UK & Germany: Wealth Economic Update July 25, 2016

U.S. and World News

  • U.K. Prime Minister Theresa May made it clear that she would attempt to secure a very close economic relationship with Germany post-Brexit, but German Chancellor Angela Merkel refuses to negotiate until the U.K. invokes Article 50. If negotiations were to start early, it would give the British incentives to delay notification (the official start of the 2 year negotiation process), which would give them an advantage and could lead to the negotiations being dragged out indefinitely.  
  • A three-month state of emergency has been declared by Turkey’s President Erdogan Wednesday night in order to “protect democratic values” by stopping parliament from passing new laws against supporters of last Friday’s coup. President Erdogan has also suspended or detained roughly 50,000 police officers, judges, civil servants, and teachers this week which has provided some stability, but some uncertainty still remains. The Turkish equity index regained some of its losses and Turkey’s central bank cut its overnight lending rate 0.25% to 8.75%.

Markets

  • This week the S&P 500 was up 0.64% and closed at 2,175. The Dow Jones gained 0.35% and closed at 18,571. So far in 2016, the S&P is up 7.61% and the Dow is up 8.05%.
  • The 5 year and 10 year U.S. Treasury Notes are now yielding 1.12% and 1.57%, respectively.
  • The spot price of WTI Crude Oil fell 5.21% this week to close at $44.22 per barrel. WTI Crude is up 4.29% in 2016.
  • The spot price of Gold lost 1.11% this week, closing at $1,322.64 per ounce. Year to date, gold prices are up 24.65%. 

Economic Data

  • Initial jobless claims came in at 253,000 which is slightly lower than last week’s reading. The Labor Department noted no special factors in the data. The four week moving average for claims moved down to 259,000.
  • Existing home sales were up 1.1% in June reaching a post-crisis high versus expectations of a slight decline. This was led by multi-family home sales and homes in the Midwest region.

Fact of the Week

  • The medium square footage of new single family homes built in the United States in 2015 was 2,467 square feet, an increase of 547 square feet over the last 20 years. That’s equivalent to a 23’ x 23’ addition to new homes today when compared to 1995 home construction. Source: Joint Center for Housing Studies of Harvard University.

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

Rich Gartelmann CFP® – (630) 844-5730 rgartelmann@oldsecond.com
Jean Van Keppel CFA® – (630) 906-5489 jvankeppel@oldsecond.com
Brad Johnson CFA®, CFP® – (630) 906-5545 bjohnson@oldsecond.com
Joel Binder, SVP – (630) 844-6767 jbinder@oldsecond.com
Jacqueline Runnberg CFP® – (630) 966-2462 jrunnberg@oldsecond.com
Ed Gorenz, VP – (630) 906-5467 ejgorenz@oldsecond.com

Visit Old Second Wealth Management

*Image of Theresa May, Photo credit:UK Home Office, via Wikimedia Commons. License: Creative Commons Attribution 2.0 Generic license.. (See, https://commons.wikimedia.org/wiki/File:Theresa_May_2015_(cropped).jpg).

Non-deposit investment products are not insured by the FDIC; not a deposit of, or guaranteed by, the bank; may lose value.

 

Banking Leaders: Are They BORN or MADE?

Bob DiCosola, EVP, Human Resource/Training & Development/Risk Management

Robert DiCosola

As an adjunct professor at a local college, I always ask that question as part of the
curriculum for the HR management and business classes I teach. The answer is almost always the same: About 50 percent of the class feels leaders are born, and the other 50 percent believes leaders are made.

That split is actually quite predictable. Experts in this field note that about 15 percent of executives (the top of the bell curve) are born leaders who start out strong and get better over time. Another 15 percent (the bottom of the bell curve) are executives who never want to be leaders or who are never going to be good leaders. The middle of the bell curve (everyone else, or 70 percent of executives) is where the potential to make leaders lies!

A perfect case study for this blog involves my two sons, Joe and Rob. Joe, 22 years old and a recent Audio Engineer grad, is humble, sympathetic, patient, empathetic, a great listener, and a young man of high integrity. Rob, 17 years old and a senior in high school (and drum major in the Batavia marching band this year), is a great communicator, consensus-builder, coach, motivator, problem identifier and problem solver. All of these are outstanding traits for a leader of people. But Joe would rather have a root canal than lead, while Rob naturally leads his peer group like the Pied Piper of Batavia!

 So Rob is at the top of the bell curve and Joe is at the bottom. What does that mean for the 70 percent?

For those executives who have aspirations to manage and lead, a good place for them to start is to train a laser focus on their company’s core values and. Then they can work to hone the leadership competencies necessary to embodying those values.

At Old Second, our core values drive the competencies we require for potential leaders. They are:

  • Solve It
  • Own It
  • Collaborate
  • Innovate
  • Keep Growing
  • Walk the Talk

The corresponding leadership competencies are to:

  • Support strategic growth goals by being a visionary, strategic planner, as well as a sales/service coach and motivator; a consensus and unity builder; and a manager who understands profitability and is willing to serve as a change agent when needed.
  • Support the image of a trusted community banker by leading through example and acting with integrity, trust, and credibility, while being inclusiveness and demonstrating strong community ties.
  • Support ongoing development vs. stagnation through the continuous development of yourself and staff; offering operational and technical expertise; and serving as an example of a well-rounded banker.

As a senior management team, we strongly believe that respect and leadership are mutually inclusive. We further believe that managers who serve as role models of ethics and integrity and who gain respect through credibility, rather than through intimidation, make the best ambassadors for a community bank.

In discussing career growth with our employees, we always make sure that they understand our overall philosophy:

“Career development is the responsibility of the incumbent; management’s role is to provide the tools and opportunities to make it happen.”

Ultimately, Where Your Career Leads Is Up to You

The question is not whether you are a naturally born leader or not. The question you need to ask yourself is: o you have the drive, focus and perseverance to become one?

It’s of the utmost importance to create your own personal blueprint. Identify and address opportunities for improvement as they arise, while maximizing your strengths. Then, partner with your boss to make what comes next happen!

New British PM: Wealth Economic Update July 18, 2016

U.S. and World News

  • Theresa May, British Prime Minister

    Theresa May, British Prime Minister*

    Just three weeks after the U.K. voted in favor of leaving the European Union, Theresa May took over from David Cameron to become the 54th British Prime Minister. Financial markets appeared to approve of the selection although many analysts have said the implications for the U.K. economy could be much bigger due to uncertainty about her policies. May has wasted no time readying her Brexit team as she has appointed a Chancellor, foreign secretary, a Brexit “Tsar” and a trade negotiator.

  • Staying in the U.K., the Bank of England surprised the market by choosing to hold off on any easing action this week. It was believed that BOE Governor Mark Carney would cut rates 25 basis points or increase its bond buying program in the wake of the Brexit vote in order to ward off a possible recession.

Markets

  • This week the S&P 500 was up 1.51% for the week and closed at 2,162. The Dow Jones gained 2.04% and closed at 18,517. So far in 2016, the S&P is up 6.94% and the Dow is up 7.68%.
  • The 5 year and 10 year U.S. Treasury Notes are now yielding 1.11% and 1.56%, respectively.
  • The spot price of WTI Crude Oil gained 1.17% this week to close at $45.94 per barrel. WTI Crude is up 9.69% in 2016.
  • The spot price of Gold lost 2.21% this week, closing at $1,336.15 per ounce. Year to date, gold prices are up 25.92%.

Economic Data

  • Initial jobless claims came in at 254,000 which was unchanged from last week’s reading. The Labor Department noted no special factors in the data. The four week moving average for claims moved down to 259,000.
  • The headline Consumer Price Index (measure of inflation) rose 0.2% in June, below estimates of 0.3%. This was boosted by a 1.3% increase in energy prices, although food prices decline -0.1%. Over the last 12 months, headline CPI has risen 1.0%.
    • The Core CPI (excludes food and energy) rose 0.2%, in line with expectations. Rent inflation remained firm, rising 0.3% in the month. Over the last year, core prices have risen 2.3%.
  • Retail sales increased by 0.6% in June, soundly beating estimates of 0.1%. Sales were boosted in part by higher gasoline sales as fuel prices rose.

Fact of the Week

  • As of 6/30/2016, there was $11.7 trillion of sovereign debt that carries a negative interest rate (ie. investors loaned governments money with the guarantee that they would be paid back less if they held the bond to maturity). This represents over 30% of the world’s sovereign debt. Countries issuing negative yield debt include Japan, Germany, Sweden, Denmark and Switzerland. (Source: Fitch Ratings)

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

Rich Gartelmann CFP® – (630) 844-5730 rgartelmann@oldsecond.com
Jean Van Keppel CFA® – (630) 906-5489 jvankeppel@oldsecond.com
Brad Johnson CFA®, CFP® – (630) 906-5545 bjohnson@oldsecond.com
Joel Binder, SVP – (630) 844-6767 jbinder@oldsecond.com
Jacqueline Runnberg CFP® – (630) 966-2462 jrunnberg@oldsecond.com
Ed Gorenz, VP – (630) 906-5467 ejgorenz@oldsecond.com

Visit Old Second Wealth Management

*Image of Theresa May, Photo credit:UK Home Office, via Wikimedia Commons. License: Creative Commons Attribution 2.0 Generic license.. (See, https://commons.wikimedia.org/wiki/File:Theresa_May_2015_(cropped).jpg).

Non-deposit investment products are not insured by the FDIC; not a deposit of, or guaranteed by, the bank; may lose value.

 

Brexit aftermath: Wealth Economic Update July 5, 2016

U.S. and World News

  • pont_fawr_bridge_Wales_84636501_340The U.K. now faces the challenge created by its vote to leave the European Union and Chancellor George Osborne cautioned it would not be “plain sailing” in the days and weeks ahead. In the fallout from the shocking vote, there have been rumblings of a “re-do” vote or a renewed independence vote in Scotland, but neither is likely to gain too much traction. The process for the U.K. to leave is will officially begin when Parliament invokes Article 50, the timing of which has yet to be determined. Candidates for the Prime Minister post that David Cameron resigned from are beginning to emerge, though prominent Brexit figurehead and former London Mayor Boris Johnson has dropped out of the running.
  • Puerto Rico today defaulted on $800 million of debt payments it had constitutionally guaranteed to make to general obligation bond holders. These bond holders were supposed to receive priority before the Puerto Rican government paid out anything to state employees like police and teachers, however Governor Garcia Padilla ruled to continue running essential services on the island. This marks the first time that a U.S. state or territory has failed to pay general obligation bonds since the Great Depression. In response, Washington has pushed through a law signed by President Obama that would create a federal oversight board to oversee the restructuring of Puerto Rico’s over $70 billion of additional debt. The plan involves 1 out of every 3 dollars the island earns in revenue being used to pay off creditors.

Markets

  • After falling dramatically again on Monday, markets roared back the remainder of the week and regained most if not all of the post-Brexit losses. The S&P 500 was up 3.27% for the week and closed at 2,103. The Dow Jones gained 3.18% and closed at 17,949. So far in 2016, the S&P is up 4.00% and the Dow is up 4.37%.
  • Interest rates moved lower again this week despite the rally in the equity markets. The 5 year and 10 year U.S. Treasury Notes are now yielding 1.00% and 1.44%, respectively.
  • The spot price of WTI Crude Oil gained 3.48% this week to close at $49.30 per barrel. WTI Crude is up 17.71% in 2016.
  • The spot price of Gold gained 1.95% this week, closing at $1,341.35 per ounce. Year to date, gold prices are up 26.41%.

Economic Data

  • Initial jobless claims came in at 268,000 which was an increase from last week’s reading of 259,000. The Labor Department noted no special factors in the data. The four week moving average for claims moved down to 266,750.
  • The Case-Shiller home price index rose 0.5% in April, slightly missing expectations of 0.6%. Prices increased in 16 of the 20 cities represented in the index. Over the last 12 months, home prices as measured by the index have risen 5.4%.
  • The headline PCE Index (measure of inflation) rose by 0.2% in May, in line with consensus expectations. The increase was in part due to a 1.4% rise in energy goods and services prices. Over the last 12 months, headline PCE has increased 0.9%.
  • The Core PCE Index (excludes food and energy, preferred measure of inflation by the Federal Reserve) also increased 0.2% in May and was in line with expectations. Over the last 12 month, Core PCE has risen 1.6%, still well short of the Fed’s 2% inflation target.

Fact of the Week

  • According to the Social Security Trustees 2016 report, the trust fund backing the payment of Social Security benefits would be zero in 2035. A zero trust fund does not mean that Social Security payments would also go to zero, but rather would drop to 77% of their originally promised level (or a 23% cut to benefits). In the 2009 report, the projection had been that that the trust fund would hit zero in 2042.

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

Rich Gartelmann CFP® – (630) 844-5730 rgartelmann@oldsecond.com
Jean Van Keppel CFA® – (630) 906-5489 jvankeppel@oldsecond.com
Brad Johnson CFA®, CFP® – (630) 906-5545 bjohnson@oldsecond.com
Joel Binder, SVP – (630) 844-6767 jbinder@oldsecond.com
Jacqueline Runnberg CFP® – (630) 966-2462 jrunnberg@oldsecond.com
Ed Gorenz, VP – (630) 906-5467 ejgorenz@oldsecond.com

Visit Old Second Wealth Management

Non-deposit investment products are not insured by the FDIC; not a deposit of, or guaranteed by, the bank; may lose value.

 

What May Surprise You About Treasury Management at Old Second Bank

Juwana Zanayed, First Vice President/Director—Treasury Management

Juwana ZanayedIn today’s world, access to treasury management tools is beneficial to companies of all sizes. But, how you gain access to those tools, their level of sophistication and the support you receive once you sign up for them can vary greatly. At Old Second, we offer all the same big bank products, on a local level and with personal hands-on service.

At their most basic, treasury management products and services help your business in at least one of three ways:

  1. Increase cash flow through remote deposit or lockbox services
  2. Tailor treasury management services to reduce accounts receivables
  3. Streamline operations through improved efficiencies

As technological innovations have enabled more banks to offer these products to companies of all sizes, there has been a tendency for some of the larger banks to package these services into off-the-shelf solutions. There are some efficiencies to be gained from doing this—at least from a bank’s perspective. But, taking a one-size-fits-all approach to bringing treasury management products to mid- to small-sized companies isn’t always a more efficient option for each client.

For this reason, we customize the suite of services we offer to your firm’s needs and then scale those services to the size of your company, not the other way around. Taking a right-sized approach enables us to not only give more clients access to the latest innovations in treasury management as soon as they are available, it also ensures you only pay for the services that are right for you.

One-Stop Shop Thanks to a Team Approach

Each relationship manager has an in-depth understanding of and can suggest best practices in treasury management. This allows us to look at the customer relationship as a whole, drawing in experts from across different service areas of the bank as needed.

As a result of this approach, each client is assigned a dedicated team of experts—including a lender, treasury advisor and a wealth manager. Regardless of whom you reach out to on the team, each knows the history of your relationship and will take a hands-on approach to answering your questions and resolving any issues that may arise.

What You Need Today

In addition to treasury management and credit tools, including our BusinessManager® [DIRECT LINK to previous blog] product, we find what businesses are most in need of today is confidence that when they are transacting business online it’s secure.

Our commercial online banking platform allows you to manage your accounts twenty-four hours a day with secure access from any computer with Internet access.

For this reason, we provide our clients with access to multi-layered protection in a variety of ways. We use Trusteer Rapport, a security software, to protect online banking communication from being stolen by detecting malicious browser tampering. It can also remove existing financial malware from employee machines and prevent future infections.

Security Manager, is another software feature. It offers password authentication by generating single-use, text passcodes. Old Second also uses multi-layered security and encryption to keep bank and account information secure.

In addition, we offer two fraud prevention tools:

  • Positive Pay protects against fraud by validating each item on each check to ensure only authorized checks are cleared through your accounts.
  • ACH Fraud Protection blocks and filters information to protect against electronic fraud.

For more information our treasury management services click here. To determine which are appropriate for your firm—contact a commercial representative at 877-866-0202. We can’t wait to talk to you about what we can do for you today.