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Bill’s By The Number$

1. ALMOST A RECORD CLOSING HIGH – The S&P 500 closed last Friday 10/25/19 at 3023, within 3 points of its all-time record close of 3026 established 3 months earlier on Friday 7/26/19. The 62-year old stock index has set 220 record closes during its ongoing bull market run that began on 3/10/09. The S&P 500 consists of 500 stocks chosen for market size, liquidity and industry group representation. It is a market value weighted index with each stock’s weight in the index proportionate to its market value (source: BTN Research).

2. NEW WAYS TO COUNT – The size of the US economy as of 9/30/19 will be published on Wednesday 10/30/19 with the release of the government’s “advance estimate” of our nation’s “Gross Domestic Product” (GDP), measured at $21.34 trillion in size as of 6/30/19. Some economists believe the measurement of GDP is outdated, focusing on tangible output but failing to account for some of the economic activity in today’s technological world, possibly understating our economy’s size by 2% or $400-450 billion (source: Mark Cliffe, ING Group).

3. JUST FIVE SURPLUS YEARS – The budget deficit for the United States in fiscal year 2019 (i.e., the 12 months that ended 9/30/19) was $984 billion. The USA has run a budget deficit in 54 of the last 59 fiscal years, i.e., 1961-2019. The only surplus years were 1969, 1998, 1999, 2000 and 2001 (source: Treasury Department).

4. BACK IN TIME – The cover story for Time Magazine on 3/05/84 was “That Monster Deficit, America’s Economic Black Hole.” The article, written by Charles Alexander, chronicled how the nation’s 1984 deficit threatened to derail the country’s economic recovery. The fiscal year 1984 deficit was $185 billion (source: Time Magazine).

5. DEFICIT PER YEAR – Aggregate budget deficits for the US government over the last 11 fiscal years (i.e., 2009-2019) total $9.8 trillion, an average deficit of $892 billion per year (source: Office of Management and Budget).

6. NATIONAL EXPENDITURES – 62% of the $4.447 trillion of total outlays for the US government during fiscal year 2019 took place in just 4 categories – Social Security ($1.044 trillion), National Defense ($688 billion), Medicare ($651 billion) and Net Interest Expense ($376 billion) (source: Treasury Department).

7. LIVE WITHIN YOUR MEANS – 41% of American households make less than $50,000 of adjusted gross income (AGI) per year. Only 8% of American households make at least $200,000 of AGI (source: Census Bureau).

8. DEPENDS ON WHERE – The median sales price of the 5.4 million existing homes sold in the United States during September 2019 was $272,100. The median sales price of existing homes sold in the “West” was +48% greater than the national average ($403,600) while the median price of existing homes sold in the “Midwest” was 22% less than the national average ($213,500) (source: National Association of Realtors).

9. UNAFFORDABLE FOR MANY – The median home price in June 2019 in San Francisco ($1,466,900) was more than 5 times the median home price in Phoenix ($280,000), i.e., by moving 754 miles southeast from the northern California coast to the Arizona desert, the median home price drops by 81% (source: Redfin).

10. CUT IN HALF – US homebuilders started construction on 13.773 million single-family homes over the 10 years of 1998-2007, an average of 1.38 million new homes per year. Homebuilders started construction on 6.990 million single-family homes over the 11 years 2008-2018, an average of 635,500 per year (source: Census Bureau).

11. NO WORK – 37% of American seniors report they retired earlier than planned as a result of health problems, buyout packages, layoffs, grandchildren, or caring for an aging parent (source: Health and Retirement Study).

12. I DID IT MYSELF – A survey of 4,000 American millionaires concluded that the millionaires who created their own personal wealth were “moderately happier” than the millionaires who inherited their wealth (source: Harvard Business School, 2018).

13. ROTTEN KIDS – A study involving 2,500 wealthy families over decades of wealth transfers across generations found that on average only 30% of the original family fortune remained at the end of the 2nd generation, and only 10% remained at the end of the 3rd generation (source: Williams Group).

14. GOOD CALL – Jeff Bezos, the founder of Amazon and the world’s richest person (worth $114 billion as of October 2019) was Time Magazine’s “Person of the Year” in 1999. The 12/27/99 cover declared “E-commerce is changing the way the world shops” (source: Time).

15. BABE RUTH – As a 21-year old pitcher for the Boston Red Sox, Babe Ruth pitched a 14-inning complete game 2-1 victory in the 2nd game of the 1916 World Series vs. the Brooklyn Dodgers, the most innings ever thrown by one pitcher in a single postseason baseball game (source: Major League Baseball).

 

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Bill’s By The Number$

1. JUST NOT LATELY – The S&P 500 is up +19.6% YTD (total return) through the close of trading last Friday 10/04/19, but the index is up just +1.1% since the end of April 2019. The S&P 500 consists of 500 stocks chosen for market size, liquidity and industry group representation. It is a market value weighted index with each stock’s weight in the index proportionate to its market value (source: BTN Research).

2. HOW MANY? – 2 US presidents in history were impeached by the House, but later acquitted by the Senate, i.e., Andrew Johnson in 1868 and Bill Clinton in 1998. A 3rd president likely would have been impeached by both the House and the Senate, but elected to resign instead, i.e., Richard Nixon in 1974 (source: Congress).

3. SMALL SAMPLE SIZE – In the 1-year following Richard Nixon’s 8/09/74 resignation as President of the United States, the S&P 500 gained +6.4%. In the 1-year following Bill Clinton’s 12/19/98 impeachment by the House, the S&P 500 gained +19.6% (source: BTN Research).

4. COUNTING ALL STOCKS – Through the close of trading on 9/30/19, the market capitalization of all US stocks was $32.3 trillion. At the start of the current bull market for stocks (an advance that began on 3/10/09), the market capitalization of all US stocks was $7.6 trillion (source: Wilshire).

5. BIG PERCENTAGE – The market cap of the S&P 500 is 80% of the total market capitalization of all US stocks as of 9/30/19 (source: BTN Research).

6. BOND MARKET – From the end of 2009 through 6/30/19, the outstanding par value of the US municipal bond market has been flat, i.e., $3.8 trillion on 12/31/09 to $3.8 trillion on 6/30/19. Over the same time period, the outstanding par value of the US Treasury market has more than doubled, i.e., growing from $7.3 trillion on 12/31/09 to $15.9 trillion on 6/30/19 (source: Securities Industry and Financial Markets Association).

7. IS THAT ENOUGH? – 58% of 1,015 Americans surveyed in August 2019 believe that a retiree who has accumulated $1 million in pre-tax investment accounts will be able to enjoy a “comfortable” lifestyle in retirement (source: TD Ameritrade).

8. OVER PROMISED, UNDERFUNDED – The pension plans for state and local government employees nationwide are just 52% funded, i.e., the current fair market value of the assets backing public sector pension plans are equal to 52% of the present value of future liabilities as promised by the pension plans (source: Federal Reserve).

9. HEALTH INSURANCE – The average annual cost for health insurance coverage for a family plan in 2019 is $20,576, with the employer paying 71% of the total ($14,561) and the employee paying 29% ($6,015). Ten years ago (2009), the average cost was $13,375 and the employer/employee split was 74/26 (source: Kaiser FF).

10. A QUIRK IN THE LAW – The “economic benefit” to an employee of having one’s employer pay a portion of the employee’s health insurance is unique in that the “economic benefit” is not considered “ordinary income” and thus has no impact on an employee’s tax return. If Congress was to change the tax law and reclassify the “economic benefit” as “ordinary income,” the modification would bring in an estimated $280 billion annually in income taxes and payroll taxes (source: Tax Policy Center).

11. ALL IN THE FAMILY – One political party has controlled the White House, the Senate and the House of Representatives in 22 of the last 60 years, i.e., 1960-2019. Republicans last controlled the White House, the Senate and the House in 2018. Democrats last controlled all 3 in 2010 (source: BTN Research).

12. A TRILLION PER YEAR – The national debt as of 9/30/19 (i.e., the end of fiscal year 2019) was $22.7 trillion, up $1.2 trillion in the last year, up $4.9 trillion in the last 5 years, and finally up $10.8 trillion in the last 10 years (source: Treasury Department).

13. WAY OFF – In January 2009, the Congressional Budget Office released a 10-year forecast for our nation’s national debt. The debt projection made in 2009 for the end of fiscal year 2019 (i.e., 9/30/19) was $15.973 trillion. Our actual national debt as of 9/30/19 was $22.719 trillion (source: The Budget and Economic Outlook).

14. MOST EVER – 8,567 American retail stores have closed YTD through 9/27/19, exceeding the all-time record of 8,139 store closures from 2017 (source: Coresight Research).

15. BEST AND WORST – 4 teams won at least 100 regular season games this season (Houston, LA Dodgers, NY Yankees and Minnesota), an all-time first for MLB. 4 other teams lost at least 100 games this year (Detroit, Baltimore, Miami and KC), also an all-time first for MLB in its 144-year history (source: Major League Baseball).

 

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Bill’s By The Number$

1. FINAL QUARTER OF THE YEAR – Over the last 25 years (1994-2018), the S&P 500 stock index has gained an average of +4.3% (total return) over the final 3 months of the year (October-November-December). 19 of the last 25 fourth quarters (76%) have produced a positive total return gain. The S&P 500 consists of 500 stocks chosen for market size, liquidity and industry group representation. It is a market value weighted index with each stock’s weight in the index proportionate to its market value (source: BTN Research).

2. NO SHUTDOWN – The House (on 9/19/19) and the Senate (on 9/26/19) each passed a “continuing resolution” to keep the government open through 11/21/19 instead of shutting down at midnight on 9/30/19, the final day of fiscal year 2019. The action prevents our 4th shutdown in just the last 2 years (source: Congress).

3. ALMOST A MILLION BUCKS – If the nation’s aggregate net worth of $113.5 trillion was spread equally across all 122.5 million US households, every American household would be worth $927,000 (source: Federal Reserve).

4. DYK? – The Social Security retirement benefit of the “lower paid” spouse in a couple where both spouses worked is equal to the greater of the retirement benefit based upon the “lower paid” spouse’s work history, or 50% of the “higher paid” spouse’s retirement benefit. Consult a retirement expert for details (source: Social Security).

5. PLANNING AHEAD – 77% of private sector workers had access to and participated in employer-provided retirement benefits in March 2019. 91% of public sector workers, i.e., government workers, had access to and participated in employer-provided retirement benefits in March 2019 (source: Department of Labor).

6. SHORT OF CASH – The board of directors who run the $88 billion defined benefit pension plan for the Ohio Public Employees Retirement System have recommended that the plan’s “cost of living adjustment” (COLA) be frozen for all plan participants in 2022 and 2023, i.e., there would be no COLA increase (source: OPERS).

7. BORROWERS WERE GOUGED – When banks and investors need to borrow cash on a short-term basis (e.g., overnight), other banks make their “excess” reserves available in multibillion-dollar electronic transactions that take place late in the trading day. In today’s interest rate world, the borrower would pay approximately 0.005% per day ($50,000 per day per $1 billion borrowed). When the regular flow of “overnight” money (about $75 billion a day) disappeared on 9/16/19, lenders exploited the shortfall and the daily rate that was charged increased “fivefold,” i.e., a cost of $250,000 per day per $1 billion borrowed (source: Federal Reserve).

8. DISAGREEMENT – The Federal Reserve Board consists of the 7 members of the Fed’s Board of Governors (which has 2 vacancies currently) and the presidents of the 12 regional Federal Reserve banks, i.e., there are 17 current members of the Federal Reserve Board. At the 9/18/19 Fed meeting where an interest rate cut was approved, 7 of the 17 supported an immediate rate cut and saw the need for an additional rate cut later in 2019, another 5 of the 17 supported an immediate rate cut but anticipated no further action during 2019, and the final 5 of the 17 did not support the most recent rate cut or any other reductions in 2019 (source: Federal Reserve).

9. TWELVE-YEAR HIGH – New residential construction in the US totaled 121,100 housing units in August 2019, its highest total recorded since August 2007. The total includes 82,600 single family homes, 1,800 apartment buildings with 2-4 units and 36,700 apartment buildings with 5 or more units (source: Census Bureau).

10. BIGGER LOAN – On 1/03/19, the national average interest rate for a 30-year fixed rate mortgage was 4.51%, producing a $507 monthly “principal and interest” payment per $100,000 borrowed. The same $507 payment at last week’s 3.64% national average would allow a home buyer to borrow $111,027 (source: Fannie Mae).

11. VOTING – The 2020 elections in the US take place 400 days from today. On 11/03/20, Americans will vote for a President, all 435 members of the House and 33 members (out of 100) of the Senate (source: Congress).

12. TWO OUT OF THREE – 65% of college graduates in 2018 finished their schooling with outstanding student loan debt (source: The Institute for College Access & Success).

13. EACH AND EVERY DAY – The world consumes 101 million barrels of crude oil per day, with the United States consuming 21 million barrels of the global daily total (source: Department of Energy).

14. FREEDOM AND UNITY – The lowest unemployment rate in any US state as of August 2019 was 2.1% in Vermont (source: Department of Labor).

15. THE LIGHTS GO OUT – After 72 seasons of airing Chicago Cubs baseball games, WGN-TV broadcasted their final Cubs TV game last Friday night 9/27/19. Game # 1 in the streak took place on 4/23/48 (source: WGN).

 

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Bill’s By The Number$

1. ADULTS IN THE ROOM – 73% of stocks (by dollar) owned by Americans are held by households headed by individuals over the age of 55 (source: Federal Reserve).

2. NO CLEAR CONSENSUS – As of 9/18/19, 35% of investors surveyed are “bullish” on the prospects for US stocks over the next 6 months, 37% are “neutral” on stocks, and the remaining 28% are “negative” on stocks (source: American Association of Individual Investors).

3. PLAN FOR PRICE INCREASES – As of 8/31/19, the “consumer price index” is up +19% over the last 10 years, up +54% over the last 20 years, and up +106% over the last 30 years. The consumer price index (CPI) is a measure of inflation compiled by the US Bureau of Labor Studies (source: Department of Labor).

4. VULNERABLE – Before the drone attacks on 2 Saudi oil facilities on Saturday 9/14/19, Saudi Arabia was producing 10% of the world’s daily production of crude oil. The price of crude oil went from $54.85 a barrel on Friday 9/13/19 to $62.90 a barrel as of the close of trading on Monday 9/16/19, an increase of +15% in a single trading day (source: New York Mercantile Exchange).

5. JUST IN CASE – Our nation’s Strategic Petroleum Reserve consists of 4 sites in Texas and Louisiana containing 727 million barrels of crude oil in underground storage caverns. In 2018, the US consumed an average of 21 million barrels of crude oil per day (source: Department of Energy).

6. MAKING THINGS – The number of manufacturing jobs in the United States peaked in June 1979 (40 years ago) at 19.55 million, fell to a low of 11.45 million in March 2010, and now has rebounded to 12.85 million in August 2019 (source: Department of Labor).

7. THE BANK OWNS IT NOW – Lenders repossessed 11,493 homes in August 2019, down 47% from 21,640 repossessions in August 2018. The all-time record for bank repossessions in a single month in US history: 102,134 in September 2010 (source: Attom Data Solutions).

8. SURPLUS IN SEPTEMBER? – With just the final month of the 2019 fiscal year yet to be calculated, the US has already surpassed a trillion-dollar deficit ($1.067 trillion) for fiscal year 2019 through 8/31/19. However, the United States has produced a surplus in each of the last 7 Septembers (2012-2018) and the average surplus has been $73 billion, including $119 billion in September 2018 (source: Treasury Department).

9. COST HAS DOUBLED – Through 8/31/19, the US government has spent $1.13 billion per day during fiscal year 2019 on interest payments related to our national debt. At the same point in time a decade ago during fiscal year 2009, the government was spending $0.57 billion per day on interest payments (source: Treasury Department).

10. REALLY LONG – In an effort to “lock-in” historically low interest rates, the Treasury Department stated on 9/12/19 that they are considering issuing a 50-year Treasury bond in 2020 (source: Steven Mnuchin, Treasury Secretary).

11. MORE THAN JUST WAGES – For every $1 spent for wages and salaries in the private sector, employers spend an additional 46 cents on benefits, including paid leave, insurance, retirement plans and legally required benefits. Average compensation is $27.43 per hour while the cost of benefits averages an additional $12.49 per hour (source: Bureau of Labor Statistics).

12. ANNUAL BUMP – The “cost of living adjustment” (COLA) made to Social Security benefits is calculated based upon the year-over-year increase in prices from the 3rd quarter of subsequent years. E.g., the COLA that will be applied to benefits paid in January 2020 will be based on the change of prices from the end of the 3rd quarter 2018 to the end of the 3rd quarter 2019. The COLA increase was +2.8% last year (source: Social Security).

13. IT’S TIME TO REVIEW – Medicare covers 59.9 million Americans, equal to 2 out of every 11 Americans. Medicare’s annual open-enrollment period starts 10/15/19 and runs through 12/07/19, allowing participants to make changes to their Medicare coverage. Plan options are available online on the medicare.gov website beginning 10/01/19 (source: Medicare).

14. SHOW ME THE MONEY – The California State Assembly has passed legislation that would allow college athletes in its state to profit from endorsements as of 1/01/23 without losing eligibility. E.g., the student-athlete would retain the right to their name and image on apparel (source: “Fair Pay to Play” Act, Senate Bill 206).

15. ARE THEY PLAYING FOOTBALL? – The Houston Astros beat the Oakland A’s 15-0 on 9/09/19. The very next day the A’s turned the tables and beat the Astros 21-7 on 9/10/19 (source: Major League Baseball).

 

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Bill’s By The Number$

1. ONE FOLLOWED THE OTHER – During the 30 years ending 8/31/19, the best 12-month performance and the worst 12-month performance for the S&P 500 occurred over a single 24-month period. The worst 12-months (a total return loss of 43.3%) was the 1-year from 3/01/08 to 2/28/09 and the best 12-months (a total return gain of +53.6%) was the 1-year from 3/01/09 to 2/28/10. The S&P 500 consists of 500 stocks chosen for market size, liquidity and industry group representation. It is a market value weighted index with each stock’s weight in the index proportionate to its market value (source: BTN Research).

2. A NEW HIGH – After adjusting numerical data from the past for the impact of inflation, the median household income in 2018 ($63,179) is the highest ever recorded in the USA and the 3rd consecutive year (2016-2018) that produced an all-time inflation-adjusted record. Before 2016, the peak for median household income was $61,526 set in 1999 (source: Federal Reserve Bank of St. Louis).

3. TREASURIES – The amount of outstanding Treasury debt issued by the USA has quadrupled since the end of 2004, rising from $3.95 trillion on 12/31/04 to $15.61 trillion as of 6/30/19 (source: SIFMA).

4. COULD IT HAPPEN? – The wealthiest one-tenth of 1% of US households (top 122,000 households) are estimated to own 20% of total US wealth, i.e., 20% of $109 trillion. An annual 1% “wealth tax” levied on this group would generate $218 billion per year in tax revenue (source: The Brookings Institute).

5. REALLY LOW – The unemployment rate in the USA was 3.7% in August 2019, the 7th consecutive month that the nation has reported a jobless rate of 3.8% or less. The USA has not had a “jobless rate streak” of 3.8% or less for that long of a period since December 1969 or almost 50 years ago (source: Department of Labor).

6. NOT AGAIN!? – Since Congress has not passed the necessary 12 spending bills for fiscal year (FY) 2020, i.e., the FY beginning 10/01/19 or 2 weeks from tomorrow, they may be forced into passing a “continuing resolution” (CR) that would extend FY 2019 spending levels into FY 2020. The CR would defer decisions on spending levels until some future date, e.g., 11/22/19 or the Friday before Thanksgiving. Without the completion of all 12 spending bills or a CR, the government would shut down at midnight 2 weeks from today (source: Congress).

7. SO FAST – The new 5G technology being installed across the United States is estimated to be 20 times faster (in terms of download speed) than the current 4G technology that is in place nationwide (source: Lifewire).

8. WE’RE ALMOST EVEN – The USA has 121 companies in the Fortune Global 500 rankings for 2019 compared to 119 companies from China. 20 years ago (1999), the USA had 181 companies in the Fortune Global 500 rankings while China had just 5 companies. The rankings are based upon annual revenues (source: Fortune).

9. SLOWING ECONOMY – The People’s Bank of China, aka the Fed of China, has reduced the reserve requirements for banks 7 separate times since 1/01/18, most recently on 9/06/19. By reducing the amount of reserves that banks are required to hold, the Chinese banks are able to make new loans (source: PBOC).

10. LESS HELD BACK – The $1.35 trillion of excess reserves held by US banks at the 12 regional Federal Reserve banks as of 8/28/19 is down $860 billion from the $2.21 trillion held 2 years ago. Excess reserves are funds held that are above and beyond the federally mandated reserve requirement amounts (source: Federal Reserve).

11. THEY DO NOT LAST FOREVER – There have been 10 recessions in the United States since 1950, the most recent being an 18-month downturn that ended in June 2009. The average length of the 10 recessions since 1950 is 11 months (source: National Bureau of Economic Research).

12. BIG PROBLEMS – The mayor of Chicago released her city’s fiscal year (FY) 2020 budget on 8/29/19, forecasting an $838 million deficit, i.e., $10.68 billion of revenues vs. $11.52 billion of outlays. The city’s pension bill is projected to grow from $1.36 billion in FY 2019 to $2.24 billion in FY 2022 (source: Chicago.gov).

13. GUARANTEED INCOME – The city of Stockton, CA started a program in February 2019 to pay $500 per month to 125 low-income citizens for the next 18 months. There are no restrictions on how recipients can spend the money (source: Stockton Economic Empowerment Demonstration).

14. IMPACT ON TAXES – A maximum $2,500 of interest expense from student loans is deductible annually from taxable income. Please consult a tax expert for details (source: Internal Revenue Service).

15. FIRST COVER – The first issue of Sports Illustrated was dated 8/16/54 (65 years ago). Baseball player Eddie Mathews of the Milwaukee Braves, batting against the NY Giants, was on the cover (source: Sports Illustrated).

 

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Bill’s By The Number$

1. AFTERWARDS – The 9/11/01 terrorist attacks on the USA that killed 2,977 people took place 18 years ago this week. The S&P 500 stock index closed for 6 days following the attacks and then reopened on Monday 9/17/01. In the 1-year following 9/11/01, the S&P 500 lost 15.5% on a total return basis. The S&P 500 consists of 500 stocks chosen for market size, liquidity and industry group representation. It is a market value weighted index with each stock’s weight in the index proportionate to its market value (source: BTN Research).

2. OUT OF BUSINESS – Lehman Brothers, a 158-year old company, was forced to file for bankruptcy protection on 9/15/08 (11 years ago) when no “white knight” emerged to rescue the company from its substantial investment in subprime mortgages. It was (and still is) the largest US bankruptcy ever (source: Business Insider).

3. FANNIE AND FREDDIE – Treasury Secretary Hank Paulson announced on 9/07/08 (i.e., 11 years ago) the government’s plan to take control of mortgage giants Fannie Mae and Freddie Mac. Fannie and Freddie received $191 billion of taxpayer aid but have paid back $297 billion (source: Treasury Department).

4. CAN’T TALK NOW – The Fed next meets for 2 days on September 17-18. Fed officials are required to observe a “blackout period” during which they are not allowed to deliver a speech or give an interview from midnight 2 Saturdays before the scheduled meeting to midnight on the Thursday after the meeting, i.e., the next “blackout period” is from midnight on Saturday 9/07/19 to midnight on Thursday 9/19/19 (source: Federal Reserve).

5. LUMP-SUM NEEDED – A present value (PV) amount of $195,929 is required to fund a $1,000 per month payment for 20 years with a +3% annual increase for maintenance of purchasing power if a +5% annual rate of return is maintained into the future. The PV amount is $269,006 if the required payment period is 30 years. The calculations ignore the impact of taxes and are for illustrative purposes only and are not intended to reflect any specific investment alternative (source: BTN Research).

6. THE MOST PAID – The maximum Social Security benefit paid to a worker retiring at full retirement age in 2019 was $2,861 per month, more than triple the $899 per month paid 30 years ago in 1989 (source: Social Security).

7. HOW DID YOU DO? – An average single-family home in America increased in value by +5.0% over the 1-year period from 6/30/18 to 6/30/19, by +5.9% per year over the last 5 years from 6/30/14 to 6/30/19, and by +3.6% per year over the last 10 years from 6/30/09 to 6/30/19 (source: Federal Housing Finance Agency).

8. MOST OF THEM – The sales of existing homes account for 90% of all homes sales in the United States (source: Treasury Department).

9. NOT AS MUCH NEEDED – The USA imports 28% less oil today than it did a decade ago. Oil imports averaged 6.904 million barrels a day for the week ending 8/30/19, down from 9.576 million barrels a day for the week ending 8/28/09 (source: Department of Energy).

10. TARIFFS IN PLACE – 59% of all imports coming into the US in 2019 (as measured by dollar) are subject to a trade tariff imposed by the United States. 75% of all imports coming into China in 2019 (as measured by dollar) are subject to a trade tariff imposed by China (source: Global Trade Alert).

11. A FEW FOLKS HAVE A LOT OF DEBT – 17% of the 45 million Americans that have student loans hold 58% of the nation’s $1.48 trillion of outstanding student loans (source: Brookings Institute).

12. JOIN THE PARTY – There are 10 states in the USA where marijuana “possession and purchase” has been legalized for adults as of 1/01/19, all having passed the legislation via a state-wide ballot measure. Illinois passed similar legislation in June 2019 that is effective 1/01/20, making it the 11th state to approve marijuana usage. However, Illinois is the first US state to pass the legislation through actions of its state legislature rather than a ballot measure (source: National Conference of State Legislatures).

13. NO MORE – 8,051 American retail stores have closed YTD through 8/31/19. This year’s store closures are on pace to exceed the all-time record of 8,139 store closures from 2017 (source: Coresight Research).

14. LABOR DAY – Only 6% of private sector workers belong to a union, compared to 37% of public sector workers. Overall, 13% of US workers, i.e., 1 out of every 8, belong to a union (source: Gallup).

15. RALLY CAP – As of games played through Thursday 9/05/19, every team in the majors except for the LA Dodgers and the Houston Astros has blown at least a 4-run lead in a game and eventually lost the game. The Toronto Blue Jays have lost 7 games this season when they held at least a 4-run lead earlier in the game (source: MLB).

 

– Broker/Dealer Use Only, Reproduction Prohibited without Express Permission –
Copyright © 2019 Michael A. Higley. All rights reserved. Email mick.higley@mahbtn.com for subscription information.

Bill’s By The Number$

1. A SMALL NUMBER OF DAYS – The total return of the S&P 500 stock index over the last 10 years (2009-2018) is +243.0% (total return). The 25 best trading days during the 10 years (i.e., 25 days out of 2,516 trading days) produced a +162.9% gain. Thus, 25 trading days over the last 10 years were responsible for 67% of the index’s total return, i.e., 1% of the trading days (25 out of 2,516) drove 67% of the index’s return. The S&P 500 consists of 500 stocks chosen for market size, liquidity and industry group representation. It is a market value weighted index with each stock’s weight in the index proportionate to its market value (source: BTN Research).

2. WHERE WE ARE – With 4 months to go in 2019, the S&P 500 is up +18.3% YTD (total return). The stock index has gained +9.8% per year over the last 50 years, i.e., 1969-2018 (source: BTN Research).

3. HOW WAS YOUR SUMMER? – Stocks gained +6.9% (total return) during the 3 summers months (June-July-August) while bonds gained +4.1% (total return). The S&P 500 was used for the stock calculation, while the Bloomberg Barclays Aggregate bond index, calculated using 6,000 publicly traded government and corporate bonds with an average maturity of 5 years, was used as the bond measurement (source: Bloomberg).

4. GOOD AND BAD – The best performing individual stock within the S&P 500 index YTD through Friday 8/30/19 is up +94%, while the worst performing individual stock YTD is down 63% (source: BTN Research).

5. MAINTAINING PURCHASING POWER – A 65-year old spending $100,000 per year (after-tax) would need $128,008 per year (after-tax) by age 75 and $163,862 per year (after-tax) by age 85 if his/her cost of living was increasing by +2.5% per year due to inflation (source: BTN Research).

6. WRONG – As of 12/17/18, 10 Wall Street strategists predicted where the yield on the 10-year T-note would be as of 12/31/19. All 10 forecasted an increase in the 10-year note yield from its actual 12/31/18 yield close of 2.68%. However, the yield on the 10-year note has fallen to 1.50% as of Friday’s close 8/30/19 (source: Barron’s).

7. UNEXPECTED – The average interest rate nationwide on a 30-year fixed rate mortgage has dropped from 4.51% on 1/03/19 to 3.58% on Thursday 8/29/19 (source: Freddie Mac).

8. HOME VALUES RISING – Between 6/30/18 and 6/30/19, average home prices increased in all 50 US states. Idaho’s +11.4% average home price gain led the nation over the last year while Delaware’s +1.2% growth rate was the nation’s smallest (source: Federal Housing Finance Agency).

9. IT WILL HAPPEN AT SOME POINT – 40% of 226 economists surveyed in July 2019 believe the United States will fall into a recession by the end of 2020, while the remaining 60% believe our nation’s next recession will begin in 2021 or later (source: National Association for Business Economics).

10. JOBLESS RATE – The last recession in the United States began in December 2007 and lasted 18 months. The nation’s unemployment rate in December 2007 was 5.0%, on its way to a peak jobless rate of 10.0% by October 2009. The unemployment rate nationwide in July 2019 was 3.7% (source: Department of Labor).

11. ANYTHING YOU CAN DO – China announced on 8/23/19 new tariffs ranging from 5% to 10% on $75 billion of US goods effective 9/01/19 (yesterday) and 12/15/19. The United States retaliated by raising existing tariffs from 10% to 15% on $300 billion of Chinese goods effective 9/01/19 (source: White House).

12. SPOOKY NUMBERS – The Congressional Budget Office estimated on 8/21/19 that over the next 10 fiscal years (2020-2029), the US government will take in $45.6 trillion of tax receipts versus $57.8 trillion of outlays, resulting in a $12.2 trillion deficit, or an average annual deficit of $1.22 trillion. The United States has produced annual deficits of at least $1.22 trillion just 3 times in our nation’s history – 2009-2010-2011 (source: CBO).

13. A SINGLE PERCENT – Total foreign aid spending by the USA in fiscal year 2019 (i.e., the 12 months that will end 9/30/19) is projected to be $39.2 billion or less than 1% of our government’s projected spending of $4.529 trillion for the 2019 fiscal year that ends later this month (source: Office of Management and Budget).

14. MEDICAID – Medicaid expenditures make up on average 29% of the budget of a US state. Medicaid is a health care program for low-income Americans that is jointly funded by the federal government and states, but running the program is the responsibility of the individual states (source: Medicaid and CHIP Payment Access Commission).

15. HE’LL DO OKAY – NFL quarterback Andrew Luck retired from pro football on 8/24/19, giving up $58.1 million of guaranteed money contractually due him over the next 3 seasons – $15.1 million in 2019, $22 million in 2020, and $21 million in 2021. During his 7-year pro career, Luck has earned $97.1 million before taxes (source: NFL).

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Bill’s By The Number$

1. DON’T FORGET ABOUT THEM – Dividends have contributed 2.0% per year on average to the annual total return of the S&P 500 over the last 20 years, i.e., 1999-2018. The S&P 500 consists of 500 stocks chosen for market size, liquidity and industry group representation. It is a market value weighted index with each stock’s weight proportionate to its market value (source: S&P Dow Jones Indices).

2. FOURTH QUARTER – The 3 months of October-November-December rank 3-2-5 in terms of average monthly performance for the S&P 500 index (i.e., October is 3rd best, November is 2nd best and December is 5th best) over the last 25 years. The 3 months have jointly gained +4.3% per year (total return) over the last 25 years (1994-2018) or 47% of the index’s total return over the entire 25-year period (source: BTN Research).

3. NOT RECENTLY – The total return of the S&P 500 over the last 4 months through the close of trading last Friday 8/23/19, i.e., 4/23/19 to 8/23/19, is a loss of 2.3%. The total return of the S&P 500 year-to-date through the close of trading last Friday 8/23/19 is +15.1% (source: BTN Research).

4. BEST RESULT IN YEARS – The bond market is up +8.9% YTD (total return) through the close of trading on Friday 8/23/19. The bond market last produced an annual total return of at least +10% in 2002. The Bloomberg Barclays Aggregate bond index, calculated using 6,000 publicly traded government and corporate bonds with an average maturity of 5 years, was used as the bond measurement (source: Bloomberg).

5. NEED WORK? – 51% of the 2.25 million new jobs created in the United States during the 12 months ending 7/31/19 were produced in just 6 states – Texas (323,300 jobs), California (311,800), Florida (227,200), Washington (102,400), New York (95,500) and North Carolina (75,700) (source: Department of Labor).

6. THE RISK – The average interest rate paid by the US government on its interest-bearing debt was 2.554% as of 7/31/19. The average interest rate paid on our interest-bearing debt was 3.418% as of 7/31/09 (10 years earlier) or just under 0.9 percentage points higher. Every 1 percentage point increase in the cost of debt on our nation’s $16.2 trillion of publicly held debt is equal to $162 billion of annual interest expense (source: Treasury Dept.).

7. MOST EVER – Mortgage debt in the United States peaked at $9.29 trillion as of 9/30/08, fell 16% to $7.84 trillion by 6/30/13, and now has climbed all the way back to a new record level of $9.41 trillion as of 6/30/19 (source: Federal Reserve Bank of New York).

8. MAINTAINING THEIR MARKET SHARE – The Chinese renminbi has fallen from 15.38 (US) cents on 12/31/17 to 14.09 (US) cents as of last Friday 8/23/19, a drop of 8.4%. Thus, an export coming out of China (i.e., an import coming into the United States) that is renminbi-priced has become cheaper in dollars, partially offsetting the impact of US-levied tariffs against China (source: BTN Research).

9. TRADE TENSIONS – 60% of 1,503 Americans surveyed in June 2019 hold an “unfavorable” view of China. Ten year ago (2009), just 38% of Americans viewed China “unfavorably” (source: Pew Research).

10. STILL NEED HELP – In 2018, the United States consumed on average 20.5 million barrels of crude oil per day. For the week ending Friday 8/16/19, the United States produced 12.3 million barrels of crude oil per day (source: Energy Information Administration).

11. THE TWO BIGGEST – 49% of the crude oil production during July 2019 from the 14-nations that make up OPEC came from just 2 countries – Saudi Arabia (33%) and Iraq (16%) (source: OPEC).

12. PONZI UPDATE – Bernie Madoff has been incarcerated in federal prison in North Carolina for more than 10 years (he began serving his sentence on 7/14/09). Madoff, 81 years old, is scheduled to be released in 120 years on 11/14/2139 (source: Federal Bureau of Prisons).

13. REAL ESTATE – Builders began construction on 876,000 single-family homes in the United States in 2018, the 7th consecutive year of increasing housing starts, i.e., 2012-2018. The peak in housing starts (1.716 million) took place in 2005 (source: Joint Center for Housing Studies of Harvard University).

14. SMALL TOTAL – Estate and gift taxes collected during fiscal year 2019 through 7/31/19 amounted to $14 billion, equal to only ½ of 1% of the $2.86 trillion of tax receipts collected to date (source: Treasury Department).

15. BIG BUCKS – The 2020 Summer Olympics will be held in Tokyo, Japan over 17 days beginning Friday 7/24/20. Olympic organizers in Japan have already raised more than $3.1 billion in sponsorship funds, making the games the largest financially sponsored event in sports history (source: Tokyo Organizing Committee).

 

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Bill’s By The Number$

1. STOCKS AND POLITICS – In the last 50 years (1969-2018), the S&P 500 has been up +17.5% per year (total return) under a Democratic President and a Republican-led Congress, 4 times the +4.5% annual return achieved under a Republican President and a Congress controlled by the Democrats. The stock index gained +12.3% per year when the White House and Congress were controlled by the same political party. When the House and the Senate were controlled by different parties as is the case in 2019 (regardless of which party is in the White House), the S&P 500 has been up +9.2% per year. The S&P 500 consists of 500 stocks chosen for market size, liquidity and industry group representation. It is a market value weighted index with each stock’s weight in the index proportionate to its market value (source: BTN Research).

2. UP MOST OF THE TIME – The bond market has produced a negative total return in just 3 of the last 40 years, i.e., 1979-2018. The down years were 1994, 1999 and 2013. The Bloomberg Barclays Aggregate bond index, calculated using 6,000 publicly traded government and corporate bonds with an average maturity of 5 years, was used as the bond measurement (source: Bloomberg).

3. LOWEST YIELD EVER – The US Treasury Department has auctioned off 30-year government bonds since 1977. The lowest yield ever on our nation’s 30-year paper until last week was 2.10% on 7/08/16. The 30-year Treasury bond yield fell to 1.98% on Thursday 8/15/19, an all-time record low (source: Treasury Department).

4. CLOSED – The US stock and bond markets are open the same days each year except for 2 trading days when the stock market is open, but the bond market is closed – Columbus Day and Veterans Day (source: NYSE).

5. UP THE COST – China has increased the tariff that it applies to imports coming into its country from the USA by an average of 12.4 percentage points since May 2018 (source: Peterson Institute).

6. JAPAN > CHINA – Japan replaced China as the largest foreign holder of US Treasury debt as of June 2019. Japan ($1.123 trillion) has increased its holdings by $90 billion during the last year while China ($1.113 trillion) has reduced its holdings by $79 billion over the last year (source: Treasury Department).

7. NOT A PENNY – 44.4% of US individual tax filers (76.4 million out of 172.0 million) did not pay any federal income tax in tax year 2018, i.e., 4 out of every 9 tax units in the United States (source: Tax Policy Center).

8. AT A MINIMUM – 21 of 50 US states have a minimum hourly wage of $7.25 in 2019, the federally mandated minimum wage, including Texas and Pennsylvania. 29 of 50 US states have implemented a minimum wage higher than $7.25, including California ($12) and Colorado ($11.10) (source: National Conference of State Legislatures).

9. TWO-THIRDS – 64% of working Americans are active participants in a defined contribution plan (e.g., 401(k) plan) or a defined benefit pension plan, or their spouse is an active participant in a pre-tax retirement plan. This study was released on 8/05/19 (source: Investment Company Institute).

10. SLOWING DOWN – The US economy has grown by +2.1% per year since 2000 (i.e., the 19 years from 2000-2018), by +2.8% per year since 1975 (i.e., the 44 years from 1975-2018), and by +3.2% per year since 1950 (i.e., the 69 years from 1950-2018) (source: Commerce Department).

11. BREXIT IMPACT – The US economy (largest in the world) has contracted during 10 quarters in the last 20 years (80 quarters), most recently in the 1st Q 2014. The UK economy (5th largest in the world) has contracted during 8 quarters in the last 20 years, most recently in the 2nd Q 2019 (source: Office for National Statistics).

12. BROKE BOOMERS – 12.2% of individual bankruptcy filers were at least age 65 in 2016, i.e., 1 out of every 8 bankruptcies. 2.1% of individual bankruptcy filers were at least age 65 in 1991, i.e., 1 out of every 48 bankruptcies (source: “Graying of U.S. Bankruptcy: Fallout from Life in a Risk Society).

13. TWO MONTHS TO GO – The US government has incurred an $867 billion deficit through 10 months of fiscal year 2019, i.e., the 10 months ending 7/31/19, the difference between $2.860 trillion of receipts and $3.727 trillion of outlays. The all-time record for receipts and outlays took place just last year in fiscal year 2018 – a total of $3.330 trillion of receipts and $4.109 trillion of outlays (source: Treasury Department).

14. COLLEGE COSTS – 45 million Americans owe $1.48 trillion in student loan debt as of 6/30/19, a +114% increase (up +$790 billion) in just the last 10 years (source: Federal Reserve Bank of New York).

15. BLEW IT – The Colorado Rockies led the San Diego Padres 11-5 going into the 9th inning of a game on 6/14/19, but lost the game 16-12, the worst 9th inning collapse in major league baseball this year (source: MLB).

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Bill’s By The Number$

1. THINGS CAN CHANGE QUICKLY – After closing at a record 3026 on Friday 7/26/19, the S&P 500 fell 6.0% in just 6 trading days (through Monday 8/05/19), its largest 6-day drop since 12/24/18 when the stock index fell 9.6%. Over the 6 trading days through 8/08/11, the index lost 13.4%. S&P 500 consists of 500 stocks chosen for market size, liquidity and industry group representation. It is a market value weighted index with each stock’s weight in the index proportionate to its market value (source: BTN Research).

2. TRADE WAR FALLOUT – The US stock market had a total capitalization of $32.6 trillion as of 7/31/19, but then lost $1.55 trillion over the next 3 trading days, including $950 billion alone on Monday 8/05/19 (source: Wilshire).

3. I’M ALL DONE WITH MY WORK – An average American worker has increased his/her productivity by +97% in the last 35 years, i.e., an average worker can complete in 1 hour as of 12/31/18 the same amount of work that it took him/her 2 hours to finish as of 12/31/83 (source: Department of Labor).

4. I QUIT – 3.43 million American workers quit their jobs in June 2019. A decade earlier, just 1.79 million American workers quit their jobs in June 2009 (during the nation’s 2008-09 recession). A higher “quit level” is indicative of a greater level of confidence in finding a new job to replace one’s current occupation (source: Department of Labor).

5. WHAT’S THE ALTERNATIVE? – Foreign investors held $6.54 trillion of US Treasuries in May 2019, i.e., short-term bills, intermediate-length notes and longer-term bonds, its highest level ever (source: Treasury Department).

6. CLOSE TO A RECORD LOW – The yield on the US Treasury 10-year note fell to 1.71% last Wednesday 8/07/19, its lowest level since 10/04/16. The all-time record low yield for the 10-year note is 1.36% set on 7/08/16 (source: Treasury Department).

7. LAST TIME – The last rate cut cycle by the Fed lasted from 9/18/07 to 12/16/08 (15 months) and saw the Fed cut its key short-term rate by 5 percentage points, i.e., from 5.25% to 0.25% (source: Federal Reserve).

8. SHOULD WE BUY TODAY? – 70% of Americans surveyed in June 2019 think “it’s a good time to buy a house.” That percentage was as high as 83% in December 2014 and has been as low as 57% in October 2008 (source: University of Michigan Surveys of Consumers).

9. BIG NUMBERS – The total net worth of Americans as of 3/31/19 was $108.6 trillion, including $29.1 trillion (27% of the overall net worth total) in retirement accounts (source: Investment Company Institute).

10. JUST THREE COUNTRIES – The US Treasury Department labeled China as a “currency manipulator” on Monday 8/05/19, the first time the US has made such a claim against China since 1994 or 25 years ago. Since 1988, the US has accused just 3 countries of weakening their domestic currency to gain a trading advantage – Japan (1988), Taiwan (1988 and 1992) and China (1992-94) (source: Treasury Department).

11. WEAKER CHINESE CURRENCY – The Chinese government had manipulated its currency downward until 2005 in order to lower the cost of Chinese exports to foreign buyers, providing its exporters an advantage over competitors. From July 2005 to the end of 2013, the value of the Chinese currency (the renminbi) had grudgingly increased in value as a result of global pressure, rising by +37% over the 8 ½ years from 12.08 cents to 16.50 cents. In retaliation last week against the US, the Chinese government pushed the value of the renminbi down to 14.16 cents on Wednesday 8/07/19 (its lowest level in 11 years), a negative for American exporters selling to China but a positive for American consumers buying Chinese exports (source: BTN Research).

12. DYING INDUSTRY? – The number of Americans that work in the newspaper business has almost been cut in half over the last decade, falling 46% from 71,000 newsroom employees in 2008 to just 38,000 employees in 2018 (source: Pew Research Center).

13. PRICEY – The cost of tuition, fees, room and board for the upcoming 2019-2020 school year at Bennington College in Vermont is $72,650 (source: Bennington College).

14. NOT THE USA – There are 10 countries in the world that currently maintain the top credit rating from each of the 3 major credit rating agencies, including Canada, Germany and Sweden (source: Trading Economics).

15. ROTTEN BULLPENS – On consecutive nights (7/27/19 and 7/28/19) the Tampa Bay Rays and the Toronto Blue Jays played each other in baseball games where the winning team trailed by 7 runs going into the 6th inning but rallied to win by identical scores of 10-9. The Blue Jays trailed the Rays 9-2 on 7/27/19 but rallied to win 10-9. The Rays trailed the Blue Jays 8-1 on 7/28/19 but rallied to win 10-9 (source: MLB).

 

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