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The RFG Weekly Wealth Report

July 19, 2016
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"Start your engines," was not in the Department of Labor (DOL)'s June Employment Report Summary, but it may as well have been. A positive jobs report revved investor optimism and sent U.S. stock markets sprinting higher last week.

Job growth was strong in June with 287,000 new jobs created. That helped soothe worries raised by a less than stellar May jobs report.

The American Association of Individual Investors (AAII)'s Investor Sentiment Survey reported bullish sentiment - the expectation stock prices will rise over the next six months - increased by 5.8 percentage points last week to 36.9 percent. That's just the second time since November 2015 bullishness has stayed above 30 percent for two weeks in a row.

Investors' enthusiasm was fortified by positive earnings reports and helped some markets reach new highs. The Dow Jones Industrial Average finished Friday at a record high, according to Reuters, and Bloomberg said, "...the S&P 500 Index closed at record highs on four consecutive days, something that hadn't happened since November 2014."

LOOK INTO THE CRYSTAL BALL... Sure, the world has changed during the last decade or two. We've gained about 1.6 billion people. (There are now 7.2 billion of us, globally.) There is an app for almost everything. (Just try to 'catch 'em all!') We even job hunt in cyberspace.

Here are a few other changes that may be coming our way soon:

  • Saltwater crops. One-fifth of the world's irrigated farmland has been swamped by seawater, and rising sea levels mean more acreage may be at risk. Phys.org reports scientists around the world have been studying how to grow salt-tolerant crops, including potatoes, strawberries, carrots, onions, and lettuce.
  • Custom-engineered bones. "For the first time, pieces of living bone have been grown from the cells of...miniature pigs - and sculpted to replace... a pig's lower jaw, one of the strongest and most complex jaws in the face," according to LiveScience.com.
  • Smart refrigerators. Someday soon, you may replace your old refrigerator with a smart fridge. The latest models have cameras that connect to your smart phone via Wi-Fi, so you can see what's inside while you're shopping at the grocery store.
  • Food-sharing apps. Don't have time to cook? Log in to a food-sharing app to "connect with people in the same area who have leftover food to give away, allowing surplus to be shared and not wasted."
  • Dragon silk armor. Genetically modified silkworms - they now share DNA with spiders - are spinning one of the toughest fibers ever made. If it performs well in ballistic tests, the U.S. Army may soon be wearing silk.

Our parents and grandparents saw the arrival of countless innovations - the telegraph, radio, television, automobiles, space travel, and much more. We're likely to witness some pretty amazing things, too!

Quote of the Week

"It is important for all of us to appreciate where we come from and how that history has really shaped us in ways that we might not understand."

--Sonia Sotomayor, Supreme Court Justice

Golf Tip of the Week

Quit Topping the Ball

"Topping the ball," or making contact with the top hemisphere of the ball, can rob your stroke of power and cause weak, unpredictable shots. Trying to lift or scoop the ball at impact often causes the problem. If you're struggling with this issue, practice "Breaking the Tee" with the following drill:

Set a tee deeply in the ground so that the top sits just above the ground. Set up to the ball normally and try to swing so that you snap the tee out of the ground. To do this successfully, you'll need to shift your weight forward and hit with a downward blow. After you've successfully broken the tee and sent it flying a few times, practice the same drill with a golf ball on the tee. Hopefully, you'll see increased power and accuracy in your shots.

Financial Question of the Week

What is diversification and why is it important?

If you invest in a single security, your return will depend solely on that security; if that security flops, your entire return will be severely affected. Clearly, held by itself, the single security is highly risky.

If you add nine other unrelated securities to that single security portfolio, the possible outcome changes - if that security flops, your entire return won't be as badly hurt. By diversifying the investments in your personal financial plan, you have substantially reduced the risk of the single security. However, that security's return will be the same whether held in isolation or in a portfolio.

Diversification substantially reduces your risk with little impact on potential returns. The key involves investing in categories or securities that are dissimilar: Their returns are affected by different factors and they face different kinds of risks.

Diversification should occur at all levels of investing. Diversification among the major asset categories - stocks, fixed-income and money market investments - can help reduce market risk, inflation risk and liquidity risk, since these categories are affected by different market and economic factors.

Diversification within the major asset categories - for instance, among the various kinds of stocks (international or domestic, for instance) or fixed-income products - can help further reduce market and inflation risk. Diversification among individual securities helps reduce business risk.

Please contact my office if you or someone you know would like help diversifying your portfolio.