Mid - March Update

Amazon, Microsoft and Netflix Carry S&P 500


According to a recent wall street journal report, (dated 2/22/18), Amazon has accounted for 27% of the S&P 500 gains this year, followed by Microsoft and Netflix. Based on Dow Jones data Amazon, Microsoft and Netflix accounted for 27%, 13% and 8.3% of the S&P 500’s 1.6% gain as of 2/22. (Figure 1)

Figure 1


This phenomenon of just a few businesses dominating the S&P 500 frequently occurs because the S&P is capitalization weighted, which means bigger companies carry a heavier weight in the index.  And Amazon recently became the third largest company in the index behind second place Google and first place Apple.

As an investor planning for retirement or semi-retirement, it’s important to keep this in mind and diversify beyond Large company indexes such as the S&P 500. You can accomplish adequate diversification by including indexes weighted by a metric other than a market cap, such as equal weighted or dividend weighted. You should also diversify with exposure to mid-cap and small-cap US equities as well as international equities and perhaps Income annuities.

As a retiree moves from accumulation phase to distribution, it is important to control volatility. We don’t want our future in the hands of Amazon, no matter how fast they deliver our packages!


Mid - March Update

Inflation Is Hiding – Consumer Dynamics

Each month the Bureau of Labor Statistics releases the Consumer Price Index (CPI) which essentially is a measure of inflation. The latest CPI numbers tell us that inflation over the past year (Jan 2017 – Jan 2018) is about 2.1%. The 2.1% reading is a compilation of prices of various services and products consumed throughout the economy. Of the many items monitored, a few stood out as rising faster in prices than the overall inflation rate. Fruits and vegetables, eating out, energy, hospital services and auto insurance.

Inflation impacts consumers differently with demographics and lifestyle being significant components. As an example, inflation for retiring individuals is very different than inflation for college students. Not only are age differences significant but lifestyle and daily needs are as well. Of the various components that have risen faster than the overall inflation rate for the past year, essential items such as energy and fruits and vegetables tend to impact seniors and students similarly. However the ongoing increases in medical and hospital service expenses is primarily a burden for seniors and retirees. On the other hand the increase in auto insurance costs and transportation services tend to be more impactful on younger consumers that are still very mobile.

When you are building assumptions for your retirement plan, it can be helpful to look beyond the CPI into the specific goods and services that you and your family are purchasing each month.

Source: Bureau of Labor Statistics

Coming Soon: New Medicare Cards

 The government is removing personal info from your ID.  Beginning April 1st, 2018, new Medicare cards will be mailed to approximately 44 million Medicare beneficiaries.  Each will feature a computer-generated Medicare beneficiary identifier (AKA MBI) assigned just to you.  The MBI will be used to verify eligibility for services, check the status of a claim and for billing.

Theses changes are designed to make it significantly harder for unscrupulous individuals to steal our identity. According to the justice department, the number of identity-theft cases for people 65 or older hit 2.6 million in 2014.  The Federal Trade Commission has reported that seniors are being called by people pretending to be from Medicare looking for information.  Of course, you should hang up if you get such a phone call.

Mailing cards to 44 million people is a big job, so it will take time.  No worries if you get your card before or after your spouse, family or friends, Medicare members have until 12/31/2019 to begin using the new ID.  Both the new cards AND your current card will be valid until then.