Three Cheers for New Jersey

Give yourself a pat on the back: According to a survey from the Financial Industry Regulatory Authority, New Jersey is one of the top three most knowledgeable states for handling money, alongside California and and Massachusetts. The study participants were asked five basic financial literacy questions, and residents of the Garden State came out near the top.

It also looked at smart financial behaviors, and New Jersey did well on many of those measures as well. Some 45 percent of Garden Staters report having a rainy day fund, compared to 40 percent of all Americans. Only 30 percent of us reported that they pay just the minimum on their credit cards, as opposed to 34 percent of all people nationwide.

Here's another one in which we're gaining ground: 59 percent of people in New Jersey say they don't comparison-shop for rates before they choose a credit card, which seems like a lot but is actually below that national average of 61 percent. Back in 2009, we were worse than the national average.

Troubles for Small Business

We had good news this week about consumer confidence increasing, but a new study from Gallup throws a little cold water on those results. Over the course of the past 12 months, more small business owners report having to let workers go than have hired new ones. Only 11 percent of small business owners said their hiring increased over that time, while 23 percent said it declined.

The self-reported hiring levels for small business owners haven't moved much since January 2011. The index is at -11 now, but at least that's up significantly from the all-time low of -27 in January 2010.

The good news is that the number of business owners who expect to hire has been on the rise. That figure was just 17 percent back in January but is up to 20 percent now. The problem is that the number who expect to let workers go has also risen, from 9 percent in April 2012 to 14 percent now.

Americans Love This Economy

Americans just keep feeling better and better about this economy. According to the quasi-official numbers compiled by the Conference Board, the U.S. consumer-confidence index reached a five-year high of 76.2 in May, up from 69.0 in April. The related consumer sentiment survey hit a six-year high in May.

The biggest reason for the jump was increased optimism about the health of the economy over the next six months. The expectations index jumped to 82.4, more than 10 percent above the April level and the highest that figure has been in seven months. The percentage of respondents expecting more jobs to be available six months from now rose to 16.8 percent, the highest that number has been in 2013.

Oddly enough, the improvement in consumers’ outlook is coming when wages have been fairly stagnant. Median annual household income in April was $51,456, up marginally from March’s $51,190. Since the end of the recession, household income has remained in a narrow band between $51,000 and $52,000.

The Power of Balanced Funds

We’ve talked quite a bit about how equity mutual funds, which had seen outflows ever since the market crashed in 2008, have rebounded strongly this year. But another type of fund has also shown remarkable strength: Balanced funds, which have seen a record amount of money pumped into them.

Balanced funds invest in both stocks and bonds, which makes them a nice halfway point for investors still somewhat spooked by the stock market. According to a Bloomberg study, they’ve taken in more money from January through April of this year than in any previous four months on record. Assets in the balanced funds Bloomberg studied took increased 3.6 percent, or three times the rate of equity funds, which increased 1.2 percent.

The surprising thing about all this success is that the performance for balanced funds hasn’t been great.  Such funds have returned 8.8 percent this year, as opposed to 16 percent for the S&P 500. That’s to be expected, though; the bond part of the portfolio is intended to be protection against the riskier equity side of the portfolio.

Thoughts for Memorial Day

"A hero is someone who has given his or her life to something bigger than oneself." ~ Joseph Campbell

"Ceremonies are important. But our gratitude has to be more than visits to our troops and once-a-year Memorial Day ceremonies. We honor the dead best by treating the living well." ~ Jennifer Granholm

"Courage is contagious. When a brave man take a stand, the spines of others are often stiffened." ~ Billy Graham

The Incredible Performance of 401(k)s

A new study out from Fidelity Investments shows just how important staying invested in stocks has been to Americans' retirement savings. Since the stock market bottomed out in the first quarter of 2009, the average balance in a Fidelity 401(k) has nearly doubled, from $130,700 to $255,000, for people who aren't retired yet but are 55 and older and have been with their current employer for at lest ten years.

Although the study focused just on Fidelity customers, there's no reason to believe the results have been much different for all 401(k) holders. We're now at a record high for the average 401(k) balance, driven by a stock market in which the S&P 500 has risen by 145 percent since March 9, 2009.

And the increases have continued. The average balance in a Fidelity 401(k) - for investors of all ages - rose from $77,300 at the beginning of the year to $80,900 at the end of the first quarter.

Housing Recovery in Full Swing

The housing recovery looks like it’s finally in full stride, the final piece that should fuel the overall recovery of the economy. Sales of existing homes rose by 0.6 percent in April to an annual rate of nearly 5 million. That’s the highest that figure has been since November of 2009.

Prices are rising too, with April marking the fifth straight month in which property values didn’t just increase – it was the fifth straight month in which they increased by more than 10 percent. Median home prices were up 11 percent in April compared with the year earlier.

Home builders are growing more confident as well. A recent survey from the National Association of Home Builders shows expectations for future sales rose to 53 in May. That’s the most optimistic that group has been since February 2007, well before the recession began.

Americans Love Fido and Kitty

One thing that has clearly shown itself to be recession-proof is America's love for its pets. A new study out from the Bureau of Labor Statistics demonstrates that even in the depths of the recession, Americans were unwilling to cut back on spending for their cats, dogs, birds, ferrets, and what-have-you. Between 2007 and 2011, Americans' spending on their pets remained at 0.9 percent to 1.1 percent of their household expenses every year.

And that amount has been standing at right around $500 per year. It was $502 in 2011, the last year in the BLS study. That includes $182 for food, $142 for vet services, and $141 for buying the pet itself and other supplies.

Interestingly enough, the type of household that spends the most on pets are those with two adults but no kids at home. Those families spent an average of nearly $700 on their pets in 2011. All told, Americans spent more than $60 billion on their pets in that year alone.

Seeking Retirement Income

What will be the source of your retirement income? Gallup recently asked more than 2,000 American adults that very question, and the top answer, not surprisingly was a 401(k), IRA, or other retirement savings account. But what may be surprising is that less than half of Americans - 46 percent  - cite those accounts as a major source of income in retirement.

So what else is there? Thirty percent say they plan to rely on Social Security; 24 percent on a savings account, and 21 percent on part-time work. Only 9 percent planned to derive significant income from annuities or other types of insurance plans.

The responses differ greatly as you move up the ladder in income. For upper-income people (those who currently have more than $75,000 in annual income), 65 percent of them cite a 401(k) as a major source of income, up from the 46 percent overall rate. And the number in that cohort citing Social Security drops all the way down to 17 percent.

Risk in the Muni Bond Market

One concern that investors had during the recession was that the municipal bond market was going to run into serious problems, with many cities and other governments going into default on the bonds they had issued. In the past, these issues hardly ever defaulted: According to Moody's Investors Service, there was an average of 1.3 annual defaults in the muni bond market from 1970 through 2007.

And to be sure, the recession lifted those numbers somewhat, but not nearly as much as many investors feared would happen. In the past five years, the number of municipal bond defaults has increased, but only up to 4.6 per year.

And that number may even be slowing a bit, In 2012, there were only four defaults in the entire municipal bond market. So yes, it's true that the muni bond market has indeed become riskier since the recession, but that risk still appears to be small.

Prices on the Move

The Fed released its latest report on inflation yesterday, and the good news is that it remains subdued. The Consumer Price Index rose by just 0.2 percent in April, or 1.8 percent on an annualized basis. The core index, stripping out the more volatile food and energy costs, rose by just 0.1 percent.

More interesting is the report from the Cleveland office of the Fed on how the prices of various items fared over the course of the month. Gas prices have been falling so quickly lately that they'd drop by 64 percent if they keep up their April pace for an entire year. Fruits and vegetables dropped at a 20 percent annualized pace, and women's apparel dropped at a 12 percent pace.

Nothing is rising in price nearly as fast as gas has been falling, but a few items did increase in April. The cost of baked goods went up 8 percent on an annualized basis, and - in sharp contrast to women's apparel -  men's apparel went up nearly 15 percent.

Troubles in Europe Continue

While the recovery here in America keeps plodding along, Europe's economy remains in recession, with no end in sight. The European Union released the latest data for the first quarter of 2013 yesterday, and it showed that the EU's economy shrunk by 0.9 percent, marking the sixth straight quarter of contraction.

Even the strongest European nations have entered recession. Spain and Italy both saw their economies shrink by about 2 percent in the first quarter; France's contracted by about 0.7 percent. Germany managed to eke out 0.3 percent growth, and the only other European nations to report any growth at all were Belgium and Slovakia.

Unemployment throughout the European Union now stands at 12.1 percent. The year and a half of economic contraction marks the longest European recession since the euro was created in 1999, even longer than the recession of 2008-09 that paralleled the Great Recession here in the U.S.

Americans Are Paying Their Bills

American households’ bottom lines have continued to improve in the early part of 2013, according to a new report out this week from the Federal Reserve Bank of New York. After significant decreases in housing-related debt and credit card balances, outstanding household debt fell by $110 billion in the first quarter of this year. The overall figure is now down to $11.23 trillion, down from a peak of $12.68 trillion in the third quarter of 2008.

And we’re paying our bills on time, too. The Fed found that the overall delinquency rates for the various forms of household debt have declined, with about 8.1 percent of outstanding debt currently in some stage of delinquency. In the fourth quarter of 2012, the same number was 8.6 percent.

Among the various forms of credit, the ones least likely to fall into delinquency are home equity lines of credit, at just 3.2 percent that are more than 90 days late, and auto loans, at 3.9 percent. Most common to fall behind on: credit cards (10.2 percent delinquent) and student loans (11.7 percent delinquent).

IPOs Get Hot Again

One sign of the growing strength of the economy is the continuing interest companies have in coming to market in the form of an initial public offering. This year is shaping up as the biggest year for IPOs since before the financial sector melted down in 2008.

There have been 64 listed new public offerings in the U.S. so far this year, raising a total of $16.8 billion. By contrast, at this same time last year, IPOs had raised $13.1 billion. That doesn't include the Facebook IPO, which reaches its one-year anniversary this Saturday and raised $16 billion all by itself, and which helped 2012 become the biggest year for IPOs (in dollars) since 2008.

And the market is heating up. Last week, there were 11 IPOs that came to the various American exchanges. That makes it the top week for IPO activity since way back in December 2007, when the recession was just beginning.

College Tuition Help

Finally, we're seeing a little good news for people trying to pay for college. Although we keep hearing about how the costs of higher education continue to spiral upward, the number of people actually paying the full list price is at an all-time low.

According to the National Association of Colleges and Universities Officers, the average tuition discount rate - the percentage of the tuition that the school pays for - is up to 40 percent for all colleges. For private institutions, the figure is up to 45 percent. That's an all-time high, and marks the sixth straight year that number has gone up.

In 2012, 86.9 percent of all entering freshman got some sort of financial aid from their college. That figure averages 53.1 percent of the cost of the first year of attending school, then decreases in the subsequent school years.

Another Source for Good Jobs News

The news we get on jobs comes from several different ways of measuring employment. The headline unemployment figure, which dropped to 7.5 percent last week, comes from a monthly household survey. The number of new jobs added to the economy each month derives from the so-called establishment survey, which asks businesses about their hiring.

Then there's the number of new jobless claims, which unlike those other two, comes out weekly rather than monthly. This one isn't a survey but simply the count of new applications for unemployment insurance. And this week's number was outstanding: 323,000 new applicants, which is down 4,000 from last week and is the lowest that number has been since January 2008.

The longer-term picture looks even better. The four-week average for new jobless claims is down to 336,750, which is the lowest that figure has been since November 2007 - before the recession had even started.

Taking Debt Into Retirement

One thing everyone hopes for in retirement is that their financial worries would be over, or at least dwindling away. That's what is so unnerving about a recent study from the Securian Financial Group: It seems that more than half of all the people surveyed expect to retire with at least $25,000 in debt. A third expect their debt level to be higher than their assets at the time they retire.

One big factor in that is all the outstanding mortgage debt that people will carry. Two thirds of all people surveyed expect to carry a mortgage into their retirement years. The recession has had a huge effect on that number; as recently as 2009, just 30 percent expected to do so.

The good news is that people know that this is not the right way to be headed into retirement. More than half of the pre-retirees surveyed said they understand that debt in retirement should be avoided at nearly all costs.

A Long, Hard Slog to 15,000

Yesterday, for the first time in its history, the Dow Jones Industrial Average closed above 15,000 points. It was a long hard climb to that level: The Dow had reached 14,000 for the first time back on July 19, 2007, before beginning its long crash that October. That means it took nearly six years to cross that last 1,000 points.

By contrast, the Dow moved from 13,000 to 14,000 in the space of just three months back in 2007. But that's hardly a record for moving from one set of three zeroes to the next. During the dizzying days of the dot-com era, the Dow hit 10,000 for the first time on March 29, 1999, then made it to 11,000 on May 3 - barely more than a month later.

On the other hand, it could have been a lot slower as well. The Dow was first formulated in 1896, and didn't make it to the 1,000 mark until November 14, 1972 - a span of more than 76 years.

The Rise of the Defensives

One common way to subdivide the stock market is to put all companies into two broad categories: cyclicals and defensive stocks. Cyclicals fall into sectors like high-tech or consumer discretionary stocks, things that people tend to buy more of when the economy is doing well. Defensive stocks are less tied to the strength of the economy, things that people still buy regardless of macroeconomic factors, like health care or consumer staples.

In the current market, defensive stocks like Procter & Gamble and Johnson & Johnson are far outpacing the cyclical stocks. According to data compiled by Bloomberg News, defensive stocks are up 19 percent on average so far in 2013, which is their best start to a year since 1991. The current difference between the two categories is the widest it's been since August 2011.

And there may be some future significance to that indicator. According to research from JP Morgan, when defensive stocks have significantly outperformed in recent years, the S&P 500 has posted gains over the next quarter eight out of ten times.

The Biggest Dividend Payers

Apple's stock has seen some rough sailing lately, but there's one area in which it still stands above its peers: Apple pays out more in dividends than any other company in America. It's currently paying out $11.5 billion in dividends annually, which is more than the entire market cap for the recently merged US Air and American Airlines.

In second place is the company that Apple jockeys with for position as the largest company in the world, Exxon Mobil. Exxon Mobil pays out $11.3 billion in dividends every year. The other leading dividend-payers:

• AT&T: $9.9 billion
• General Electric: $7.9 billion
• Chevron: $7.0 billion
• Microsoft: $6.9 billion

Movement on Jobs

There was a reasonably positive jobs report out this morning from the Bureau of Labor Statistics, which reported that the economy added 165,000 jobs in the month of April. That's a "new normal" figure; the average number of jobs added for the prior 12 months was 169,000 per month.

But the unemployment rate ticked down from 7.6 percent to 7.5 percent, in large part because of revisions to previous reports. March, which was originally reported as creating 88,000 jobs, has been revised upward to 138,000, and February's number has been revised from 268,000 to 332,000.

That means that February was the best month for new hiring since June 2010, when the economy added 521,000 jobs. And aside from that single outlying month, you have to go all the way back to December 2005 - when we added 335,000 jobs - to find another month that was better for hiring than February 2013.

What the Fed Is Watching For

The Federal Reserve Board concluded its two-day meeting yesterday, and emerged saying that it was planning to keep its bond-buying stimulus program intact. Actually, the Fed hedged its bets: It noted that it might change policy "as the outlook for the labor market or inflation changes."

This is in keeping with other recent statements that the Fed will keep both its quantitative easing and its near-zero interest rates in place until the economy crosses some significant benchmarks. Fed chair Ben Bernanke has said in the past that he is watching for unemployment to drop to 6.5 percent - it's currently at 7.7 percent, although new figures are due out tomorrow - before he shifts his strategy.

Bernanke did leave open the possibility that the Fed would actually increase its bond buying, which is currently $85 billion a month. That topic hadn't really been broached until yesterday. Economic growth, as well as the performance of the market, would likely have to slow significantly before we cross that barrier, though.

The Calm and Steady Market

One of the things that has been so encouraging about the stock market in recent times has been its steadiness. Even after the crash of 2008-09, investors got used to being whipsawed around by stock prices, but things have been much calmer lately. In fact, we've now made it through 165 days without having the S&P 500 index drop by more than 5 percent, according to research from Bespoke Investment.

The biggest decrease we've seen was when it slipped 3.2 percent last month, between April 11 and 18. But the market bounced right back, increasing on five of the next six trading days.

That 165 days constitutes the longest such stretch in more than two years. The last time we had a longer streak than that, it ended in February 2011. The longest streak of all time was 593 days without a decline of 5 percent or more; that one extended from December 1957 to August 1959.