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BEHIND THE HEADLINE

New data shows Americans have the “highest household income ever“…

Do you truly feel richer?

What you should know about this data.

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BIG PICTURE: U.S.A.

Americans are earning more.

Fewer people in poverty (lowest number since 2006).

It’s a trend. Income increased last year for the third year in a row.

$61,371 = median household income.

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THE WAGE DEBATE

The American economy has grown, added jobs & workers… but data shows our income is NOT rising as quickly, as expected, as previous years, or compared to what things cost (inflation).

Do we look like we make more on paper, but have less $pending power?

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What’s Going on?

No one knows for sure: 2 theories

White House: Bad data & wage growth is good. Stats don’t consider tax cuts & other perks. Some (non-WH) economists agree.

Another theory: People reentering workforce may get lower paying or part-time jobs, or have fewer qualifications, so they make less $$.

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Something To Consider: The way the census measures median income has changed. Some say that makes the data difficult to compare to previous years. It's a good reminder data tells us only so much of a story. How do you feel about your wages and the economy?

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REALTY CHECK

 

Foreclosures – while still historically low – are rising in nearly half of U.S. housing markets. Is it the latest sign of a broader real estate slowdown?

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What To Know:

“The increase in foreclosure starts is not just a one-month anomaly in many local markets given that July represented the third consecutive month with a year-over-year increase in 33 metro areas, including Los Angeles, Miami, Houston, Detroit, San Diego and Austin.”

Daren Blomquist, ATTOM Data Solutions SVP, a property data firm
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Why it Matters

The Great Recession was triggered largely by the U.S. housing bubble bursting in 2007 after years of lenders giving out risky mortgages.

Our current lending environment has changed, but one property data company says “some loosening” of lending standards has put risk back into the market.

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Cause For Concern?

  • High Home Prices: Median cost of U.S. homes was up 6.2% in June vs. last year – a lower gain from the previous month.
  • Rising Mortgage Rates: 30-year fixed 4.5% vs. 4% at start of 2018.
  • Homebuilding Slows: hit a 9-month low in July and has yet to significantly rebound.
  • Fewer Foreign Buyers: Overseas purchases down a record 21%.
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Housing faces an uncertain future. A new study finds a record low percentage of millennials think buying a home is a good investment.

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TRADING UP?

America & Mexico agree *in theory* to a new trade deal.
Will Canada come a long for the ride?
(and why it may impact the cost of your next car).

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NAFTA 101

  • Trade deal negotiated under Pres. H. W. Bush & steered through Congress by Pres. Clinton.
  • Simple Overview: Lowered tariffs (taxes) between Canada, Mexico & U.S. so we could all do business more easily and cheaply.
  • Pres. Trump called it the “single worst trade deal ever” because he says it allowed American jobs to go to Mexico; many disagree.
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Why Now?

Mexico & U.S negotiating NAFTA behind the scenes for weeks.

  • New government of Mexico *just* elected & both sides want to secure deal before new leadership takes office.
  • New trade deal needs approval by Congress; completing draft puts pressure on Congress to act before or after midterm elections.
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What’s At Stake?

American jobs, industry & pay.

One example of many potential changes: New “NAFTA” agreement reportedly requires more U.S. car parts made in America with more U.S. material (like steel) in exchange for the “no tax” benefit for companies.

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Cost To Consumer

“The industry is hopeful that any changes to Nafta auto rules of origin continue to strike the right balance by incentivizing production and investment in North America while keeping new vehicles affordable for more Americans.”

Alliance of Auto Manufacturers
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The North American Trade Agreement was a result of a trifecta of Mexico, Canada & the U.S. Since the U.S. & Mexico have a working template, the big question is: Will Canada agree to negotiations or stall them?

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RECORD WIN STREAK
ON WALL STREET

9 Yrs, 5 Months & 13 Days

Stocks on track to hit the longest-running rally in stock market history.

Why the timing matters.

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Why It Matters

  • Stocks’ “bull market” (sustained period when stocks are rising & expected to continue to rise) on track to be longest in history.
  • Surprising after stocks plunged 50% during the financial crisis ending March 9, 2009.
  • Gains have added trillions of dollars to household wealth, boosting the economy and retirement savings.
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Important Context

  • Last time stocks rose for this long was the dot-com boom (October 1990 – March 2000).
  • However, during the 1990s run, stocks rose 417%. That’s nearly 25% *MORE* than this current bull market run, according to LPL Financial.
  • Bottom line: it’s the longest bull market, but not necessarily the greatest.
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“This bull market has been breathtaking…valuations in general have become stretched; however, corporate earnings have been strong, and I believe US stocks are likely to continue to outperform in the shorter term given the strength of the US economy and the perceived safety of US stocks in the midst of trade wars.”

Kristina Hooper, Invesco's chief global market strategist, as the S&P 500 rose to a new all-time high Tuesday.
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Strong earnings growth continues to power the stock market, but experts warn investors to continue to watch trade disputes and possible higher interest rates. Timing matters: the Federal Reserve, which sets interest rates, meets on Friday to discuss the economy & policy.

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Billion Dollar Bubbles

 

 

What Pepsi’s latest $3 Billion purchase tells us about the beverage industry (and our drinking habits).

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Pepsi Buys SodaStream

  • Pepsi says purchase expands healthier options, better for environment (people can create soda at home, with reusable bottles).
  • Big Picture: Major brands are battling for bubbles. Last year, CocaCola bought TopoChico, a sparkling water brand, for more than $200M.
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“Sparkling water has grown far more strongly than the overall bottled water category in the U.S.”

Wall Street Journal, on how sparkling water market has grown more than 30% in recent years. In the meantime, Americans are drinking less soda.
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Are Bubbles Actually Healthier?

What we know (from somewhat limited studies) about carbonated water:

  • Helps with hydration.
  • Doesn’t strip bone density (as reported in mid-2000s).
  • May (mildly) impact your teeth enamel.
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The man who invented sparkling water also discovered oxygen (as we know it) ... and the rubber eraser! The Englishman believed in the American Revolution & was lifelong friends with Benjamin Franklin. We have his must-read bio on our source page.

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Apple’s Trillion Dollar Day

From its humble start in a California garage to now the FIRST & MOST valuable company ever at
$1,000,000,000,000.

Why some say the focus on the $$$$ may miss the point of the company’s true value.

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iPhone Center Stage

  • Apple now worth more than all but 26 countries in the world. 
  • Why? Better than expected iPhone sales in its latest earnings report pushed the stock higher.
  • Stock price impacts the worth of the company or “market cap.”
  • Apple “beat” expectations, but some analysts lowered #’s wks ago because of concerns re: iPhone sales.
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What’s Next?

New iPhone expected in Sept. Predictions of a larger & a cheaper version.

Some Wall Street analysts think Apple’s stock has room to trade even higher, which would lift its market cap OVER $1T.

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Why $1T Ain’t Everything

“The fact that you have a billion and a half people with Apple devices around the world in a sense gives them a user base that if they can figure out other ways to make money off that user base.”

NYU professor Aswath Damodaran to CNBC, pointing out that even if Apple's iPhone sales slow now, its CURRENT customer base has great value.
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Food for thought: Apple makes many of its products in China, where trade tensions run high w/U.S. re: tariffs. One commentator says companies with the highest market cap often underperform in the years ahead. Read his analysis on our source page.

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WHEN SHE MAKE$ MORE

1-in-4 women are the family breadwinner, but when it comes to reporting it they say it’s just crumbs.

Why husbands & wives BOTH lie and say the *MAN* earns more.

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“Manning Up & Womaning Down”

  • Census found inconsistencies in incomes reported vs. IRS tax forms and investigated.
  • When a wife earns more, both husbands & wives exaggerate man’s earnings on avg of 2.9%, diminish woman’s by 1.5%.
  • Says couples “minimize the violation” of social norms by lying.
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“It’s kind of like if he’s shorter than she is, she doesn’t wear heels. It’s in the cultural DNA that if anyone should be bigger, richer, more successful, it should be the man.”

Bill Doherty, marriage therapist & Univ. of Minnesota professor on the marital struggles he's seen when the women is more successful professionally.
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Bigger Picture

2013 Study: Marriages in which the woman earns more are less likely to form and when they do, more likely to end in divorce.

Pew survey: 71% say very important for man to support a family financially to be a good husband or partner, 32% for women.

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Social norms impact self-reported data, and the Census Bureau warns that makes it less reliable.

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LAST VHS STANDING

In its heyday, a new Blockbuster store opened every 17 hours, but now only one remains in the US… and it may have a $40 late fee to blame for its downfall.

 

 

 

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Internet Killed the Video Store

  • Last remaining store is in Bend, Oregon after 2 close in Alaska.
  • It’s privately owned; pays a licensing fee to Dish Network to use the Blockbuster name.
  • Its IBM computers run the same floppy disks from 1990s renting DVDs, Blu-rays & video games.
  • No plans to close anytime soon.
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The Ultimate Late Fee

Reed Hastings once said he created Netflix in 1997 out of frustration over a $40 Blockbuster fine after returning Apollo 13 late.

At its peak in 2004, Blockbuster had 9K stores. Filed for bankruptcy in 2010.

Today, Netflix has 125M global subscribers.

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The real kicker? Blockbuster's CEO passed on an opportunity to buy Netflix back in 2000 when it was just a DVD mailing company. The asking price? $50 Million. Netflix is now worth $163 BILLION. Read more about the decision here.

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Media Love Triangle

Disney + Fox + Comcast

 

An old-fashioned bidding war sparks on Wall St. as media giants look to partner up before the music stops.

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Get Me Up to Speed

  • Last year, Disney offered $52B for a big stake in 21st Century Fox.
  • Then Comcast decided to get in on the action, offering $65B.
  • Disney isn’t having that & just last week raised its offer to $71B, which Fox says is a superior bid.
  • Ball is now in Comcast’s court: will it up the stakes even more?
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$71B?! Why So Much?

  • What Disney & Comcast want: Fox’s stake in Hulu (streaming service) & Hollywood studios with TV & film franchises (Think: X-men & The Simpsons).
  • Bottom line: Real driver is the fear of the future with digital rivals like Amazon, Facebook & Netflix disrupting content, advertising & distribution. Media cos. need to get in the game to compete.
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Whoever wins in the end - Disney or Comcast - it's important to note Fox would retain some assets, including Fox News and Fox Broadcasting Company. So who's next to get in on the mergerpalooza action? Click to read more.

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Your Online Shopping
Dollars & Sense

 

 

The Supreme Court ruled states can require online sellers to collect sales tax on your purchases – what this means for your family.

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What Happened?

Some online retailers voluntarily collect sales tax in the 45 states + DC that impose a sales tax, but many don’t, placing brick-and-mortar shops at a disadvantage.

The high court overturned a 1992 ruling prohibiting states from collecting sales tax from out-of-state retailers w/o a “physical presence” in the same state as the buyer.

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“The retail industry is changing, and the Supreme Court has acted correctly in recognizing that it’s time for outdated sales tax policies to change as well. This ruling clears the way for a fair and level playing field where all retailers compete under the same sales tax rules whether they sell merchandise online, in-store or both.”

National Retail Federation President and CEO Matthew Shay
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What It Means For You:

  • Online-only shops might raise their prices to make up for the money they’ll have to pay in sales tax to the states. Amazon is unlikely to do so – it’s been collecting sales tax nationwide on most items since 2017.
  • States will have more $ to spend internally. In its decision, the Supreme Court estimated states were losing up to $33B a year.
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Stocks for major online retailers like Amazon, Ebay, Overstock and Wayfair all dropped immediately following the ruling, but the lasting impact will take some time to measure.

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CHARITABLE RECORD

Big Benajamins, But Not From Average Joes.

For the first time, charitable giving topped $400B last year, but it may not be as impressive as it $eems.

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STUDY RESULTS

  • Americans gave $410B to charities last year vs. $390B in 2016, according to Giving USA.
  • Credits “booming stock market & a strong economy.”
  • BUT Americans’ generosity no higher than decades ago at 2% of disposable income.
  • Foundation donations up 15%, driven by mega gifts Michael Dell ($1B) & Mark Zuckerberg ($2B).
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WHY IT MATTERS

  • Last year, $4.1B in mega gifts by individuals vs. $1.49B in 2016.
  • This as we learn millionaires & billionaires hold almost half of global personal wealth.

“Some people feel they don’t need to give any more.”

Stacy Palmer, Chronicle of Philanthropy, alluding to a drop in giving for lower-income & middle-class families.
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Need another reason to give? A study last year shows being generous really does make you happier - and may even make you healthier. Click for why.

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How Hot is TOO Hot?

A fired-up U.S. economy does have a downside…

Why the Federal Reserve is taking action to cool things off.

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“Main takeaway is the economy is doing very well.” 

Federal Reserve Chair Jay Powell

  • What: Federal Reserve (U.S. Central Bank) hiked a key short-term interest rate Wednesday.
  • Why it matters: Borrowing gets more expensive – rate impacts credit cards, mortgages, auto loans, etc. But savers to benefit.

 

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What’s to Blame

  • Inflation = increase in prices, drop in purchasing value of money (i.e. things cost more).
  • Fed’s goal: keep economy expanding, but not so fast that it drives up inflation.
  • A decade after the recession, Fed has made progress. May unemployment rate was 3.8%, lowest since 2000, while inflation was just below Fed’s 2% target.
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The Fed began raising rates from 0 at the end of 2015 with the goal to bring it to 3% in next few years. We're halfway there with 2 more increases expected this year. Click for one opinion on why the Fed should just let inflation rise.

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