Economic and Investment News Bits
- As markets correctly anticipated, the Federal Reserve raised interest rates by 25bps. This is largely seen as a vote of confidence in the US economy, which has experienced increasing inflation and job growth. Following suit, most banks increased their prime lending rates…and may eventually increase their deposit rates. Keep these increasing interest rates in mind for any variable-rate debt you are carrying (i.e. Credit cards).
- Total credit card debt in the United States dropped to $995 billion in January, the first month-over-month decrease since February 2016. The peak in credit card debt nationally was $1.022 trillion in April 2008. (Source: Federal Reserve)
- 82% of the deposits maintained in FDIC-insured institutions in the United States are held by fewer than 2% of the banks and savings institutions. (Source: FDIC)
- Many of us enjoyed unseasonably warm weather in February. Some of the improved employment and payroll data can be attributed to this spring tease: “In the past 20 years, an average of 307,000 workers missed work due to bad weather in February; this February it was only 157,000.” (Source: Brian Westbury, First Trust)
- China has a 2017 economic growth target of +6.5%. The United States has achieved year-over-year growth of at least +6.5% just once in the last 50 years (+7.3% in 1984). (Source: National People’s Congress)
- The annual NFL scouting combine was recently held where prospective players are analyzed, measured, and interviewed to determine which team may draft them. Adidas promised to give a prospect an island valued at $1 million if they could break the current 40-yard dash time while wearing Adidas shoes. Former University of Washington Wide Receiver John Ross bested the then current record; however, Ross was wearing Nike shoes. Ross’ reaction: “Well, I can’t swim that well, and I don’t have a boat.”
Thought for the week
Steven Wright, American Comedian (b. 1955)
“I went to a restaurant that serves ‘breakfast at any time’, so I ordered French Toast during the Renaissance.”
Chart for March (CLICK TO ENLARGE)
Warren Buffett is universally regarded as one of the greatest investors in history. In 1965, he took control of Berkshire Hathaway. A $10,000 investment when he took over would now be worth $88 million. The same investment in the S&P 500 would be worth “only” $1.3 million. The chart above shows the excess return of Berkshire Hathaway’s stock compared to the S&P 500. Prior to the “Tech Bubble” of the late 1990’s, Berkshire stock routinely outperformed the S&P 500 by 20%+. For the last 20 years, Berkshire stock has at best outperformed the S&P 500 by 10% and has even underperformed the broader benchmark on a few occasions. This may largely be attributable to Berkshire’s size (it currently has the 4th largest market capitalization on the S&P 500 behind only Apple, Alphabet (Google), and Microsoft). Due to the continued growth and diversification of the portfolio of companies Berkshire owns and manages, it seems to make sense that its investment performance increasingly tracks that of the U.S. stock market.
Please remember that past performance may not be indicative of future results. Different types of investments involve varying degrees of risk, and there can be no assurance that any specific investment, strategy, or product or any non-investment related content, made reference to directly or indirectly in this newsletter, will be suitable for your individual situation, or prove successful. This material is distributed by PDS Planning, Inc. and is for information purposes only. Although information has been obtained from and is based upon sources PDS Planning believes to be reliable, we do not guarantee its accuracy. It is provided with the understanding that no fiduciary relationship exists because of this report. Opinions expressed in this report are not necessarily the opinions of PDS Planning and are subject to change without notice. PDS Planning assumes no liability for the interpretation or use of this report. Consultation with a qualified investment advisor is recommended prior to executing any investment strategy. No portion of this publication should be construed as legal or accounting advice. If you are a client of PDS Planning, please remember to contact PDS Planning, Inc., in writing, if there are any changes in your personal/financial situation or investment objectives. All rights reserved.