#278 Retirement, Fiduciary, Social Security Expansion with Mark Miller

Mark Miller, the editor and publisher of RetirementRevised and nationally recognized expert on trends in retirement and aging, returns to the show to offer his unique perspective. Mark offers a holistic view of retirement security, including healthcare and Medicare, Social Security, retirement investing, midlife careers and housing.  He also writes frequently about retirement-related public policy issues, including Social Security, Medicare and workplace retirement plans.

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We started the conversation discussing Mark's next book, “Jolt: From Trauma to Transformation,” which examines what makes some of us able to bounce back from trauma and others not so much.

Mark weighed in on the Department of Labor's Fiduciary rule and completely dismissed the industry's push back against the changes. (Check out his post: Is the fiduciary rule fight really about the little guy?) With trillions of dollars in assets set to leave big firms, it's no wonder they fought so hard against putting clients' interests first. We finished up with tips on Social Security and Mark's take on the possibility of Social Security expansion.

Thanks to everyone who participated this week, especially Mark, the Best Producer/Music Curator in the World. Here's how 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

Mid Year Money Tips 2016

Global uncertainty, volatile markets and elections are out of your control, but as we start the second half, here are some Mid-Year Money Tips. Check even a couple off the list and you will be in better financial shape and feel virtuous for having completing them! Track your Money: In the age of easy to use apps like Mint, Digit and Level Money, not to mention bank apps, there is no excuse for getting a handle on what’s coming in and more importantly, what’s going out!

Attack your Consumer and Student Loan Debt: Create a list of outstanding debt and divide it into two categories: Consumer (credit card/auto) and Student Loan. Put the highest interest rate debt at the top, followed by other loans, in descending order. Attack the highest interest loan first and once you whittle it down, shift the money towards the next highest one.

Check/Repair Credit: About half of Americans (46 percent) say they have checked their credit score within the past year, according to a Bankrate.com survey. That is simply crazy—you need to know what’s on your report and your score BEFORE you try to borrow money to buy a car or house. Go to AnnualCreditReport.com to review/correct your report and be persistent-it can often take time and energy to have errors removed.

Refinance your Mortgage: Mortgage rates are flirting with near four-year lows and house prices have increased. That means that a lot of homeowners who may have been unable to refinance may now qualify.

Insurance: Homeowners. Don’t wait for a natural disaster to occur before you review your policy. The three biggest mistakes are: 1) under-insuring; 2) shopping for price only/not comparing apples to apples; and 3) not reading policy details. Also, check to see if you have at least 20 percent equity in your home -- if so, you may be able to drop your Private Mortgage Insurance (PMI). Auto. If you have an old car worth under $5,000, eliminate collision and comprehensive coverage and increase deductibles. Liability. You may be able to earn discounts by purchasing car, homeowner’s and umbrella liability insurance coverage from one company. Life. Needs often decline as you age, so you may be able to get rid of an old policy or consider replacing an expensive policy with a cheaper term one.

Retirement: Still haven’t calculated your number? You are not alone. According to the Employee Benefit Research Institute’s Retirement Confidence Survey 2016, less than half (48 percent) of workers report they and/or their spouse have ever tried to calculate how much money they will need to have saved so that they can live comfortably in retirement. Go to your retirement plan website or use EBRI’s “Choose to Save Ballpark E$timate”.

Investments: The fallout from the Brexit vote was a good reminder that market gains can quickly evaporate before your eyes. The end of the quarter is the perfect time for long-term investors to rebalance accounts so that allocations remain in check. If possible, choose auto-rebalancing so you don’t have to worry about the direction of markets or when its time to reallocate.

Estate Planning: PLEASE DRAFT/UPDATE YOUR WILL! I advise hiring a lawyer to prepare a will, power of attorney and health care proxy/living will. If you insist on doing it yourself, you can use a software program like Quicken WillMaker. All of your estate documents and final instructions should be stored in a safe place – don’t forget to provide copies to your executor/trustee. Those with larger estates, or who want more control over the disposition of assets, may consider a revocable or changeable trust.

What Does Brexit Mean for MY Money?

Since voters in the United Kingdom decided to leave the European Union last week, US consumers, investors and even travelers are trying to understand the impact of the historic Brexit vote. The question I continue to field is" “What does Brexit mean for MY money?”  Unlike the run of the mill correction that we saw earlier this year, the UK’s exit from the 28-member union is an “exogenous event.” That means that it has come from outside the predicted modeling system that most economists utilize and as a result, can have significant, negative effects on prices. For example, the British pound sterling tumbled to its lowest level against the US dollar in thirty years and global stocks have fallen sharply. Meanwhile, bastions of safety like US treasuries, German bunds and gold are rising. Still, large financial firms are saying that so far, there is no liquidity crisis and markets are functioning well.

While that is indeed good news, let’s not repeat old mistakes. Consider this: nine years ago this month, June, 2007, an unexpected event occurred: investment banking firm Bear Sterns (BS) had to bail out two of its hedge funds that were collapsing because of bad bets on subprime mortgages. At the time, there was no mystery surrounding the risks that were emerging, though 15 months later, there were complaints that the financial media had failed to sound the warning alarms.

In fact, the New York Times said the crisis at BS stemmed “directly from the slumping housing market and the fallout from loose lending practices that showered money on people with weak, or subprime, credit, leaving many of them struggling to stay in their homes. Bear Sterns averted a meltdown this time, but if delinquencies and defaults on subprime loans surge, Wall Street firms, hedge funds and pension funds could be left holding billions of dollars in bonds and securities backed by loans that are quickly losing their value.”

Let’s put that seemingly small BS event from nine years ago into context:

• June 2007: BS Bails out funds
• October 2007: US stock indexes hit all-time highs
• March 2008: BS goes broke and is taken over by JP Morgan Chase
• September 2008: Lehman Brothers Holdings files for Chapter 11 bankruptcy protection; Bank of America purchases Merrill Lynch; the Federal Reserve Bank of New York is authorized to lend up to $85 billion to AIG; the Reserve Primary Money Fund falls below $1 per share; Goldman Sachs and Morgan Stanley become bank holding companies

I am not suggesting that Brexit will cause a financial crisis, but we should carefully consider what dangerous spillover effects could occur. While US banks are better capitalized than they were leading up to the fall of 2008, the UK and European banks do not look nearly as healthy. In the two trading sessions after Brexit, the European Bank index lost about a quarter of its value and UK based banks did even worse.

If you are traveling to the UK or Europe or you enjoy imported cheese and wine, you might be delighted to see the US dollar strengthen. But as the dollar rises, emerging markets like China could come under pressure, echoing what happened in the first six weeks of the year, when global stocks tumbled and US stock corrected. And if European growth slows, its weaker economies (Portugal, Italy, Greece, Spain) will once again be at the heart of sovereign debt questions.

In terms of the US, analysts at Capital Economics say the UK and the EU account for 4 and 15 percent of US exports, respectively. If both regions go into a recession, Brexit could shave 0.2-0.3 percent from the current US growth rate of 2 percent. But estimates can be rocked by emotions. A US-based multinational may hold back on hiring everywhere to see how things shake out post-Brexit. For US exporters, the rising US dollar will create a drag on competitiveness in overseas markets and could potentially trigger lay offs at home. And if non-affected businesses and consumers start to feel unnerved, they too might pull in the reins, causing the US economy to slow down more than anticipated.

Amid all of this uncertainty, anxiety levels are rising, testing the third longest bull market in history. Some may feel butterflies and may even be tempted to sell. Remember that market timing rarely works because even if you sell and manage to steer clear of the bear by staying in cash, you will not be able to reinvest dividends and fixed-income payments at the bottom and you are likely to miss the eventual market recovery. There is clear evidence that when investors react either to the upside or downside, they generally make the wrong decision.

The best way to avoid falling into the trap of letting your emotions dictate your investment decisions is to remember that you are a long-term investor and do not have all of your eggs in one basket. Your diversified portfolio strategy, based on your goals, risk tolerance and time horizon should help you fight the urge to react to short-term market conditions. It’s not easy to do, but sometimes the best action is NO ACTION. And don’t forget that if you are still contributing to your retirement plan or funding your kid’s education fund, take comfort in knowing that you are buying shares at cheaper prices.

If you are really freaked out about the movement in your portfolio, perhaps you came into this period with too much risk. If that’s the case, you may need to trim readjust your allocation. If you do make changes, be careful NOT to jump back into those riskier holdings after markets stabilize. Finally, if you need access to your money in the short-term (within the next 6-12 months), be sure that it is not invested in an asset that can fluctuate.

Brexit Blues: What Happens Next?

It’s official: UK voters decided to leave the European Union. Brexit was a seismic and unexpected result, which caught global investors off guard (more on that later). The big question: What happens next? As noted in Brexit Q&A, the “Leave” win means that the UK government must decide when to invoke Article 50 of the Treaty of Lisbon, which outlines the legal process by which a state can withdraw from the EU. Prime Minister David Cameron announced that he would step down in October and suggested that the next Prime Minister should initiate the Article 50 process. Once it does, the withdrawal negotiations would begin. At a minimum, it would take two years, but that time frame could be extended by unanimous agreement among the remaining 27 member nations. During the process, the UK would obey EU treaties and laws, but not take part in any decision-making.

The biggest issue is how trade would be handled between the EU and the rest of the world. According to law firms Davis Polk and Sullivan and Cromwell, two powerhouses that advise multinational corporations, there are three basic options for the UK’s exit, based on existing models. Leaders of the Leave movement did not advocate a specific alternative during the campaign, so it is unclear which model they will follow.

Total exit: the UK leaves the EU and does not continue to benefit from any part of the single market. The UK either relies solely on the rules of the World Trade Organization (which include rules governing the imposition of tariffs on goods and services) as the basis for trading with the EU or negotiates a new bilateral trade deal with the EU.

The Norwegian model: the UK leaves the EU but joins the European Economic Area (EEA). The EEA is made up of 28 EU member states and three countries, which are not EU member states (Norway, Iceland and Liechtenstein), and extends the free movement of goods, services, capital and persons beyond the EU to those three countries. Under this arrangement, the UK would not benefit from or be bound by the EU’s external trade agreements. It would have to make significant financial contributions to the EU and continue to allow the free movement of persons, two of the Leave camp’s main criticisms of EU membership.

The Swiss model: the UK leaves the EU and does not join the EEA, but enters various bilateral agreements with the EU to obtain access to the internal market in specific sectors, rather than the market as a whole. Switzerland has negotiated a large number of sector-specific bilateral agreements with the EU and has access to some parts of the single market, but is excluded from the single market in some major sectors (for example, the financial services sector).

BREXIT impact on US companies: The choice of model will impact US companies that have a large presence in the UK. One sector in particular that is left hanging is financial services, because under the “Total Exit” or “Swiss” models, there would be no right for UK-authorized firms or individuals to provide financial services in the EU on a “passported” basis. This is critical because most US financial institutions currently use a UK-authorized person and/or entity to provide financial services elsewhere in the EU. Without passporting, the companies would need to obtain authorization from a EU member state by either establishing an authorized branch or subsidiary in that state.

Loss of passporting would create legal, compliance and infrastructure headaches, not to mention steep costs to US firms. Additionally, many US banks make London their hub across the pond because of the access to talent, support services and the use of English as the global language for financial services. So while many Wall Street operations and legal departments are scouting locations in Dublin and Frankfurt, they are hoping that they will not have to move the majority of their people and offices.

MARKET REACTION: At 1:00am Friday morning, when the referendum results were becoming clear, the first thing I did was to look up when US stock market circuit breakers are triggered. At that time, the British pound sterling tumbled to its lowest level since 1985, US stock futures were getting crushed and the mad dash to safe assets like US treasuries, German bunds and gold was under way. The news from trading desks across the globe was that unlike in 2008, there was no liquidity crisis and markets were functioning fairly well.

At the end of the trading day, the damage was not too bad, considering the magnitude of the news. US stock markets were down 3.5 to 4 percent, Treasury bond prices jumped and yields fell; and gold added 4.6 percent. The action in the UK and Europe was instructive: the UK FTSE 100 index fell 3.1 percent, boosted by export-driven companies that would benefit from a weak Pound. The larger FTSE 250 index fell 7.2 percent, its worst one-day drop percentage fall since Black Monday in 1987.

Meanwhile, European exchanges also slumped. The German DAX fell 6.8 percent and the French CAC-40 fell 8 percent. Investors are clearly worried about the impact of the BREXIT on the European economy and likely understand that a protracted and nasty divorce could push the EU into a recession.

CENTRAL BANK TOOLBOX: Over the past eight years, amid the financial crisis, worries about Greece and a generally sluggish economic recovery, global central banks have been able to soothe markets with interest rates cuts (sometimes going negative) and unconventional tools like bond buying (“Quantitative Easing”). This time around, though, the central bank toolbox may come under pressure. Global interest rates are already close to zero and bond buying may not do the trick if the BREXIT shock causes individuals and businesses to shut down and do nothing for a while.

That said; the next Federal Reserve occurs July 26-27 and if the cloud of EU uncertainty has prompted a further sell off in stocks, a rise in the US dollar and general mayhem around the globe, don’t be surprised if Janet Yellen and company reverse course and explicitly say that the central bank is not going to keep raising rates and would consider undoing last December’s hike and launching QE IV, if conditions worsen.

Frexit, Italeave, Czexit: Some economists and traders are concerned that because the world was not prepared for BREXIT, there could be a domino effect, whereby other nations will choose to leave the EU. Even a coordinated central bank intervention could not fight off the power that a fraying EU might create throughout the world.

And now, the weather: After talking to a number of traders, economists, bankers and analysts, it is clear to me that very few of them thought that BREXIT would occur; as a result, they are still in a bit of shock. While Friday was not terrible, the short, intermediate and long-term implications of BREXIT are simply unknowable. Like the weather in London, it looks we will be forced to live with lots of clouds, occasional storms and hopefully, a ray of sunshine.

MARKETS:

• DJIA: 17,400, down 1.6% on week, down 0.1% YTD
• S&P 500: 2037, down 1.6% on week, down 0.3% YTD
• NASDAQ: 4708, down 1.9% on week, down 6% YTD
• Russell 2000: 1127, down 1.5% on week, down 0.7% YTD
• 10-Year Treasury yield: 1.56% (from 1.61% a week ago; touched 1.42% on Friday, just above its record low of 1.404% set in July 2012)
• British Pound/USD: $1.3649, -8% Friday, weakest level since the financial crisis
• July Crude: $47.64, down 1.6% on week
• August Gold:  at $1,322.40, up 2.1% on week, a two-year high
• AAA Nat'l avg. for gallon of reg. gas: $2.31 (from $2.34 wk ago, $2.78 a year ago)

THE WEEK AHEAD:

Mon 6/27:

8:30 International Trade in Goods

10:30Dallas Fed Mfg Survey

Tues 6/28:

8:30 GDP

8:30 Corporate Profits

9:00 S&P Case-Shiller HPI

10:00 Consumer Confidence

Weds 6/29:

8:30 Personal Income and Spending

9:30 Janet Yellen on panel at ECB central banking conference in Portugal (Panelists: BofE Gov Mark Carney, ECB Pres Mario Draghi, Brazil Central Bank Gov Alexandre Tombini)

10:00 Pending Homes Index

Thursday 6/30:

9:45 Chicago PMI

Friday 7/1:

Motor Vehicle Sales

9:45 PMI Manufacturing Index

10:00 ISM Mfg Index

10:00 Construction Spending

#277 Summer Travel with Peter Greenberg

Here's the perfect antidote to Brexit Blues: Talking travel with Peter Greenberg. Peter, a multiple Emmy-winning investigative reporter and producer, is the travel editor for CBS News, appearing on CBS This Morning, CBS Evening News with Scott Pelley, and Sunday Morning, among other broadcast platforms. He is also the host of  the public television show, “The Travel Detective with Peter Greenberg”.

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We started with the basics that every traveler needs to know about Zika virus. Although fear is dominating, Peter says travelers need to practice common sense and be sensitive to germs. Because of the Zika fears, there are still deals for the Olympics in Rio! Peter advises that if you are interested in heading down to Rio, call hotel and ask which organization is controlling the block and leave your name. He also said that economic problems in Puerto Rico are presenting travelers with good options.

Last year, Peter told us to get to Cuba before it becomes Miami Beach South. He reiterates that advice and says that there is even more access to Cuba now, because six airlines are flying there. "Go now." says Greenberg, because before long, there will be price gauging when all of the tourists get there. Spend a week, but remember that the island-nation is still primarily a cash-only country. Peter's big tip: Change US dollars into euros, because there is a 30 percent premium on USD exchanges!

Peter's current favorite European destination is Malta, which is 1.5-hour flight from Rome. He said that you will find history, art and architecture, as well as a classic hotel in the Corinthian. For exotic or faraway destinations, Peter likes the Faroe Islands (between Greenland and Europe) and Indi, which he says is too big to do as one trip. Peter's two favorite hotels in NYC are The Mandarin Oriental and The Lowell, which has the last working fireplaces in New York!

You may want to check out Peter's book, “Don’t Go There,” which helps travelers avoid some common pitfalls. He advises avoiding places with high pollution, crime and alcohol consumption. His hot list of places to avoid includes: Syria, Chechnya and the Congo.

As a reminder, Peter warns not to confine your search for airfare to the web–only 52% of inventory is available there! Amazingly, calling still works, as does using alternate airports, which can also help limit airport security craziness/lines.

FOLLOW UP: I mentioned that previous guest Mark Cortazzo has an Annuity Review service…the website is www.annuityreview.com.

Thanks to everyone who participated this week, especially Mark, the Best Producer/Music Curator in the World. Here's how 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

Brexit Q&A

What is Brexit? Borrowing from the mash up “Grexit,” which referred to the potential exit of Greece from the eurozone, “Brexit” is used to describe the referendum ("Should the United Kingdom remain a member of the European Union or leave the European Union?"), to be held on June 23rd. British, Irish and Commonwealth citizens who live in the UK, along with Britons who have lived abroad for less than 15 years, will determine whether to “leave” or “remain” in the EU.  What is the European Union? In 1957, the Treaty of Rome created the European Economic Community (EEC), or "Common Market," which was the basis of what is now known as the European Union, or “EU”. The idea behind the EU was that countries that trade with one another become economically interdependent and more likely to avoid conflict, a pressing concern in the shadow of two world wars on the Continent.

There are 28 member-nations in the EU: Austria, Belgium, Bulgaria, Croatia, Republic of Cyprus, Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Ireland, Italy, Latvia, Lithuania, Luxembourg, Malta, Netherlands, Poland, Portugal, Romania, Slovakia, Slovenia, Spain, Sweden and the UK.

What is the Eurozone? The eurozone is a subset of the EU that shares a common currency, the euro. The Treaty of Rome, the Single European Act of 1986 and the 1992 Maastricht Treaty all paved the way for the Economic and Monetary Union (EMU) and a single currency -- the euro.

The currency was launched in 1999 for electronic transactions, and physical notes and coins were first issued in 2002. The 11 initial members of the EMU included: Austria, Belgium, Finland, France, Germany, Italy, Ireland, Luxembourg, Netherlands, Portugal, and Spain. Greece joined in 2001, followed by Slovenia in 2007, Cyprus and Malta in 2008, Slovakia in 2009, Estonia in 2011, Latvia in 2014 and Lithuania in 2015. Today, the euro area numbers 19 EU Member States.

Do all EU countries use the Euro? No. Three of Europe's largest economies -- Norway, Sweden, and the United Kingdom -- do not use the euro. Great Britain maintains its own currency, the Pound Sterling.

What is the “Leave” Argument? Those who are in support of leaving say membership in the EU has led to high levels of immigration (one main tenant of EU membership is "free movement", which means you don't need to get a visa to go and live in another EU country); too many rules and regulations; and high costs. UK Treasury figures show that net contribution to the EU (including a negotiated rebate and money that is paid but sent) is £7.1 billion or $10.2 billion. The Leave argument is that not only would the UK save that money, but as Europe’s second-biggest economy, it could negotiate a better trade deal as a non-EU member.

What is the Remain Argument? Trading with other EU nations, as well as an influx of immigrants is good for the U.K. economy, according to the Remain camp. Additionally, there is a fear that if the U.K leaves the EU, international businesses will flee the UK, in search of a home in another EU nation. 

What’s Expected? Recent opinion polls have shown a dead heat, but bookmakers’ odds still point to a victory for “Remain”.

When will we know the results? Polls close at 22:00 GMT (6:00ET) Thursday, 23 June and most believe that it will take about 6 hours to get a clear picture of who won, especially if the vote is as close as anticipated.

If “Leave” wins, how long will it take for Britain to leave the EU? Following a vote to leave, the UK government would have to decide when to invoke Article 50 of the Treaty of Lisbon, which outlines the legal process by which a state can withdraw from the EU. Once it does, the UK and the EU would begin to negotiate a withdrawal agreement, which at a minimum would be two years.

During the negotiation process, the UK would obey EU treaties and laws, but not take part in any decision-making, as it negotiated a withdrawal agreement. That period could be extended by unanimous agreement, which is why many analysts believe that it could take four or five years to tackle the myriad of issues, the biggest of which is how trade would be handled between the EU and the rest of the world. If the UK wanted to rejoin the EU, it could, but it would have to start the process from scratch.

If “Leave” wins, would other nations, like Greece, follow? Brexit could potentially be the first step towards the break-up of the EU, or the exit of one or more countries from the euro. Additionally, many believe that Scotland would launch a second effort to leave the U.K. – the first occurred about two years ago.

What are the market implications of Brexit? A vote to leave would negatively impact the British Pound, UK interest rates and stocks. According to the IMF, Brexit would likely plunge the UK into recession and could spark a stock market crash and a steep fall in house prices. It could also potentially create spillover effects in global markets, as uncertainty, the enemy of investors, would dominate. If Leave wins, economists expect UK GDP to shrink by 1.5 to 4.5 percent by 2021.

What are the political implications of Brexit? A Leave vote could see the departure of Prime Minister David Cameron, who started this risky process after he won the 2015 general election. Cameron was responding to pressure from his own Conservative MPs and the UK Independence Party (UKIP), both of which had heard from disgruntled constituents about the issue of EU control.

MARKETS: It was a “risk-off” week, as the combination of loose global central bank policies, worries over economic growth and fear over Brexit pushed investors into the sovereign bond markets. On Tuesday, the yield of the German 10-year bond fell below zero for the first time ever. The S&P 500 and NASDAQ had their largest weekly drops since late April.

• DJIA: 17,675 down 1% on week, up 1.5% YTD
• S&P 500: 2071 down 1.2% on week, up 1.3% YTD
• NASDAQ: 4800 down 1.9% on week, down 24.1% YTD
• Russell 2000: 1145, down on week, up 2.5% YTD
• 10-Year Treasury yield: 1.61% (from 1.64% a week ago)
• July Crude: $47.98, down 2.2% on week
• August Gold: $1,294.80, up 1.5% on week
• AAA Nat'l avg. for gallon of reg. gas: $2.34 (from $2.34 wk ago, $2.80 a year ago)

THE WEEK AHEAD:

Mon 6/20:

Tues 6/21:

10:00 Janet Yellen’s semi-annual testimony before Senate Banking Committee

Weds 6/22:

10:00 Janet Yellen’s semi-annual testimony before House Financial Services

10:00 Existing Home Sales

Thursday 6/23:

UK BREXIT VOTE

10:00 New Home Sales

Friday 6/24:

8:30 Durable Goods Orders

10:00 Consumer Sentiment

#276 Father's Day with Retirement Investing Expert Mark Cortazzo

We celebrate Father's Day with guest Mark Cortazzo of Macro Consulting Group. Mark says retirement investing requires a big shift in thinking, especially when it comes to risk. While growing your portfolio, time and volatility can be your friend but once you start withdrawing from the portfolio, they become your enemy and market hits have a much greater impact. Mark's perspective on how to manage the transition from accumulating wealth to withdrawing during retirement is valuable.

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• Download this week's show (MP3)

In honor of Father's Day, check out this post, where I review some of the valuable lessons Albie (also known on this show as "Big Al") imparted to me.

You might think that as a former options trader on the floor of the American Stock Exchange (AMEX), my father would have been a big risk-taker, but Dad developed a healthy respect for risk. He compared investing to swimming in the ocean. When the water is calm, you feel brave and alive, but when a wave sweeps you off your feet, you are humbled.

 Here are some of Dad's pearls of investing wisdom:

• “Every asset class stinks, but cash is the best of the worst.”
• Sarcastically referring to big investment firms’ opposition to the DOL’s Fiduciary Rule: “Only these geniuses think that NOT putting the client first is a smart business proposition.”
• About investors who pile into expensive, but poor performing hedge funds: “Just because they have money does not make them smart.”

If you missed the great episode with James Altucher, check it out here.

Thanks to everyone who participated this week, especially Mark, the Best Producer/Music Curator in the World. Here's how 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

Father's Day Advice: Cash is Best of the Worst

This is my third Father’s Day without a father and it still seems strange that he’s not here. I think about Albie (“Albert” to my grandmother, “Big Al” to others) every day and especially now, as we celebrate my niece’s and nephew’s high school and college graduations; new career turns for various family members; and some amazing career highlights for me, including a once-in-a-lifetime opportunity to interview Dame Julie Andrews. But it’s when my attention turns to markets and the economy that I often hear Albie offering a no-baloney quip that would cut to the core of any issue of the day. I could imagine him describing the current investment environment like this: “Every asset class stinks, but cash is the best of the worst.” Or sarcastically referring to big investment firms’ opposition to the Department of Labor’s Fiduciary Rule: “Only these geniuses think that NOT putting the client first is a smart business proposition.” And to investors who pile into expensive, but poor performing hedge funds: “Just because they have money does not make them smart.”

You might think that as a former options trader on the floor of the American Stock Exchange (AMEX), my father would have been a big risk-taker, but as he admitted “Going broke a couple of times tends to cure one of swinging for the fences.” Dad developed a healthy respect for risk -- similar to the one he had for swimming in the ocean. When the water is calm, you feel brave and alive, but when a wave sweeps you off your feet, you are humbled.

As he matured, my father learned to be a more patient and disciplined investor and although I never liked his proclivity towards being an individual stock and bond picker, I knew that his mantras (“Nobody rings a bell at the top or the bottom”, “don’t fall in love with your positions”, “wait 24 hours before making any major purchase or sale that deviates from the plan”) kept him out of any serious trouble.

My father was a bit of a contrarian, something that used to drive me crazy. But what seemed annoying as a kid, was actually a good habit to develop: questioning the status quo, especially when articulated by so-called experts, helped me avoid being swept up in various investment manias – and freaked out about crashes – over the years. It also allowed me to consider some of Albie’s favorite challenges to conventional wisdom: Why is home ownership preferable to renting? Aren’t there cases when renting makes sense? Is attending an expensive college really worth it? Why doesn’t everyone realize that financial planners/brokers/advisers consistently fall prey to their own optimism? What if you are unable to earn 6 percent on your retirement assets? Why are people so unwilling to talk plainly about money and death?

I had lengthy conversations with my father about all of those questions and many more, including debates on sports, politics, television and movies. I was thinking about Albie after reading a report from Allianz, which found that sobering third of Americans say they regret the major choices they made in their lives, such as when/where they went to school, the profession they chose and when/where they worked. My father was the type of man who had no regrets, not even for the mistakes that he made.

On what would be the last Father’s Day we spent together, he said, “The best thing I have ever have done in my life was to raise two wonderful daughters.” He wasn’t gooey when he said it— for him, it was a statement of fact. For me, it’s the best way to remember Albie.

Will Fed Wait Until Dec to Raise Rates?

Seven years ago, the recession officially ended. According to the National Bureau of Economic Research’s (NBER) Business Cycle Dating Committee, the organization responsible for declaring the beginning and end of U.S. expansions and contractions, June 2009 was the nadir of the worst recession since the Great Depression. Yes, employment bottomed out six months after the official end date, but that NBER says that is to be expected, because a recession “is a period of diminishing activity rather than diminished activity.” In other words, although the economy was still weak after June 2009, with lingering high unemployment, it had expanded considerably from its trough 15 months earlier. Where does that leave us today? The U.S. has seen a sluggish recovery, but the economy is far better off than it was seven years ago, by almost every objective metric. That said, a seven year expansion seems ripe for a breather, which is why so many are worried about the next recession. Adding to the concern was a report last week from the World Bank, which downgraded global growth estimates. “Overall growth remains below potential” and “looking ahead, the prospects of global growth remain muted.”

As expected, the commodity exporters have been hit particularly hard, but even advanced economies are stymied by sluggish growth. U.S. GDP is likely to be about 2 to 2.2 percent this year, consistent with the pace experienced over the past few years and the last few jobs reports have shown deceleration.

Amid this environment, it’s hard to see how the Federal Reserve could possibly raise interest rates when it meets this week. Although many central bankers went on a speaking junket in May, telling us that the U.S. economy had shown enough progress that a rate hike would be appropriate in the “coming months,” but the recent jobs data, combined with the dour World Bank assessment, makes it nearly impossible for the Fed to budge this week.

Instead, it’s back to parsing the Fed’s accompanying statement, the updated FOMC projections and Chair Janet Yellen’s press conference, for any signals of when the next rate hike might come. The answer, according to Capital Economics, “depends on whether the weakness in payroll employment in not just May but April too was a temporary blip or the start of a more serious downturn.”

If hiring picks up and the U.K. votes to remain within the European Union on June 23rd, the next Fed meeting at the end of July could be a possibility, but it would be a long shot. The more likely possibility would be the September meeting. If not September, it’s hard to fathom Fed action in November, just days before the presidential election. Unless there is a big uptick in economic activity, the last policy of the year on December 13 and 14, the one-year anniversary of the first rate hike of this cycle, may be the first and only Fed rate increase of 2016.

MARKETS: As U.S. indexes flirted with all-time record levels, the real action was in the bond market. The yield of the 10-year U.S. treasury tumbled to 1.639%, the lowest close since May 2013. Additionally, yields of comparable bonds in Germany and Japan, fell to all time lows, as investors bet on the continuation of sagging growth and low inflation and found solace in the overall safety of the bond market.

• DJIA: 17,865 up 0.3% on week, up 2.5% YTD
• S&P 500: 2096 down 0.2% on week, up 2.6% YTD
• NASDAQ: 4894 down 1% on week, down 2.3% YTD
• Russell 2000: 1164, flat on week, up 2.5% YTD
• 10-Year Treasury yield: 1.639% (from 1.7% a week ago)
• July Crude: $49.07, up 0.9% on week
• August Gold: $ 1,275.90, up 2.7% on week
• AAA Nat'l avg. for gallon of reg. gas: $2.38 (from $2.35 wk ago, $2.76 a year ago)

THE WEEK AHEAD:

Mon 6/13:

Tues 6/14:

FOMC Meeting Begins

6:00 NFIB Small Business Optimism

8:30 Retail Sales

8:30 Import/Export Prices

10:00 Business Inventories

Weds 6/15:

8:30 PPI

8:30 Empire State Mfg Survey

9:15 Industrial Production

2:00 FOMC Decision

2:00 FOMC Economic Projections

2:30 Janet Yellen Press Conference

Thursday 6/16:

8:30 CPI

8:30 Philly Fed Business Outlook

10:00 Housing Market Index

Friday 6/17:

8:30 Housing Starts

#275 Career Advice: Use Gums, Not Thumbs

Coach Barbara Russo has sound career advice for every worker: Use your gums, not your thumbs! In other words, stop texting and e-mailing and instead seek to create face to face relationships in your work life, if you want to succeed. Barbara says there are usually three types of clients that she encounters: those who want to get in, move up or move on. In each phase, she offers common sense ways that we can advance our careers.

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In many of her engagements, Barbara asks her clients to look within themselves to answer some important questions:

What do you want more or less of in your work and personal life? What is working right now/what isn't? What do you want your life to look like in the next 10-20 years? Are there co-workers or bosses who you need to better manage in order to be happier? For those who are risk-averse,  Barbara says,  "Sometimes you jump off a cliff and land paradise."

If you missed the great episode with James Altucher, check it out here.

Thanks to everyone who participated this week, especially Mark, the Best Producer/Music Curator in the World. Here's how 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