4th Quarter 2017

The American Academy of Pediatrics has issued a warning citing negative outcomes of social media on young kids and teens. Children’s brains and personalities are still developing and social media isn’t a substitute for person-to-person interaction and development.

There is mounting evidence that social media addiction can be seen in young and old. Studies have confirmed that many people show symptoms of psychological withdrawal when they stop using digital devices.

Phil Reed, one of the authors of the study conducted by Swansea and Milan Universities said, “We have known for some time that people who are over-dependent on digital devices report feelings of anxiety when they are stopped from using them, but now we can see that these psychological effects are accompanied by actual physiological changes.”

California State Teachers’ Retirement System (CalPERS) and JANA Partners own about $2 billion of Apple shares. They sent a letter to Apple calling on the company to develop new software for their devices allowing parents to control and limit use.

We don’t know where this is going but there is a whole generation that from birth on may be given a phone to occupy them and become involved with social media as they age. What is the impact on their development and what, if any, are the long-term effects?

Another disturbing trend is called self-cyberbullying. There is an alarming trend for teenagers to post mean things online—about themselves!

Sameer Hinduja, professor of criminology at Florida Atlantic University said about 6% of children from 12-17 years of age bullied themselves. Hinduja said, “we have a tendency to demonize the aggressor, but in some cases, maybe one out of 20, the aggressor and target are the same.”

The question confounding researchers is why someone would do this to him/herself.

We suspect studying behavior and the interconnection between young people and social media is in its infancy but needs to be accelerated to counteract harmful circumstances.

Jill is about to become a parent to a rescue dog—her first in adulthood. As a friend said, “It took you long enough.”☺

According to www.rover.com there is an average initial cost to rescue a dog of $838. This usually covers vaccines, spaying/neutering, microchip, and adoption fee. The Humane Society needs money to operate too. Average annual cost for food, treats, and annual vet check-up $1,020.

Potential Other Costs

• Veterinary expenses for emergencies, illness, etc.
• Training for behavioral problems
• Replacement of household goods Rover may have mistakenly thought were toys
• Pet sitting
• Pet walking

Some “dog people” recommend pet insurance. To follow are two links Jill found discussing the various pet insurance companies and rating them. We are not advocating buying pet insurance but do feel it is part of Jill’s due diligence becoming a dog parent.

https://www.consumersadvocate.org/pet-insurance/a/best-pet-insurance?utm_source=Yahoo&utm_medium=cpc&utm_term

http://www.topconsumerreviews.com/pet-insurance/

Our investment approach has always utilized mutual funds as opposed to individual stocks. From our perspective, it is less risky to own $25,000 of a mutual fund that has a basket of individual stocks (companies) than a single stock for $25,000. Since our inception in 1987, risk has always been our first criterion before looking at returns.

Hendrik Bessembinder, a finance professor at Arizona State University published a report November 2017, “Do Stocks Outperform Treasury Bills?” His findings may surprise you.

Method

• Data source:  All common stocks that appeared in the database of the Center for Research in Securities Prices (CRSP) from 1926 – 2016.
• Calculations: Monthly returns for each stock compared to Treasury Bills of the same month. (Most stock market returns are based on a diversified stock market portfolio as opposed to viewing returns for each stock.)
• Stocks Reviewed:  25,782
• Number of monthly calculations: 3,524,849 (good thing we have computers!)

Results

• Only 4% of 25,782 stocks accounted for all the returns (increase in wealth measured in dollars)
• Only 48% of one-month stock returns exceed the T-Bill returns for the same month

The chances that someone can pick the single stock that will be successful over time, is slim. As Forbes journalist Paul Merriman stated reviewing the study, “Think you can pick the future winners that well? Good luck!”

According to The Economist, the United Nations estimates 141 million births in 2018, down 61,000 from 2017. The demographers project this decline to continue through 2050.

Asia produces about half the world’s babies but sub-Saharan Africa might move into first place shortly. In 1990, about 19% of the babies were born in Africa but this figure is anticipated to reach 31% this year.

The forecast is the growing population in Africa will migrate north because of the rapidly aging population.

Alternatively, Bangladesh, Mexico, Brazil, and Iran are now beginning to produce too few babies to replace their population. Europe and America reached this circumstance decades ago.

The bull market continued another year. It will probably be remembered for strong returns with a remarkable lack of volatility. The VIX, also known as the “fear” index, reflected the lowest volatility since data collection began in 1990.

The market ignored:

• Higher valuations
• Fears of conflict with North Korea
• Presidential turmoil
• Russia probe
• Hurricane and fire devastation
• Rapidly growing national debt

As in last year, some of the largest technology companies had outsized influence for the market rise. You probably wouldn’t think that such companies as General Electric (-43%), Mattel (-43%), Advance Auto Parts (-42%), and the Apache Oil and Gas Company (-34%) had such large declines.

The economy continues its slow but steady pace. The Fed is keeping the investing world guessing as to whether it will raise interest rates three or four times in 2018. Unemployment is very low and there is concern that there aren’t enough workers to meet the demand.

International funds had a good year, especially with the decline of the dollar. Valuations are lower overseas.

The 10-year Treasury Bond yield ended the year at 2.41%.

If you would like to review your portfolio, please contact us. If you anticipate any changes in your circumstances in 2018, let us know so we can make adjustments as needed.