 4791, up 1.7% on week, up 3.5% on month, up 14.7% YTD
• Russell 2000: 1173, up 0.01% on week, up 2% on month, up 0.8% YTD
• 10-Year Treasury yield: 2.17% (from 2.31% a week ago)
• January Crude Oil: $66.15, down 13.5% on the week, down 18% on month
• December Gold: $1175.50, down 1.8% on the week
• AAA Nat'l average price for gallon of regular Gas: $2.78 (from $3.28 a year ago)

 THE WEEK AHEAD:

Mon 12/1:

Cyber Monday

9:45 PMI Manufacturing

10:00 ISM Manufacturing

Tues 12/2:

Motor Vehicle Sales (2014 is on pace to be the best year since 2006)

10:00 Construction Spending

Weds 12/3:

8:15 ADP Private Sector Employment Report

8:30 Productivity

10:00 ISM Non Manufacturing

2:00 Fed Beige Book

Thurs 12/4:

8:30 Weekly Jobless Claims

Fri 12/5:

8:30 November Employment Report

10:00 Factory Orders

3:00 Consumer Credit

#195 The Thanksgiving 2014 Show

Have a great Thanksgiving!

• Download the podcast on iTunes
• Download the podcast on feedburner
• Download this week's show (MP3)

Thanks to everyone who participated and to Mark, the BEST producer in the world. Check out Mark's first-producing credit for this CBS Evening News segment that aired recently. If you have a financial question, there are lots of ways to contact us:

• Call 855-411-JILL and we'll schedule time to get you on the show LIVE 

• Send an email: askjill@jillonmoney.com 

• Tweet us: @jillonmoney and @MTalercio

Financial Thanksgiving 2014

Thanksgiving is a time when we can give thanks for all of the blessings in our lives, like health, loving spouse, a wonderful family and amazing friends. But this is a money column, so this week, I would also like to give thanks to all of the amazing people and resources that have improved our financial lives. The Financial Planning Coalition: The collaboration of the Certified Financial Planner Board of Standards (“CFP Board”), the Financial Planning Association® (“FPA”), and the National Association of Personal Financial Advisors (“NAPFA”) continues to work on behalf of consumers to make the fiduciary standard the gold standard for financial advice-givers.

The Employee Benefit Research Institute (EBRI): The mission of EBRI is to contribute to, to encourage, and to enhance the development of sound employee benefit programs and sound public policy through objective research and education. EBRI has also developed an easy to use retirement calculator, which I wholeheartedly endorse.

Life Happens: While I have been a critic of some of the practices of the insurance industry, this nonprofit, founded by seven producer organizations, is dedicated to helping Americans take personal financial responsibility through the ownership of life insurance and related products, including disability and long-term care insurance. Of particular interest is the Life Happens Insurance calculator.

Mark Kantrowitz/FinAid.org: Mark created this terrific web site for education funding in the fall of 1994 as a public service. It is the quintessential resource for every would-be college student, providing informative, objective and valuable advice for students and their families, who are looking for ways to finance their education.

SSA.gov: I know that everyone complains about the Social Security system, but the government’s web site is a great tool. You can manage your account online and use the estimator to determine your future benefit.

Jack Bogle: When he was a junior at Princeton University in 1949, Jack Bogle decided to use the concept of index funds as the topic of his senior thesis. That decision eventually led to the creation of the modern index fund. In 1976, The Vanguard Group – then a new mutual fund company – rolled out the First Index Investment Trust, which ultimately became the Vanguard 500 Index Fund. The fund, which was originally referred to as “Bogle's Folly” has become the single best friend to retail investors.

AnnualCreditReport.com: In the aftermath of the credit boom and bust, there were singing pirates and a myriad of online offers to help consumers take control of their credit histories, but there was only one official site, guaranteed by Federal law, where you can obtain a free credit report annually.

Consumer Financial Protection Bureau (CFPB): The CFPB was created out of 2010’s Dodd-Frank Wall Street Reform and Consumer Protection Act. The CFPB consolidated most Federal consumer financial protection authority in one place and focuses on one goal: watching out for American consumers in the market for consumer financial products and services. Although various regulators had consumer divisions, none has the sole focus of keep an eye out for us. The CFPB works to give consumers the information they need to understand the terms of their agreements with financial companies. They are working to make regulations and guidance as clear and streamlined as possible so providers of consumer financial products and services can follow the rules on their own.

Ann Marsh: Since we have just celebrated Veterans’ Day, I would like to highlight the work of Financial Planning Magazine’s Senior Editor and West Coast Bureau Chief. Ann’s phenomenal work highlighted how financial problems are weighing on our servicemen and servicewomen, and in some cases, contributing to suicide. Please read her article and if you are interested in supporting our veterans, please check out www.giveanhour.org, which is in the process of considering launching a financial planning arm of its services and www.psycharmor.org, which is putting together a new network of private sector professionals to help soldiers and vets, including financial planners.

Holiday Sales Season 2014 Kicks Off

American consumers: start your engines! This weekend kicks off the holiday shopping season and with just 33 days to go before Christmas, retailers and economists alike have visions of sugarplums dancing in their heads. Back in October, the National Retail Foundation predicted holiday sales in November and December (excluding autos, gas and restaurant sales) would increase 4.1 percent to $616.9 billion, a full percentage point higher than 2013’s actual 3.1 percent increase during that same time frame and above the 2.9 percent growth over the past 10 years.

Other estimates have been similarly upbeat. Deloitte’s annual holiday forecast suggests sales will increase 4 to 4.5 percent, boosted by a 13 percent increase in consumer spending across all categories to $1,299 this holiday season. Analysts at Morgan Stanley believe that it will be a jolly holiday season, helped by an increase in personal income and wilder availability of credit. And research from Capital Economics shows that with employment rising and a fall in gas prices boosting real incomes, “this holiday shopping season could be the best in nine years”.

Regardless of the actual results, what is clear is that the nature of the holiday season is changing. NRF notes that holiday sales represent approximately 19.2 percent of the industry’s annual sales of $3.2 trillion, but for some retailers, the two-month season can account for almost 40 percent of total annual revenues. Perhaps that is why so many big names have extended the season by opening on Thanksgiving Day and even earlier - Wal-Mart started its holiday promotions last Friday!

With a full week to shop, the influence of Black Friday and Cyber Monday are expected to wane. That said, digital is where the growth lies. Shop.org expects 2014 online holiday sales to increase between 8 and 11 percent over last holiday season to as much as $105 billion. But that’s not the whole story: Deloite found that 50 percent of in-store retail sales, or $345 billion, will be influenced by digital interactions this holiday season.

For those inclined to get a jump on shopping, research from Adobe Digital has found that online prices will hit rock bottom on Thanksgiving Day, where consumers will see an average discount of 24 percent. (The average item will be 20 percent off during Thanksgiving week; prices will increase the Tuesday after Cyber Monday.) The second best day to shop online is the Monday before Thanksgiving.

Finally, despite the pain of the past credit bubble bursting, Americans are still willing to go into hock during the holiday season. According to a survey commissioned by NerdWallet and conducted by Harris Poll, families with household incomes between $50,000 and $75,000 will take an average of 2.6 months to pay off holiday debt, whereas families with household incomes below $50,000 will take an average of 2 months.

MARKETS: Stocks reached a milestone last week: For the first time since the dotcom bubble (14 years), the S&P 500 hit a new all-time, inflation-adjusted high.

• DJIA: 17,810, up 1% on week, up 7.4% YTD
• S&P 500: 2063, up 1.2% on week, up 11.6% YTD (45^th record close of 2014)
• NASDAQ: 4712, up 0.5% on week, up 12.8% YTD
• Russell 2000: 1172, flat on week, up 0.9% YTD
• 10-Year Treasury yield: 2.31% (from 2.31% a week ago)
• January Crude Oil: $76.51, up 0.9% on the week (snaps a seven-week losing streak)
• December Gold: $1197.70, up 1% on the week
• AAA Nat'l average price for gallon of regular Gas: $2.83 (from $3.24 a year ago; AAA projects 46.3 million Americans will travel 50 miles or more from home during the Thanksgiving weekend, the highest volume since 2007 and a 4.2 percent increase over 2013. Almost 90 percent will celebrate the holiday with a road trip.)

THE WEEK AHEAD: Despite the Thanksgiving holiday, it will be a big week for economic data.

Mon 11/24:

8:30 Chicago Fed National Activity Index

10:30 Dallas Fed Manufacturing Survey

Tues 11/25:

8:30 Q3 GDP – 2^nd Estimate (Initial reading: +3.5%)

9:00 Case-Schiller Home Price Index

10:00 Consumer Confidence

Weds 11/26:

8:30 Weekly Claims

8:30 Durable Goods Orders

8:30 Personal Income and Spending

9:55 Consumer Sentiment

10:00 New Home Sales

Thurs 11/28: Thanksgiving Day: ALL US Markets closed

The OPEC oil cartel meets in Vienna: Most experts say that even if the group were to agree on an export cut, it is unlikely to have a meaningful effect on prices, due to increased production by non-members

Fri 11/29: Black Friday

1:00 US markets close early