“We don’t develop courage by being happy every day.  We develop it by surviving difficult times and challenging adversity.”  –  Barbara De Angelis


So far this year as of this writing (10:05AM Wednesday January 18), the S&P 500 is up 3.2% YTD and the Nasdaq is up 6.1% YTD but the Bear Market is not over. As I stated in last week’s letter, all Bear Markets have Bear Market rallies. What I want you to think about is the data so don’t fall prey to “recency bias”.

Let’s take a look at some of the current data.

*Probably first and absolutely the most important is the coming fight in Congress over the debt ceiling being raised.

*The Savings Rate continues to sit at a multi-decade low.

*Credit Card Balance Growth is at multi-decade highs as of the latest data.

*The interest rate on that revolving credit accelerated to multi-decade highs as of the latest data.

*Real Income growth has now been negative for a record 21 consecutive months.

*Luxury Goods Consumption is negative -7.4% Y/Y while Luxury Homes Sales in now at -38% Y/Y. Wealth destruction for the wealthy is in overdrive and there is no return on all that capital they own as the balances of the populous retrenches.

Yesterday the New York Fed Consumer Survey showed the Share of Households Reporting a Large Purchase fell to a 2-year low while Expected Growth in Spending fell to a 20-month low.

*The latest update to the Census Household Pulse Survey showed the ” Difficulty Paying for Usual Household Expenses” series is back up to cycle highs.

*Goldman Sachs, JP Morgan, Citi Group show declining earnings with Goldman Sachs down -70% Y/Y

*U.S. corporations are in a profit recession with profits down -6.4% so far this reporting period. Keep in mind that corporate earnings drive stock prices up or down.

*Auto loan delinquencies (60 days or more) are up +25%.

*Auto loan delinquencies for sub-prime borrowers is at 7.1% which is the highest since 2006. This is during a period when unemployment is at an all time low and incudes the Great Recession of


*Consumption is cratering and it got a fresh confirmation across the goods economy this morning

with Retail Sales again printing a negative number and with steep negative revisions to the November report.

*Empire Manufacturing Survey is the worst since the Great Recession.

The above statistics are not consistent with a rising stock market and the rate of change of the above data is accelerating.



 Facing the Possibility of Incapacity

Being incapacitated is not a pleasant subject but it is one that all of us must face eventually.  The following article from Broadridge is a good summary of what can be done to cope with incapacitation if and when it happens.

Incapacity means that you are either mentally or physically unable to take care of yourself or your day-to-day affairs. Incapacity can result from serious physical injury, mental or physical illness, advancing age, and alcohol or drug abuse.

Incapacity can strike anyone at anytime

Even with today’s medical miracles, it’s a real possibility that you or your spouse could become incapable of handling your own medical or financial affairs. A serious illness or accident can happen suddenly at any age. Advancing age can bring senility, Alzheimer’s disease, or other ailments that affect your ability to make sound decisions about your health, or to pay your bills, write checks, make deposits, sell assets, or otherwise conduct your affairs.

Planning ahead can ensure that your wishes are carried out

Designating one or more individuals to act on your behalf can help ensure that your wishes are carried out if you become incapacitated. Otherwise, a relative or friend must ask the court to appoint a guardian for you, a public procedure that can be emotionally draining, time consuming, and expensive. An attorney can help you prepare legal documents that will give individuals you trust the authority to manage your affairs.

Managing medical decisions with a living will, durable power of attorney for health care, or Do Not Resuscitate order

If you do not authorize someone to make medical decisions for you, medical care providers must prolong your life using artificial means, if necessary. With today’s modern technology, physicians can sustain you for days and weeks (if not months or even years). If you wish to avoid this, you must have an advance medical directive. You may find that one, two, or all three types of advance medical directives are necessary to carry out all of your wishes for medical treatment (make sure all documents are consistent).

A living will allows you to approve or decline certain types of medical care, even if you will die as a result of the choice. However, in most states, living wills take effect only under certain circumstances, such as terminal injury or illness. Generally, one can be used only to decline medical treatment that “serves only to postpone the moment of death.” Even in states that do not allow living wills, you might want to have one anyway to serve as evidence of your wishes.

A durable power of attorney for health care (known as a health-care proxy in some states) allows you to appoint a representative to make medical decisions for you. You decide how much power your representative will have.

A Do Not Resuscitate order (DNR) is a doctor’s order that tells all other medical personnel not to perform CPR if you go into cardiac arrest. There are two types of DNRs. One is effective only while you are hospitalized. The other is used while you are outside the hospital.

Managing your property with a living trust, durable power of attorney, or joint ownership

Consider putting in place at least one of the following options to help protect your property in the event you become incapacitated.

You can transfer ownership of your property to a revocable living trust. You name yourself as trustee and retain complete control over your affairs as long as you retain capacity. If you become incapacitated, your successor trustee (the person you named to run the trust if you can’t) automatically steps in and takes over the management of your property. A living trust can survive your death, but it can be expensive to maintain and administer.

A durable power of attorney (DPOA) allows you to authorize someone else to act on your behalf. There are two types of DPOAs: an immediate DPOA, which is effective immediately, and a springing DPOA, which is not effective until you have become incapacitated. A DPOA should be fairly simple and inexpensive to implement. It also ends at your death. A springing DPOA is not permitted in some states, so you’ll want to check with an attorney.

Another option is to hold your property in concert with others. This arrangement may allow someone else to have immediate access to the property and to use it to meet your needs. Joint ownership is simple and inexpensive to implement. However, there are some disadvantages to the joint ownership arrangement. Some examples include (1) your co-owner has immediate access to your property, (2) you lack the ability to direct the co-owner to use the property for your benefit, (3) naming someone who is not your spouse as co-owner may trigger gift tax consequences, and (4) if you die before the other joint owner(s), your property interests will pass to the other owner(s) without regard to your own intentions, which may be different.



If you have friends or family in need of financial life planning services,

It would be the honor of Laurence Lof Financial Advisors to assist them.

We value your referrals!

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These are Larry Lof’s opinions and not necessarily those of Cambridge, are for informational purposes only and should not be construed or acted upon as individualized investment advice. Past performance is not indicative of future results. Due to our compliance review process, delayed dissemination of this commentary occurs.

The S&P 500 index of stocks compiled by Standard & Poor’s, a division of The McGraw-Hill Companies, Inc. The Index includes a representative sample of 500 leading companies in leading industries of the U.S. economy. Indices mentioned are unmanaged and cannot be invested into directly.

Technical analysis represents an observation of past performance and trend, and past performance and trend are no guarantee of future performance, price, or trend. The price movements within capital markets cannot be guaranteed and always remain uncertain. The allocation discussed herein is not designed based on the individual needs of any one specific client or investor. In other words, it is not a customized strategy designed on the specific financial circumstances of the client. Please consult an advisor to discuss your individual situation before making any investments decision. Investing in securities involves risk of loss. Further, depending on the different types of investments, there may be varying degrees of risk including loss of original principal.

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