Wealth Management Weekly Update April 26, 2013

Italy

U.S. and World News

  • In Italy, Giorgio Napolitano has been reluctantly reelected as president and is now tasked with trying to end the nation’s political gridlock. The 87 year old will be sworn in for a second seven year term and has tabbed center-left Democratic Party member Enrico Letta as the new Italian Prime Minister. Letta has started talks about forming a grand coalition with Silvio Berlusconi’s center-right group as well as made mention of altering the government’s Eurozone-inspired austerity program.
  • The Senate and House pushed through a bill this week that allows the Department of Transportation to bypass the impact of sequestration by using unspent funds to cover the costs of air traffic controllers and end the furloughs that have caused widespread flight delays. The bill now goes to President Obama who is expected to sign off on it.
  • A bogus tweet from the Associated Press on Tuesday reported two explosions at the White House and said that the President had been injured. Minutes later, the AP said its account had been hacked and the tweet was a fake. In the meantime, trading algorithms that scan news sources for tradable events sold heavily on the erroneous reports and sent the Dow down 145 points in less than one minute. Within minutes, stocks recovered and held their gains that day. The Syrian Electronic Army, which has recently targeted other media groups, took responsibility for the hack.
  • The Bank of Japan held off from adding to the country’s easing program despite the fact that the country remains firmly stuck in deflation as March’s Consumer Price Index fell by 0.5%. In its semi-annual economic outlook, the BOJ forecast that inflation won’t hit the target of 2% in the next two years, but could reach that level by March 2016.

 

Markets

  • Stock markets bounced back from their worst week of 2013 with the S&P 500 Index gaining 1.7%, closing at 1,582. The Dow Jones Industrial Average also rose and was up 1.1% to close at 14,713. Following the rebound this week, the S&P and the Dow up 10.9% and 12.3% respectively year to date.
  • Despite the gains in the equity markets, treasury yields fell a bit this week, as the 5 year and 10 year treasury finished the week at 0.69% and 1.67% respectively.
  • The spot price of WTI Crude Oil rebounded this week, rising by 5.1%, closing at $92.74 per barrel. On the year, oil prices are down 0.8%.
  • Gold and precious metals also bounced back this week with the spot price of Gold rising 4.0% and closing at $1460.05/ounce. Despite this week’s gains, gold is down 12.9% for the year.

 

Economic Data

  • Weekly Initial Jobless Claims fell by 13,000 this week and came in lower than expected at 339,000 vs. consensus expectations of 350,000. The 4-week moving average of jobless claims moved down to 357,500. The Labor Department noted that we are still in a seasonally volatile period of the year but did not point to any major factors that would distort claims numbers.
  • Real GDP grew at a slower than expected 2.5% annual rate in the 1st quarter vs. consensus expectations of 3.0%. Government spending was a large subtraction for the second consecutive quarter, shaving 0.8% off of Q1 growth. The unexpectedly large drag from defense spending was likely due to the first effects of the sequestration cuts.
  • 1st quarter earnings season continues on, with 271 companies in the S&P 500 having reported. Some of the takeaways so far:

o   1st quarter earnings have beat consensus expectations by an average of 3%. However, estimates for the rest of the year fell by 1% as roughly 75% of managements guided below 2nd quarter consensus expectations.

o   More than 40% of firms in the Industrials and Materials sectors missed revenue expectations as global demand weakened, led by Europe.

 

Fact of the Week

  • The International Labour Organization estimates a record 200 million people will be unemployed around the world in 2013. If you gave them their own country, it would be the fifth largest nation in the world.

 

Please contact a member of the Wealth Management Department if you have any questions about this information.

Rich Gartelmann – (630) 844-5730 rgartelmann@oldsecond.com
Dayle Malone – (630) 906-5489 dmalone@oldsecond.com
Brad Johnson – (630) 906-5545 bjohnson@oldsecond.com
Joel Binder – (630) 844-6767 jbinder@oldsecond.com
Jacqueline Runnberg – (630) 966-2462 jrunnberg@oldsecond.com

Visit Old Second Wealth Management

Old Second Ottawa accepting donations for Marseilles flood victims

Old Second Bank in Ottawa (323 E. Norris Drive) is a donation drop-off site for the displaced victims of the Marseilles flood.

We are accepting cash or necessity items.

Items needed include:
Toothbrushes, toothpaste, soap, shampoo, washcloths, towels, razors, combs, brushes, Depends Pads, Feminine Products, Diapers, Wipes and any type of cleaning supplies/items. Especially needed are garbage bags, mops, buckets, gloves, batteries & paper products.

Check donations can be made out to “The Flood Relief Fund.”

For more information, call or visit

Old Second Bank
323 E. Norris Dr., Ottawa, IL
(815) 366-4557

FHFA Extends HARP to 2015

Old Second Residential LendingOld Second Residential Lending division has positioned itself to accommodate the Home Affordable Refinance Program (HARP).  The Federal Housing Finance Agency (FHFA) directed Fannie Mae and Freddie Mac to extend HARP by two years to December 31, 2015. The program was set to expire December 31, 2013.

In addition, FHFA will soon launch a nationwide campaign to inform homeowners aboutHARP. This campaign will educate consumers about HARP and its eligibility requirements and motivate them to explore their options and utilize HARP before the program ends.

The HARP program is designed specifically to help borrowers who may not qualify for traditional refinancing due to low home value or because they have low or no home equity. Borrowers may be able to lower their monthly payment, their rate or move from an adjustable rate loan product to a fixed rate loan product.

“The housing industry has a seen a number of changes in the past several years.” said Steve Weber, senior vice resident of residential lending at Old Second Bank. “Old Second has taken the necessary measures to act as facilitators.  We want to make it easy and economical for consumers to take advantage of these federal programs.”

To be eligible for a HARP refinance homeowners must meet the following criteria:

  • The loan must be owned or guaranteed, and acquired by Fannie Mae or Freddie Mac on or before May 31, 2009.
  • The borrower must be “current” on their mortgage payments – no missed payments in the last 6 months, and no more than one payment missed in the last 12 months.)
  • The first mortgage can exceed the current market value of the home.

Borrowers can visit http://www.oldsecond.com/loans/home-loans/#special-financing to get more information about the HARP program and to determine if their loan is owned by Fannie Mae or Freddie Mac.

Wealth Management Weekly Update April 19, 2013

U.S. and World News

  • Japanese Prime Minister Shinzo Abe previewed his “third arrow” of economic policy aimed to boost growth in the nation. Arrows one and two were extremely easy monetary policy and a big boost in government spending and have sent Japanese markets much higher. This third arrow includes a promise for more free trade deals but has been met with skepticism as opening trade in Japan would require serious reform.
  • Italian elections remain unresolved as parliamentary votes have not been able to produce enough support to generate a consensus. Four rounds of parliament votes have been conducted to no avail.
  • Gun control legislation that would have required background checks for online and gun-show transactions failed in the Senate. The chamber voted 54-46 in favor of the measure, but fell short of the 60 required for the bill to pass.

Markets

  • Stock markets had their worst week of 2013 with the S&P 500 Index falling by 2.1%, closing at 1,555. The Dow Jones Industrial Average also fell and was down 2.1% to close at 14,547. Following the drop this week, the S&P and the Dow up 9.1% and 11.0% respectively year to date.
  • Treasury yields ended the week relatively flat compared to last week, as the 5 year and 10 year treasury finished the week at 0.70% and 1.71% respectively.
  • The spot price of WTI Crude Oil dropped along with most of the commodity complex this week, falling by 3.7%, closing at $87.90 per barrel. On the year, oil prices are down 5.6%.
  • Gold and precious metals continued their vicious sell off amid reports that struggling European central banks may have to sell its gold reserves to help pay for bailouts. The spot price of Gold plunged lower this week, falling 5.4% and closing at $1401.80/ounce. Gold continued its slide in 2013 and is down 16.3% for the year.

 Economic Data

  • Weekly Initial Jobless Claims rose by 6,000 this week and came in higher than expected at 352,000 vs. consensus expectations of 350,000. The 4-week moving average of jobless claims moved up to 358,500.
  • 1st quarter earnings season is underway, with 104 companies in the S&P 500 having reported. Some of the takeaways so far:
    • 72% of companies reporting have beat earnings expectations but less than 50% have exceeded revenue expectations.
    • Financial companies have beat earnings estimates, but investors have been disappointed with the quality of those beats, sending shares of those companies lower.

Fact of the Week

As of January 2013, there are 16 people left in the world who were born in the 1800s, according to the Gerontology Research Group. With dividends reinvested, U.S. stocks have increased 28,000-fold during their lifetimes.

 Please contact a member of the Wealth Management Department if you have any questions about this information.

Rich Gartelmann – (630) 844-5730 rgartelmann@oldsecond.com
Dayle Malone – (630) 906-5489 dmalone@oldsecond.com
Brad Johnson – (630) 906-5545 bjohnson@oldsecond.com
Joel Binder – (630) 844-6767 jbinder@oldsecond.com
Jacqueline Runnberg – (630) 966-2462 jrunnberg@oldsecond.com

Visit Old Second Wealth Management

Wealth Management Weekly Update April 12, 2013

U.S. and World News

  • President Obama unveiled his fiscal 2014 budget plan that looks to cut the deficit to 2.8% of GDP by 2016 from a current level of 5.3%. The proposal included shutting down tax loopholes for the well-off but also included spending cuts and an offer to use chained CPI to limit the cost of living increases on welfare programs. The package has little chance of becoming law as is, but the White House is hopeful that it can kick start negotiations.
  • Eurozone finance ministers are meeting this weekend to discuss, among other issues, the €6B that Cyprus will need over and above the original €17B required for its bailout. Cyprus is requesting extra aid, but will be met with resistance as the bloc has made it clear it does not wish to provide any more than the €10B it has already pledged.
  • The Illinois Senate has begun a two month effort to introduce pension reform in an effort to address almost $100B in unfunded liabilities. One proposal is to place restrictions on cost of living increases on pension payments and another involves asking workers to forgo state-funded healthcare in retirement. The state’s unions are opposed of course and the state’s constitution makes it difficult to enact reform.

Markets

  • Stock markets rose this week, setting more all-time highs with the S&P 500 Index rising by 2.3%, closing at 1,589. The Dow Jones Industrial Average also rallied and was up 2.1% and closed at 14,865. Both indices added to their solid gains with the S&P and the Dow up 11.4% and 13.4% respectively year to date.
  • Despite the rally in equities, treasury yields ended the week relatively flat compared to last week, as the 5 year and 10 year treasury finished the week at 0.69% and 1.72% respectively. Treasury rates seem to be reacting to the uncertainty in global economy much more so than the stock markets.
  • The spot price of WTI Crude Oil dropped again this week, falling by 1.9%, closing at $90.94 per barrel. On the year, oil prices are down only 2.4%.
  • The spot price of Gold was plunged lower this week, falling 5.8% and closing at $1488.60/ounce. Gold continued its slide in 2013 and is down 11.1% for the year.

 

Economic Data

  • Weekly Initial Jobless Claims came back down this week and fell by 39,000 and came in lower than expected at 346,000 vs. consensus expectations of 360,000. The 4-week moving average of jobless claims moved up to 358,000. The Labor Department noted that claims numbers this time of year may be affected by the Easter holiday and the timing of Spring Break.
  • Consumer sentiment was weaker than expected in April, falling to 72.3 vs. consensus expectations of 78.6, the lowest level in nine months. Surveys show that consumers remain pessimistic about government policies and are becoming increasingly pessimistic about the labor market after last week’s poor employment report.

Fact of the Week

  • The number of people receiving disability benefits has jumped from 7.1 million in December 2007 to an estimated 8.9 million in March, which is equal to 5.4% of the workforce. This compares with just 1.7% of the workforce in 1970 and has Congress looking at reforms to the programs because as currently administered, people on disability have little incentive to leave the program and find work.

 

Please contact a member of the Wealth Management Department if you have any questions about this information.

Rich Gartelmann – (630) 844-5730 rgartelmann@oldsecond.com
Dayle Malone – (630) 906-5489 dmalone@oldsecond.com
Brad Johnson – (630) 906-5545 bjohnson@oldsecond.com
Joel Binder – (630) 844-6767 jbinder@oldsecond.com
Jacqueline Runnberg – (630) 966-2462 jrunnberg@oldsecond.com

Visit Old Second Wealth Management

Wealth Management Weekly Update April 5, 2013

U.S. and World News

  • President Obama will reportedly offer cuts in Social Security and Medicare in a budget he is due to propose next week in an effort to show he is prepared to compromise with Republicans on the topic of entitlements. The plan is reported to include a chained CPI method to calculate cost-of-living increases to the programs.
  • New Bank of Japan Governor Haruhiko Kuroda announced more significant measures that the bank will take in an effort to spur inflation in the country that has been in deflation for more than 20 years. This open-ended plan includes buying Japanese government bonds of all maturities, not just short-term debt as they had done in the past.

 

Markets

  • Markets again generally fell this week but there was a bit of divergence with the S&P 500 Index falling by 1.0%, closing at 1,553. The Dow Jones Industrial Average ended the week only down 0.1% and closed at 14,565. Both indices still have solid gains with the S&P and the Dow up 8.9% and 11.1% respectively year to date.
  • Treasury yields continued their plunge this week as the 5 year and 10 year treasury finished the week at 0.69% and 1.71% respectively. Treasury rates seem to be reacting to the uncertainty in global economy much more so than the stock markets.
  • The spot price of WTI Crude Oil dropped this week by 4.3%, closing at $93.01 per barrel. So far in 2013 oil prices have been volatile but are down only 0.1% on the year.
  • The spot price of Gold was lower for the week, falling 1.1% and closing at $1579.15/ounce. Year to date in 2013, gold is down 5.7%.

 

Economic Data

  • Weekly Initial Jobless Claims spiked this week by 28,000 and came in higher than expected at 385,000 vs. consensus expectations of 353,000. The 4-week moving average of jobless claims moved up to 354,000. The Labor Department noted that the claims number may have been affected by the Easter holiday and the timing of Spring Break.
  • The monthly non-farm payrolls number also came in worse than expected, showing the addition of only 88,000 jobs vs. consensus expectations of 190,000. The previous two months were revised up by a combined 61,000, softening the blow of the report a bit.
    • The unemployment rate did fall unexpectedly to 7.6% vs. consensus of 7.7% but this drop is not being viewed as a positive. The cause of the drop was a reduction in workforce participation by about 500,000 people, bringing the workforce participation rate down to 63.3%, the lowest level since May 1979. Record numbers of Americans are giving up on finding a job or finding the unemployment benefits provided to them preferable to jobs that may be available.

Fact of the Week

  • Over the past 16 years, the Dow Jones is up 42% on Mondays and a whopping 97% on Tuesdays. The other days returns are 1% on Wednesdays, -0.5% on Thursdays and -20% on Fridays. These numbers may show that maybe traders on Wall Street like to take long weekends and come back on Monday buying.

Please contact a member of the Wealth Management Department if you have any questions about this information.

Rich Gartelmann – (630) 844-5730 rgartelmann@oldsecond.com
Dayle Malone – (630) 906-5489 dmalone@oldsecond.com
Brad Johnson – (630) 906-5545 bjohnson@oldsecond.com
Joel Binder – (630) 844-6767 jbinder@oldsecond.com
Jacqueline Runnberg – (630) 966-2462 jrunnberg@oldsecond.com

Visit Old Second Wealth Management