Interest Rate & Bond Market Outlook for 2017

The U.S. Economy: 2017 Outlook

Even Low Inflation Can Have A Large Adverse Impact

The cost of inflation

Even a low inflation rate can reduce the purchasing power of your money

Analysis of Today's Markets & Economy

How Might Investors Make Sense of Today’s Markets and Economy?

Read more here...

Q&A on the Markets and the Economy @ Fidelity

The Top 10 Retirement Challenges: #6. Monitoring Expenses

Expenses are often much different in retirement than they are during working years, but they are still incredibly important to the overall plan.

Often, clients will spend more in the early years of retirement, see expenses dip in the middle, then rise as they near the end of their lives and medical expenses climb.

Also, NOT all Expense Categories grow at the Same Rate of Inflation, and this needs to be considered when forecasting long-term expenses.

The U.S. Dollar Sure Doesn't Buy What It Used To: $100.00 in 1900 Worth $3.48 Today!!!

Why The Average Investor Is Absolutely Abysmal At Investing...

Just how BAD is the average investor at investing? 


According to BlackRock's chart of the week...
They're so bad that they've managed to underperform every major asset class for the last 20 years.  


They've even underperformed inflation!

Volatility is often the catalyst for poor decisions at inopportune times. Amidst difficult financial times, emotional instincts often drive investors to take actions that make no rational sense but make perfect emotional sense.

Psychological factors such as fear often translate into poor timing of buys and sells. Though portfolio managers expend enormous efforts making investment decisions, investors often give up these extra percentage points in poorly timed decisions.

As a result, the average investor underperformed most asset classes over the past 20 years. Investors even underperformed inflation by 0.5%.

Cost of Living Increases - Decade by Decade...

The Cost of Living (as measured by the government's Consumer Price Index, CPI) in the USA increased +25% in the decade of the 1950s, +28% in the 1960s, +103% in the 1970s, +64% in the 1980s, +33% in the 1990s and +28% in the 2000s.  

Source: Department of Labor
  

Inflation Persists On It's Downward Path: +2.3% Year-Over-Year

Gross Domestic Income Is Not Keeping Pace with Inflation...

Gross Domestic Income (GDI), an alternative gauge of economic output to gross domestic product, shows the U.S. near a standstill. GDI — income received by U.S. households and businesses — rose +0.4% in the 3rd quarter 2011.

GDI should, in theory, be equal to Gross Domestic Product (GDP), which rose +2.0%.

The discrepancy raises fears that 3rd-quarter growth was much slower than GDP figures suggest.

The Federal Reserve Is Abysmal At Forecasting GDP Growth and Inflation...

Inflation Watch: Food Prices Up +4.6% During The Past Year...

The Ugly Truth About The Last 12 Years on Wall Street...

A One-Day Hospital Stay Outpaces Inflation By Over 13 to 1...

From 1985 to 2010, the average cost of one day in the hospital (semiprivate room, Midwestern city) rose +1,366%, an increase of +11.3% per year for 25 years.

Inflation in the country over the same 25 years is up +101% or an average of +2.8% per year.

Source: Department of Labor

2011 Dalbar Study: Why The Average Equity Fund Investor Will ALWAYS Trail The Market...

From December 31, 1990 to December 31, 2010, the S&P 500 gained +9.1% per year.

But the average equity fund investor has gained less than half of much, only +3.8%!

During the same period, the typical aggregate bond index gained +6.9% per year.

But the average fixed income investor has earned 7 times less!!!, only +1.0%!

BOTTOM LINE:

1. Sadly, over the past 2 decades, investors haven't built any real wealth during neither the past 10 years nor the past 20 years. Taxes, inflation, fear, greed, the business cycle, financial crises and market meltdowns all conspired to, not grow, and not even maintain, but shrivel the purchasing power of the average investor.

2. The vast majority of passive investors simply don't have and never will have the psychological discipline to keep the faith during bear markets meltdowns of -30%, -40% or -50% that decimate their retirement nest eggs.

And who can blame them?

Thankfully, there is a better way.

The Misery Index: The Worst in 28 Years...

To put the current Misery Index (unemployment plus inflation = 12.9) in some historical context:

(1) it's higher than any time in the past 28 years

 (2) it's +36% higher than the post-World War II average of 9.5 


(3) there have been only 9 years in the past 63 when the annual Misery Index topped 12.9 — all in the inflationary 1970s.

The 1970s was the last time stagflation reared its ugly head.

Rampant government spending, regulatory hyperactivity and endless federal meddling in the economy were the root causes.


Sound familiar?

-39% Purchasing Power Destruction Over The Past 20 Years...

An individual living on a fixed income over the 20 years from the end of 1990 to the end of 2010 would have suffered a -39% loss of purchasing power over the 2 decades using the CPI as a gauge of inflation

Source: U.S. Department of Labor

Why The Average Equity Fund Investor Will ALWAYS Trail The Market...

From January 1, 1990 to December 31, 2009, the S&P 500 gained +8.2% per year.

But the average equity fund investor has gained less the half of much, only +3.2%!

During the same period, the typical aggregate bond index gained +7.1% per year.

But the average fixed income investor has earned 7 times less!!!, only +1.0%!

BOTTOM LINE:

1. Sadly, over the past 2 decades, investors haven't built any real wealth during neither the past 10 years nor the past 20 years. Taxes, inflation, fear, greed, the business cycle, financial crises and market meltdowns all conspired to, not grow, and not even maintain, but shrivel the purchasing power of the average investor.

2. The vast majority of passive investors simply don't have and never will have the psychological discipline to keep the faith during bear markets meltdowns of -30%, -40% or -50% that decimate their retirement nest eggs.

And who can blame them?

Thankfully, there is a better way.

Survey: Seniors Buying Power Suffers Erosion Since 2000

• +31% — Percentage the Social Security Cost of Living Adjustment has increased.
  
  
• +73% — Percentage typical senior expenses have jumped.
  
  
• 1 in 3 — Number of beneficiaries who rely on his or her Social Security check for 90% or more of their total income.

Seniors have lost almost one-third of their buying power since 2000, according to the Annual Survey of Senior Costs, released today by The Senior Citizens League, one of the nation's largest nonpartisan seniors advocacy groups.

In most years, seniors receive a small increase in their Social Security checks, intended to help them keep up with the costs of inflation. 

But since 2000, the Social Security Cost of Living Adjustment has increased just +31%, while typical senior expenses have jumped +73%, more than twice as fast.

"For many years, seniors have watched helplessly as the value of their benefits has eroded. Those losses have added up, and millions of seniors – among our most vulnerable citizens – are barely able to scrape by today" says Larry Hyland, chairman of The Senior Citizens League.

"To put it in perspective, for every $100 worth of expenses seniors could afford in 2000, they can afford just $68 today."

A senior with an average Social Security benefit in 2000 received $816 per month, a figure that rose to $1,072.30 by 2011. However, that senior would require a Social Security benefit of $1,414.70 per month in 2011 just to maintain a 2000 lifestyle.

A majority of the 37 million Americans aged 65 and over who receive a Social Security check depend on it for at least 50% of their total income, and 1 in 3 beneficiaries rely on it for 90% or more of their total income.

Source: PR Newswire, The Senior Citizens League

U.S. Dollar Purchasing Power Drops -20% in the Past 10 Years...