Advisors on This Week’s Show

Bob Landaas

Brian Kilb

Art Rothschild

Week in Review (Jan. 30-Feb. 3, 2012)

Significant economic indicators & reports

Monday

American consumer spending stayed even in December, despite the largest monthly jump in income since last March. The Bureau of Economic Analysis said wages and salaries rose at the end of 2011, but spending – which drives 70% of the nation’s economic activity – remained unchanged following five months of gains. The paradox is that as spending is suspended, savings grows, which could help fuel consumption later on.

Tuesday

U.S. home prices sank deeper in November, the first setback after five months of progressively narrow year-to-year declines, according to the S&P/Case Shiller Home Price Index. Of 20 cities in the composite index, 13 suffered lower 12-month rates than in October. Only Detroit and the District of Columbia posted home price gains since November 2010. With housing indicators seeming to be looking up in recent months, an economist for the index said he saw “few, if any, signs in the numbers that a turning point is close at hand.”

Business activity nationwide continued to expand in January, though at a slower pace, a report from Chicago purchasing managers said. Weakening production and new orders and the mildest growth in employment in five months stirred some concern that a global slowdown is starting to show in the U.S.

A foundation of consumer spending – consumer confidence – took a hit in January as budding optimism for employment didn’t include expectations for higher incomes in the next six months. The Conference Board said consumers’ assessment of current conditions well as their outlook for later this year have declined from rosier dispositions, particularly in the previous two months.

Wednesday

The manufacturing expansion that has pushed the U.S. emergence from recession accelerated a bit in January, the Institute for Supply Management said. New orders advanced at a faster pace, and production and employment indicators grew, although a bit slower than in December. The manufacturing index showed continued moderate growth despite signs of slower economic expansion worldwide.

Construction spending gained more than analysts expected in December, rising to its highest rate in four months. The Commerce Department reported that the annualized rate was 4% ahead of Dec. 2010, indicating a strong year-end finish for a roughed-up sector. Full-year construction spending ended down 2% from 2010 with housing down 1.1% and public construction off 6.5%.

U.S. consumers bought more autos in January, especially domestic cars, boosting the annual sales rate to nearly 14.2 million vehicles. That’s the most since before the 2008 financial crisis, if you don’t count the brief surge from the Cash for Clunkers stimulus in 2009. Trade group Autodata Corp. reported that more cars than trucks had sold for the first time in nine months, perhaps in response to rising gas prices.

Thursday

The moving four-week average for initial unemployment claims fell for the 16^th time in 19 weeks, signaling gradually steadying employment conditions. The Labor Department said the average remained below 400,000 claims for the 12^th consecutive week, the longest it has been so low since mid-2008.

Friday

Employment conditions kept improving in January as private-sector employers added more jobs than analysts expected and the unemployment rate dropped for the fifth month in a row, to 8.3%, the lowest since Feb. 2009. The Bureau of Labor Statistics reported a broad-based 243,000-job addition to payrolls last month, with most measures suggesting greater momentum for employment nationwide. Despite 16 consecutive months of job gains, though, the nation remains nearly 5.6 million jobs shy of the mark at the beginning of the Great Recession.

The Institute for Supply Management’s non-manufacturing index rose in January, beating analyst forecasts and indicating further expansion for the biggest segment of the economy. The index signaled the 25^th month in a row of growth with big gains in new orders and production. The pace of employment picked up again after showing contraction in December.

Another sign of manufacturing momentum came from increased factory orders in December. The Commerce Department said the December gain came on top of an upturn in November orders that was bigger than previously reported. Full-year factory orders rose 12% from 2010, evidence that global growth has helped U.S. economic expansion despite lukewarm consumer spending.

Where the Markets Closed for the Week

• Nasdaq – 2,906, up 90 points or 3.2%
• Standard & Poor’s 500 – 1,345, up 28 points or 2.1%
• 10-year U.S. Treasury Note – 1.95%, up 0.05  point
• Dow Jones Industrial Average – 12,862, up 199 points or 1.5%

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Advisors on This Week’s Show

Brian Kilb

Paul Coldagelli

Steve Giles

Week in Review (Jan. 23-27, 2012)

Significant economic indicators & reports

Monday

No major announcements

Tuesday

No major announcements

Wednesday

Strong activity in pending home sales cooled down in December – and more than analysts had forecast. Still, deals to buy houses were up nearly 6% from December 2010, the National Association of Realtors said. That contributed to a recent sense that the beleaguered housing industry may finally be turning the corner, fueled by low mortgage rates, cheaper prices and renewed confidence in the labor market.

Policy makers at the Federal Reserve Board called the housing sector “depressed” in an economic statement released after two days of meetings. The Fed committee reported a moderately expanding economy, despite slower global growth, which could eventually pose risks to the U.S. outlook. The central bank leaders said they expect interest rates to remain at historically low levels until late 2014 – about 18 months longer than their previous forecast.

Thursday

Industrial production, the main driver in economic growth since the recession, appeared to pick up steam with higher-than-expected gains in durable goods orders in December. Excluding volatile transportation bids, new orders rose in seven of the last eight months. Certain capital orders considered a proxy for business investments increased for the first time in three months, according to the Commerce Department. Overall orders reached their highest amount since July 2008.

The sales rate of new homes dropped in December, below forecasts and lower than the year before, the Department of Housing and Urban Development said. The number of houses on the market ticked up for the first time in five months, but positive signs include a drop in the median time houses were for sale and a slight increase (though less than inflation) in the median price between 2011 and 2010.

Through slightly recalibrated measurements, the Conference Board’s leading economic indicators suggested “cautious optimism” for the first half of 2012. The business research group echoed concerns from the Fed over slowing global growth but suggested that domestic momentum might influence economic progress abroad.

The morning after the Fed cited improved overall labor market conditions, the Labor Department reported that the moving four-week average for initial unemployment claims stayed below 400,000 for the 11th week in a row, the longest period since before the 2008 financial crisis. The indicator suggests employers aren’t letting as many workers go, giving the long-time unemployed a better chance of finding work again.

Friday

Economic expansion quickened in the last quarter of 2011 but not as fast as analysts forecast. The Bureau of Economic Analysis said Gross Domestic Product grew by 2.8% in the last three months of the year, up from 1.7% in the third quarter. A bigger buildup in inventories and more consumer spending offset GDP setbacks from increased imports and continued declines in government spending. The Fed’s key gauge of inflation showed a 1.1% increase from the fourth quarter of 2010. That’s down from a 2.1% rate in the third quarter and the Fed’s long-term target of 2%.

News of job gains helped boost consumer sentiment in January, pushing it near post-recession highs, according to Thomson Reuters and the University of Michigan. Consumer sentiment, which feeds into consumer spending, has gained each of the last five months. However, consumers still express lack of confidence in their personal finances and near-record skepticism about government policies.

Where the Markets Closed for the Week

Nasdaq – 2,816,  up 31 points or 1.1%

Standard & Poor’s 500 – 1,317, up 3 points or 0.2%

10-year U.S. Treasury Note – 1.90%, down 0.13 point

Dow Jones Industrial Average – 12,663, down 50 points or 0.4%

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As an offshoot of our weekly podcasts – and to encourage your participation – we occasionally feature responses to listeners’ questions.

With low yields on bonds at the outset of 2012 and expectations for gradually rising interest rates in two or three years, some investors are thinking about dividend-paying stocks to generate more income for their retirement, Bob Landaas says.

That’s one of the considerations he suggests to a listener named Bob who requested advice on what to do with a windfall of $75,000 he’s expecting.

The short answer is to determine what you want the money for, the president of Landaas &Company explains. More detailed advice would follow from that. (Please click the audio player above to hear the response from Bob Landaas.)

initially posted Jan. 26, 2012

For What It’s Worth

To learn about the origins of the term “windfall,” please click here.

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(an occasional sampling of what’s catching the eye of investment professionals at Landaas & Company)  

The past couple of years have exposed essential contradictions that could disrupt efforts to form a united economic market with a single currency among the countries in the euro zone. In a publication of the International Institute for Strategic Studies, a longtime journalist in the region reports that the resolution of the European fiscal crisis may result in the success or division of the 27-nation European Union.

(Steve Giles, vice president)

A sequel to the 1988 book “Dividends Don’t Lie” examines the contributions of dividends to total return and the degree to which blue-chip dividend-paying companies can indicate stock valuations.

(Nelson Weine, vice president)

Author and investment executive Mohamed A. El-Erian looks with hope at world leaders convening in Davos, Switzerland. But he disparages past attempts since the financial collapse of 2008 to get the global economy back on track, citing “active inertia” by policy makers both in Europe and in the U.S.

(Jeff Peterson, senior vice president)

initially posted Jan. 26, 2012

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By Lindsay Whaleysmith              

It is that season when year-end documents can overwhelm you, and you wonder what to stash in a folder (or basket for some of us) until tax time. To provide some clarity and to better prepare you for tax preparation, here is a guide to some of the forms you may find as you sort your mail.

Investment Income

Outside of a qualified retirement account, such as an IRA, any income earned on an investment is subject to tax. 

Form 1099-DIV.  The most common investment income is from dividends. Your dividend income can be categorized as “Ordinary,” which is taxed as ordinary income, similar to earnings from employment. Or the income can be “Qualified,” which is taxed at your capital gains tax rate.  The mutual fund company or corporation issuing the dividend will categorize how your dividend income should be reported.  This information can take awhile for institutions to compute, so you will likely have to wait for this document until the end of February.

Landaas & Company provides this article for information only.  Please consult a tax professional for advice.

Form 1099-INT.  Interest earned on bonds or cash-type vehicles such as savings accounts or money market funds is taxed as ordinary income and is reported on this form.  This form will usually arrive in late January from your bank and late February from an investment company. Usually reported on the 1099-INT – although in some cases on the 1099-DIV – would be any dividends earned from municipal bonds or municipal bond funds.  Such income is usually but not always tax-free federally.  Municipal bonds generally are subject to state income tax but some exemptions and exceptions may apply.

Investment Proceeds

Anytime you sell a security outside of a qualified account, you must report either the gain or loss to the Internal Revenue Service. 

Form 1099-B.  The institution that held the security you sold will report the sale as “Gross Proceeds” on this document, which you should expect to receive before the end of February. 

For securities purchased after Jan. 1, 2011, clearing firms must report the cost basis for the investments sold. Otherwise, you will need to collect and report your cost basis, which includes the purchase price of the security, any reinvested dividends and any additional purchases or sales. In most cases, the institution that purchased the security for you will have these records.  (As a service to clients, Landaas & Company attempts to assist with cost basis reporting as much as possible.)

IRA Distributions

Any distribution from an Individual Retirement Arrangement (IRA) or other qualified plan that is not put back into an IRA within 60 days must be reported to the IRS and is subject to ordinary income tax.

Form 1099-R.  IRA distributions are reported on this form, which also should show how much of the distribution you may have withheld for federal and state income taxes.  Also, any distributions from a Roth IRA will be reported on a 1099-R, even though those funds are not subject to income tax.   Typically, you should expect to have this form by the end of January.

You also can expect a Form 1099-R if you completed a non-taxable 401(k) rollover into another qualified retirement plan or an IRA.  The IRS requires you to document that the amount of the distribution reported on your 1099-R matches the amount of the contribution reported on your Form 5498.

IRA Contributions

Form 5498.  Any contributions to traditional or Roth IRAs will be reported to the IRS on this form.  But because contributions for 2011 are allowed up until the tax filing deadline in 2012, 5498s are not sent until after April.  That means you need to recall any IRA contributions you made last year and be sure they’re reported.  Once you receive your 5498 – probably in mid-May – file it away with copies of your completed tax return.

More information
“Investment Income and Expenses,” IRS Publication 550
“Tax Guide for Seniors,” IRS Publication 554

Lindsay Whaleysmith is an associate at Landaas & Company.

initially posted Jan. 26, 2012

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Professionals at Landaas & Company are licensed to provide financial advice. But often we’re asked where to get a bite to eat within walking distance of our downtown Milwaukee offices.

Feel free to ask us while you’re visiting, but in case you want to plan ahead, here are some suggestions:

Bacchus, * A Bartolotta Restaurant

Contemporary American cuisine, gourmet dining, famous for its wine list and service

Click the restaurant names to connect to their websites.

925 E. Wells St., in the Cudahy Tower

Café at the Pfister

Casual dining featuring soups, sandwiches and café items in a sumptuous, grand old hotel

Located in the Pfister Hotel, 424 E. Wisconsin Ave.

Carnevor *

Known as a steakhouse, but there’s seafood and chicken, too

724 N. Milwaukee St.

Cubanitas Restaurant

A thoroughly Cuban restaurant

728 N. Milwaukee St.

Dick’s Pizza & Pleasure

Coal-fired artisan pizza by the slice, appetizers, salads and shakes

730 N. Milwaukee St.

Karl Ratzsch’s

German cuisine based on Old World recipes from a family restaurant begun in 1904

320 E. Mason St.

Mason Street Grill

Classic American with wood-grilled burgers, wood-fired pizzas, seafood and more

Located in the Pfister Hotel, 425 E. Mason St.

Metro

With an emphasis on natural, seasonal ingredients, the lunch menu includes soups, salads and baguette sandwiches

Located in the Hotel Metro, 411 E. Mason St.

Umami Moto *

Asian-fusion with fresh fish, sushi and more

718 N. Milwaukee St.

Zarletti *

Traditional fare based on the northern regions of Italy

740 Milwaukee St.

Please click here to see the online dining guide of Milwaukee’s East Town Association.

For Milwaukee-area restaurant recommendations from the visitor guide Key Milwaukee, please click here.

initially posted Jan. 24, 2012

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Landaas & Company continues investing in its commitment to clients. The firm has negotiated an extension of its lease at the 411 East Wisconsin Center through at least mid-2019.

As one of the original tenants, Landaas & Company recently marked its 25^th anniversary in the 30-story downtown Milwaukee landmark. The offices provide clients and employees with pre-eminent space in the heart of Wisconsin’s financial center. The building includes both the convenience of covered parking and the efficiency of state-of-the-art fiber optic lines.

Landaas & Company also is investing in a new telephone system in 2012 to further enhance communications capabilities between clients and financial professionals.

Management for the 411 building is making some commitments of its own, including plans for lobby renovations in 2012.

Dining suggestions: As long as you’re in the neighborhood, grab a bite to eat. Click here to see some of the nearby restaurants often recommended by the Landaas staff. 

initially posted Jan. 24, 2012

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By Bob Landaas

Most people who try to invest their own money will look at all of the articles that come out at the beginning of the year reporting last year’s winners and losers. Invariably, people tend to migrate to what went well last year.

I’m wired just the opposite.

I tend to cull the list to look at what got creamed last year. That’s where I want to look for possible opportunities. The whole idea is to buy low and have some hope of being able to sell higher at some point in the future.

So, for instance, if you look at some of the international funds, on average that group was off 14% last year. That’s a lot. There’s a wonderful opportunity to engage your savings in an area that is temporarily distressed.

If you’re the type that needs to see improvement tomorrow, forget what I just said. But if you’re smart enough to lay the groundwork and plant the seeds, it’s only a matter of time before the dollar starts to decline again and those markets come back. You’re just not going to get all that many opportunities to buy international funds at a 14% discount.

How many times have we heard from people saying that they want to wait until things improve a little? What they’re telling me is they want to wait until things get more expensive before they buy. That’s really what you’re telling me when you say that you want the skies to clear, the sun to come out, you want to be sure of a brighter tomorrow before you invest. Well, you just paid full price.

I, on the other hand, am trying to get a discount on appropriate investments. For all the money that I’ve made for clients and for myself, I could say this until I’m blue in the face: Try to get a deal on what you buy. It may become a better deal later or stay a deal awhile, but it’s really hard to look dumb if you concentrated on getting a bargain when you deployed your capital.

The problem is that most of us are the opposite. We want to go into something that has done well recently because we think that the good times are going to continue in that category. Sometimes they do. Sometimes they don’t. But in all the trades that I’ve done over all these years, if you focus on getting a bargain when you buy something that fits in your portfolio anyway, you’re going to look pretty smart later on.

Avoid the temptation to buy what’s done well recently. Take a look at the funds that have been roughed up. If the fundamentals warrant it, if it’s appropriate for your portfolio, that’s a pretty good green light.

Bob Landaas is president of Landaas & Company.

initially posted Jan. 23, 2012

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Advisors on This Week’s Show

Brian Kilb

Jeff Peterson

Week in Review (Jan. 16-20, 2012)

Significant economic indicators & reports

Monday

No major announcements

Tuesday

No major announcements

Wednesday

Reflecting an easing in global commodity costs as economic growth worldwide has cooled, wholesale inflation fell in December for the second time in three months. The Bureau of Labor Statistics said both food and fuel prices dropped in December. The 12-month increase in the Producer Price Index slowed to its lowest rate since January 2011.

U.S. production capacity was at its highest rate of the recovery in December, according to the Federal Reserve. Industrial production increased led by a continued push in manufacturing and overcoming the fifth month in a row of declines by utilities – a function of warmer-than-usual weather. The capacity utilization rate of 78.1% stayed below the long-term average, suggesting room for further growth without threatening inflation.

Thursday

The broadest measure of inflation stayed unchanged for the second straight month in December, the Bureau of Labor Statistics reported. Energy costs fell for the third month in a row while the cost of medical services rose. The year-to-year inflation rate for the Consumer Price Index reached 3%, the lowest since March and below the 63-year average of 3.7%.

The labor market continued to show improvement as the moving four-week average for initial unemployment claims stayed below 400,000 for the 10th week in a row, the longest it has been so low since mid-2008. According to data from the Labor Department, the average dropped every week but three since September, signaling that employers aren’t as apt to get rid of workers.

The Commerce Department had mixed news on housing in December. Activity for both housing starts and building permits was less than analysts had forecast but stayed above recession low points, suggesting the beleaguered sector has seen its worst for now. The annual rate of building permits – a leading indicator – remained about level with November but was up nearly 8% from December 2010.

Friday

Another encouraging sign for the housing industry is that the number of existing homes sold in 2011 rose 1.7% from 2010. The National Association of Realtors said an improving jobs picture and record low mortgage rates are helping. The inventory of unsold homes in December fell to the lowest point since March 2005, which could help stabilize prices. The median price of a home sold in December was $164,000, down 2.5% from the year before.

Where the Markets Closed for the Week

Nasdaq – 2,785, up 74 points or 2.7%

Standard & Poor’s 500 – 1,314, up 25 points or 1.9%

10-year U.S. Treasury Note – 2.03%, up 0.16 point

Dow Jones Industrial Average – 12,713, up 291 points or 2.3%

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Advisors on This Week’s Show

Bob Landaas

Brian Kilb

Art Rothschild

Week in Review (Jan. 9-13, 2012)

Significant economic indicators & reports

Monday

U.S. consumers amassed more credit card debt for the third month in a row in November and the biggest increase in the recovery, the Federal Reserve reported. Analysts said the data suggested that Americans were more confident in their ability to borrow short-term for holiday shopping, although it also indicated that consumer spending was outpacing income.

Tuesday

In a sign that businesses are keeping supplies in line with demand, wholesale inventories rose slightly in November, keeping pace with sales, according to new figures from the Commerce Department. Continued uncertainty in the economy has kept companies from stockpiling too much merchandise ahead of sales orders. A low ratio of inventories to sales has been keeping production fairly steady, which has helped the gradual economic expansion.

Wednesday

No major announcements

Thursday

As with wholesalers, business inventories also ticked up in November at the same pace as sales. The growth was less than analysts had expected. The Commerce Department reported that the rate of business inventories to sales stayed at the same low spot for the fifth month in a row.

American consumers spent less than expected at stores in December, with retail sales rising 0.1% from November. Excluding the volatile automotive category, Commerce said sales actually fell for the first time since May. Part of the story may be that price discounting lowered sales figures during the holiday shopping period. Also, Commerce said shoppers spent more than initially estimated in October and November. Retail sales rose 6.5% from December 2010, which beat the long-term year-to-year average of 4.5%.

Improvements in the labor market looked a little more fragile with a slight gain in the moving four-week average for initial unemployment claims. The Labor Department said the average rose for the first time in six weeks, but it remained below 400,000 claims for the ninth week in a row, the longest it has been so low since mid-2008.

Friday

Increased imports and declining exports sent the U.S. trade deficit higher in November for the first time in five months. Imports rose by 1.3% led by oil and automobiles. Exports fell 0.9%, most notably to Europe, where debt worries are triggering greater austerity. The Bureau of Economic Analysis said the trade deficit rose to nearly $47.8 billion, its highest point since June.

The new year has begun with rosier consumer sentiment, according to the University of Michigan and Thomson Reuters. The first reading from their monthly index showed a fifth monthly increase, making it the the highest optimism since May. Recent results from other consumer confidence measures from the Conference Board and Bloomberg financial news also indicate Americans are starting to feel better about their situations, which could lead to more consumer spending – the biggest driver in economic growth.

Where the Markets Closed for the Week

Nasdaq – 2,711, up 37 points or 1.4%

Standard & Poor’s 500 – 1,289, up 11 points or 0.9%

10-year U.S. Treasury Note – 1.87%, down 0.11 point

Dow Jones Industrial Average – 12,422, up 62 points or 0.5%

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