LVZ Advisors

May Economic Report

lvzadmin — Thu, 09 May 2013 19:42:25 +0000

In spite of headlines pointing to emerging signs of recovery, the economy continues to perform poorly. The charts below show longer-term trends in the two factors contributing to real growth—productivity and hours worked.

Jobs and hours worked are a poor guide to the economy’s health. More important is productivity which determines living standards.

Historically, US productivity growth has averaged 2.2% a year. At this pace, living standards double every 33 years. Whenever the US has abandoned classical economic principles, productivity growth has slowed. When it restores those principles, productivity improves.

Full Report

April Economic Report

lvzadmin — Wed, 10 Apr 2013 15:05:05 +0000

An anemic economic recovery hasn’t prevented stock prices from reaching new all-time highs. One reason stocks have done well is because earnings have continued to grow. In spite of the economy’s slump, earnings for S&P 500 companies have continued to increase at a 6.5% yearly rate.

While the future direction of stock prices will depend on earnings and interest rates, any projection of the market’s future should begin with an assessment of its current value.

Read Full Report Here

February Economic Report

lvzadmin — Fri, 15 Feb 2013 20:57:31 +0000

Economic numbers for January show little change from the 2% a year real growth of the past three years. Any economy’s growth rate reflects a combination of the growth in hours worked and increases in efficiency (output per hour worked).

Over the past 15 years the US private economy has had no increase in total hours worked. There are two reasons for this. First, rising regulatory costs have led companies to reduce their demand for workers. Second, welfare benefits and unemployment compensation have reduced the incentive to work.

For most of the past decade companies were able to maintain productivity increases close to the long-term average of 2% a year. They did this by reducing their demand for workers. However, for the past 2-3 years, the increase in federal spending and regulatory burdens has slowed the growth in productivity to close to 1% a year.

Read Full Report Here

January Economic Report

lvzadmin — Tue, 22 Jan 2013 21:47:02 +0000

My previous forecast was based on the assumption the President would refuse to agree to a deal on tax rates without extracting major concessions from Republicans. I was wrong. While the agreement is a negative in terms of higher tax rates and giveaways to various companies and industries, it’s not as damaging as I had expected.

Read the full report here.

November Economic Report

lvzadmin — Tue, 13 Nov 2012 20:04:25 +0000

Voters gave the President another four years to improve the economy. This is similar to decisions voters made in 1932, 1936 and 1940. Then, as now, voters assumed a more active government policy would help restore prosperity. It never has.

As late as 1945, the private economy was no larger than it had been in 1929. FDR’s policies prevented the private sector from recovering. This is what has occurred whenever government has aggressively increased its control over the economy.

The economy responds to policies, not to personalities. Whether they realize it or not, voters have opted for a set of policies geared to more government control, more spending and higher tax rates.

Read Full Report Here

October Economic Report

lvzadmin — Thu, 11 Oct 2012 15:52:39 +0000

This will be the last monthly update prior to the elections. The outcome of these elections, more than any others will shape our nation’s economic future. At this point, economic forecasts include so much speculation and so many assumptions that they should viewed with even more skepticism than usual.

While many view the outcome of the Presidential election as a tossup, I continue to predict Romney will win. Jay Cost often has the most perceptive insights into polling and the outcome of elections. His recent reports show how swing voters tend to decide the election in the final weeks and explain why the President is in trouble.

Read the full report here.

August Economic Report

lvzadmin — Wed, 08 Aug 2012 17:38:33 +0000

Does Money Still Matter?

When the Fed creates the raw ingredients for money it has a powerful effect on financial markets and the economy. It always has. It always will. However, Milton Friedman once noted, “There are many slips between the cup and the lip.”

The Federal Reserve starts the process of creating money by creating bank reserves. It creates bank reserves when it buys financial securities and pays for them by crediting banks with additional assets called bank reserves.

The Fed has complete control over bank reserves, which represent one measure of the money supply. Bank reserves are referred to as high-powered money since an increase in these reserves can produce a multiple expansion in the more common measures of money such as checking account deposits, savings deposits and so on. Once an increase in bank reserves has been transformed by the banking system into the more commonly recognized forms of money, it becomes available to boost the pace of spending.

Read the full report here

July Economic Report

lvzadmin — Fri, 13 Jul 2012 18:51:49 +0000

There were two major developments this past month. The first surrounds the tax increases due January 1^st. The second involves the Court’s decision on the healthcare law. Each of these developments has important implications for the economy and financial markets.

Read the full report HERE

Beneficiary Designations

lvzadmin — Wed, 06 Jun 2012 18:46:58 +0000

I recently worked with a client in completing a claim form for life insurance that his father purchased in 1966. The primary and contingent beneficiaries were still as his father had wanted them and the distribution of the policy proceeds were received without a hitch. Even though this case went well it makes you wonder how many people keep their beneficiaries up to date, especially on life insurance that was purchased forty years ago. As your life evolves please remember to update the beneficiaries on your life insurance, 401k, IRA, etc. Some people make the mistake of thinking that because they have a will or trust that they are now covered on all accounts. Unfortunately their beneficiary designations take precedent over what is stated in a will or trust. Remember whoever you have listed as your primary beneficiary when you pass away will receive the asset under that designation. Picture this situation, you recently graduate college and get your first job. You enroll in the company 401k plan and they ask you who you want to get the money should something happen to you. Of course you add your college roommate as your beneficiary! Now twenty years have passed, you still work for that same employer and you are now married with kids. Life is good until tragedy strikes and no matter how much sense it makes to pass the money on to your family, your old college roommate receives the assets in your 401k. As advisors we read and attend seminars on estate planning on a regular basis. The horror stories of people who neglect their beneficiary designation are endless and always interesting. As we meet with clients we review current beneficiary designations at least every couple years. This is one of the easiest and most often missed aspects of financial planning. If you ever have any questions on best practices for beneficiary designations please feel free to contact us.

By Nate Baumann

Vice President, LVZ Advisors, Inc.

June Economic Report

lvzadmin — Wed, 06 Jun 2012 18:23:01 +0000

There is a potentially powerful headwind facing the economy next year over and above an array of new tax rates. Beginning next year, individuals and businesses will face roughly $500 billion in additional burdens to comply with various government mandates.

The first major expenditure results from a more complete implementation of healthcare legislation. Unless the Supreme Court throws it out, the so-called “Affordable” Care Act will cost well over the Congressional Budget Office’s (CBO) estimate of $176 billion a year. Among other things, CBO estimates fail to include indirect costs.

A second burden will be paying for Dodd-Frank financial reforms. Extensive analysis of the various provisions indicates this legislation is at least 15 and possibly more than 30 times more complex than Sarbanes-Oxley (SOX). Assuming the costs of Dodd-Frank are 15 times more than SOX this piece of regulation will cost at least $200 billion a year for the next five years.

Read the Full Economic Report Here