Investment Commentary –August 16th, 2017

Market Indices as of Market Close August 16th, 2017
Dow 22,025 (11.32% YTD)
S&P 2,464 (10.08% YTD)
NASDAQ 6,333 (17.65% YTD)
Gold $1,278 (9.61%)
OIL $49.12 (-9.63%)
US 10Y Treasury 2.27 (-17.43%)
Barclay Bond Aggregate (2.87% YTD)

Housing starts stumble in July as new-home construction churns gradually higher

Builders broke ground on fewer homes in July, but new-home construction continues to grind slowly and steadily higher, supporting a gradually improving housing market.

Housing starts ran at a 1.16 million seasonally adjusted annual rate, the Commerce Department said Wednesday. That’s 4.8% below June’s pace, and 5.6% lower compared to a year ago. It also missed the MarketWatch consensus forecast of a 1.23 million rate.

Housing permits, which foreshadow future construction activity, slid 4.1% in July to a seasonally adjusted annual 1.22 million pace. Permits are 4.1% higher than in July 2016, however.

Why the 1% loves annuities

Class envy is currently in vogue, and it’s politically correct to be against what some politicians refer to as the “evil rich.”

Recent studies reveal that the top 1% in this country earns over $380,000 annually, and the top 10th of 1% bring in more than $1.7 million in yearly earnings. Good for them in my capitalistic opinion.

That’s pretty lofty income air to be in for sure, but do these 1%-ers even look at annuities? The answer is a resounding yes and their view of Annuities are nothing more than contractually guaranteed transfer-of-risk products, and 1%-ers use annuities as a way to transfer risk to the annuity carrier. They don’t view annuities as, or compare them to, true investments because they understand that annuities aren’t in the investment category.

The 1%-ers usually have enough risk on their plate with their jobs and outside investments, so they look to annuities as a way to take risk off the table. These transfer-of-risk strategies should be a blueprint on how everyone should use annuities within their own portfolio.

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Investors head to bonds

The volatile rhetoric between the U.S. and North Korea sent many investors flocking to bonds. The yield on the 10-year Treasury fell to under 2.1% before rebounding slightly on Friday. The euro rose on Wednesday to its highest level versus the U.S. dollar since January 2015. Europe’s common currency has been lifted by recent economic gains and expectations that the European Central Bank will soon tighten its monetary policy.

Oil falls again

A rise in OPEC crude production and the situation with North Korea kept the price of oil at under $50 a barrel. OPEC’s increase has dovetailed with a decrease of inventory in the United States.

Help wanted?

American employers have a record 6.2 million job openings, according to the latest data from the U.S. Department of Labor. However, hiring remains flat, as employers are taking longer than ever to fill these positions.

On Tap for the rest of the week:

Wednesday: Release of minutes from July 25–26 meeting of the U.S. Federal Reserve Board


Leaders this past week included utilities and consumer goods. Laggards included services, basic materials and conglomerates.

THIS DAY IN FINANCAL HISTORY: Steel Workers Get Eight-Hour Work Day

On this day in 1923, Carnegie Steel establishes an eight-hour workday for all of its steel workers. The late founder of this company was not always friendly to labor though. Many deadly strikes and riots against his company took place in the decades prior.

The views presented are not intended to be relied on as a forecast, research or investment advice and are the opinions of the sources cited and are subject to change based on subsequent developments. They are not a recommendation, offer or solicitation to buy or sell any securities or to adopt any investments.