Monthly Archives: January 2016

Retire for Longer Using a Few Easy Tips

Photo courtesy of  http://taxcredits.net/

Photo courtesy of taxcredits.net

Baby boomers and those coming after are living longer, often meaning that retirement is also becoming a larger chunk of a person’s lifetime. The Centers for Disease Control and Prevention says that the number of people living past age 100 has increased from 50,281 in the year 2000 to 72,197 in 2014, and increase of close to 44 percent.

This is great news, but it means more thorough planning is needed for the retirement years. Someone who retires at age 65 can hope to live an additional 35 years, and hopefully without running out of money.

Here are a few tips to help finance those years without too much pain.

Claim your Social Security benefits later in life. People can begin collecting Social Security at their full retirement age of 66, or 67 for those born after 1960. For every year that someone delays they are entitled to an additional 8 percent in their payments. Waiting unit age 70 to begin collecting can increase the benefits by 32 percent, and those higher payments will last the rest of your life.

Be sure your retirement money is keeping up with inflation. Social Security payments automatically keep pace with inflation, and so do some types of government bonds. You can also keep part of your savings in investments that have a track record of keeping up with price hikes like stocks, commodities and real estate. Be careful though, the last group has no guarantees attached.

Try and arrange to have a pension plan from your employer. Traditionally pension payments last as long as you do, even if you live a long, long time. The downside is often pension plans do not keep up well with inflation. See your options at work, and choose wisely.

More Signs of Slowing Economic Growth

Main entrance Commerce Department Building, 14th and Constitution.

Main entrance Commerce Department Building, 14th and Constitution.

According to the Commerce Department US inventories in November posted their largest drop since 2011. This statistic is a sign that businesses are reducing their stockpiles of unsold goods. Such reductions are a sign of significant slowing of economic growth in the fourth quarter of 2015.

Friday’s announcement said that inventories fell 0.2 percent, the largest decline since September 2011. October’s data showed a 0.1 percent drop. Reuters had forecast a 0.1 percent drop in November, but the data shows a drop of twice the prediction. Inventories are an important part of calculating the gross domestic product (GDP.)

Inventories in the retail sector, excluding the auto industry, rose by 0.2 percent in November.

During the first half of 2015 there was a record-breaking accumulation of goods which surpassed demand, leaving businesses stuck with unsold merchandise, causing a reduction in the orders for more goods. This is an important contributing factor to the significant downward direction in manufacturing activity.

The Flip Side of Reduced Oil Prices

OILPeople always find lower oil prices attractive. But the question is, are reduced prices in oil always 100% good news? Apparently not. It can have a negative impact on the housing market. In fact, it is anticipated that there will be a very slow increase in house prices in 2016, of only around 3.5 percent. And with states that produce energy that figure could be less or even go into decline.

Together with a negative impact on the housing market, the employment market could also take a plunge. Reduced prices in oil, gas and coal might lead to redundancies. According to National Association of Realtors Chief Economist, Lawrence Yun, “fewer jobs means less home buying demand and that will naturally soften the housing markets in those job-impacted areas.”

For example, British Petroleum will be forced to “eliminate 4,000 of the approximately 24,000 positions in its exploration and production units this year. That would be in addition to about 4,000 jobs that the company cut last year, when it trimmed its work force to about 80,000.”   However, the oil industry in Mexico is currently faring quite well. “Petróleos Mexicanos just announced that “its production costs are among the lowest in the world, averaging under $10 per barrel among currently producing fields and less than $7 a barrel for its cheapest fields. ..This cost level means that Pemex production activities continue to be profitable even with the recent fall in hydrocarbon prices.”

Vancouver is encountering different negative impacts with the reduced oil prices. According to energy analysts, given the “lower prices and a global glut of oil [there are] fewer infrastructure projects than in years past.” As brokerage services director at CHS Hedging, Phyllis Nystrom said, “when people were starting to set their budgets, even as early as last fall for their capital expenditures for the coming year — and really almost out two years — people were already cutting back. Even when (oil prices) were at $60, people were starting to second-guess what they were going to spend.”

It thus seems that it is not as clear cut that reduced oil prices will result in increased wealth. As we can see from evidence recorded above, in some industries it can be helpful; in others, absolutely not.

Fast Flights to Europe Ready for Take Off

Photo Courtesy of Aerion Corp.

Photo Courtesy of Aerion Corp.

Former Boeing exec Doug Nichols of Aerion is developing s supersonic 12-seat jet which promises to get its passengers from New York to London in a mere 4.5 hours. That is about 3 hours faster than conventional jets.

Nichols is betting that the savings of time the new plane will provide will be worth the hefty $120 million price tag. He has been developing his dream for the past seven years, hoping to fill the supersonic jet niche that was vacated when Concorde stopped its service in 2003.

The plane, which will fly at up to 1.5 times the speed of sound is expected to take to the skies for the first time in 2021, and then be ready for regular use two years later. But this will remain but a dream unless Nichols can convince business jet investors and plane manufacturers that the plane will be in demand, especially at its special price.

Aerion estimates that the plane’s final cost for development, production, and certification will run the company a bill upwards of $4 billion.

Beauty Companies Turning to Private Equity Firms

Interestingly, many private equity firms have their eyes on skin care products and personal products for beauty.

Avon Ladies, for instance, has sold its North American business to private equity firm Cerberus Capital Management. They are selling 80.1% of their US and Canadian divisions to Cerberus, which is known for its turnaround expertise.

Similarly, MidOcean Partners with CEO Ted Virtue has announced that it has made a significant investment in IMAGE Skincare. Founded in 2003, IMAGE is a clinical skincare brand that is only sold in spas, through physicians and through other professional channels.

They will continue to be led by Janna Ronert, their founder and CEO and Dr. Marc Ronert, their president and medical director. They will continue to have a significant ownership of the company. As Janna Ronert said, “We are excited for this new phase in our journey to become the leading global professional skincare brand. We will greatly benefit from the combined resources of IMAGE Skincare and MidOcean, and we look forward to expanding our business together.”

Jonathan Marlow, Principal at MidOcean said, “MidOcean has been evaluating opportunities in the beauty space and believes that IMAGE Skincare is a high quality business and brand whose rapid global expansion can be accelerated.

 

Fed’s Mester Predicting Strong Growth for Economy

Cleveland Federal Reserve. Photo courtesy Craig Hatfield

Cleveland Federal Reserve. Photo courtesy
Craig Hatfield

Hawkish policymaker Loretta Mester, president of the Cleveland Federal Reserve, praised the recent rise in interest rates, saying it was a good first step to more normal monetary policy. She said it sent a positive message that the US economy will continue making gains.
“I fully supported the … December action,” Mester said, referring to the interest rate increase from almost zero. The Feds had refrained from raising rates for the better part of a decade.

“It was prudent to take the first step on the path of gradual normalization of interest rates,” she said in prepared remarks, and “an indication of monetary policymakers’ confidence that the economic progress we have seen in recent years will continue.”

Although the interest rate hike was much anticipated and was also modest, there is still a fear that the move could unbalance some financial markets. The Fed will be assessing the effects of their decision, and will continue to make decisions which could influence the success of the economy and world markets.

Mester predicted “above trend” GDP growth of between 2.5 to 2.75 percent for the last quarter of 2015, and similar numbers for the entire 2016. She is also forecasting growth in wages and continued improvement in the US labor market. Unemployment stands at about 5 percent, close to half of what its recessionary high was.