Category Archives: Stories of Interest

Believe It or Not​,​ 5 US States Have Hottest Year on Record

2014 was quite a year across the globe for warm temperatures. At the stroke of midnight on the 31st of December, a number of US urban areas joined the record-setting festivities while not a single major urban area achieved record cold. The facts are, it’s been almost 30 years since a major US city had a record cold year. According to the folks over at Climate Central, 17 of the 125 largest metropolitan areas in the US had their hottest year on record. Interestingly, the record setting cities all sit to the west of the Rockies. The heat followed Interstate 5 from Seattle down through Portland, Sacramento and San Diego with detours to San Francisco, Fresno and Modesto before heading east to Las Vegas, Phoenix, Reno and Tucson. Salt Lake City, Los Angeles and El Paso are among other western metro areas also had their top 5 warmest years. Here are some more details from the year-end report.

  • Five states with record setting cities were Arizona, California, Nevada, Oregon and Washington.
  • California has 10 of the 17 hottest cities in part because it’s such a huge urban state, but also because it has experienced some extreme heat over the year. the state was running about 2 degrees F above its previous hottest year, which is a huge margin when you consider most records are broken by tenths or hundredths of degrees.
  • The 17 metro areas that set records in 2014 have a population of 28.5 million, or about 9% of the US population.
  • Some metro areas, however, such as Kansas City, MO and Fayetville, AR did actually experience a top 10 coldest year, but most major cities east of the Mississippi River had just cool or near average temps. This of course, was due to that polar vortex that sat over the middle section of the nation for the first couple months of last year.
  • It’s been 29 years since any city in the US has seen a record cold year. The last metro area to feel the big chill was Kansas City, Mo., Spokane, WA., and Boise City, ID back in 1985.
  • When it comes to global record coldest year, you’d have to go back a century to 1909. Incidentally, that record was tied two years later on 1911. 

Bitcoin, The Worst Investment of 2014

Bitcoin, the much hyped computer generated currency, is set to rank as the worst investment of 2014. The currency gained widespread attention last year when the anonymous drug trafficking sight Silk Road was busted and the Justice Department confiscated some $4 million worth of the coins. Bitcoin has faced other roadblocks since, with governments warning consumers against using it, some even banning its use, and a few bitcoin exchange sites completely collapsing. All the troubles have left bitcoin values down -52% this year. I hope everyone followed our lead and chose NOT to invest or jump on this overly hyped bandwagon. 

Thoughts On Crude Oil

Q. Kevin, what’s your thoughts on Crude Oil?

A. Crude oil prices have now plunged by almost 40%, the bulk of which has occurred in just the past three months. As most of you know, energy price declines of this size and magnitude are most often associated with large declines in global economic growth. There have however been two specific periods of time in recent history where energy prices saw similar type setbacks and they were not associated with a global recessions. Those setbacks occurred in 1986 and again in 1997. Keep in mind both of those time-frames were followed by stronger than expected nearby global growth. Meaning, despite the fears of the world slowing down, this might actually be the shot in the arm that is needed as the Fed exits Quantitative Easing??? Here at home, I hear most of the existing wells could hang in there and still be profitable if crude oil prices pull all the way back to $40. Its the NEW wells and exploration that are in danger of being stopped or halted. Everybody had leveraged up and the cost to finance a new well has dramatically increased in the past few years. In other words it might be the businesses that have leveraged up along with the oil companies that get hit the hardest on a major drop in crude i.e some of those who rapidly expanded in rail, those in the business of building new tankers, new railcars, drilling equipment, frack sand, drilling pipe, etc… Make sure your connecting all the dots and understanding how the drop in crude could negatively impact some of your other investments. Before you liquidate, just make certain you aren’t throwing the baby out with the bathwater. There are some great energy stocks that are now being offered at some good discounts (talk with your advisor about specifics). On the positive side, I’m hearing some larger traders say they suspect the billions consumers are saving (over $1,000 per household) will go to more money being spent on travel, entertainment and at restaurants. These might also be something to consider if in fact energy prices are going to stay low for an extended period of time. 

Year End Planning – The Boring Stuff!

Between all the busy holiday festivities, it’s easy to overlook the boring “practical” stuff, but spending just a few hours on some year end financial planning could save you thousands​ in the long run​. Here are a few that should definitely be on your To Do list:

401(k) contributions – Hopefully, you’ve been contributing to your plan all year long, but there is still time max it out. Workers age 49 and younger can contribute up to $17,500 in 2014. Since taxes aren’t due on this money until it’s withdrawn, this can be a very good year-end move for the highest tax bracket earn​ers. Contributions are due by December ​31, but since this is typically deducted by an employer, you need to give them a little lead time on making the contribution. Bottomline, you can’t make the request onDecember 30th!

IRAs – The deadline for 2014 IRA contributions isApril 15, 2015, but people often rush to make these before the end of the year. It’s easy to forget that there are two types of IRAs – traditional and Roth – and depending on how your 2014 taxes work out, one may be better ​for your bottomline ​than the other. Get with your financial advisor before rushing to cross this one off your list​ to make sure you’re contributing to the one that most works in your favor​!

Cut Your Losses – Now is the time to make sure you’ve maxed out your tax deductions. Consult your accountant about how to structure losses in order to offset gains. For instance, if you own rental property, it might make sense to make deductible repairs or upgrades before year end. If you’re self-employed, there are a number of business expenses that can be deducted or amortized to lower taxable income. Harvest your investments for losses as well. Sometimes it’s better to just take the hit and replace it with something that has better prospects in the year ahead.

Review and Rebalance – While you’re cutting those losses, now’s as good a time as any to assess all your investment allocations. With some of the wild moves ​the ​markets have seen this year, your portfolio might be weighted much differently than you thought​​.

Pay For College – Pay for your kids’ or grandkids’ college by contributing to a 529 plan. The deadline is December 31 for most plans and many states will give you a tax deduction on those contributions.

Charitable Contributions – Charitable contributions can not only help lower your tax bill, they will make you feel good! If you don’t already have your prefer​r​ed charities picked out, it’s worth it to take some time to do ​some research into organizations doing good work in areas ​that really matter to you personally.

Healthcare Accounts – If you have an FSA – a flexible spending account for health care expenses – that still has funds in it, you need to use up all but the last $500 before year end, otherwise it’s gone for good.

Looking For That “Silver Lining”… Be Careful!

Like many of you, through the years I’ve become a long-term buyer and accumulator of physical silver. It started in the late-90’s as an investment idea, but as of late (with falling prices) I’m going to start calling it a “hobby.” Up until 2007 I was slowly building my collection with prices well below $10 per ounce. Not only was I looking at silver as longer-term hedge against a potential collapse in the US dollar, but more importantly silver’s increasing usage as an industrial metal. Everything about my investment was moving along as planned, then in 2008, slowing global economies dropped the industrial demand for silver by about 25%. Basically, as investment dollars and consumer purchases in auto, solar and electronics fell, the price of silver was cut in half, from just above $20 an ounce to below $10 an ounce in the blink of an eye. Once again I was a small buyer on the break. This proved to be a smart play as prices quickly rebounded and eventually surged to a high of nearly $50 per ounce in the spring of 2011. The problem is I’ve never pulled the trigger and made any sales. In fact I was a small buyer again in the summer of 2013 when silver prices first pulled back below $20 per ounce. As I sit here now I’m thinking I should have waited for another pullback to below $10. There’s article after article circulating in the trade right now about how The U.S. Mint has ran out of American Eagle silver coins. Bloomberg recently reported in October U.S. Mint sales jumped 40 percent to 5.79 million ounces from a month earlier to the highest since the record in January 2013. The Royal Canadian Mint is also reporting a massive jump in consumer purchase. In other words, everyone believe Silver prices are drastically oversold and way too cheap. My question is, when’s the last time the investment public was correct in their thinking? Yes, I know that the “gold-to-silver” ratio is supposedly all out of whack and silver is the hidden gem. But as the US dollar looks poised to continue its surge to higher ground and “deflation” rather than “inflation” plays the lead-role, the price of silver may continue to struggle. ​W​ith this in mind, I’m choosing to sit this so called perfect investment buying opportunity out. Simply said I’m going to wait for even lower prices before I add any additional pieces to my “collection.” I’m also going to try and convince myself and my wife that it’s more of a “hobby” than an “investment”… it just feels so much better:) Below is a 25-year continuous Silver chart (source: Barchart.com). As you can see we’ve spent a lot of time in the sub-$10 range.

Personal Thoughts On The Evolving Market

Personal Thoughts: My last cash soybean sale at $10.45 felt for a brief moment to be an extremely smart play, now it clearly appears to have been nothing more than a premature-sale. Probably what I’m most upset about is the fact I didn’t act on my instinct and purchase the “strangles” 30-45 days ago when the “vol” was low and prices were trading at the low end of the range.  From my perspective that’s been somewhat “easy-money” the past few years with the Quant’s, Algo’s and HFTs in the game.  Something similar in todays marketplace might be going out and  buying the JAN15 $80 WTI Crude Oil Calls and at the same time Buying the JAN15 $75 WTI Crude Oil Puts.  Rember, in buying the “strangle” your not trying to predict direction, but simply betting the market doesn’t trade in a sideways channel. Right now it would cost you about $3,000 to make the play, obviously having been much cheaper when the “vol” was lower.  What I’m trying to point out, and something we have to understand, is that many of the players in todays marketplace strive on extreme volatility, many the traditional rules have changed. Below are a couple of lessons I’ve learned:

Know the Rules of the Game – More specifically know the “unwritten” rules of the game.  When these rules change all prior knowledge and understanding about the game has to be modified.  When the NFL changed the “pass interference” rule, head coaches quickly starting adapting and making changes to the routes their receivers were running.  At the same time defensive back coaches started changing the techniques they were teaching.  Same thing has happened in the investment world. With you being the head coach of your own investment portfolio or farm marketing program, you have to recognize the new written and unwritten rules and the NEW way the game is being played. This clearly dictates the need for new strategies and new techniques being implemented on your end.

Size No Longer Matters – The markets being similar to sports have become more about “speed” than about “size.” As my coach always said, “It’s not the big that eat the small, but rather the fast that eat the slow.”   If “speed” has truly become the edge, then you have to believe extreme volatility gives those with speed and the ability to most quickly change direction the decisive advantage.  Moral of the story, be careful being extremely long or short when the market reaches extreme levels. Remember, there is still a large amount of “financial” money at play in the commodity markets.  How much froth and and unpredictability is that creating in the marketplace, I don’t think anybody really knows?

India And Pakistan Tensions Heating Up

India and Pakistan have a long history of conflict, but it’s been some time since things were considered “tense.” New skirmishes along the border are now threatening to derail the relatively peaceful relations the two have maintained for years now. The problems started in May when a group of Pakistani militants attacked India’s consulate in Afghanistan. The Islamic terrorists had planned to kill the India’s staff at the embassy, but security forces were able to kill the terrorists first. The would be assassins belong to a group known as Lashkar e Tayyiba (Army of the Pure), or LeT for short, which has in the past served Pakistan’s military intelligence service. This fact has India accusing the Pakistan government of “sponsoring” the attack and India on high alert assuming another attack is in the works. That led to India beefing up its border security along the ceasefire line in Kashmir, known as the “Line of Control.” Since that time, the zone hasexperienced some of the worst fighting its seen in over a decade. Over 20 people have been killed in the crossfire just this month, and hundreds of civilians on both sides have been forced to flee. Some of this heightened aggression is due to new Prime Minister Narendra Modi’s hardline stance against terrorism, a pledge that was part of his winning campaign platform. India border commanders stepped up these aggressions even more this month, though it’s not really clear why? The last time the two countries went head to head was the 1999 Kargil War, at which time then US President Bill Clinton put pressure on Pakistan to stand down after they put their nuclear forces on high alert. Yes, Pakistan has nuclear weapons, a lot more now than what they had in 1999. India has a nuclear arsenal as well, with missiles that can launch them all the way to China, a key Pakistan ally. So far, India has shown no signs of backing down. In fact, Modi has cancelled all diplomatic talks with his Pakistani counterpart, Nawaz Sharif. As for Sharif, he was Pakistan’s prime minister during the 1999 war. After he gave in to US pressures to stand down, he was overthrown by a military coup. He only returned to power in 2013 so also faces a lot of pressure to stand his ground. And this time around, the US has much less influence in the region.

For the First Time… Memory Loss​ In Alzheimer’s Reversed

This wicked disease is scheduled to become a much larger problem as the baby boomers move beyond the age of 60. Alzheimer’s was first discovered some 100 years ago, according to Science Daily, ​but ​this might be the first time researchers have been able to reverse the memory loss caused by the disease. It has always been thought of as an irreversible brain disease that slowly destroys memory and thinking skills, and eventually even the ability to carry out the simplest tasks. In most people with Alzheimer’s, symptoms first appear after age 60.

Estimates vary, but experts suggest that as many as 5.1 million Americans may now have Alzheimer’s disease. In a nutshell it w​as the patien​ts​ who were treated with a complete lifestyle change that displayed the largest improvements. Basically a team of scientist​s at​ UCLA’s Center for Alzheimer’s Disease Research and the Buck Institute for Research on Aging, came up with a 36-point program which included changes to diet, increased brain stimulation, optimal sleep, more exercise, particular medications, and specific daily supplements. I wish I could guarantee results, but I thought with so many of our family members suffering from this horrific disease, keeping this information on file might come in handy one day. Below are some of the main parts of the program that Science Daily recently outlined. Keep in mind this program was administered by trained medical professionals and was personalized for each patient. This should only be used as a generality of the program that recently helped improve the symptoms of Alzheimer’s disease.

 

  • Eliminating all simple carbohydrates and gluten
  • Eliminating processed food
  • Eating more vegetables and fruits
  • Eating wild-caught fish
  • Meditating twice a day
  • Starting yoga
  • Increasing sleep to between seven and eight hours each night
  • Daily supplementation of coenzyme Q10, fish oil, melatonin, methylcobalamin, and vitamin D3
  • Improving oral hygiene by introducing an electric flossing tool and an electric toothbrush
  • Reinstating hormone replacement therapy as needed
  • Fasting for a minimum of 12 hours between dinner and breakfast
  • Not eating at least three hours before bedtime
  • Exercising for at least 30 minutes, up to six days each week

It’s worth noting the only major side effects of this therapeutic system were overall improved health and an improved body mass index, a stark contrast to the side effects of many drugs. See all of the details and the complete study at “Reversal of Cognitive Decline: A Novel Therapeutic Program” by ​clicking HERE You can also read more about the disease and its symptoms at the National Institute on Aging.

What About Possible Riots In Ferguson

The great state of Missouri might still have two teams in postseason play with dreams of reaching the World Series, but unfortunately state police and FBI agents are increasingly worried about what happens if and when the grand jury does not indict white officer (Darren Wilson) for killing a black teen (Michael Brown) back on August 9th. There seems to be some spreading fear that a major riot could break out or perhaps provoke more wide-spread riots across the US. Keep in mind civil rights groups and protestors from across the country are heavily monitoring this case. According to arrest records from the St. Louis county police, of the 227 people arrested in connection with the protests, 36 were from outside Missouri, including seven from New York, 12 from Illinois and five from California. Something else to keep in the back of your mind…there are reportedly nine white and three black jurors.  Reports from inside Ferguson are that a rally held this past week by Black Lawyers for Justice in a local church, was attended by eight members of the “New Black Panther Party,” all dressed in battle fatigues and berets. There are reports circulating that Michael Brown supporters and protestors where at the recent Cardinals playoff game and where meet with heavy headwinds from the local fans as they chanted “DAR-REN WIL-SON”… There were also some fans wearing the name Darren Wilson on the back of their Cardinals jersey’s.  If you don’t think things are going to get a little crazy check out the video posted over at Deadspin by clicking here. Now I  hear a St. Louis county judge granted a 60-day extension to the grand jury, so jurors will have until Jan. 7th to make a decision.  The problem is the protesters are already starting to gather and are coming in from all parts of the country.  In fact protesters have organized four days of activities in Ferguson and surrounding areas this weekend (over the Columbus Day holiday). Starting Friday, they say they expect thousands of people to take part in marches, rallies and a yet-to-be-detailed acts of civil disobedience.  All I can say is pay close attention to this one.  Its one thing to have riots in L.A. or an Occupy Wall Street movement in N.Y., but when you start splintering the nations midsection the consequences could be much more severe. Lets just hope this thing doesn’t spiral into major civil unrest. (Source: Reuters)

Ballooning Cost Of College…The Next Great “Bubble”

With thousands of kids headed off to college the past couple of weeks (including my own), I thought we should take another look at the rising cost of attending. Do you realize tuition costs that have risen by 1,225% since 1978? In just the past decade, tuition has risen three times as fast as the consumer-price index and twice as fast as health care. Even as enrollment numbers have waned and college grads still struggle to find jobs, prices have continued to sky-rocket. As we all know, many students will end up financing part of their higher education, but that really isn’t accounted for when we think about the true cost of college. Depending on the length of the loan and interest rate, a $10,000 tuition bill could end up easily costing close to double that by the time it’s all said and done. The average student loan debt for college graduates is $29,400, a tough pill to swallow considering that the unemployment rate for 25 to 34 year olds continues to run higher than the national average. To counter some of that debt load, more families have opted to pay tuition costs outright. In fact, the percent of college costs in 2012-2013 covered by borrowing was down to a five year low. That’s not necessarily a good thing for parents who may be opting to pay for college rather than save for retirement though. So what is behind the ballooning costs? For one, students are taking more time to get their degrees, with those entering four-year colleges spending an average of 5 ½ to graduate. Another major reason is decreased state funding for public colleges and universities. To fill the gap, schools raise tuition. Some of the bigger private colleges are experiencing a similar problem, but the income they are losing has been from donor money, rather than government funding. But again, the costs are made up by raising tuition. The other major reason is simply an increase in spending on everything from administrative costs to new state-of-the-art facilities. Those “upgrades” might not contribute much to an improved education, but they contribute plenty to college costs. The double-edged sword in this is that the way the modern job market is geared, kids can’t afford to NOT go to college. If costs keep climbing at the same pace we’ve seen in the last 30 years though, it’s worrisome to think how few people will be able to pay for it ​ in the next 30 years​. (Source: Bloomberg)