Economy Archives - Page 6 of 7 - NorthStar Capital Advisors

Home Prices See Strong Gains in Q1 2013

Year-over-year change in home price (Click to enlarge)

Very positive news from the S&P/Case-Shiller Home Price Indices based on the latest data (through March 2013):

• All three composites posted double-digit annual increases.
• The 10-City and 20-City Composites increased by 10.3% and 10.9% in the year to March with the national composite rising by 10.2% in the last four quarters.
• All 20 cities posted positive year-over-year growth.
• In the first quarter of 2013, the national composite rose by 1.2%. On a monthly basis, the 10- and 20-City Composites both posted increases of 1.4%.
• Charlotte, Los Angeles, Portland, Seattle and Tampa were the five MSAs to record their largest month-over-month gains in over seven years.

Click to enlarge

College Graduates Fare Well in Jobs Market, Even Through Recession

A remarkably stark employment picture in the below New York Times graphic below – the recovery and early stages of the new Knowledge Economy has not been kind to non-college graduates at all.

From the related article:

The number of college-educated workers with jobs has risen by 9.1 percent since the beginning of the recession. Those with a high school diploma and no further education are practically a mirror image, with employment down 9 percent on net. For workers without even a high school diploma, employment levels have fallen 14.1 percent.

Education Still Matters If You Want a Decent Paying Job

Click for larger view

Data: BLS, FactSet, J.P. Morgan Asset Management. Source: Census Bureau, J.P. Morgan Asset Management; Unemployment rates shown are for civilians aged 25 and older.

Source: JPM Morgan Guide to Markets, Q2 2013

Dow at All-Time High: What Has Changed?

Click for larger view

The Dow climbed to 14253.77 on Tuesday to set a new all-time high. The economic landscape has changed a great deal since the previous record was set in October 2007:

GDP Growth: Then +2.5%; Now +1.6%
Unemployed: Then 6.7 million; Now 13.2 million
Food Stamp users: Then 26.9 million; Now 47.69 million
Fed’s Balance Sheet: Then $0.89 trillion; Now $3.01 trillion
Debt as a Percentage of GDP: Then ~38%; Now 74.2%
Total US Debt: Then $9.008 trillion; Now $16.43 trillion
Consumer Confidence: Then 99.5; Now 69.6
VIX: Then 17.5%; Now 14%
10 Year Treasury Yield: Then 4.64%; Now 1.89%
Gold: Then $748; Now $1583
NYSE Average daily volume: Then 1.3 billion shares; Now 545 million shares

Source: WSJ

Do I need to worry about the “fiscal cliff”?

This is a frequent question that we have heard from our clients and friends lately. Do I need to worry about the “fiscal cliff”?

We don’t think the fiscal cliff represents a long-term concern to investors’ portfolios. The market may make a temporary move down if a compromise is not reached before January 1st. However, an agreement is inevitable and the market should move forward with renewed confidence.

There are so many unknowns involved that the best course of action is likely no action at all. We are not making any special changes to our NorthStar client portfolios (FYI: our stock portfolio is up over 30% YTD for 2012; see details and performance disclosures).

It’s interesting to note that retail investors (aka individual, “mom and pop” investors) have been selling and fleeing the market in response to the fiscal cliff hype-a-palooza. Meanwhile, professional investors (institutions and hedge funds) have been strong buyers. See the chart below.

Fiscal Cliff’s Jagged Edge

If Washington can’t end the budget dilemma by year-end, most households will be impacted by the “fiscal cliff”.

As the table below shows, lower-income people would see the steepest tax increases in percentage terms. For example, an average married couple making $20,000 to $30,000 would see their tax go up $1,423, from receiving a $15 refund to paying $1,408.

Here are the key drivers behind the tax increase broken out by group:

Single unemployed person: loss of benefits
College student: loss of education breaks as well as the payroll tax holiday
Lower-income working couple: loss of Bush-era 10% bracket, loss of relief from so-called marriage penalty and the reduction of the child credit
Retiree households: loss of Bush-era tax rates
Higher income professional: loss of protection from the alternative minimum tax (AMT)
High-income couple: disappearance of Bush-era tax cuts & AMT relief plus higher taxes on investments

source: Wall Street Journal

Home Building Surges as Confidence Grows

Residential construction picked up momentum in September and now is running at its highest level in four years, a turn that could have a positive effect on the jobs market and the broader U.S. economy.

Source:
Wall Street Journal

Are You Better Off? Take a Look at the Stock Market

Are you better off now? This is not meant as a political question. We’re actually trying to make an important point regarding investor behavior.

As of September 14, the S&P 500 index with dividends is 87% higher than it was on inauguration day, January 19, 2009.

This fact shocks many people because it’s just hard to believe given the financial fallout of the Great Recession and the ensuing slow recovery. As humans we tend to be backward looking. The pain we experienced collectively and personally persists. However, the stock market is focused on the future and investors judge the long-run prospects of the entire U.S. economy to be strong.

Bottom line: Your personal experience, economic opinions, and intuition are often a poor guide to managing your investments.

For example, is your stock portfolio up 87% as well or did you invest emotionally and cash out at the depths of the Great Recession?

Is the Housing Bust Over?

The Wall Street Journal is claiming the housing bust in the U.S. is finally over based on the observations that

Home prices are inching up
More homes are being sold
Housing starts are turning up
Home building is adding to economic growth

2,000 Years of Economic History in One Chart

The fascinating graph above represents 2,000 years of economic history starting in 1 AD. It was produced by Michael Cembalest, head of investment strategy at JP Morgan.

The ebb and flow of economic dominance is interesting. India (orange) and China (red) dominated for roughly 1800 years. However, they were pushed aside by growth in the United States (green), Western Europe (shades of blue), and Japan (yellow) which peaked by 1950. Since then China has surged back toward a larger role.

The Economist published a different rendition that gives the time sampling on the x-axis a more rigorous treatment:

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