Crytpo-Crash

 

April, 2018

 

Last year, it was hard to turn on your computer without reading about the dramatic rise in cryptocurrency values, or see advertisements for ways that you, too, could participate in this get-rich-quick opportunity to buy virtual money that is backed by no government on Earth. 

 

It’s almost always the case that when an investment becomes wildly popular and experiences a dramatic runup in price, that is exactly the wrong time to invest.  And it turns out that cryptocurrencies were no exception.

 

While the stock markets were dropping moderately in value, cryptocurrencies lost their owners an estimated $60 billion in the last week of March, including a $20 billion drop over one dramatic six-hour period.  Bitcoins are trading below $7,000, and the trend is taking them toward their February 6 low—and, perhaps, further.  In case you’re not up on other cryptocurrencies, there’s something called Ether (now $381 per coin); Bitcoin cash ($691.48); Litecoin ($116.27) and Ripple (49 cents). 

 

The problem, as always, is figuring out whether these alternative currencies are actual investments.  For now, there are very few stores which accept them as actual money.   Bitcoin’s primary purpose in the marketplace has famously been to enable drug and weapons traffickers to buy and sell without leaving a paper trail for international police agencies to follow. 

 

Sincerely,

 

Edward J. Kohlhepp, Jr., CFP®, MBA President 

 

Edward J. Kohlhepp, CFP®, ChFC, CLU, CPC, MSPA

Founder & CEO 

 

 

This material was prepared by BobVeres.com., and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. 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.

 

Source: 

https://www.marketwatch.com/story/cryptocurrency-market-sheds-a-further-20-billion-in-total-value-overnight-2018-03-30

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Another Tariff, Another Downturn

 

March 28, 2018

 

Last weeks, stocks went on sale again, but there didn’t seem to be a lot of bargain hunters stepping in to take advantage.  The S&P 500 dropped 5.9% over five days, its worst week since January 2016.

 

This follows a by-now-familiar pattern: the Trump Administration announces tariffs—this time on Chinese imports with an estimated value of $60 billion a year—but is not specific on the details.  Traders fear that there will be retaliation against American products sold abroad, and put a lower value on the large multinational companies that account for most exports and make up most of the major indexes.

 

The last time this happened, the tariffs involved steel and aluminum, and the panicked sellers  later discovered that the impact on global trade was actually quite small, due to negotiated exemptions for major steel producing nations like Canada and South Korea—plus the Eurozone and Mexico.  This time around, the U.S. trade representative has 15 days to develop a list of specific Chinese products to slap the additional taxes onto, and there will be a public comment period before the threatened tariffs go into effect.  China has announced that it is developing its own list, and as companies (and farmers) become aware of what is included in its reported $3 billion tariff package, they will lobby for exemptions which may turn this announcement into another tempest in a teapot.

 

Meanwhile, in the wake of the Cambridge Analytica (no relation to Cambridge Investment Research) scandal, admissions that private information on 50 million people had been pilfered, and up to 126 million Americans had seen posts by a Russian troll farm on its site, Facebook shares fell almost 10%, from 176.83 down to 159.39.  This took the social media giant down from the 5th largest-capitalization company in the S&P 500 index to the 6th (behind Berkshire Hathaway)—dragging the index down even further.

 

What’s remarkable about the selloff over things that might or might not happen is that it came amid some very good news about the U.S. economy.  Durable-goods orders jumped 3.1% in February, sales of newly-constructed homes were solid, and Atlanta Fed president Raphael Bostic announced that there were “upside risks” in GDP and employment.  Translated, that means that the economy is looking too good to keep interest rates as low as they have been, which means this is a curious time to be selling out and heading for the investment sidelines.

 

Sincerely,

 

Edward J. Kohlhepp, Jr., CFP®, MBA
President 

 

Edward J. Kohlhepp, CFP®, ChFC, CLU, CPC, MSPA

Founder & CEO

 

 

This material was prepared by BobVeres.com., and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. 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.

 

 

 

Sources:

http://theirrelevantinvestor.com/2018/03/23/8750/

https://www.marketwatch.com/story/heres-why-the-stock-market-took-the-china-tariffs-so-hard-2018-03-22

https://www.usatoday.com/story/money/2018/03/22/stock-market-falls/448665002/

http://www.symbolsurfing.com/largest-companies-by-market-capitalization


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Much Ado About.....

 

 

March 13, 2018

 

You may have heard about the “Trump Tariffs;” that is, the proposed 25% surtax on all steel imports coming into the U.S. from foreign manufacturers, and a similar 10% surtax on aluminum.  The markets certainly noticed; they fell dramatically after the announcement, as investors feared that the move would spark a global trade war.

 

The proposed tariffs would be enacted under a loophole in the World Trade Organization rules, which generally prohibit countries from straying from their agreed-upon trade arrangements, but permit “safeguard” responses to a sudden, unforeseen and damaging import surge that could seriously damage a particular industry.  Internally, the Trump Administration plans to circumvent Congress by imposing the tariffs under Section 232 of a 1962 U.S. law that allows the President to take unilateral action based on national security concerns.  The last time Section 232 was invoked was back in 1975, when President Ford imposed taxes on foreign oil.

 

The initial panicked market reaction cooled after it became clear that the tariffs may actually never be imposed—for several reasons.  One is that there has actually been no unforeseen or damaging import surge in aluminum or steel, or really any surge at all.  The U.S. already imposes 169 trade taxes on various types imported steel, including 29 on Chinese products that were imposed during the Obama Administration.

 

Another is that the national security concern is not easy to justify, particularly after the President signaled that he would remove these tariff measures on Mexico and Canada—two of the largest exporters of steel to the U.S.—if those countries come back to the table to renegotiate the North American Free Trade Agreement.  Wouldn’t that put the country back at risk all over again?

 

A third is that the tariff is a bit like shooting at the enemy and hitting one of your fellow hunters instead.  President Trump specifically called out China for destroying the U.S. steel industry and dumping artificially-priced steel on U.S. markets.  But China is only the 11th largest source country to the U.S., accounting for just two percent of total U.S. steel imports last year.  The Chinese steel industry doesn’t depend on the U.S. market; America is China’s 26th biggest import customer, well behind South Korea, Vietnam, the Philippines, Thailand and Indonesia. 

 

Who would be hurt most by the tariff?  Canada is by far the biggest source of manufactured steel, accounting for 17% of U.S. imports.  Other U.S. allies like South Korea, Mexico and Brazil are all significant sources for U.S. manufacturers.

 

Finally, if the effort is to boost the number of manufacturing jobs in the U.S., the proposal looks like it could seriously backfire.  There are approximately 170,000 steel- and aluminum-related jobs in the U.S. currently.  But if the measure makes steel and aluminum more costly, it would lower profits for companies that employ more than 6.5 million workers—who are paid to make everything from pickup trucks to canned soup.  Worse, the measure opens the doors for the European Union and China to create targeted retaliatory measures like slapping significant tariffs on Harley Davidson motorcycles, bourbon and a variety of agricultural products that depend on exports—further endangering American jobs.

 

So while the sweeping tariff proposals make headlines, the reality is likely to be a quiet walking back from the proposal altogether or, to save face, a tariff that makes a lot of exceptions and grandfathers existing long-term contracts.

 

 

 

 

This material was prepared by BobVeres.com., and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. 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.

 

Sources:

 

https://www.reuters.com/article/us-usa-trade-explainer/trumps-extraordinary-tariffs-idUSKBN1GH2IR

https://www.dallasnews.com/news/donald-trump-1/2018/03/01/trump-says-will-steel-aluminum-tariffs-despite-objections-industry-congressional-leaders

http://money.cnn.com/2018/03/02/news/economy/steel-industry-statistics-us-china-canada/index.html

https://www.cnbc.com/2018/03/02/if-trump-thinks-hes-taking-steel-tariff-war-to-china-hes-wrong.html

https://www.nytimes.com/2018/03/05/opinion/trump-tariff-americans-jobs.html

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Cybersecurity Alert: What You Need to Know about Tax Identity Theft

March 1, 2018  

As we enter tax season, it's important to be aware of the tax identity-theft scams targeting the public this year. Tax identity theft has been a massive threat for years. Recently, however, the IRS has made progress on catching fraudulent tax returns before money is paid out. Last year, the IRS stopped $4 billion in fraudulent tax returns. This year, it may be a different story.  

Experts worry that this tax season could bring more fraud than we’ve seen in recent years. The reason? The Equifax breach exposed 143 million consumer’s Social Security numbers and other personal data. That other personal data was just discovered by Congress to include tax identification numbers

The amount of personal data exposed makes it easy for tax identity thieves to file fraudulent tax returns in your name, collecting your tax refund check for themselves. The best way to protect yourself from this threat is to file your taxes as early as possible—before the thief has time to file in your name.  

If a tax return has already been filed with your information, the IRS will alert you. If you file your taxes online, you will be notified right away. If you send your documents in through the mail, you will receive notice via a mailed letter. If someone has filed in your name, be sure to alert the IRS of the fraud immediately by filling out Form 14039.  

But it’s important to be on the lookout for other tax scams as well. The IRS is already reporting on a multitude of scams this season. For example, in one scam a fraudulent tax return is filed in the victim’s name and the check is deposited in their account. The victim is then contacted by a thief posing as a debt collector who informs them that the deposit was a mistake and the funds must be paid back immediately.  

Scammers claim to be calling from a company called DebtCredit and have created a realistic-looking website that they direct victims to visit. The website includes a video that explains the frequency of mistake payments from the IRS and references personal information of the victim such as Social Security number and bank routing information. The webpage also shows details of the debt collector, including a photo, name, telephone number, and email address.  

This scam, in particular, is believed to have begun with phishing messages targeting tax preparers’ offices. Experts believe that malware was loaded onto tax preparers’ computers and was designed to steal information saved on the device.  

It’s important for tax preparers and individuals keep an eye out for scams over the next few months. Remember that the IRS will only contact you via mail about an issue. If you receive a call or an email and you are unsure, hang up and call the IRS directly to inquire.  

Emerging threat: Social Security benefits stolen by thieves

Security expert Brian Krebs reported on a new trend this month that involves a couple’s Social Security benefit being stolen by a hacker. The couple had created an account online with the Social Security administration but were delaying collecting their benefit. The wife then received written notice she had successfully signed up for benefits and that $11,000 would be transferred out of her SSA account. But she never requested this. It was later discovered that a thief had impersonated the woman by calling the SSA and signing up to receive her benefits. Creating an account at MySSA.gov is important, as it prevents others from opening an account in your name. However, as this story illustrates, you must continue to check your account regularly to protect your benefit. As always, stay alert!  

Sincerely, Kohlhepp Investment Advisors, Ltd.

Source: Savvy Cybersecurity, Horsesmouth  

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Perspective on This Week’s Market Events

 

February 9, 2018

 

It looks like the U.S. stock market will finally get something that happens, on average, about once a year: a 10+ percent drop—the definition of a market correction.  However, the last time a verydeep drop happened, it was a whopper—the Great Recession drop that caused U.S. stocks to drop more than 50%--so most people today probably think corrections are catastrophic.  They aren’t.  More typically, they last anywhere from 20 trading days (the 1997 correction, down 10.8%) to 104 days (the 2002-2003 correction, down 14.7%).  Corrections are unnerving, but they’re a healthy part of the economy—for a couple of reasons.

 

Reason #1: Because corrections happen so frequently and are so unnerving to the average investor, they “force” the stock market to be more generous than alternative investments.  People buy stocks at earnings multiples which are designed to generate average future returns considerably higher than, say, cash or municipal bonds—and investors require that “risk premium” (which is what economists call it) to get on that ride.  If you’re going to take more risk, you should expect at least the opportunity to get considerably more reward.

 

Reason #2: The stock market roller coaster is too unsettling for some investors, who sell when they experience a market lurch.  This gives long-term investors a valuable—and frequent—opportunity to buy stocks on sale.  That, in turn, lowers the average cost of the stocks in your portfolio, which can be a boost to your long-term returns.

 

The current market downturn relates directly to the first reason, where you can see that bonds and stocks are always competing with each other.  This week’s 4.1% decline in the S&P 500 coincided with an equally-remarkable rise in the yields on U.S. Treasury bonds.  Treasuries with a 10-year maturity are now providing yields of 2.85%--hardly generous, but well above the record lows that investors were getting just 18 months ago.  People who believe they can get a decent, relatively risk-free return from bond investments are tempted to abandon the bumpy ride provided by stocks for a smoother course that involves clipping coupons.  Bond rates go up and the very delicate supply/demand balance shifts, at least temporarily, in their direction, and you have the recipe for a stock market correction.

 

This provides us all with the opportunity to do an interesting exercise.  It’s possible that the markets will drop further—perhaps even, as we saw during the Great Recession, much further.  Or, as is more often the case, they may rebound after giving us a correction that stops short of a 20% downturn.  The rebound could happen as early as Monday, or some weeks or months from now as the correction plays out.

 

Once it’s over, no matter how long or hard the fall, you will hear people say that they predicted the extent of the drop.  So now is a good time to ask yourself: do I know what’s going to happen tomorrow?  Or next week?  Or next month?  Is this a good time to buy or sell?  Does anybody seem to have a handle on what’s going to happen in the future?

 

Record your prediction, and any predictions you happen to run across, and pull them out a month or two from now.

 

Chances are, you’re like the rest of us.  Whatever happens will come as a surprise, and then look blindingly obvious in hindsight.  All we know is what has happened in the past.  This week’s market drop is nothing more than a data point on a chart that doesn’t, alas, extend into the future.

 

Sincerely,

 

Edward J. Kohlhepp, Jr., CFP®, MBA President 

 

Edward J. Kohlhepp, CFP®, ChFC, CLU, CPC, MSPA

Founder & CEO

 

 

 

This material was prepared by BobVeres.com., and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. 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.

 

 

Sources:

 

https://www.fool.com/knowledge-center/6-things-you-should-know-about-a-stock-market-corr.aspx

 

https://www.yardeni.com/pub/sp500corrbear.pdf

 

https://finance.yahoo.com/news/stocks-getting-smashed-143950261.html

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Kohlhepp Investment Advisors, Ltd.
150 East State Street
Doylestown, PA 18901
Phone: 215-340-5777
Fax: 215-340-5788
Email: Info@KohlheppAdvisors.com

Securities offered through Cambridge Investment Research, Inc. a Registered Broker/Dealer, Member FINRA/SIPC. Investment Advisory Services offered through Kohlhepp Investment Advisors, Ltd., a Registered Investment Advisor. Kohlhepp Investment Advisors, Ltd. and Cambridge Investment Research Advisors, Inc. are not affiliated.


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