Quote of the Week

“History is on our side. There have been 13 Fed tightening cycles since 1950. Ten of these landed the economy in recession, and neither the consensus nor the Fed staff saw them coming when they actually started. So before knowing anything else, the fact that we have been in the midst of a Fed tightening phase sends recession odds north of 80%.”– David Rosenberg, “Snack with Dave,” published December 28, 2018 (subscription required)

Technical Corner

Stocks started off 2019 with more turbulence but finished higher for the holiday-shortened week. The combination of a profit warning from Apple, which cited weakness in China, and a softening in the ISM (Institute for Supply Management) manufacturing index raised concerns over the impact of slowing global growth to the U.S. economy. However, a strong jobs report issued on Friday, which if you look into the details of the report really wasn’t that good, caused the markets to rally on Monday with a weaker follow through today (Tuesday). The U.S. economy added 312,000 jobs in December, the most in 10 months, plus the combination of faster wage growth made things look like the worst is over. However, if growth is slowing, short term interest rates are rising, and wages are going up, that combination puts a squeeze on company earnings. Think about this. If top-line corporate revenue is declining and the cost of doing business is increasing due to interest costs going up, and wages going up, profits will decline. If profits decline, stock prices will go down.

Just as an example of a slowing global economy, the latest news on Germany’s economy doesn’t look good and Germany is the strongest economy in Europe. According to data released, German factory orders contracted in November ended three consecutive months of growth. The primary culprit of the 1 percent decline was the eurozone, where orders contracted almost 12 percent. China, Japan, South Korea, and Europe are all slowing. The U.S. is predicted to have slowed considerably in the fourth quarter of 2018.

The Central banks of the world have stopped stimulating their respective economies. The rise in the world economies has been driven by the huge amount of money pumped into the system. The economies of the world, and thus the stock markets of the world,  have been living on a sugar high. Now the supply of sugar is gone, and it is clear that the world economy can’t stand on its own.

We are still allocated to safety. Most portfolios have approximately 50% allocated to long term U.S. Treasury bonds with other investments that can do well during periods of market declines and falling interest rates.

Larry’s Thoughts

Recently our practice has been involved with clients who either are looking to sell their house and downsize or clients whose parents are no longer able to take care of themselves living alone.

There are many options to consider depending on the individual circumstances. In Tucson, there are many wonderful independent living facilities. I have toured a few, and they are really nice with meals included, lots of activities, transportation, and the opportunity to meet many new friends. They can be that cure for loneliness.

My experience from talking to the residents is that they say they should have done the move many years ago. The cost, when compared to owning a home, is not that much more especially if you are paying a mortgage payment. Plus, the upkeep and the worry are eliminated. Many of these independent living facilities also can provide assisted living, nursing home services, or memory care if needed without having to move.

I found the following article that discusses housing options for older individuals. It doesn’t discuss the independent living option, so I covered that option above.

Housing Options for Older Individuals

As you grow older, your housing needs may change. Maybe you’ll get tired of doing yardwork. You might want to retire in sunny Florida or live close to your grandchildren in Illinois. Perhaps you’ll need to live in a nursing home or an assisted-living facility. Or, after considering your options, you may even decide to stay where you are. When the time comes to evaluate your housing situation, you’ll have numerous options available to you.

There’s no place like home

Are you able to take care of your home by yourself? If your answer is no, that doesn’t necessarily mean it’s time to move. Maybe a family member can help you with chores and shopping. Or perhaps you can hire someone to clean your house, mow your lawn, and help you with personal care. You may want to stay in your home because you have memories of raising your family there. On the other hand, change may be just what you need to get a new perspective on life. To evaluate whether you can continue living in your home or if it’s time for you to move, consider the following questions:

  • How willing are you to let someone else help you?
  • Can you afford to hire help, or will you need to rely on friends, relatives, or volunteers?
  • How far do you live from family and/or friends?
  • How close do you live to public transportation?
  • How easily can you renovate your home to address your physical needs?
  • How easily do you adjust to change?
  • How easily do you make friends?
  • How does your family feel about you moving or about you staying in your own home?
  • How does your spouse feel about moving?
Hey kids, Mom and Dad are moving in!

If you are moving in with your child, will you have adequate privacy? Will you be able to move around in your child’s home easily? If not, you might ask him or her to install devices that will make your life easier, such as tub or shower grab bars and easy-to-open handles on doors.

You’ll also want to consider the emotional consequences of moving in with your child. If you move closer to your child, will you expect him or her to take you shopping or to include you in every social event? Will you feel in the way? Will your child expect you to help with cooking, cleaning, and baby-sitting? Or, will he or she expect you to do little or nothing? How will other members of the family feel? Get these questions out in the open before you consider moving in.

Talk about important financial issues with your child before you agree to move in. This may help avoid conflicts or hurt feelings later. Here are some suggestions to get the conversation flowing:

  • Will he or she expect you to contribute money toward household expenses?
  • Will you feel guilty if you don’t contribute money toward household expenses?
  • Will you feel the need to critique his or her spending habits, or are you afraid that he or she will critique yours?
  • Can your child afford to remodel his or her home to fit your needs?
  • Do you have enough money to support yourself during retirement?
  • How do you feel about your child supporting you financially?
Assisted-living options

Assisted-living facilities typically offer rental rooms or apartments, housekeeping services, meals, social activities, and transportation. The primary focus of an assisted-living facility is social, not medical, but some facilities do provide limited medical care. Assisted-living facilities can be state-licensed or unlicensed, and they primarily serve senior citizens who need more help than those who live in independent living communities.

Before entering an assisted-living facility, you should carefully read the contract and tour the facility. Some facilities are large, caring for over a thousand people. Others are small, caring for fewer than five people. Consider whether the facility meets your needs:

  • Do you have enough privacy?
  • How much personal care is provided?
  • What happens if you get sick?
  • Can you be asked to leave the facility if your physical or mental health deteriorates?
  • Is the facility licensed or unlicensed?
  • Who is in charge of health and safety?

Reading the fine print on the contract may save you a lot of time and money later if any conflict over services or care arises. If you find the terms of the contract confusing, ask a family member for help or consult an attorney. Check the financial strength of the company, especially if you’re making a long-term commitment.

As for the cost, a wide range of care is available at a wide range of prices. For example, continuing care retirement communities are significantly more expensive than other assisted-living options and usually require an entrance fee above $50,000, in addition to a monthly rental fee. Keep in mind that Medicare probably will not cover your expenses at these facilities, unless those expenses are health-care related and the facility is licensed to provide medical care.

Nursing homes

Nursing homes are licensed facilities that offer 24-hour access to medical care. They provide care at three levels: skilled nursing care, intermediate care, and custodial care. Individuals in nursing homes generally cannot live by themselves or without a great deal of assistance.

It is important to note that privacy in a nursing home may be very limited. Although private rooms may be available, rooms more commonly are shared. Depending on the facility selected, a nursing home may be similar to a hospital environment or may have a more residential feel. Some on-site services may include:

  • Physical therapy
  • Occupational therapy
  • Orthopedic rehabilitation
  • Speech therapy
  • Dialysis treatment
  • Respiratory therapy

When you choose a nursing home, pay close attention to the quality of the facility. Visit several facilities in your area, and talk to your family about your needs and wishes regarding nursing home care. In addition, remember that most people don’t remain in a nursing home indefinitely. If your physical or mental condition improves, you may be able to return home or move to a different type of facility. Contact your state department of elder services for guidelines on how to evaluate nursing homes.

Nursing homes are expensive. If you need nursing home care in the future, do you know how you will pay for it? Will you use private savings, or will you rely on Medicaid to pay for your care? If you have time to plan, consider purchasing long-term care insurance to pay for your nursing home care.

Copyright 2019 Broadridge Investor Communication Solutions, Inc

By the Numbers

“AFTER THE FALL – From its all-time closing high of 2931 set on 9/20/18, the S&P 500 dropped 19.8% to close at 2351 on 12/24/18, nearly falling the necessary 20% to qualify as the index’s 11th bear market since the end of WWII. For the earlier 10 bears, the S&P 500 took an average of 24 months to retrace its steps and close above the index’s previous closing high that was achieved before the “20%-plus” decline (source: BTN Research). – Michael A. Higley, BTN 01-07-2019

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

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These are the opinions of Larry Lof and Stephanie Mayoral 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 is an 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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