Monthly Archives: March 2014

Guarding Against Identity Theft

2007 Stress out ladt look at computer 2007 pic
Take steps so criminals won’t take vital information from you.

BY GREG OLIVER

America is enduring a data breach epidemic. As 2013 ended, the federal Bureau of Justice Statistics released its 2012 Victims of Identity Theft report. Its statistics were sobering. About one in 14 Americans aged 16 or older had been defrauded or preyed upon in the past 12 months, more than 16.6 million people.1

Just 8% of those taken advantage of had detected identity theft through their own vigilance. More commonly, victims were notified by financial institutions (45%), alerts from non-financial companies or agencies (21%), or notices of unpaid bills (13%). While 86% of victims cleared up the resulting credit and financial problems in a day or less, 10% of victims had to struggle with them for a month or more. 1

Consumers took significant financial hits from all this. The median direct loss from cyberthieves exploiting personal information in 2012 was $1,900, and the median direct loss from a case of credit card fraud was $200. While much of the monetary damage is wiped away for the typical victim, that isn’t always the case.1

Tax time is prime time for identity thieves. They would love to get their hands on your return, and they would also love to claim a phony refund using your personal information. In 2013, the IRS investigated 1,492 identity theft-linked crimes – a 66% increase from 2012 and a 441% increase from 2011.2

E-filing of tax returns is becoming increasingly popular (just make sure you use a secure Internet connection). When you e-file, you aren’t putting your Social Security number, address and income information through the mail. You aren’t leaving Form 1040 on your desk at home (or work) while you get up and get some coffee or go out for a walk. If you just can’t bring yourself to e-file, then think about sending your returns via Certified Mail. Those rough drafts of your returns where you ran the numbers and checked your work? Shred them. Use a cross-cut shredder, not just a simple straight-line shredder (if you saw Argo, you know why).

The IRS doesn’t use unsolicited emails to request information from taxpayers. If you get an email claiming to be from the IRS asking for your personal or financial information, report it to your email provider as spam.2

Use secure Wi-Fi. Avoid “coffee housing” your personal information away – never risk disclosing financial information over a public Wi-Fi network. (Broadband is susceptible, too.) It takes little sophistication to do this – just a little freeware.

Sure, a public Wi-Fi network at an airport or coffee house is password-protected – but if the password is posted on a wall or readily disclosed, how protected is it? A favorite hacker trick is to sit idly at a coffee house, library or airport and set up a Wi-Fi hotspot with a name similar to the legitimate one. Inevitably, people will fall for the ruse and log on and get hacked.

Look for the “https” & the padlock icon when you visit a website. Not just http, https. When you see that added “s” at the start of the website address, you are looking at a website with active SSL encryption, and you want that. A padlock icon in the address bar confirms an active SSL connection. For really solid security when you browse, you could opt for a VPN (virtual private network) service which encrypts 100% of your browsing traffic; it may cost you $10 a month or even less.3

Make those passwords obscure. Choose passwords that are really esoteric, preferably with numbers as well as letters. Passwords that have a person, place and time (PatrickRussia1956) can be tougher to hack.4

Check your credit report. Remember, you are entitled to one free credit report per year from each of the big three agencies (Experian, TransUnion, Equifax). You could also monitor your credit score – Credit.com has a feature called Credit Report Card, which updates you on your credit score and the factors influencing it, such as payments and other behaviors.1

Don’t talk to strangers. Broadly speaking, that is very good advice in this era of identity theft. If you get a call or email from someone you don’t recognize – it could tell you that you’ve won a prize, it could claim to be someone from the county clerk’s office, a pension fund or a public utility – be skeptical. Financially, you could be doing yourself a great favor.

GREG OLIVER 092179037209437[029734`[02934[2907837

Citations.
1 - dailyfinance.com/2013/12/31/scariest-identity-theft-statistics/ [12/31/13]
2 – csmonitor.com/Business/Saving-Money/2014/0317/Tax-filing-online-Seven-tips-to-avoid-identity-theft.-video [3/17/14]
3 – forbes.com/sites/amadoudiallo/2014/03/04/hackers-love-public-wi-fi-but-you-can-make-it-safe/ [3/4/14]
4 – articles.philly.com/2014-03-18/business/48301317_1_id-theft-coverage-identity-theft-adam-levin [3/18/14]

China, Ukraine & the Markets

China, Ukraine & the Markets

China, Ukraine & the Markets
New economic & political concerns are putting stocks to the test.

BY GREG OLIVER

Dow drops again, analysts wonder. March 13 saw another triple-digit descent for the blue chips – the Dow Jones Industrial Average plummeted more than 230 points, the second market day in less than two weeks to witness a loss of 150 points or greater. The S&P 500’s (small) YTD gain was also wiped out by the selloff. As the bull market enters its sixth year, it faces some sudden and potentially stiff headwinds, hopefully short-term.1,2

In Ukraine, the situation is fluid. As the trading week ended, much was unresolved about the nation’s future. The parliament of its autonomous Crimea region had announced a March 16 referendum, which gave voters two options: rejoin Russia, or break away from Ukraine and form a new nation.3

Ukraine’s government calls the referendum unconstitutional. The United States and key EU members agree and claim it violates international law. Russia welcomes the vote – 60% of the Crimean Peninsula’s population is made up of ethnic Russians, and Russian troops more or less control the region now.3

Russia wants the real estate (its Black Sea naval fleet is based on the Crimean Peninsula) and could spread its economic influence further with the annexation of that region. The cost: economic sanctions, probably harsh ones. Should diplomacy fail to stop the secession vote, then Russia can expect “a very serious series of steps Monday in Europe and [the United States],” according to Secretary of State John Kerry.3

So far, the moves have been largely symbolic: a suspension of the 2014 G8 summit and the talks on Russia’s entry into the OECD, and asset freezes for individuals and companies deemed to be hurting democracy in Ukraine. Additional “serious” steps could include financial sanctions for Russian banks, an embargo on arms exports to Russia, and the EU opting to get more of its energy supplies from other nations. Russia could respond in kind, of course, with similar asset freezes and possible pressure on eurozone companies doing business in Ukraine. The fact that Russia has already staged war games near Ukraine adds another layer of anxiety for global markets.4

Investors see China’s growth clearly slowing. Its exports were down 18.1% year-over-year in February. Analysts polled by Reuters projected China’s industrial output rising 9.5% across January and February, but the gain was actually just 8.6%. The Reuters consensus for a yearly retail sales gain of 13.5% for China was also way off; the advance measured in February was 11.8%. These disappointments bothered Wall Street greatly on Thursday. The news also roiled the metals market – copper fell 1.3% on March 13, its third down day on the week. Besides being the world’s top copper user, China also employs the base metal as collateral for bank loans.1,5,6

As Chinese Premier Li Keqiang noted on March 13, the nation’s 2014 growth target is 7.5%; the respected (and very bearish) economist Marc Faber told CNBC he suspects China’s growth is more like 4%. The upside, Faber commented, is that “4 percent growth in a world that has no growth is actually very good.”6

Will the bull market pass the test? It has passed many so far, and it is just several days away from becoming the fifth-longest bull in history (outlasting the 1982-7 advance). Bears wonder how long it can keep going, referencing a P-E ratio of 17 for the S&P 500 right now (rivaling where it was in 2008 before the downturn), and the 1.9% consensus estimate of U.S. Q1 earnings growth in Bloomberg’s latest survey of Wall Street analysts (down from a 6.6% forecast when 2014 began).1

Then again, the weather is getting warmer and the new data stateside is encouraging: February saw the first rise in U.S. retail sales in three months, and jobless claims touched a 4-month low last week. Maybe Wall Street (and the world) can keep these signs of the U.S. economic rebound in mind as stocks deal with momentary headwinds.1

Citations. GREG OLIVER 9384983943
1 – bloomberg.com/news/2014-03-12/nikkei-futures-fall-before-china-data-while-oil-rebounds.html [3/12/14]
2 – ajc.com/feed/business/stock-market-today-dow-jones-industrial-average/fYjPS/ [3/3/14]
3 – cnn.com/2014/03/13/politics/crimea-referendum-explainer/ [3/13/14]
4 – uk.reuters.com/article/2014/03/13/uk-ukraine-crisis-factbox-idUKBREA2C19L20140313 [3/13/14]
5 – cnbc.com/id/101492226 [3/13/14]
6 – cnbc.com/id/101489500 [3/13/14]

Hanging on Through the Turbulence

couple peeping through hole in white paper
Patience & diversification matter in all manner of stock market climates.

BY GREG OLIVER

Stocks rise, fall … and rise again. Volatility certainly came back to Wall Street during the first several weeks of 2014 in the form of a 7.2% descent for the Dow Jones Industrial Average and a 5.9% retreat for the NASDAQ. The declines gave investors pause: was a correction underway? Would bulls be held back for 2014?1

As it turned out, no. On February 27, the S&P 500 settled at a new all-time peak of 1,854.30, with dovish remarks from Federal Reserve chair Janet Yellen providing lift. On the same market day, the DJIA closed at 16,272.71 and the NASDAQ at 4,318.93.2

Ups and downs are givens when you invest in equities. Still, the skid stocks took in 2008-09 has made everyone from millennials to members of the Greatest Generation anxious about any string of down days for the big indices. If the benchmarks lose a couple of percentage points in a week, or more in a month, headlines and news alerts emerge and encourage collective fears of a stock bubble.

Be patient; be prepared. We don’t really know what will happen tomorrow, and therefore we don’t really know what will happen on Wall Street tomorrow (though we can make educated guesses in both respects). Because of that, it is wise to diversify your portfolio across different asset classes and rebalance it from time to time.

Would you rather have a portfolio that might perform at least decently in varied stock market climates, or a mix of investments that only makes sense in a bull run? We recognize that diversification is wise, especially for the long run … and yet, when things go really well or really poorly on the Street, impatience and anxiety readily lure us away from the age-old wisdom.

The S&P 500 rose 29.6% in 2013, 31.9% with dividends included. Rationally, investors realize that such phenomenal stock gains won’t happen every year. Even so, the temptation to go full-bore into U.S. stocks and stock funds was pretty strong at the end of 2013 … comparable to the call to invest in gold or bear-market funds back in 2008-09.4

If an investor relied on impulse rather than diversification across these past few years, he or she might be poorer and/or awfully frustrated today. Gold is in a bear market now, and according to Morningstar, the average bear market fund has lost 33% annually since 2008. Stocks are firmly in a bull market now, but an investor hypothetically going “all in” on domestic stocks at the end of 2013 (i.e., buying high) would have faced a market decline early in 2014 and might have impatiently sold their shares.3

Strategies like dynamic asset allocation attempt to leverage better-performing sectors of the market while shifting portfolio assets away from underperforming sectors. Such tactical moves may lead to improved portfolio performance. Of course, the strategy also seeks to foster intelligent diversification across asset classes.

Dynamic asset allocation is a strategy best left to professionals, even teams of them. Most retail investors would be hard pressed to even attempt it, even at a basic level. This is why the buy-and-hold approach (buy low, sit back, ride it out, sell high years later) is so often suggested to those saving for retirement and other long-term objectives.

Hang on when turbulence affects the markets. Staying in the market can prove the right move even when the news seems cataclysmic – look at how stocks have rebounded, and hit new highs, since the precipitous fall the S&P took in the recession. Sticking with principles of diversification can prove wise in both challenging and record-setting markets.

GREG OLIVER 093490137890389018309183091384

093274[39074[`90374[930/// ohio / g. oliver

Citations.
1 - marketwatch.com/story/the-markets-in-for-a-wild-but-clearly-bullish-ride-2014-02-27 [2/27/14]
2 – thestreet.com/story/marketstory.html [2/27/14]
3 – marketwatch.com/story/dont-try-to-time-the-market-2014-02-21 [2/21/14]
4 – tinyurl.com/k9ul3af [12/31/13]