Friday, October 31, 2014

Happy Halloween!

Are you dressing up for Halloween today? According to the National Retail Federation, 67.4 percent of of us will be buying Halloween costumes this year. That's the highest percentage this survey has recorded in its 11-year history.

Even though many more kids dress up than adults, the amount spent breaks down as $1.4 billion on adult costumes and $1.1 billion on children's costumers. On top of that, Americans will also be spending $350 million on costumes for our pets.

All told, Americans are expected to spend $7.4 billion on Halloween this year, including $2.2 billion on candy alone. That breaks down to a total of $77.52 for the average person, up from $75.03 last year. Boo!

Thursday, October 30, 2014

End of an Era

The Federal Reserve announced yesterday what many investors have been expecting: Its bond buying program will end this week, as October draws to a close. The third and presumably final round of quantitative easing had begun in September 2012, meaning it will have lasted for just over two years.

The end of QEIII is a signal that the Fed has confidence in this economy. Forecasters expect that third quarter GDP will grow at about 3 percent. At the same time, the end of the program is of concern to investors, since the asset purchases had been intended, in part, to prop up the stock market.

The ends to the earlier phases of the program reflected that. After the end of QEI in 2010, the S&P 500 fell 12 percent. And in 2011, three months after QEII concluded, the S&P 500 dropped 14 percent. Markets were fairly quiet yesterday, though, so it may be that this is a program whose time has come to a proper end.

Wednesday, October 29, 2014

Oil Keeps Dropping

One of the big financial stories of the year continues to be the drop in oil prices, with gasoline prices dropping alongside them. Oil prices have fallen 25 percent since June, and it's now trading at around $86 a barrel. It's been up above $100 a barrel for most of the last three years.

But it may be falling even further. Goldman Sachs is now predicting that oil prices will fall to $70 a barrel by the second quarter of 2015. To show how quickly things are changing, that forecast comes just three weeks after Goldman's last prediction for the price of oil.

That's why the national average for a gallon of gas is about to drop below three dollars a gallon; they currently sit at $3.03. The lowest average prices for gas comes in South Carolina, where they're paying just $2.78 a gallon. We're not far behind that here in New Jersey, where the average gallon of gas costs just $2.86.

Tuesday, October 28, 2014

The New High-Tech Era

Facebook recently issued some new stock to help pay for its acquisition of WhatsApp, an instant-messaging service. Facebook's share price didn't change much as a result, so the new issuance raised the social media giant's market cap to $224 billion. As the Wall Street Journal pointed out, that means that Facebook is now worth more than JP Morgan Chase. Not bad for a company that's barely ten years old.

JP Morgan isn't quite as dominant as it used to be; back in 2011, Wells Fargo passed it up as the bank with the largest market cap. In addition to Facebook, JP Morgan is now also smaller than Google and Microsoft. It may be that we are seeing the dawn of a new high-tech era, this one dominated by behemoths rather than the upstarts of the 1990s.

But all those companies are small compared to Apple. Despite some setbacks in recent months, Apple's market cap is still greater than JP Morgan and Wells Fargo - the two biggest banking stocks - combined.

Monday, October 27, 2014

Why Housing Is Coming Back

Home sales in September reached a new high-water mark for 2014, reaching an annual rate of 5.17 million homes sold, according to figures released last week by the National Association of Realtors. Median home prices are also up to $209,700, an increase of 5.6 percent from a year earlier.

Sales of previously existing homes were up 2.4 percent in September. Home sales actually peaked in the middle of 2013, at an annual rate of 5.38 million. While they haven't returned to that level, both figures are well above the recession-fueled low of 3.45 million in 2010.

One of the reasons for this year's resurgence has been the drop in mortgage rates. Last week, 30-year mortgage rates fell to 4.03 percent, down from 4.29 percent in September, and 4.63 percent at the beginning of the year. Thirty-year fixed rates are now at their lowest level since June 2013.


Friday, October 24, 2014

Mixed Signals on Earnings

Earnings season is just underway, with about 300 companies having reported their earnings thus far; that's about 15 percent of the reports we can expect this quarter. So far this season, 64.9 percent of companies have beaten the consensus analyst earnings estimates. That's a pretty strong figure, the highest we've seen since 2010.

But that's not the only way to look at things. Just 49.3 percent of companies have beaten their consensus estimates for revenue, which would be a weak figure for that metric. More than half of all reporting companies have beaten their revenue estimates in each of the past seven quarters.

Which is the more reliable measure? Investors would generally prefer to see revenue numbers come in stronger than earnings numbers, because revenue numbers - which simply measure sales rather than profits -  are more difficult for companies to fiddle with. But so far this earnings season, the opposite has occurred.

Thursday, October 23, 2014

Good News for Retirees

If you're retired, you'll see a little bump in your income next year. The Social Security Administration announced Wednesday that people receiving Social Security will get a cost-of-living adjustment of 1.7 percent for 2015. That reflects the modest increase in inflation over the past year.

The 1.7 percent is consistent with the increase we've seen in the past few years. The Social Security adjustment was 1.5 percent for 2014, and 1.7 percent for 2013. But in 2010 and 2011, as the economy struggled to emerge from the recession, there was no cost-of-living adjustment at all.

On the other hand, when the economy is stronger, retirees generally get more of a bump than this. In every year from 2004 to 2009, the adjustment was higher than this year's 1.7 percent - including a high of 5.8 percent in 2009.