Tavares | Winter Park | The Villages

It’s A Topsy-Turvy World

topsy turvyIt’s a topsy-turvy world.

In the United States, during the last quarter of 2014, about seven million (13 percent) of all mortgaged residential properties were underwater, meaning the mortgage loan amount was at least 25 percent higher than the estimated market value of the property, according to RealtyTrac.com. That’s a significantly lower number than the 12.8 million that were underwater early in 2012. Regardless, it’s an unhappy situation for the homeowners who may wish they lived in Spain.

Why Spain? Well, as has been mentioned before, negative interest rates have been sweeping across Europe and affected mortgage rates. The Wall Street Journal explained:

In countries such as Spain, Portugal, and Italy, the base interest rate used for many loans, especially mortgages, is the euro interbank offered rate, or Euribor… Banks set interest rates on many loans as a small percentage above or below a benchmark such as Euribor. As rates have declined, sometimes to below zero, some banks have faced the paradox of paying interest to those who have borrowed money from them.

In fact, at least one bank – the seventh largest in Spain – has been paying some of its mortgage holders’ interest! It just deducts the interest amount from the principal amount the borrower owes. It may be safe to say European banks’ expenses have increased since, in addition to paying interest on some loans they’ve issued, banks also have been “compelled to rebuild computer programs, update legal documents, and redo spreadsheets to account for negative rates.”

In addition to a confounding interest rate environment, Europe is also contending with issues related to Greek debt, which triggered a sell-off in stock markets late last week. U.S. markets fared no better. Major markets lost value last week on concerns about Greece leaving the Euro, the potential for weaker-than-expected earnings results, and new trading regulations in China.

* This article first appeared in our weekly email newsletter. To subscribe to the Ruggie Wealth Management Weekly Commentary email sanemone@ruggiewealth.com or call us at  352.343.2700

It’s A Millennial Thing

millennialsSure, you know China surpassed the United States to become the world’s largest economy, but did you know the millennial generation surpassed the baby boomers to become the largest generation here in America? According to Pew Research, there were about 75.3 million millennials (born from 1981 to 1997) at the end of 2014 and about 74.9 million baby boomers (born from 1946 to 1964).

It’s no secret baby boomers have had a profound affect on the American economy. History.com reported:

“Baby boomers bought mouse-ear hats to wear while they watched “The Mickey Mouse Club” and coonskin caps to wear while they watched Walt Disney’s TV specials about Davy Crockett. They bought rock and roll records, danced along with “American Bandstand,” and swooned over Elvis Presley. They collected hula hoops, Frisbees, and Barbie dolls. A 1958 story in Life magazine declared “kids” were a “built-in recession cure.”

As they retire, the baby boomers are expected to have a profound influence on health and wellness providers, pharmaceutical companies, and others in markets that serve the needs of retired Americans.

The boomer generation has been the focus of investors for so many years it can be easy to forget about the influence of millennials. They’ve come of age during the Great Recession which curbed their appetite for consumption. Millennials’ preference for access rather than ownership sparked the ‘sharing economy,’ which includes online companies that facilitate the sharing of unused goods. The New York Times reported, “Millions of people are using social media sites, redistribution networks, rentals, and cooperatives to share not only cars but also homes, clothes, tools, toys, and other items at low or near zero marginal cost. The sharing economy had projected revenues of $3.5 billion in 2013.”

It’s a good idea to keep an eye on demographic change. It can have a profound impact on economies, industries, and companies.

* This article first appeared in our weekly email newsletter. To subscribe to the Ruggie Wealth Management Weekly Commentary email sanemone@ruggiewealth.com or call us at  352.343.2700

How Much Is One Trillion?

pile moneyHow much is one trillion?

  • If you waited one trillion seconds, it would take 31,688 years.
  • If you had a trillion dollars, and spent $10 million a day, it would take 273 years to go broke.
  • If you taped $100 bills end-to-end, you could wrap the earth 41 times with $1 trillion dollars.
  • Alternatively, you could paper over Delaware in $100 bills – twice.

Last week, the value of global equities surpassed – not $1 trillion – but $70 trillion, according to Bloomberg Business, which credited central banks’ stimulus programs for soaring stock values. Of the 24 national stock indices covered by Barron’s, 10 have delivered double-digit returns year-to-date. These include Australia, Japan, Hong Kong, China, and Philippines in the Asia Pacific region, and France, Germany, Italy, Spain, and Sweden in Europe. The Standard & Poor’s 500, NASDAQ, and Dow Jones Industrial indices all remained in single-digit territory. Barron’s reported:

“The market could bounce higher if first-quarter results come in above reduced targets. So far, 20 of the 24 companies releasing earnings have topped expectations, FactSet reports. The Dow Jones industrials were propelled above 18,000 again last week, and the S&P 500 climbed north of 2100.

But those who look beyond the first quarter see a number of head winds facing U.S. equities. The Federal Reserve appears ready to start raising interest rates, for one. The strong dollar looks to be a drag on trade and earnings, and profit margins could be about to peak. Add to this widespread investor optimism and above-average earnings multiples and the market could be vulnerable.”

Experts are uncertain about the direction of stock markets and so are investors. Last week’s AAII (American Association of Individual Investors) Investor Sentiment Survey showed both bullish and bearish sentiments were below long-term averages (and lower than the previous week) while neutral sentiment is relatively high (and was up 14.5 percent over the previous week).

* This article first appeared in our weekly email newsletter. To subscribe to the Ruggie Wealth Management Weekly Commentary email sanemone@ruggiewealth.com or call us at  352.343.2700

Healthcare? Revolution? Really?

stethoscope moneyWe may be taking part in a revolution and not even realize it! The way healthcare is provided in the United States has been changing. In the past, Americans participated in fee-for-service healthcare. You might think of it as healthcare a la carte. Hospitals and doctors were reimbursed for each test and treatment, which created incentives to do more rather than less, and may have caused the system to perform less efficiently.

The Economist recently reported, as a result of the Affordable Care Act, hospitals and doctors are being paid by results. Instead of getting a fee for each service, they receive a flat fee for all services performed:

“There are also incentives for providers who meet cost or performance targets, and new requirements for hospitals to disclose their prices which can vary drastically for no clear reason… The upshot is there are growing numbers of consumers seeking better treatment for less money. Existing health-care providers will have to adapt or lose business. All sorts of other businesses, old and new, are seeking either to take market share from the conventional providers or to provide the software and other tools that help hospitals, doctors, insurers, and patients make the most of this new world.”

A key to making the transition from fee-for-service to alternative healthcare payment models will be providing doctors with support and guidance as they adopt new systems. A Rand study evaluated episode-based and bundled payments, shared savings, pay-for-performance, fees/taxes, and retainer-based practices as well as accountable care organizations and medical homes. The study found, “There was general agreement among physicians that the transition to alternative payment models has encouraged the development of collaborative team-based care to prevent the progression of disease.”

* This article first appeared in our weekly email newsletter. To subscribe to the Ruggie Wealth Management Weekly Commentary email sanemone@ruggiewealth.com or call us at  352.343.2700

THOMAS RUGGIE, ChFC®, CFP® NAMED TO BARRON’S 1200 TOP FINANCIAL ADVISORS

9887 Tom Ruggie in front of RcroppedCentral Florida-based Ruggie Wealth Management’s Founder & CEO Named for Third Time

Ruggie Wealth Management Founder and CEO Tom Ruggie, has been named to Barron’s list of America’s Top 1,200 Advisors: 2015. This is the third time he has made the list expanded from the Top 1,000 advisors, having also received the distinction in 2009 and 2013.

Barron’s publishes its Top 1200 Advisors by State compilation every February to recognize advisors demonstrating exceptional performance, professionalism, client service and community involvement. Among the factors the “Barron’s Top 1,200 Advisors” ranking takes into consideration are quality of practice, assets under management, revenues, and philanthropic work.

“It’s an honor to be counted among Barron’s Top Advisors,” said Tom, of the prestigious listing which recognizes both an elite group of independent financial professionals and large wirehouses.

“Ruggie Wealth Management is an independent, fee-only Registered Investment Advisory firm that takes the time to understand our clients and their needs. We manage individual and corporate wealth, as well as the assets of select endowments and foundations, and take our fiduciary responsibility very seriously. Our team makes decisions with our client’s best interests in mind, and we are committed to serving each one with the highest standards of integrity and care. As the flagship company of Ruggie Capital Group, we offer a broad range of services and products to help clients achieve their goals.”

Ruggie Wealth Management has offices in Tavares, Winter Park, and The Villages.

Global Economy Acts Like A Rube Goldberg Contraption

global gearsThe global economy performed a bit like a Rube Goldberg contraption during the first quarter of 2015, although it’s doubtful many countries found humor as economic, financial, and political events triggered other economic, financial, and political events across the world.

Europe heads into deflation

“The whiff of deflation is everywhere,” reported The Economist early in 2015:

“Even in America, Britain, and Canada – all growing at more than 2 percent – inflation is well below target. Prices are cooling in the east with Chinese inflation a meager 0.8 percent. Japan’s 2.4 percent rate is set to evaporate as it slips back into deflation; Thailand is already there. But it is the euro zone that is most striking. Its inflationary past – price rises averaged 11 percent a year in Italy and 20 percent in Greece in the 1980s – is a distant memory. Today, 15 of the area’s 19 members are in deflation; the highest inflation rate, in Austria, is just 1 percent.”

Low energy prices contributed to persistently low levels of inflation in many countries, although oil prices were slightly higher toward the end of the first quarter.

The Swiss take pre-emptive action

In mid-January, anticipating the European Central Bank (ECB) was about to try to head off deflation with a round of quantitative easing (QE) that would reduce the value of the euro, the Swiss National Bank (SNB) announced it would no longer cap the value of the Swiss franc at 1.2 per euro. The response was exceptional and unexpected. Experts speculated the SNB planned for the franc to lose value against the euro. Instead, it gained more than 30 percent. The Swiss market lost about 10 percent of its value on the news, and U.S. markets slumped, too.

The ECB commits to a new round of QE

The SNB may have miscalculated the effect of de-capping its currency, but it was correct about the ECB and QE. After months of dithering and debate, the ECB announced it was committed to a new round of QE and would spend about $70 billion a month through September 2016. Global markets cheered. Stock markets in Europe ascended to a seven-year high. The euro descended to an 11-year low.

Disparate central bank policies trigger currency issues

Divergent monetary policy – the Federal Reserve ended a round of QE just before the Bank of Japan and the ECB introduced new rounds of QE – proved to be a pressure cooker for currencies. With the dollar rising and the euro falling, countries with currency pegs were forced to follow suit. U.S. dollar-linked countries generally tightened monetary policy, even if it might hurt their economies, and euro-linked countries pursued looser monetary policy. The Economist reported that, “Denmark has had to cut interest rates three times, further and further into negative territory, in order to discourage capital inflows that were threatening its peg against the euro.”

Interest rates fall lower and lower and lower

Thanks to quantitative easing, lots of banks in the United States and Europe have a lot of cash tucked away in their central banks’ coffers. The Economist reported:

“…negative interest rates have arrived in several countries, in response to the growing threat of deflation… Banks, in effect, must pay for the privilege of depositing their cash with the central bank. Some, in turn, are making customers pay to deposit cash with them. Central banks’ intention is to spur banks to use “idle” cash balances, boosting lending, as well as to weaken the local currency by making it unattractive to hold. Both effects, they hope, will raise growth and inflation.”

In the Euro area, Germany, Denmark, Sweden, Switzerland, the Netherlands, France, Belgium, Finland, and Austria have issued bonds with negative yields. Why would anyone be willing to pay to invest in bonds? The Wall Street Journal suggested one possibility: Investors think yields have further to fall.

* This article first appeared in our weekly email newsletter. To subscribe to the Ruggie Wealth Management Weekly Commentary email sanemone@ruggiewealth.com or call us at  352.343.2700

Pondering Demographic & Economic Milestones Can Inform Healthy Financial Investment

graph milestonesYOUR GRANDPARENTS AND GREAT-GRANDPARENTS SAW A LOT OF THINGS CHANGE DURING THEIR LIFETIMES… During the 20th century, the first Nobel prizes were awarded. The first license plates were issued. The first World Series was played. Americans lived through McCarthyism, the Great Depression, and Orson Welles’ ‘The War of the Worlds’ broadcast. Rock and roll became popular. The first theme parks opened, NASA was formed, and Earth Day was introduced. Two World Wars were fought as well as the Vietnam, Korean, and Gulf Wars. The Gold Standard ended and the tech revolution arrived.

Many of these events had immediate or eventual implications for industries – automobiles, sports, communications, entertainment, defense, technology, and others – as well as financial markets. The last decade has seen some significant changes, too. Here are a few milestones we’ve witnessed:

  • 2006: The United States population passed 300 million. (100 million in 1915; 200 million in 1967)
  • 2007: More babies were born in the United States than in any other year in American history.
  • 2008: Nielsen reported texting had become more popular than calling.
  • 2009: More people lived in urban areas than in rural areas across the globe.
  • 2010: This was the hottest year since 1880 – until the record was broken again in 2014.
  • 2011: Digital music sales overtook physical music sales for the first time ever.
  • 2012: China became the world’s biggest trading nation and largest pork producer.
  • 2013: The United States overtook the Saudis to become the world’s biggest oil producer.
  • 2014: China’s economy surpassed that of the United States.
  • 2015: Millennials (born 1980 to late 1990s) became our nation’s largest living generation.

When considering investment opportunities, it can be helpful to ponder the ways in which demographic and economic shifts may affect the future and what types of businesses may benefit (or not benefit) from the changes.

* This article first appeared in our weekly email newsletter. To subscribe to the Ruggie Wealth Management Weekly Commentary email sanemone@ruggiewealth.com or call us at  352.343.2700

When Will Federal Reserve Rates Increase For Overnight Borrowing?

money reserve rate federalIt’s a question that has plagued bond investors throughout the first quarter of 2015. In January, 10-year Treasury yields fell as low as 1.6 percent. Early in March, they rose to about 2.2 percent before falling back below 2.0 percent. The Financial Times reported:

“Higher volatility is typical when markets are on the cusp of a major turning point, and that has been the story so far this year for U.S. Treasury debt… The year has already been characterized by big swings in bond yields, which move inversely with prices… The lack of a clear signal over when policy shifts towards a tightening phase may provide the central bank with greater flexibility but does not quell the uncertainty facing investors.”

In recent weeks, Fed Chairwoman Janet Yellen indicated the timing and pace of a rate change would be determined by economic data. In general, the Fed considers a variety of employment and inflation measures when determining policy. The Times suggested bond markets have priced out the possibility of a June rate hike, although several Federal Reserve officials recently said a June increase is still under consideration.

U.S. stock markets reflected investor uncertainty last week, too. Turmoil in the Middle East sparked concern an oil price reversal could occur if supply is disrupted. In addition, investors worried weaker-than-expected economic data might indicate U.S. economic growth was slowing. The Commerce Department reported business investment spending plans fell for the sixth straight month. That could result in reduced expectations for first quarter growth, as well as delay a Fed rate increase. Stock markets showed signs of life late in the week but finished lower.

* This article first appeared in our weekly email newsletter. To subscribe to the Ruggie Wealth Management Weekly Commentary email sanemone@ruggiewealth.com or call us at  352.343.2700

Ruggie Named to Barron’s Top 1200 Financial Advisors for Sixth Time

We’re excited that Ruggie Wealth Management Founder and CEO Tom Ruggie, ChFC®, CFP®, has been named to Barron’s 2018 list of America’s Top 1,200 Advisors, the sixth time he has earned this distinction, and fourth in a row.

Barron’s publishes its annual Top 1200 Advisors by State compilation to recognize advisors demonstrating exceptional performance, professionalism, client service and community involvement, and the ranking recognizes both an elite group of independent financial professionals and large wirehouses.

Among the factors the ranking takes into consideration are quality of practice, assets under management, revenues, and philanthropic work.

“Competition is steep to be selected for this list, and those who make the cut represent a very high level of achievement in serving their clients’ wealth management needs,” said Ruggie of the ranking which recognizes both an elite group of independent financial professionals and large wirehouses. “I believe our clients turn to us because of our dedication to placing their interests above ours, and for the strength of our processes and collective wisdom of our team. To once again be named among Barron’s Top Advisors is an honor that reinforces we are doing what we set out to do on our clients’ behalf.”

Tom is the only Barron’s recognized advisor in Lake, Sumter and Marion Counties.

Rankings and/or recognition by unaffiliated rating services and/or publications should not be construed by a client or prospective client as a guarantee that he/she will experience a certain level of results if Ruggie Wealth Management is engaged, or continues to be engaged, to provide investment advisory services, nor should it be construed as a current or past endorsement of Ruggie Wealth Management by any of its clients.  Rankings published by magazines, and others, may base their selections on information prepared and/or submitted by the recognized adviser.

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