In The News...

It has been a pretty crummy couple weeks between Las Vegas, North Korea, the Napa fires, the U.S. missing the World Cup, and so on. But there was one bit of good news last week.

If you are one of the 66 million Americans receiving Social Security benefits, your monthly amount is increasing by +2% next year. This comes after a +0.3% bump in 2017 and no increase in 2016. Social Security benefits are supposed to link to the change in the Consumer Price Index (CPI) to ensure that retiree payments keep pace with cost increases that gradually occur over time. This is referred to as the "cost-of-living-adjustment" (COLA). Here is the history of benefits increases, showing that 2018 will be the biggest change since 2011 (note that each year's COLA affects the following calendar year):

If you have yet to start taking benefits you are unaffected. This only affects those currently taking Social Security. If you are still working, age 62 is the youngest age you can begin receiving Social Security, albeit an amount that is permanently reduced if you take them early. For most workers, age 67 is the "normal retirement age" as determined by the Social Security Administration. That is when you receive your "full" benefit. You may instead delay taking benefits until the latest of age 70, which would increase your benefits by +8% for each year you postpone taking them. This means you could increase your benefits by a whopping +24% if your normal retirement age is 67 but you wait until age 70.

If you are married but did not work, you can receive a benefit equal to one-half of your spouse's amount. If you are divorced but were married more than 10 years you can receive benefits based on your ex-spouse, so long as you did not remarry. There are other nuanced rules, including widow benefits. If you want to know more, just ask. Your goal should be to balance maximizing your total Social Security payout with delaying payments no longer than when you need the money.

In The Market...

The S&P 500 rose +0.2% last week. Let's look under the hood...

STOCKS: It was a quiet, mostly positive week for stocks. Seven of the 10 equity sectors gained and the S&P 500 index continues to ascend higher toward 2,600, finishing last week at 2,553. It was the fifth-straight weekly gain for the broad-market index. Our Technology positions (namely XLK and QQQ) and our Utilities position (XLU) nicely outperformed the S&P 500.

BONDS: Interest rates fell as demand for Treasuries and Investment-Grade Corporate bonds picked up. This was a positive development considering we continue to own both within most client accounts.

In Our Opinion...

There were two quotes from last week that I would like to touch on...

No tax reform anytime soon? Senator Ted Cruz (R-TX) was on CNBC last week, where he said he does not see tax reform happening until the end of this year or sometime in 2018. Two weeks ago I discussed President Trump's tax reform plan (at least the details provided) and indicated that it has a legitimate shot of happening. I cannot say I am surprised that it will not occur in 2017. We are only a few weeks from the holidays and for as stagnant as Congress can be, legislation particularly slows down near year-end.

Trump credits the stock market for reducing national debt. It is little secret that the U.S. stock market has done well since the election nearly one year ago. This is more coincidence than correlation. Politicians will credit themselves if the stock market performs well during their tenure. And perhaps they should, as long as it works for their agenda.

But the truth is, presidents and stock market performance are simply not correlated. For example... The internet took off during the Clinton administration. Should he get credit for the immeasurable positive impact that the world wide web has had on global economic growth? No he shouldn't, just in the same way that President George W. Bush should not be blamed because the tech bubble burst during the first two years of his administration and the S&P 500 fell some -40% from 2001-2003.

In order to properly explain why the market goes up or down you would have to know the motivation that every investor has for deciding whether to buy or sell, which is impossible. I have written about this before so I won't belabor that argument. But what is new is Trump's assertion that market gains have reduced the national debt. He cited that the U.S. government had borrowed $10 trillion during the Obama administration, bringing the total national debt to $20 trillion. He said that during his brief tenure the stock market has "in a sense" recovered $5 trillion of that $10 trillion in additional Obama debt due purely to market gains.

This is an outrageous statement. I don't care who the messenger is. This could come from any president, of any party. Not only is it inaccurate, but it is bizarre because it just doesn't make sense. Market gains will result in individuals paying more in the way of investment-related taxes and those types of capital gains and dividends taxes are sources of government revenue that drives the national budget. But such revenue increases are minimal when talking about $20 trillion in overall debt and a government that is adding to that amount by running a budget deficit most months.

In Our Portfolios...

Q&A/Financial Planning...

We are frequently asked, whether directly or indirectly, questions pertaining to what makes our firm's approach better/different than other options. I am considering hosting a webinar that details our investment process and philosophy, to help answer many of these questions. I can then save the recording and make it available on our blog at your leisure.

If this is something you would be interested in seeing, please share your thoughts. It will take some time to put this together so if I do it I just want to make sure that I cover the things you are most interested in learning about. Among the points of differentiation that I would include:

How we manage against risk -- How we use different types of bonds to truly diversify and mitigate stock market risk.
How we analyze the market -- We use technical analysis, namely price history and statistics that stem from price. This differs from firms that use other techniques.
Fees -- Warren Buffett famously said, "Price is what you pay, value is what you get." It can be difficult to compare fee structures between firms, but I believe ours is pretty straightforward and commensurate to the overall service we provide.
Financial planning -- This kick-starts the investment approach for most clients. Some investment advisory firms do not provide planning or provide it for an additional cost. We provide it at no additional charge so long as our $25,000 investment minimum is reached.

I welcome your feedback. I think it is important to know how we conduct business and ensure that we are consistent with your needs over time.

What's New With Us?

After six great years in our current office location I am likely moving our home office. I think it is good to mix things up every few years and this will be an opportunity to do that. We won't move far - in fact, my hope is to find a location that is more convenient for you to visit us here in downtown Seattle. If you happen to know of any available office space here in Seattle, please share!

Enjoy the rest of your week!

Brian E Betz, CFP®
Principal

Market & Financial Planning Commentary