Our Clients, Advisors and Friends:
The European Central Bank (ECB) borrowed from the playbook of the USA’s Federal Reserve last week, taking a 5-year old American strategy into an area never seen before.
The Fed has been paying just ¼ of 1% since January 2009 to US banks on funds they deposit at the 12 regional Fed banks around the country. Fed chair Janet Yellen has considered lowering that rate in order to encourage domestic banks to lend more money (to corporations and individuals) to spark our nation’s economy.
The ECB (led my Mario Draghi) announced last Thursday (6/05/14) that it will now charge (not pay) European banks 0.1% to park money with them. Draghi, like Yellen,
believes that banks can be coaxed into making more loans. His unconventional approach
may be just what Europe needs to jump-start their economies (source: BTN Research).
The number of employed Americans (i.e., nonfarm jobs) peaked at 138.4 million on 1/31/08 (7 months before the beginning of the 2008 global financial crisis) then fell by 8.7 million over the next 2 years to 129.7 million by 2/28/10. The US employment numbers have steadily climbed back to their pre-recession levels and the government reported last week that the total number of people employed nationwide has bounced back to 138.5 million as of 5/31/14 (source: Department of Labor).
The bull market for the S&P 500 begins its 64th month today, up +222% (total return)
from its bear market low. The stock index has set 63 all-time record closes in the
63 months since 3/09/09. 3 of the 10 bulls that have occurred since 1950 (the current
bull is the 11th) have lasted at least 6 years, i.e., 72 months (source: BTN Research)
Notable Numbers for the Week:
1) TWO OUT OF THREE – 65% of all individual tax returns filed in 2011 (95.0 million
out of 145.4 million) reported less than $50,000 of adjusted gross income (source:
Internal Revenue Service).
2) HALF AS MANY – Lenders repossessed 119,429 homes nationwide (an average of 995
per day) during the first 4 months of 2014 (i.e., January-April), a 50% drop compared
to the 236,977 homes repossessed during the first 4 months of 2012 (source: RealtyTrac
3) TIME FOR REFORM – From 1984 through 2008, the Social Security payroll taxes
paid by Americans exceeded the benefit payments made by Social Security. However
since 2009, benefits paid have exceeded taxes collected, including a $51 billion
shortfall in 2013 (source: Social Security).
4) WERE YOU AVERAGE? – The net worth of an average American increased by +10.8% over the 12 months ending 3/31/14, including gains from stocks, bonds and real estate holdings (source: Federal Reserve