One of the best market sessions in months was followed by a much more sluggish round of trading Tuesday, though the selling followed the “rotation to value” theme we’ve discussed in recent weeks.
The tech-heavy Nasdaq Composite (-1.7% to 13,358) and Russell 2000 (-1.9% to 2,231) suffered the steepest drops, while the Dow Jones Industrial Average managed to slip away with a mere 0.5% decline to 31,391.
Those losses came on a slow news day, though there was another positive development in the global fight against COVID. Days after Johnson & Johnson’s (JNJ, -0.2%) single-shot coronavirus vaccine received emergency-use clearance in the U.S., the Washington Post reported that President Joe Biden would soon announce a rare deal that would see competitor Merck (MRK, +0.7%) boost supply by manufacturing more of JNJ’s vaccine.
The 10-year Treasury yield also pulled back to 1.41% – another seemingly bullish driver amid a market that had balked at rising rates – but nothing appeared to draw the bulls’ interest Tuesday.
Other action in the stock market today:
The S&P 500 declined 0.8% to 3,870.
Target (TGT, -6.8%) sharply dropped despite better-than-expected quarterly sales and profits; the company announced that it would reinvest $4 billion annually for years to upgrade technology, refurnish its stores and make other improvements.
Twitter (TWTR, -5.1%) retreated in response to a $1.25 billion convertible-debt offering.
U.S. crude oil futures improved by 0.4% to $60.92 per barrel.
Gold futures gained 0.6%, settling at $1,733.60 per ounce.
Bitcoin prices dropped 1.5% to $47,563. (Bitcoin trades 24 hours a day; prices reported here are as of 4 p.m. each trading day.)
Yes, Growth Is on the Outs, But …
While there’s a steady drumbeat of news pointing to boom times for value, don’t give up on growth entirely.
Regardless of what broad investment trends are currently in favor, certain technological, societal and other developments simply can’t be ignored — and buying into the companies addressing them could be a potent long-term recipe for success, especially when those firms are a bit out of favor.
These 11 growth stocks, for instance, are worth monitoring for dips, as are these 13 growth ETFs, which have the added benefit of diluting risk across dozens of stocks.
Picks ripe for this kind of short-term pain, long-term gain include stocks tethered to the expansion of 5G communications technology. This trend is hardly any secret, and many stocks in the space are actually cooling off after months, even years, of anticipatory gains. But that’s good news for new buyers, as many of the benefits from a nationwide 5G rollout will take years to fully realize.
One way to put yourself ahead of the curve is to identify stocks that not only can soar on 5G’s updraft, but have other bullish arguments to be made at the moment … such as these seven picks.
With artificially intelligent technology on the rise across industries, learning about investing in AI is top-of-mind for many Americans. As people observe the rapid growth of innovative companies utilizing AI tech, there’s been a natural spike in interest around AI investing. Predictions that the AI market size will be worth $390.9 billion by 2025 motivates people to understand more about this business sector.
From machine learning to pattern recognition and predictive modeling, it’s not easy to keep up with different subsets of artificial intelligence and how they’re impacting businesses. Since AI is such a broad category of technology, sometimes it’s overwhelming to even understand the basics. When you’re considering investing in an AI-driven company, it’s crucial to learn as much as possible about these types of investments. If you’re curious about delving more into the topic of AI investing, check out our guide.
This guide will cover:
What Is AI Investing?
Artificial intelligence (AI) is a series of programs and algorithms that mimic human intelligence to efficiently perform tasks usually completed by humans. The term “artificial intelligence” was coined in 1956, so AI isn’t a new concept. However, the capabilities of AI have improved drastically over the past two decades, ushering in a new era of technological advancements.
AI touches almost every aspect of our lives. It’s hard not to notice the influence of AI technology, whether it’s at home with smart devices like Google Home and Amazon’s Alexa, or shopping online with chatbots that recognize our consumer behavior.
AI investing, or learning how to invest in the AI market, is spiking in popularity thanks to its rapid growth. As AI becomes more integral to various companies and industries, stocks across various industries are becoming more desirable to some investors.
However, even though research and development in this area are growing exponentially, people still need to be careful about placing bets on developing technology and tools. As with any type of investment, there will always be an element of risk involved when investing in AI.
Trends in AI Investing
With AI investing rapidly spreading across the globe, it’s no wonder that people are paying attention to its growth more than ever. Across various fields, there are over 400 use cases and applications for AI. Leaders in AI development include tech giants like Google, Microsoft, Amazon, and IBM. At the same time, startup funding for lesser-known AI disruptors has been steadily climbing as well.
What makes AI investing particularly interesting is its potential to be sustainably lucrative. Banks and financial services firms are building powerful AI strategies and utilizing the technology to streamline fraud detection, wealth management, underwriting, and more. In construction and manufacturing, AI can streamline products and experiences. AI also majorly impacts industries in healthcare, education, and safety.
Three main signs indicating AI investing trends are the following:
Factors to Consider Before Investing in AI
Before diving into the world of AI investing, it helps to consider both qualitative and quantitative factors. The ability to find quality investments based on market opportunities isn’t enough, because even solid, profitable companies can be a poor financial investment if the stock prices are too high for you. To position yourself to wisely purchase AI stocks with strong return potential, understand performance and valuation metrics.
Before you decide if an AI-driven company is worth your investment, you’ll probably want to take note of the following:
Research companies fully. Understand a company’s business plan and its track record for success so far. What are their guidelines and processes, where are their headquarters and manufacturing facilities, and what are their growth plans for the future?
Look for the company’s price-to-earnings ratio. Even if you feel strongly about investing in a company, don’t let those emotions cause you to give them the benefit of the doubt. When it comes to their financials, you need to understand the ins and outs. How much debt do they have? Are they currently profitable? Understand the current share price relative to its per-share earnings, too.
Figure out how much risk is involved. How can you tell how much risk is involved with one company’s stock compared to the rest of the market? You can start by determining a company’s beta, or measure of volatility in relation to the broader market, before investing any funds. Calculating a company’s beta isn’t difficult, and it can save you trouble in the long run.
Determine if the stock has a high enough dividend to be worth it. Investors can determine which stocks pay dividends by researching financial news websites. Don’t have false expectations — you shouldn’t expect a dividend from a startup.
Keep an eye on the company’s stock chart. Look for some of the most simple cues from stock charts to gauge price movement. Also, consider how the company would be affected by different economic factors and potential changes to the market it serves.
Companies Shaping the Future of AI Technology
Many of the companies providing AI technology through their cloud platforms are household names, like Google, Amazon, IBM, and Microsoft. However, there are still plenty of other companies in other sectors that are shaping the future of AI investing. Below are six of the AI-investing business leaders to keep an eye on. We are not in any way recommending that you invest in these companies, rather these are examples of the leaders in investing in AI.
1) Amazon. Amazon Web Services offers both consumer and business-oriented AI products and services and many of its professional AI services are built on consumer products. For example, the Amazon Echo brings artificial intelligence into the home through the AI bot, Alexa.
2) Alphabet. Google’s parent company Alphabet is deeply invested in furthering its AI capabilities, along with acquiring numerous AI startups in the last several years. In addition to using AI to improve its services, a number of AI and machine learning services are sold to businesses via the Google Cloud Platform.
3) IBM. IBM has always been a leader in AI innovation, but its efforts in recent years are around IBM Watson, including an AI-based cognitive service. IBM has been acquiring multiple AI startups over the years as it competes with other industry leaders in this space like Google.
4) Microsoft. Microsoft has a wide range of AI projects that can benefit both businesses and consumers. For example, Cortana, the digital assistant that comes with Windows, is designed for business clients. On its Azure Cloud Service, Microsoft sells AI services such as bot services, machine learning, and cognitive services.
5) Alibaba Cloud. Alibaba is the top cloud computing platform in Asia. It offers business clients a sophisticated Machine Learning Platform for AI, including an intuitive, user-friendly visual interface.
6) Salesforce. Salesforce developed Salesforce Einstein, their artificial intelligence service. Their latest initiative, which includes an extensive team of data scientists, uses machine learning to help employees streamline various tasks. It looks like this technology will also become more widely available in the near future.
There are tons of helpful resources for decision-making about investing in AI. Regardless of how financially savvy you are, there’s always more to learn about how to invest in the most efficient way possible. Your financial portfolio should be as diverse and robust as possible to set you up for long-term success.
One of the best ways to start the process of educating yourself is by reading free insights from reputable technology and finance research publications. Try reading MarketWatch and Morningstar on a daily basis to keep track of the latest and most accurate company information. By analyzing a company’s financials with a critical eye before making investment decisions, you’ll protect your personal financial health.
We hope this piece could be a solid introduction to some of the concepts and trends that explain why AI has promising potential in the world of investing. AI investing presents various exciting possibilities for the future, but investors should still proceed with caution. When it comes to investing, always do your due diligence to avoid losing money. AI technology is seamlessly integrated into aspects of almost every industry. Focus on budgeting and consider investment decisions that are best for your long-term financial health.
Average mortgage rates fell a little or held steady yesterday (Friday). Unfortunately, it was the only glimmer of light in a gloomy week that saw rises — including a sharp one — on every other day.
Right now, there seems to be no end in sight to these rate increases. Of course, we’re almost bound to see an occasional fall, because that’s how markets work. But sustained downward movement appears unlikely, and I’m expecting that mortgage rates will keep rising next week. Read on for more details.
Find and lock a low rate (Feb 27th, 2021)
Conventional 30 year fixed
Conventional 15 year fixed
Conventional 20 year fixed
Conventional 10 year fixed
30 year fixed FHA
15 year fixed FHA
5 year ARM FHA
30 year fixed VA
15 year fixed VA
5 year ARM VA
Rates are provided by our partner network, and may not reflect the market. Your rate might be different. Click here for a personalized rate quote. See our rate assumptions here.
Find and lock a low rate (Feb 27th, 2021)
COVID-19 mortgage updates: Mortgage lenders are changing rates and rules due to COVID-19. To see the latest on how coronavirus could impact your home loan, click here.
Should you lock a mortgage rate today?
If I were still floating, I’d lock my rate right away. Of course, there’s always a possibility of rates falling back. But that currently looks a slim one. And the chances of continuing rises seem much stronger. Read on to discover why.
So my recommendations remain:
LOCK if closing in 7days
LOCK if closing in 15 days
LOCKif closing in30 days
LOCK if closing in 45 days
LOCKif closing in 60 days
However, with so much uncertainty at the moment, your instincts could easily turn out to be as good as mine — or better. So be guided by your gut and your personal tolerance for risk.
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What’s moving current mortgage rates
The forces that are driving rates higher are the same ones we reported last week. The vaccination program and dwindling COVID-19 infection rates are creating optimism that an economic recovery will be upon us sooner than many expected. Indeed, we’re already seeing some better economic data. And a better economy goes hand-in-hand with higher rates.
But what we last week listed as a secondary factor may have now turned into the primary one. And that’s the fear of future inflation.
Unfortunately, such fears also tend to push mortgage rates higher.
Fear of inflation
And you can see why. Imagine you’re an investor who buys a mortgage bond (a mortgage-backed security or MBS) with a fixed rate of 3% for 30 years. That means your yield (income) is fixed, too.
And now imagine how sick you’d feel if next year (or in 10 years’ time) serious inflation took hold, and you were suddenly seeing inflation and interest rates soaring up to 10% or even higher — while you were still getting 3%.
This isn’t impossible fiction. Between 1978 and 1990, the average rate for a 30-year, fixed-rate mortgage never dipped below 10%, measured annually. And, in October 1982, that rate peaked at 18.45%, according to Freddie Mac’s archives.
It’s not hard to imagine how petrified investors are of having their money tied up in fixed-rate securities if there’s any likelihood of future inflation.
Still a slim possibility of falls
Of course, nothing’s certain in markets. And some disastrous news could come out of nowhere and kill both optimism and its accompanying fear of inflation.
Indeed, earlier this week, The New York Times reported on a new variant of SARS-CoV-2 (the virus that causes COVID-19) that’s currently circulating in New York City. And some scientists worry that it might prove more resistant to current vaccines than existing strains are.
That research is yet to be peer-reviewed. And it may turn out to be nothing. But it’s an example of the sort of news that could turn markets and mortgage rates around. The trouble is, the chances of such an event arising before your closing date don’t seem high.
Economic reports next week
Next Friday brings the official, monthly, employment situation report. And that’s arguably the most important economic data of all at the moment. So markets may be moved by those figures
They’re less likely to be affected by the other reports this week. However, any data can have an impact if it varies significantly from expectations.
Here are next week’s main economic reports:
Monday — January construction spending. Also February auto sales. Plus the February manufacturing index from the Institute for Supply Management (ISM)
Wednesday — February ISM services index
Thursday — Weekly new claims for unemployment insurance.
Friday — February employment situation report, including nonfarm payrolls and the unemployment rate.
Watch out, too, for top Federal Reserve officers’ speaking engagements. The Fed’s walking a fine line at the moment between keeping the recovery on the road and not stoking inflation fears. So investors are paying close attention to their remarks.
Find and lock a low rate (Feb 27th, 2021)
Mortgage interest rates forecast for next week
Unfortunately, I can only predict rising rates this week. The pace of increases may slow and we might even see some small and occasional falls. But, overall, it’s hard to imagine the recent trend reversing.
Mortgage and refinance rates usually move in tandem. But note that refinance rates are currently a little higher than those for purchase mortgages. That gap’s likely to remain constant as they change.
How your mortgage interest rate is determined
Mortgage and refinance rates are generally determined by prices in a secondary market (similar to the stock or bond markets) where mortgage-backed securities are traded.
And that’s highly dependent on the economy. So mortgage rates tend to be high when things are going well and low when the economy’s in trouble.
But you play a big part in determining your own mortgage rate in five ways. You can affect it significantly by:
Shopping around for your best mortgage rate — They vary widely from lender to lender
Boosting your credit score — Even a small bump can make a big difference to your rate and payments
Saving the biggest down payment you can — Lenders like you to have real skin in this game
Keeping your other borrowing modest — The lower your other monthly commitments, the bigger the mortgage you can afford
Choosing your mortgage carefully — Are you better off with a conventional, FHA, VA, USDA, jumbo or another loan?
Time spent getting these ducks in a row can see you winning lower rates.
Remember, it’s not just a mortgage rate
Be sure to count all your forthcoming homeownership costs when you’re working out how big a mortgage you can afford. So focus on your “PITI” That’s your Principal (pays down the amount you borrowed), Interest (the price of borrowing), (property) Taxes, and (homeowners) Insurance. Our mortgage calculator can help with these.
Depending on your type of mortgage and the size of your down payment, you may have to pay mortgage insurance, too. And that can easily run into three figures every month.
But there are other potential costs. So you’ll have to pay homeowners association dues if you choose to live somewhere with an HOA. And, wherever you live, you should expect repairs and maintenance costs. There’s no landlord to call when things go wrong!
Finally, you’ll find it hard to forget closing costs. You can see those reflected in the annual percentage rate (APR) you’ll be quoted. Because that effectively spreads them out over your loan’s term, making that higher than your straight mortgage rate.
But you may be able to get help with those closing costs and your down payment, especially if you’re a first-time buyer. Read:
Down payment assistance programs in every state for 2020
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Mortgage rate methodology
The Mortgage Reports receives rates based on selected criteria from multiple lending partners each day. We arrive at an average rate and APR for each loan type to display in our chart. Because we average an array of rates, it gives you a better idea of what you might find in the marketplace. Furthermore, we average rates for the same loan types. For example, FHA fixed with FHA fixed. The end result is a good snapshot of daily rates and how they change over time.
Intrinsic value vs market value refers to the difference between where a stock is trading and where it ought to be according to its fundamentals. The term “market value” simply refers to the current market price of a security. Intrinsic value represents the price at which investors believe the security should be trading at. Intrinsic value is also known as “fair market value” or simply “fair value.”
According to Merriam-Webster dictionary, the word “intrinsic” means “belonging to the essential nature or constitution of a thing.” At times, stocks become overbought or oversold, meaning their market price can rise above or below their intrinsic value.
When it comes to value vs. growth stocks, value investors look for companies that are out of favor and below their intrinsic value. The idea is that sooner or later stocks return to their intrinsic value.
What Is Market Value?
In a sense, there is only one measure of market value: what price the market assigns to a stock, based on existing demand.
stock market crash, for example, fear may grip investors and the market value of many stocks could fall well below their fair market values.
News headlines can drive stock prices above or below their intrinsic value. After reading an earnings report that’s positive, investors may pile into a stock. Even though better-than-expected earnings might increase the intrinsic value of a stock to a certain degree, investors can get greedy in the short-term and create overextended gains in the stock price.
The rationale behind value vs price, and behind value investing as a whole, is that stocks tend to overshoot their fair market value to the upside or the downside.
When this leads to a stock being oversold, the idea is that investors could take advantage of the buying opportunity. It’s assumed that the stock will then eventually rise to its intrinsic value.
What Is Intrinsic Value?
The factors that can be used to determine intrinsic value are related to the fundamental operations of a company. It can be tricky to figure how to evaluate a stock. Depending on which factors they examine and how they interpret them, analysts can come to different conclusions about the intrinsic value of a stock.
It’s not easy to come to a reasonable estimation of a company’s valuation. Some of the variables involved have no direct physical, measurable counterpart, like intangible assets. Intangible assets include things like copyrights, patents, reputation, consumer loyalty, and so on. Analysts come to their own conclusions when trying to assign a value to these assets.
Tangible assets include things like cash reserves, corporate bonds, equipment, land, manufacturing capacity, etc. These tend to be easier to value because they can be assigned a numerical value in dollar terms. Things like the company’s business plan, financial statements, and balance sheet have a tangible aspect in that they are objective documents.
Calculating Intrinsic Value vs Market Value
There can be multiple different ways to determine the intrinsic value of an asset. These methods are broadly referred to as valuation methods, or using fundamental analysis on stocks or other securities. The methods vary according to the type of asset and how an investor chooses to look at that asset.
Calculating Intrinsic Value
For dividend-yielding stocks, for example, the dividend discount model provides a mathematical formula that aims to find the intrinsic value of a stock based on its dividend growth over a certain period of time. Here is what is a dividend: periodic income given to shareholders by a company.
market cap is:
Total number of outstanding sharesmultiplied bythe current stock price.
Dividing market cap by number of shares also leads to the current stock price.
Sometimes companies engage in “corporate stock buybacks,” whereby they purchase their own shares, which reduces the total number of shares available on the market.
This increases the price of a stock without any fundamental, tangible change taking place. Value investors might say that stocks pumped up by share buybacks are overvalued. This process can lead to extreme valuations in stocks, as can extended periods of market euphoria.
Using the intrinsic value vs market value method is best suited to a long-term buy-and-hold strategy.
Stock prices can remain elevated or depressed for long periods of time depending on market conditions. Even if an investor’s analysis is spot on, there’s no way to know for sure exactly when any stock will return to its intrinsic value.
Value investors try to understand stock volatility, using these periods as opportunities for rebalancing their portfolios, selling positions that might have increased a lot while adding to positions that may have fallen far below their intrinsic value. This contrasts to short-term day trading strategies or momentum swing-trading, which primarily uses technical analysis to try and predict and profit from short-term market fluctuations.
Found a stock you think is undervalued? Try SoFi Invest®, where investors can choose any of the most popular stocks and ETFs.
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Cities With the Youngest Workforces – 2021 Edition – SmartAsset
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While Baby Boomers and Generation X are now the bosses at many companies, more than 25% of the workforce is younger than 30. This means that Generation Z (born between 1997 and 2012) and millennials (born between 1981 and 1996) are emerging as the generations to soon comprise the largest percentage of workers.
Starting your career at a young age provides more time to build up your savings and create a retirement plan with a financial advisor. Some cities offer younger workers more opportunities for gainful employment and SmartAsset crunched the numbers to find out where younger employees make up the biggest percentage of the local workforce.
To do this, we studied data on the 100 largest cities in the U.S., analyzing the number of workers younger than the age of 30 as a percentage of total workers. For details on our data sources and how we put all the information together to create our final rankings, check out the Data and Methodology section below.
This is SmartAsset’s second annual study on the cities with the youngest workforces. You can read our 2020 edition here.
Cities with youngest workforces dominate in education, healthcare and social assistance. More than 27% of workers in our top 10 cities have jobs in educational services, healthcare and social assistance. This means that across the top 10, these industries attract or have opportunities for almost six times more workers than construction, almost four times more than manufacturing, almost three times more than retail and almost four times more than finance and real estate. One notable exception is Norfolk, Virginia: The world’s biggest naval base employs almost 21% of the city’s workforce in the armed forces (compared to less than 19% in education, healthcare and social assistance).
Midsize cities attract the youngest workforces. Midsize cities beat out the biggest cities in the top 10 of this study. Even with an average 29-and-younger workforce of about 73,000 (compared to 368,000 across the largest 10 cities in the study), the cities in the top 10 have workforces comprised of about 36% younger workers. This average is only 28% across the largest 10 cities.
1. Norfolk, VA
With a workforce of almost 42% that is younger than 30, Norfolk, Virginia ranks at the top of our list. This city also has the fifth-highest workforce participation rate for younger workers in our study, at 80.4%. One of the major drivers behind the city’s employment of people in this age group is the naval base, which is the largest in the world. Our study reveals that almost 21% of all Norfolk workers are employed by the armed forces.
2. Madison, WI
Home to the University of Wisconsin, Madison has 38.93% of its workforce made up of people ages 16 to 29. The labor force participation rate for this age group is 74.8%, 25th-highest in our study. Education, healthcare and social assistance industries are the biggest employers in Madison, comprising 32.57% of the total workforce.
3. Lubbock, TX
Lubbock, Texas is yet another college town, the home of Texas Tech. People ages 16 to 29 make up 37.79% of the workforce in this city. But the workforce participation rate for this cohort is only 66.3%, ranking 80th out of 100 in our study. The relatively low figure for this metric could be impacted by the large university population, which, although eligible for the workforce, is largely unemployed during its student tenure.
4. Lincoln, NE
Lincoln is the home of the University of Nebraska. This city has a total of 166,354 workers, and 59,184 are younger than 30 – making up 35.58% of the workforce. Education, healthcare and social assistance are the biggest industries in the city, employing just over 27% of all workers. Retail is also a major industry in the city, hiring 10.85% of the workforce.
5. Pittsburgh, PA
Pittsburgh, Pennsylvania used to be dominated by steel production. But now, the University of Pittsburgh Medical Center is the major employer. In fact, education, healthcare and social assistance jobs make up 32.03% of the city’s workforce. And workers ages 16 to 29 make up 35.25% of the total workforce.
6. Tucson, AZ
Tucson, Arizona has 98,591 workers younger than 30, with a workforce participation rate of 69.2% for that age group. People ages 16 to 29 represent 35.22% of total workers in this city.
7. Boston, MA
Boston, Massachusetts has the biggest workforce in the top 10 of this study, with 426,238 workers. And 149,695 of that force is younger than 30, meaning that 35.12% of the total workforce in Beantown is 16 to 29. Boston is another city where education, healthcare and assistance services dominate, employing 31.17% of the workforce.
8. Cincinnati, OH
Younger workers make up almost 35% of the total workforce in Cincinnati, Ohio. The number of workers ages 16 to 29 is 57,014, and their labor force participation rate is just over 70%. Education, healthcare and social assistance are the biggest industries, employing just over 27%. But manufacturing remains important in Cincinnati, accounting for 10.62% of the workforce.
9. Minneapolis, MN
Minneapolis has the seventh-highest labor force participation rate for workers younger than 30 in our study – almost 80%. Overall, younger people (ages 16 to 29) make up 34.87% of the workforce in the city. Almost 27% of those employed in Minneapolis work in education, healthcare and social assistance, with retail comprising more than 10%.
10. Richmond, VA
Richmond, Virginia claims the 10th spot on our list, with a labor force participation rate of just over 78% for people ages 16 to 29. This age group makes up more than 34% of the city’s total workforce. More than 24% of the city’s total workforce is employed by education, healthcare and social assistance.
Data and Methodology
To find the cities with the youngest workforces, we examined data on the 100 largest U.S. cities. Using population data and labor force participation rates from the Census Bureau’s 2019 1-year American Community Survey, we found the percentage of the workforce younger than the age of 30 (i.e. between 16 and 29 years old) in each city. Cities with the highest percentages of younger workers ranked at the top of the list, and those with the lowest percentages of younger workers ranked at the bottom of the list.
Tips for Managing Your Money at the Start of Your Career
It’s never too early to invest in expert advice. Even if you’re younger, it may make sense to find a financial advisor help with your money. Finding the right financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with financial advisors in five minutes. If you’re ready to be matched with advisors, get started now.
The key to retirement savings is to start as soon as possible. If you have access to a workplace retirement savings program like a 401(k), make sure you take advantage of it.
Double-check your paycheck. Knowing how much money you make after taxes is key to financial planning. Use SmartAsset’s free paycheck calculator to see what you’ll actually see on your check after everything is taken out.
Questions about our study? Contact email@example.com.
Ben Geier, CEPF® Ben Geier is an experienced financial writer currently serving as a retirement and investing expert at SmartAsset. His work has appeared on Fortune, Mic.com and CNNMoney. Ben is a graduate of Northwestern University and a part-time student at the City University of New York Graduate Center. He is a member of the Society for Advancing Business Editing and Writing and a Certified Educator in Personal Finance (CEPF®). When he isn’t helping people understand their finances, Ben likes watching hockey, listening to music and experimenting in the kitchen. Originally from Alexandria, VA, he now lives in Brooklyn with his wife.
MBS Day Ahead: It Was a Trap… Don’t Expect Stocks to Save Us
Yesterday saw yields hold at just slightly lower highs on an intraday basis, thus offering a glimmer of hope for a bond bounce. We discussed the risk that this was a trap, and so far today, it looks like it was. 10yr yields are over 1.4% and UMBS 2.5 coupons are now the only game in town. Where is that giant squid guy from Star Wars when you need him?
The bond market weakness is sharper and more relentless than many market watchers anticipated. One common topic of conversation among those hoping for a bounce is the interplay between stocks and bonds. Late 2018 is fresh in our minds with widespread belief that “high rates” precipitated a stock sell-off which, in turn, helped rates move lower.
I won’t say “that’s not what happened,” because that dynamic was in play. But I will say a few other things. First off, that wasn’t the whole story in 2018. There was a ton of momentum behind “global growth concerns.” Much like 2015, late 2018 brought a mini or “stealth” contraction for the global economy–especially manufacturing in Europe. It also marked the end of the tax bill sugar high for US equities markets.
What’s the point of all this? Just a reminder/warning/etc to not place undue hope on “high” 10yr yields (if you can call 1.4%+ “high” in the bigger picture) to do profound damage to the stock market. Scarier spikes than this have generally failed to do so. 2018 was an exception, and one that probably gets too much credit in our worldview because it was the most recent example.
MBS Pricing Snapshot
Pricing shown below is delayed, please note the timestamp at the bottom. Real time pricing is available via MBS Live.
Last week ended with snowball selling in the bond market. Given the approach of a holiday weekend, there was a chance that the weakness was overdone and that we’d see a bounce back today, but it didn’t take long for those hopes to be crushed in overnight trading. This is the kind of bond market weakness that forces analysts to find/amplify root causes after the fact, because there really hasn’t been a strong case for this much selling (even if there’s a well-understood case for steady selling in general).
To be clear, evidence in the “well-understood case” is as follows:
Plummeting covid case counts
Businesses weathered the Dec/Jan surge much better than the initial lockdowns in the Spring
Vaccine distribution improving
Economic data at home and abroad has been resilient
Massive central bank support
Fiscal stimulus expectations (looking like “bigger and sooner” now)
Strong corporate earnings, strong stocks, and more of the same expected as sidelined cash flows back into market
Heavy bond market supply (ties in with stimulus, since Treasuries are used to pay for it) as well as corporate bond supply
This list could go on, but that’s already plenty of justification for an ongoing rotation/recovery trade that favors stocks and shuns bonds. It jives perfectly well with the ongoing uptrend in yields that we’ve been tracking for months and months. The only surprise at this point is how aggressive the selling has become in the past few days with 10yr yields only about 2 bps away from March 2020’s highs (1.26 vs 1.28%). Bonds are also challenging the upper boundary of their prevailing trend. Early January increasingly looks like a ‘sea-change’ moment following the GA senate election (with the late Jan rally now looking like a brutal head-fake).
This is the sort of thing that CAN be good news as it suggests a bounce back in the other direction, all other things being equal. But that suggestion assumes the trend continues at the same pace, and that’s never a guarantee. Assessing the validity of that trend will be the first order of business today and tomorrow. If we don’t see a big, strong bounce back in bonds, it may be over.
MBS Pricing Snapshot
Pricing shown below is delayed, please note the timestamp at the bottom. Real time pricing is available via MBS Live.
Gross domestic product is the broadest indicator of the economy, measuring the value of final goods and services produced in the U.S. in a given time period. It is perhaps the most closely watched indicator as well, serving as a guidepost for Federal Reserve interest rate policy and for budgeting in both government and private industry.
At Kiplinger, we examine what trends are driving GDP up (or down) and forecast its future direction quarter by quarter. Read our current forecast »
If gross domestic product is the broadest indicator of the economy, employment is the one most personally felt. These are people’s jobs we’re talking about.
Two distinct metrics make up the employment forecast. The more important one is the “payroll report,” a summation by the Department of Labor of how many jobs the economy has created (or lost) each month. This data is broken out by sector, such as manufacturing, mining and health care. Note that simply to keep up with population growth, the economy needs to add more than 100,000 jobs every month; otherwise the unemployment rate will rise.
That rate is the other closely watched figure. It’s a simple division of the number of people who have looked for work in the prior four weeks but who do not have a job by how many people are currently in the labor force. That simplicity belies some underlying concerns about the unemployment rate. One key one: Potential workers who aren’t actively looking for work aren’t included in the calculation. Read our current forecast »
Interest rates are of tremendous interest to borrowers (for whom they are a cost) and lenders (a category that includes individuals trying to get some return on their bank savings). Almost everyone is in one or both categories.
The level of short-term rates, such as those used by banks when loaning each other money overnight, is set by the Federal Reserve through its Open Market Committee, usually at regularly scheduled meetings.
Market interest rates, including those in money markets and offered on consumer products such as certificates of deposit, follow the Fed’s lead but are also subject to other influences — for example, risk, transaction costs and expectations of inflation. Generally, the longer the period of the loan, such as with 10-year Treasury Bonds or mortgages, the more important market factors become compared with the Federal Reserve’s actions. We forecast both what we expect the Federal Reserve to do in the near term and to what extent that will affect the direction of long-term interest rates. Read our current forecast »
Inflation is the generally rising price of goods and services, or why things cost more. It’s measured by the Department of Labor using a sample, dubbed a “market basket,” of what people in urban areas in the U.S. actually buy each month. Then each month, data collectors check on the prices of those items. From that research we get the Consumer Price Index (CPI).
A component of that index, the core inflation rate, which excludes the more volatile prices of food and energy, is also closely watched. At Kiplinger, we forecast changes in both.
Economists generally believe that moderate inflation of about 2% is best for an economy. Prices that are rising too quickly cause consumers heartburn, of course, but prices that are flat or falling are a problem, too. This condition, known as deflation, makes debts more expensive to pay back and can lead to declining business investment. Read our current forecast »
Business Equipment Spending
How much businesses are laying out in investment is critical to other businesses in guiding their own spending. In making our forecasts for the direction of business spending in the quarters and years ahead, we follow two indexes from the Census Bureau: Durable Goods Shipments and Orders and Business Inventories reports. Read our current forecast »
Like it or not, petroleum and natural gas remain incredibly important to the U.S. economy. Knowing where oil prices are headed is critical to businesses of all stripes, from airlines to plumbing companies. Consumers planning their family budgets and vacations care, too. Not only do we monitor Department of Energy reports, but we also talk to commodities traders and petroleum engineers to forecast price trends, changes in production technologies and consumer habits. Read our current forecast »
In addition to being the roof over our heads, housing is an important sector in the economy. Three statistics form the core of our coverage: sales of existing homes (and the prices those sales fetch); sales of new homes; and housing starts, which reflect new construction that is counted in GDP.
Because housing is a diversified and highly regional industry, our reporting and forecasting are informed by other research as well as conversations with industry experts as well. Read our current forecast »
Consumers are the engine of our economy, and when their spending flags, business feels it. We examine trends that are influencing their habits, such as falling gas prices, to forecast what they’ll be buying in the future and how much they’ll be willing to shell out both on everyday items and on big-ticket purchases such as cars and trucks. Read our current forecast »
All nations of consequence trade with others. Those that buy more from other countries than they sell in turn have a trade deficit, and that’s been the story for the United States since the mid-1970s.
How big that deficit will be, and whether the changes will result from more (or fewer) imports or more (or fewer) exports, is the crux of our forecasting. We look at specific sectors (such as agriculture) where the United States is doing well selling abroad, as well as what items (such as smartphones) we buy from overseas. We also discuss the strength of the dollar versus foreign currencies and how that affects trade trends. Read our current forecast »
Depository bank Western Alliance has reached a deal to acquire correspondent lender AmeriHome for $1 billion in cash, the firms announced late Tuesday afternoon.
With the acquisition, Western Alliance will grab full control of America’s third-largest correspondent lender from an affiliate of financial giant Apollo Global.
AmeriHome purchased approximately $65 billion in conventional conforming and government-insured originations in 2020. The nonbank lender works with a network of over 700 independent mortgage banks and credit unions. It also manages a mortgage servicing portfolio estimated at around $100 billion in unpaid balance.
Acquisition talks began in the fourth quarter, not long after Western Alliance bought non-QM aggregator Galton Funding for an undisclosed amount and AmeriHome’s IPO was delayed.
“It just so happened that AmeriHome approached us about potentially completing a transaction and we decided to look at it, that was in the fourth quarter,” Stephen Curley, division president of Western Alliance, said in an interview with HousingWire. “It came together really quickly. We’ve known the management longer than the four years that they’ve been a customer.”
The management team at AmeriHome, led by CEO Jim Furash, will remain in place and there will be no layoffs, Curley said. Synergies will result in about $50 million in savings, mostly through offering warehouse lines that currently go to other banks, Western Alliance said.
The purchase price represents approximately 1.4x adjusted tangible book value of AmeriHome. Before the end of the second quarter, Western Alliance intends to raise approximately $275 million of primary capital through the sale of common stock. The acquisition is expected to close in the second quarter of 2021.
“It’s a very financially compelling transaction, which produces 30% EPS (earnings per share) accretion for a full year,” Curley said. “We feel like it’s a really good acquisition for shareholders because it grows our earnings per share. It also diversifies our revenue profile so we’re going to see a nice increase in fee income. We’ve normally been a spread income lender, and we haven’t had as much fee income, so buying AmeriHome brings in an important source of fee income.”
The other factor, he said, is that banks these days are awash in liquidity. “We feel like AmeriHome can help us deploy that liquidity in higher-yielding, low-credit risk assets,” Curley said. “We are very familiar with their manufacturing process, we know that they produce high quality assets. We believe that’s a good fit for our balance sheet.”
Western Alliance, which operates more as a business-to-business bank rather than a consumer-focused retail lender, said they are looking at AmeriHome for its long-term potential.
“People will ask us, ‘Are you buying at the peak?’ so to speak,” said Curley. “We really looked at 2019, 2018 volumes. We really didn’t factor in 2020 volumes and profits into our strategy” because it was an outsize year, he said.
But some awful ideas get made into products that cost big bucks to promote and then become embarrassing belly flops.
Those products live on in our collective memory, a reminder that even CEOs and high-paid marketing whizzes are capable of blowing it.
Here’s a look at some fantastic flops that sent their inventors back to the drawing board.
1. New Coke
Let’s just crown New Coke the king of all product whoopsies.
When Coca-Cola introduced the reformulated soft drink in 1985, the company hoped to re-energize its brand.
Instead, cola consumers bubbled over with complaints. As the Coca-Cola Co. says, the change “spawned consumer angst the likes of which no business has ever seen.” Just 79 days later, the company brought its original formula back.
Since then, New Coke has become a prime example of the risks in messing with something that isn’t broken. The beverage’s brief, turbulent life has even been rehashed for lessons on marketing failures in business schools.
In 2019, New Coke had the last laugh, making a very brief promotional comeback tied to an appearance in Netflix’s 1980s-themed sci-fi series “Stranger Things.”
2. The Edsel
Pity the poor Edsel. The brand of car, produced by automaker Ford beginning in 1957, was named for Edsel Ford, son of famed Ford Motor Co. founder Henry Ford.
Now, though, it’s included in certain dictionaries as a term for a product that fails to gain public acceptance despite high expectations.
Some blame the car’s unusual look, especially the vertical chrome oval on the front grill. Others blame mechanical issues — a joke circulated that Edsel was an acronym for “Every Day Something Else Leaks,” according to the Washington Post.
Ford stopped producing the car in 1959. But that’s not the end of the story. Today, a mint-condition Edsel can sell for up to six figures, the Post says.
3. Google Glass
Created in 2011, Google Glass sounded like something out of a science-fiction movie or novel.
The product resembled an odd pair of eyeglasses. The makers promoted it as a wearable computer that could take photos, shoot video and act as a GPS, among other things.
Amid product bugs, bad reviews and worries that Glass wearers could surreptitiously record people in public places, Google shuttered the original program in 2015, the New York Times writes.
And yet, Google Glass never completely went away, and MIT Technology Review recently reported the release of a new version, the Glass Enterprise Edition 2, priced at $999, for sale to businesses only. Glass “has quietly gained a foothold in various industries, including logistics and manufacturing, providing hands-free access to information as people work,” the report says.
4. Crystal Pepsi
In the 1970s, earth tones dominated design trends. The 1980s brought neon brights.
And then came the 1990s, when the trend was for no color at all — clear products were all the rage.
Crystal Pepsi, the see-through soda, led the charge with a caffeine-free product it launched in 1993 with a big Super Bowl ad splash.
Pepsi pulled the soda pop from shelves by the end of 1994. Even its inventor says Crystal Pepsi didn’t taste enough like the original Pepsi.
Crystal Pepsi was brought back for a limited time in 2016 before fading into 1990s nostalgia, along with “Seinfeld” and grunge music.
5. WOW! potato chips
Fat-free potato chips? It’s enough to make a consumer say “Wow!”
That was the hope. But when Frito-Lay introduced Wow! chips in 1998, there were issues.
The chips reportedly tasted like regular potato chips, achieving their fat-free status by using olestra, a fat substitute, which Procter & Gamble marketed as Olean, the New York Times reported in 1999.
However, there were gut-level side effects that occurred with excessive consumption of olestra over short periods of time that were, er, hard to stomach. As a result, the Food and Drug Administration required olestra products to carry what the Times called “arguably the most unappealing food product label in history: ‘Olestra may cause cramping and loose stools.’”
The FDA lifted the label requirement in 2003. But it was too late for Wow! chips.
6. ‘E.T. the Extra-Terrestrial’ video game
“E.T. the Extra-Terrestrial” was a blockbuster at movie theaters, winning four Academy Awards in 1983.
But the video game of the same name, designed for the Atari 2600 computer, has been called the worst video game ever. Game designer Howard Scott Warshaw had just five short weeks to develop the game. Apparently, it showed. Players rejected it.
Truckloads of cartridges were buried in a landfill in a New Mexico desert — as documented by a film company that dug some up in 2014.
7. The Apple Newton
Apple Inc. has created plenty of dazzling, world-changing products, including the iPhone.
The Apple Newton MessagePad was the company’s first attempt to create a handheld digital personal assistant or tablet computer. The Newton, equipped with a touch screen, could be used to take notes, translate handwriting into text and even send a fax.
Or could it? The handwriting translation worked about as well as trying to read your doctor’s messy scribbles — even “Doonesbury” mocked it in 1993.
Apple co-founder Steve Jobs hated the Newton. That sealed its doom, according to Wired magazine. Jobs canned the Newton shortly after he returned to Apple in 1997.
8. The DeLorean
John DeLorean’s car company made just one model of car, the eponymous DeLorean, but thanks to “Back to the Future,” many Americans recognize it.
The DeLorean’s famed gull-wing doors were hinged to open at the car’s roof, making the vehicle stand out from the crowd.
The cars were made only for model years 1981 through 1983. There were quality-control issues, and the car lacked power, CNN recalls.
It didn’t help that John DeLorean was arrested in a drug-smuggling case (he was later acquitted) and his company filed for bankruptcy.
The striking car might have been forgotten if not for its use as a time machine in the popular 1985 movie “Back to the Future” and its sequels.
9. The XFL
Remember the Memphis Maniax? The Los Angeles Xtreme? The Chicago Enforcers?
No? That’s understandable: Those were all team names from the XFL, a defunct American football league that took the field for one season, in 2001.
Half-owned by NBC and half by the World Wrestling Federation (now the WWE), the league may be best remembered for letting teams allow players to put nicknames on their jerseys. Running back Rod Smart made himself infamous by wearing “He Hate Me” on his Las Vegas Outlaws jersey.
The league deflated after one championship game and about a year of TV programming.
A new XFL launched in 2020, with such teams as the Seattle Dragons, St. Louis Battlehawks and Tampa Bay Vipers. But in March of last year, it had to cancel the remaining games as the COVID-19 pandemic began to spread. In April, it suspended operations, let players go and filed for bankruptcy.
But, wait. There’s a sequel. In August 2020, actor Duane “the Rock” Johnson and a group of investors purchased the league. They now hope to play again in spring 2022.
10. Microsoft Clippy
Hi, it looks like you’re writing an article about failed products. Would you like some help? Microsoft thought you might.
Beginning with Office for Windows, in 1997, Microsoft created an interactive virtual assistant that could pop up in a user’s document on the screen to offer help. The default setting for the assistant was a paper clip named Clippit, dubbed “Clippy.”
Clippy’s tendency to pop up and insert himself into a user’s work was often more annoying than useful.
The company turned off Clippy’s default setting in 2001, and by 2002 was actively poking fun of Clippy in its ads. He quietly clipped off into the sunset after that.
PC or Apple computer? Marvel or DC Comics? VHS or Betamax? The VHS-versus-Betamax competition has found its place among some of the great debates of our time.
Both were formats used by consumers to watch and record video. Betamax lost the format war.
According to PC Magazine, Betamax was introduced in 1975, and early cassettes only held one hour of video. VHS came out a year later with longer recording time. The fight was on.
As the magazine notes elsewhere, many users thought Betamax was the better format, but in the end, that didn’t matter. VHS caught on, and Betamax was gone by the 1990s.
VHS fans couldn’t gloat for long. VHS eventually was replaced by DVDs.
12. McDonald’s Arch Deluxe
In 1996, the fast-food chain tried to class up its menu with the Arch Deluxe line of sandwiches that included burgers, chicken and fish. The Arch Deluxe burger, aimed to appeal to adult tastes with a “secret” mustard and mayo sauce, was the marquee item.
Analysts estimated that development of the Arch Deluxe cheeseburger cost the company between $100 million and $200 million, the L.A. Times reported.
McDonald’s commercials bragged that the burger wasn’t for kids. Really, was that the best sales technique for a family restaurant? McDonald’s pulled the product by the late 1990s, Business Insider reports.
13. Bic for Her pens
Sure, some products appeal more to one gender than another. But you’d think the simple ballpoint pen is a unisex accessory.
When pen company Bic came out with Bic for Her pens in 2012, the jokes pretty much picked up the Bic pen and wrote themselves. Hilarious Amazon reviews skewered the concept.
The pens themselves were designed in pastel colors but were otherwise unremarkable. Bic for Her pens (later called the BIC Cristal for Her Ball Pen) are no longer made, but you can gaze on their oh-so-feminine packaging at Amazon.
Hollywood movies have come a long way. Silent films gave way to talkies, and black-and-white films to Technicolor. IMAX, 3-D, Dolby surround sound — they’ve all found their way into the theaters.
Some movie marvels, though, were goofy gimmicks. Case in point: the 1960 invention Smell-O-Vision and the similar Aroma-Rama, introduced in 1959.
As American Movie Classics’ “The History of Film” recalls, cinemas pumped relevant scents, such as pipe tobacco or smashed grapes, into the theater to accompany a “scented” film. Only a very few movies ever took advantage of the trick.
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