Market Capital Management

Tuesday, February 6, 2018

Equity Market Update - February 2018

During the past few years the equity markets have made tremendous gains with the Dow Jones Average hitting a high of 26,616 on January 26th 2018.  Over the last few days the Dow Jones Averages has fallen over 2000 points from the high posted on January 26, 2018.   This decline in equity markets has prompted many questions regarding whether the fantastic rally is over or is this decline just a correction and the Dow Jones Average continues to move higher.  The equity markets could be beginning to react to the fact that interest rates are finally moving higher in a meaningful way.  While higher interest rates may affect the equity markets, we also must consider the reason why interest rates are moving higher?  The current move of interest rates could be a reaction to the Federal Reserve Board’s statements which forecast greater economic growth and higher wages.  It is ironic that a better economy could cause markets to decline. 
For a stock market which has relied on low interest rates for the past ten years, Higher interest rates is a big change and markets do not often like change…. especially in the short term.  On the flip side of this argument, better economic growth should create better earnings for many companies.  Better earnings tend to make for higher stock prices.  In fact, many analysts expect the S&P 500 earnings to grown by over 10% in 2018. 
As such I believe this sudden decline is a much-needed correction for a market which has moved higher rapidly since November of 2016.  Moving forward we are looking for buying opportunities in sectors which may benefit from both an increase in Interest Rates and Economic Activity. 

Always know that at Market Capital Management, Inc.  we are constantly monitor the markets and our clients accounts.  We will continue to keep our clients informed as events occur.  Please call us at 760-434-3575 or email with any questions.  You can always stop by our office on the corner of Grand & Roosevelt in the heart of downtown Carlsbad.  Finally, thank you for your continued trust.

Tuesday, January 19, 2016

The Lottery Is No Retirement Plan
Pay yourself first instead, with your future in mind.  
Powerball fever swept across America last week, with a record jackpot of $1.5 billion eventually being split by three winners in the January 13 drawing. Millions lined up for lottery tickets, hoping to realize their dreams of being rich, independent, and carefree.1,2
This infinitesimal chance at massive wealth was certainly alluring – to too many, more alluring than the practical steps that can be taken in pursuit of personal wealth and retirement security.
The passion for Powerball defied logic. It may have been a commentary on our wishful thinking, and on the lack of financial literacy in America as well.
On January 13, a Powerball ticket buyer had a 1-in-292-million chance to win the big prize. In comparison, the odds of someone being killed by a falling vending machine within the next 365 days are 1 in 112 million, and the odds of a person being struck by both lightning and a meteorite during their lifetime are 1 in 210 million.2  What if we simply saved $4.33 per day, or more?  Our financial lives might take a turn for the better.
Usually, wealth is not a matter of fate or luck. We can all take practical steps toward financial freedom, and even if we do not end up rich, those steps may improve our personal finances and retirement prospects. 
First, spend less than what you make. Two or three percent less, 5% less, 10% less – whatever the number, it must be calculated from a comparison of your monthly income versus your monthly budget. That comparison may take a half an hour, but it is time well spent. Size up the money coming into your household per month with the money going out of it per month, and set a percentage that you would like to save every month
Two, direct these savings into investment accounts as well as savings accounts. It is vital to build up savings so that you can have an emergency fund – a good, strong emergency fund amounts to several months’ worth of salary. Another portion of the money can go into retirement savings accounts, preferably to be invested in equities. Yes, 2016 has started poorly on Wall Street, but one bad month (or year) is not the historical norm for the market.
Three, cut down bad debts. There are some “good debts” in life – debts that we take on in pursuit of a worthy outcome, such as a home loan or an education loan. Bad debts outnumber them, and the average credit card statement will note many. Some financial professionals and consumer advocates will tell you to try and pay off the debt with the highest interest rate first, then the one with the next highest interest rate, and so on; others will tell you to eliminate the smallest debt first and work your way up to the largest.

Four, chat with a financial professional to determine your money goals. When will you have enough savings to retire? When should you claim Social Security, and how long should you keep working? How much monthly income might you need when you are retired? Most people retire without any answers to these questions, only guesses. It is important to know not only what you are doing, but also where you are going – and through a long-run saving and investing strategy, you can set objectives and measure your progress toward them over time.
The fantasy of receiving great wealth with no effort inspires people to play the lottery and try other forms of gambling. The reality is that building wealth and saving for retirement take planning and commitment.
John Heil may be reached at 760-434-3575 ext. 101 or 
This material was prepared by MarketingLibrary.Net Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. All information is believed to be from reliable sources; however we make no representation as to its completeness or accuracy. Please note - investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.
1 - [1/14/16]

2 - [1/13/16]

Monday, August 24, 2015

Monday morning, Monday morning couldn't guarantee

     Monday morning the Dow Jones Industrial Average** lost over 1000 points at the open following the continued fall in China’s stock market. Many market watchers were hoping the China Central Bank would act over the weekend to slow their markets current decline. When the China Central Bank did not act as market watchers hoped, other markets took this as a reason to sell off. As the markets decline it may set up some opportunities.

-   Prices of dividend paying stocks are now at levels which we have not seen for years.
-   Companies which do most of their business in the US should not be as affected by happenings throughout the world.
-   Real estate markets could get a shot in the arm as interest rates have fallen causing the average 30 year mortgage down to the 3.75% range.

     The reports by the news media may be unclear. Many people believe the financial markets are going higher while just as many are reporting the financial markets are heading down.  Because of the contradiction in views, it is important to look at the facts, let’s see if we can clarify the numbers to gain some insight into the markets.

Q2 numbers as of June 30th 2015:1

1. Current S&P* forward price to earnings ratio of 16.4.

2. The 25 year average of forward price earnings ratio of the S&P* is 15.7 with a high of 24 and a low in 2008 of around 9.

3. Q2 Corporate earnings came in at or near targets with Healthcare reporting the highest year- over-year increase in earnings of all ten sectors.

4. As of August 24, 2015 the Dow Jones Industrial Average** is down over 1500 points since July 16, 2015.

5. Interest Rates as of August 19, 2015 for the 10 Year US Treasury Bond*** are under 2.1%

6. Oil prices are at a low of around approximately $38 dollars a barrel as of August 24, 2015

     Over the past few months the Global back drop of the negotiations with the debt crisis in Greece and China devaluing its currency in order to make exports more attractive may have created fear. During the same period of time the price of a barrel of oil dropped to a very low price, while the retail price at the gas pump remained relatively high.  Interest rates, which most people believed were going to rise, have instead come back down. This has put mortgage rates back under 4% which could be a plus for the real estate market.  Each of these factors may have contributed to the decline in the Dow Jones Average. If corporate earnings continue to report close to estimates and interest rates remain low, the only unresolved issue is fear. After looking at the numbers, my advice is to continue to meet and speak with us regularly.

     In my nearly 30 years in this business we have experienced several declines. In 1987 the Dow Jones Industrial average was a little over 2000 now it is close to 16000. Maintain a diverse investment portfolio and stay the course. Sometimes staying the course is harder than jumping ship, but in my experience those that keep their eye on the long term goals and not short term setbacks will come out ahead in the long run.

     Take advantage of our new integration's and financial planning; please schedule your personal appointment by contacting us via email or telephone – 760-434-3575 ext. 101

John H. Heil, President, Retirement & Wealth Planning, CA Insurance  Lic. #0A52827

1 August 20.2015

*The S&P is a market-cap weighted index composed of the common stocks of 500 leading companies in leading industries of the U.S. economy. **The Dow Jones Industrial Average (DJIA) is a price-weighted index composed of 30 widely traded blue-chip U.S. common stocks. ***The 10-year Treasury Note represents debt owed by the U.S. Treasury to the public. Since the U.S. Government is seen as a risk-free borrower, investors use the 10-year Treasury Note as a benchmark for the long-term bond market.

You cannot invest directly in an index. Diversification does not guarantee profit nor is it guaranteed to protect assets. Investing involves risk including the potential loss of principal. No investment strategy can guarantee a profit or protect against loss in periods of declining values.

“Registered Representative offering securities through First Allied Securities, Inc., a Registered Broker/Dealer. Member: FINRA/SIPC. Advisory services offered through First Allied Advisory Services, Inc., a Registered Investment Adviser."

Tuesday, December 16, 2014

When is it a good idea to pay the tax?

Who really enjoys the US tax paying process?  Most of us would not volunteer to pay more taxes than we owe.  But in some cases it may be a good idea to pay more tax this year.  How about if you could pay no taxes later? Converting your Traditional IRA to a Roth IRA may allow you to do just that!
A Traditional IRA defers a portion of income before taxes to an account in which the principal and growth are tax deferred until the saver withdraws the money in retirement.  The idea is to delay paying taxes now when the saver is in a high tax bracket and wait to withdraw the funds in retirement when the saver is presumably in a lower tax bracket.  A Roth IRA works differently in that the saver pays the tax on the income now but withdrawals the money in retirement tax free.
When to consider a Roth IRA conversion ?

1.        Tax bracket this year?  If you are in a high tax bracket or if the additional income from the conversion pushes you into a higher bracket it is generally not favorable to convert to a Roth IRA.  However, if for you are in low bracket this year it may be a good idea.  For example, if you were laid off during the year and your taxable income is significantly lower a Roth IRA conversion might make sense.  If you have substantial tax deductions such as medical expenses which lower your income a Roth IRA conversion may be right for you. 
2.       Tap current IRA funds in the next five years?  Generally, you must wait five years to tap any of the gains from your Roth IRA.  If you may need the IRA funds a Roth IRA conversion may not be right for you as you may end up paying taxes twice on the same funds.

3.        Time until retirement?  A long time horizon can make the conversion to a Roth IRA a better idea.  The longer your savings can accumulate tax free the more savings you should accumulate. 

Use our Roth IRA Conversion calculator on our website at and to determine if a Roth IRA conversion is right for you.

We would love to hear what you think. Feel free to follow our blog, give us a call or email us…until next time

John H. Heil, Senior Financial Blogger
This information is for general purposes only. This information is not intended to be a substitute for specific professional financial advice. Please see a financial professional in regards to your own individual situation.

Monday, December 8, 2014

Start by making your bed, start investing even if it is a little

Last June at University of Texas at Austin 2014’s Commencement Admiral William H Raven, Ninth Commander of U.S. Special Operations, Command gave the commencement speech to the new graduates.  Admiral Raven is a Navy Seal and his speech was about the things he learned at Seal training 36 years ago.

One of the things Admiral Raven speaks about in his commencement speech is about making his bed every morning.  This was one of his defining moments to creating change in the world.

We can use this as an easy first step to start an investment plan.  Many people believe starting a retirement plan is difficult and complicated.  The best way to start any plan is to do something easy.  My advice is to enroll in your 401k at work.  This simple task can be the start of a savings plan.  It is like making your bed every morning.  By saving a little from each paycheck your effort at work can have a positive reward. Similarly to if you accomplish nothing else, in a single day…at least you accomplished making your bed.

If you do not have access to a 401k, start investing in an IRA or other savings plan.  Make it easy by automatically deducting a contribution from your primary bank account or paycheck.  If you start an automatic plan you may be less likely to stop.   In a few months when you review your statement and realized that you can save, it is more likely you will increase your savings than lower your savings.

Finally, don’t sweat when you hear the headlines about how tough the world is today.   Our country has been through two world wars and four other wars.  A President was assassinated and another was shot.  We survived two market crashes, a depression and a financial crisis.  We have had Republican and Democratic Presidents and Congresses and each time as a country we have come through stronger.  Those investors that stay the course may change their lives for the better.

So how do you change your world?  Start by making your bed, start investing even if it is a little at a time; by doing these two things each day when you come home you may have a nice bed to fall into and a little more money in your pocket.

Link to Admiral William H Raven, ninth commander of U.S. Special Operations Command University of Texas commencement speech:

We would love to hear what you think. Feel free to follow our blog, give us a call or email us…until next time
John H. Heil, Senior Financial Blogger

Wednesday, December 3, 2014

The Good News and Bad News of lower oil prices

The other day I filled up the tank of my wife’s Prius for under $25. That is over 25% less expensive than one year ago. With the holiday shopping season on its way, every penny saved is a good thing.  Yet for most every action there is an equally opposite action and this may be true with gas prices as well. 

Oil producers and their associated industries have seen their stock prices decrease in value.  Last Thursday OPEC met to discuss production levels and prices. With Saudi Arabia leading the way the cartel voted to keep production at current levels. The strategy appears to put pressure on US shale oil producers. Most analysts believe the price of oil needs to be around $70 a barrel for producers to be profitable. By keeping prices low OPEC is hoping US shale producers will lower their production and therefore help push up the price of gas in the US. In addition, without the oil production from US shale producers OPEC could take a larger share of the market. 

The big question is whether OPEC’s strategy will work. In the long term, the shale producers most likely will not shut down and walk away because too much infrastructure and money has been invested.  One analyst actually sees a silver lining for the US shale producers. Norbert Ruecker, head of commodity research at Julius Baer thinks OPEC’s new strategy may force the US shale producers to find new ways to lower production costs. In the long run this may keep oil prices low but also allow for all oil producers to make a profit. 

This leads us to the good news of filling up the wife’s Prius tank for under $25 bucks. According to the American Automobile Association gas prices have dropped below $3.00 a gallon. AAA estimates this helps consumers save about $250 million per day as compared to the last few months of summer when prices averaged $3.68 a gallon. 

This savings is like a tax cut for the average American. It’s a good time of the year for the savings to flow into our pockets.  The biggest beneficiaries may be retail companies. Holiday retail sales started mediocre over Black Friday with the physical stores sales down but internet sales up 11%. Hopefully the extra dollars in our pockets will make for a jolly season. 

Alternatively, it is possible consumers learned a lesson from the financial crisis and decided to sock away the extra money in their pockets.  If so that could keep the economy on this slow growth path we have been experiencing. Generally, we can only hold out so long until we need to buy new appliances, cars and clothes. So enjoy the low gas prices while they last. Most analysts believe when the spring comes prices will begin to rebound and over $3.00 a gallon will be back. 

We would love to hear what you think. Feel free to follow our blog, give us a call or email us…until next time

John H. Heil, Senior financial blogger