We Who Live in Glass Houses


We Who Live in Glass Houses

It’s good to see the back of October. The first half of the month was dominated by the sixteen day shutdown of the Federal Government; the second half by the sloppy roll-out of the Affordable Care Act’s website and government operated health insurance exchange. Worst of all, the heavy artillery lobbed during the ensuing media war games has caused collateral damage to consumer sentiment and the US economy.

The US Congress will pay federal workers retroactively for the work days lost during the shut-down, but it cannot restore income to small businesses serving workers and Federal agencies, cancelled trips, or revenues from shuttered national parks and recreational sites. And then there are the lost opportunities, like the US absence from the Asia Pacific Economic Cooperation meeting (APEC) – where the President and delegations accompanying him meet and market the US to one of the world’s most dynamic regions. Republican lawmakers, particularly in the House of Representatives bore the brunt of the public’s anger, with opinion polls indicating support fell to all-time lows (24%), which may figure in next week’s off-year elections. Since Congress only funded operations for three months, we will revisit fiscal issues again in January, with talks likely to focus in part on across the board spending cuts due to take effect – also known as the sequester.

Any gloating by Democrats was short-lived once Washington returned to work and found that the healthcare.gov website, its reporting mechanisms, and security protocols had serious flaws. The Obama Administration managed the process poorly, and now also finds itself on the defensive (here’s a handy “blame game” chart). The good news is that most folks are cutting the Administration some slack – a poll shows 2/3rds think it’s a short term issue or will reserve judgment for now. The White House anticipates key fixes will be in place by late November and has delayed its marketing campaign until they have a website that works. Lost in the frenzy is that most people get insurance through work and will see more modest changes – only those without insurance or purchasing independently in states that do not have an exchange will be affected. Also, the US Treasury has loosened rules for Flexible Spending Accounts (FSAs) enabling many people putting pre-tax money aside for health expenses to carry up to $500 over to the next year. By contrast, many state-run exchanges are performing better and signing up decent numbers, but not as many as hoped.

So what’s the damage from all this? Economists may differ on their estimates, but agree that the government shut-down will reduce growth in the fourth quarter (Oct-Dec). Macroeconomic Advisors trimmed their forecast by 0.3% (here’s their calculator) while Standard & Poor’s put the cost $24 billion, reducing growth by 0.6% (here’s their statement). What’s more, recent data released show that growth momentum had slowed before the shut-down took place, with monthly job gains moderating to barely 150,000 from a pace of 180,000 earlier in the year. Retail sales rose 0.2% in August and dipped -0.1% in September, while home sales slowed due to higher prices (up 12.8% year on year according to the Case-Schiller 20 city index) and the increase in mortgage rates during the late spring/summer. The big kicker however was a plunge in consumer confidence, according to national surveys, which does not help retailers as they enter the all-important holiday season.

Source: Bloomberg.com and Econoday

All in all, this has created yet another temporary headwind for the US economy, keeping growth at or below 2% through 2013, delaying ‘the breakout year’ into 2014. But all is not lost — forward looking surveys of purchasing managers in the manufacturing sector rebounded sharply in October, with strong readings on new orders. Energy prices have fallen back, which helps businesses and consumers, and borrowing costs have eased after Federal Reserve officials announced they will maintain their extraordinary stimulus efforts for now, which in turn has helped 30-year mortgage rates dip back to 4.15%. But while the economy giveth, it remains to be seen whether Washington will ‘taketh away’. An across the board cut in supplemental food benefits (SNAP or food stamps) goes into effect today, impacting an estimated 1 in 8 households. And even though the budget deficit fell to 4.1% of GDP in the 2012-2013 fiscal year – its best result since 2007, ongoing budget talks focus on cuts in spending, which can dampen near term growth prospects, rather than longer term changes that can have a more profound and lasting positive impact on the US economy.

The battles of the past month also highlight the fact that in today’s world we all live in glass houses. There has been some bewilderment internationally, and a bit of schadenfreude too now that the US finds itself on the receiving end of advice on how to handle its affairs. While we may find ourselves working within ‘bubbles’ like those in the West Wing, or news outlets that mirror our personal perspectives, it’s only a matter of time before a wider reality sets in. Our connected world no longer protects tyrants, nor does it seem to secure our personal information – and not even world leaders can hide from the spying techniques of the National Security Agency (NSA). Perhaps once we figure out that we all do live in glass houses, we can confront some of our “stone-age” approach to conflicts – it’s not about who’s ‘right’ – but how to resolve them.

*Tipping our hat to the bit – “He who lives in a Glass Houses” from the popular cable television show, Family Guy. Here’s the link http://youtu.be/MGsZwDkk4Eo

LAST CALL: Breakfast for Women Owned Businesses (FREE!)
(& those interested in starting one)
Wednesday, November 6th ~ Nyack, New York
7:30 to 10 am (program starts at 8)

REGISTER HERE ONLINE or Call (914-366-8582) or e-mail mgannon@mtb.com.

Featuring Congresswoman Nita Lowey
& Panel of women business owners (including Feminomics)

Sponsored by:

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ACA for Women, Kitty Pilgrim, TWO Great Events, & Breaking Bad’s Science Advisor

Introducing interviews with high profile women:

Feminomics introduces Fem-Nominal Women — video interviews with terrific women who have something to say. Check out our chat with award-winning journalist & author Kitty Pilgrim at the WIE Symposium in New York City. Kitty was a correspondent and anchor for CNN, winning numerous industry awards. More recently she has written two adventure novels. CLICK HERE – or above TO WATCH:

Reasons to be Cheerful: Affordable Care Act (ACA) – aka ‘Obamacare’ and it’s impact on Women

OK, you’ve probably heard about the overloaded websites as the health exchanges go live today, confusing information, and now a government shut-down (hopefully temporary) in an attempt to delay implementation of the Affordable Care Act (known as ‘Obamacare’). But here’s the thing — the law, parts of which already have been in place, has already helped slow the rise in health care costs, and will result in marked improvement for women.

Feminomics is in pre-production for a video segment we’ll shoot next week about the new law, interviewing industry experts and featuring our Fem on the Street, but we offer a few basics and resources for you to check out today.

Health insurance premiums (similar to car insurance) have been based on risk and use — and so women have been charged higher rates because we tend to require more services, from pregnancy and childbirth, gynecological services, to counseling for depression or domestic violence. Even though men are also bear some responsibility for these issues, women get hit with the bill, and coverage has often been denied or limited once it is deemed a ‘pre-existing” illness. With the Affordable Care Act:

“Obamacare” will include maternity coverage and services like mammograms and HPV vaccine.
  1. Starting January 1, 2014, health insurance cannot sold with gender-based pricing, used in an estimated 90% of plans in the individual market.
  2. Also as of Jan. 1, 2014, health insurers cannot deny coverage due to a pre-existing illness.
  3. As of Jan. 1, 2014, plans cannot have an annual or lifetime limit on coverage.
  4. Maternity coverage will be part of Essential Health Benefits that must be included in health policies sold as of January 1, 2014. Private plans will have to provide women with supportive services for breast feeding, including a breast pump (not all models may be covered), a lactation consultation, and larger companies must provide a place to breast feed.
  5. A variety of preventative health services will be offered to women without cost sharing (co-pays), including mammograms (40+ women every 2 years), pap smears, HPV screening and immunizations, and birth control (note: some brands may not be available and some states-religious organizations have enacted restrictions).

For more information, check out these links:

Dr. Donna Nelson: Breaking Bad’s Science Advisor

The popular University of Oklahoma professor with “Jessie” — Aaron Paul

“The writers know how to make a script popular; the science advisor knows how to get it correct.” (Dr. Donna Nelson)
Meet Dr. Donna Nelson, Professor at the University of Oklahoma, who served as Science Advisor for the epic series, Breaking Bad, which concluded this week.  In an interview, Donna discusses how she got involved with the show, her role, and how the series helped spawn renewed interest in science among the next generation.  CLICK HERE FOR LINK

Join us for TWO GREAT EVENTS in October!

Beauty & Style After Hours — with Feminomics

Thursday, October 17th
6-8 pm at LeMetric Salon
124 East 40th Street — New York City

Lisa Kaess will join the team at LeMetric for a fun evening, with refreshments, skin, hair, and maekup consults and more! With Washington mired in debt and finance talks, we’ll talk about about how you can tackle the debt in your life, and answer your money basics questions.

For more information and tickets ($15), go to: https://lemetricandfeminomics.eventbrite.com/
Le Metric Salon ~ 212.986.5620

4th Annual Health & Wellness Symposium –
Workshop featuring Feminomics

Thursday, October 24th
6:30 to 10:30 pm
JCC Rockland, West Nyack

A great evening promoting women and wellness, featuring Delia Ephron, best selling author, screenwriter, and playwright. You know her films – Sisterhood of th Traveling Pants, You’ve got Mail; and she’ll talk about her new book, and her sister, the late Nora Ephron. Feminomics will lead one of 7 workshops on health and wellness topics (you’ll be able to attend two). Tickets include dinner with Delia Ephron and workshops.

For more information and tickets ($45 – includes dinner & workshops), go to: http://www.jccrockland.org/whws/index.html
JCC Rockland – telephone: 845.362.4400

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Take it to the (Debt) Limit – One More Time


Now Would be a Good Time to Lead:
Speaker of the House John Boehner & President Obama
(Photo source: Washington Post, The Fix, July 2011)

Take it to the (Debt) Limit — One More Time**

Growth in the US during the second quarter (Q2) was confirmed at a 2.5% annual rate, better than first reported and well above levels seen at the start of the year. A modest but steady recovery was echoed overseas, with China on track to meet its 7.5% GDP estimate, Japan growing at a 3.8% annualized rate thanks to a major stimulus program, and even the Eurozone expanded at a 1.2% annual rate this spring.

But just when you thought we might be on the way to a sustainable recovery, US lawmakers have once again locked horns on fiscal issues. Republicans in the House of Representatives have taken the US government hostage, putting forth their list of demands before they release funding or agree to raise debt ceiling. They include a one-year delay in the implementation of Obamacare, tax reforms along the lines of Paul Ryan’s budget, passage of the Keystone XL Pipeline, drilling for oil on Federal land, and more in a lengthy laundry list. Even Republican advisors and allies call these tactics ‘ill conceived’ and warn that ‘kamikaze missions rarely turn out well’.

Washington’s games could cut into recent gains for the US economy. The housing sector, which was revised higher in the GDP report, has decelerated a bit in response to the jump in mortgage rates and higher prices, but continues to expand. Autos and light truck sold briskly, breeching the 16 million unit annual rate in August for the first time in nearly six years. While manufacturing figures softened a bit in the summer, new orders are up sharply, and durable goods orders steadied in August after a sharp drop in July. Domestic energy production continues to grow at a robust rate, which has the added plus of reducing energy imports from abroad, while inflation remains tame. And with initial jobless claims averaging 308,000 the last month, its lowest point since the downturn, analysts expect hiring to pick up over the next few quarters.

Wall Street and Main Street have largely ignored the political noise because this deeply flawed process has produced results. Thanks to higher than expected tax receipts, income from Fannie Mae & Freddie Mac, and spending cuts, the US Federal Budget deficit has narrowed to roughly -4% of GDP for fiscal year ending September 30, less than half the -10% of GDP gap recorded in fiscal year 2009. That said, the $16.7 trillion pile of debt, equal to about a full year of GDP, has yet to be dealt with in a meaningful way.

So what’s next? Beware the Ides of October: Officials have started to brace for a possible temporary government shutdown starting next Tuesday, October 1. In practical terms it means that, should a temporary shut-down occur, essential services and payments would continue (like Social Security payments), but non-essential services would close. Here’s a list of agencies and links to contingency plans. Macroeconomic Advisors, a leading consultancy, estimates that a temporary government shut-down could reduce US growth by 0.3% in the fourth quarter, with a rebound in early 2014, similar to the drop in growth in the first quarter, followed by a rebound this year. But remember, because the US is very close to its debt ceiling (Treasury Secretary Lew estimates it will exhaust funding measures October 17), this impasse carries the threat of a sovereign default by the US on its obligations.

Risky Business: The largest concentration of “1% worst trading days” in the history of the Dow (Jones Industrial Average) have occurred near October. NOT a good time for a debt ceiling showdown.

Source: Statisticalideasblogspot.in – “The Autumn of Our Discontent” by Salil Mehta

And unlike the fiscal battles of August 2011 and last December, this debt ceiling impasse comes at a sensitive time, for October is highly correlated with stock market ‘events’. News outlets have reported how September has often been the worst month for financial market returns, but a statistical review by Salil Mehta of the worst 1% trading days in the history of the Dow Jones Industrial Average (Dow) indicates that the riskiest times have occurred near October, with a bias toward Mondays (to qualify for this “1%”, index had to fall by 3.2% or more in a single session, or nearly 500 points at current levels). Corporations begin reporting their third quarter earnings results October 8th, and already a number of companies have ‘guided’ expectations lower. With equity indices hovering near multi-year highs, Washington’s missteps could prove costly.

Against this backdrop, it’s no wonder that Federal Reserve officials opted to maintain its extraordinary stimulus efforts a bit longer. Taking a bit of flack for ‘misleading markets’ or ‘missing an opportunity’ may be the least of their concerns. With just a few days to go, pundits warn a temporary government shut-down could well occur, enabling hard liners to show they ‘delivered’ on their threat, clearing the way for another continuing resolution to fund the government, with a possible extension of automatic spending cuts (the sequester) into the 2013-2014 fiscal year. A temporary shut down could focus Wall Street’s attention in a hurry, reminding everyone of the potential costs to business, households, and the real economy. That’s messy but manageable. But as we learned with the housing crisis, just because something hasn’t ever happened yet doesn’t mean it can’t.

America’s sovereign ‘debt mountain’ — it won’t disappear by itself and a default, even temporary, could trigger sharp increases in borrowing costs (like a missed payment on a credit card), impacting mortgages, lines of credit, and business loans.


Tax Debt Chart
Source: Center on Budget and Policy Priorities, Daily Beast


** Since this is ‘déjà vu all over again’ we return to the classic Eagles hit, Take it to the Limit. Here’s a link to a video of a live performance.

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Please let us know if you have ideas for future segments, and we hope you’ll take a moment to ‘Subscribe’ to the Feminomics You Tube Channel, ‘Like’ our videos, our Feminomics Facebook Page, and follow us on Twitter.

INTRODUCING Feminomics “Webisodes”

Feminomics introduces ‘webisodes’ — segments produced for the web that are fun and informative. Welcome to ‘Fem Fabulous’ — fashion and beauty with a money twist. CLICK HERE TO WATCH:

Fem Fabulous: Cool Looks for the Hot Weather

For our debut Fem Fabulous segment (all about fashion and fun), we combed the streets of New York focusing on the trends and tips that can help you stretch your fashion dollars. Check it out HERE.

Fashion Trends:

Black and white were big favorites in the summer, often paired with a splash of color like orange or pink (see photo above). Women loved the grace and cool feel of long, flowing maxis, and ‘green’ themes with flowers and nature were also in full bloom. Most will continue to work well beyond Labor Day.

Experts talked about color blocs as a continuing hit that flatters many body types and comfy wide leg pants as a fun, fashionable way to beat the heat. And sleeveless dresses remain the go-to choice for professional women that can go from day to evening in a snap.

To help us on our mission to help women look great on a budget, we consulted with industry people and YOU to share tips for looking good on a budget. This led our Fem Fab Four Fashion Basics:

A) Do Spend on Investment Pieces:

Be sure to have a few ‘investment pieces’ to anchor your collection. These are key items that you will use regularly, so look for good quality, well-made clothes that suit your body and will last for more than one season. Examples included the perennial black dress (sheath for summer); a tailored jacket; a leather jacket; and great fitting jeans. It’s not always about ‘cheap’ – a good investment piece is one you get mileage from over time. If you use something 100 times, its ‘cost per use’ is less than a ‘bargain’ sitting in the closet.

B) Don’t put a lot of $$ into ‘trendy’ stuff:

Trends can come and go, so don’t spend big bucks on them. For example, leggings are a trendy item that you can find in price points from $5 – $100. Make a small commitment and wear them a few times – if you love them and they have staying power, you can always upgrade. If not, enjoy the moment and pass them on when you’re done.

C) Do take advantage of discounts, end of season bargains:

Over and over we heard from savvy shoppers who made the most of their money by going to nationally known discounters, taking advantage of sales, end of season clearance, even checking out ebay or vintage shops.

Caitlin & Lisa are wearing dresses bought on sale or at national discounters for under $60.

D) Don’t overdo it – before SALE becomes a four-letter word (DEBT):

Do spend on something that works for you and your budget, but avoid getting caught up in ‘the moment’. We don’t often realize how much we’re influenced by advertising, media hype, sales people or friends who may whisper – “go ahead, you deserve it”. Use your money to live your dreams. What do you really want – another pair of pants or a trip to Paris? A great handbag or money toward a downpayment on a car, home, or long term savings? TIP: Keep a photo of a life goal you want in a slot by your credit cards, and glance at it before you pay. Or ask to hold an item for a few hours or overnight. That can help keep you focused on your goals.

Special Thanks & Great Resources:

Heather, Stephanie, Aliza and everyone at Century 21 Stores in New York (www.c21stores.com); Veronica Jones and the good folks at The Brownstone (www.thebrownstonewoman.com). Both websites offer online shopping.

Special shout out to the fabulous KJ Denhert for letting us use her ‘Lucky7’ as our new closing theme song. CLICK HERE to listen to the song and other clips from her album of the same title. (More on kjdenhert.com)

Thanks so much for your support!!

Please let us know if you have ideas for future segments, and we hope you’ll take a moment to ‘Subscribe’ to the Feminomics You Tube Channel, ‘Like’ our videos, our Feminomics Facebook Page, and follow us on Twitter.

Feminomics Featured in Op-Ed



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Feminomics Op-Ed featured in The Journal News

An op-ed feature by Lisa Kaess was published in The Sunday Journal News, July 7, 2013, under the title, “Rethinking Rockland Economy”. It was based on discussions held by recent meetings of the Women’s Entrepreneur Group. Special thanks to Jill Pryor and the members of WEG for their input and support. It can also be found on lohud.com — under the title, “Make Rockland More Small Business Friendly” (CLICK HERE for link). Photo by Anthony Geathers.


Is this best of times, the worst of times, the spring of hope or winter of despair for Rockland County? In the big picture, economic and business conditions have improved markedly. At the same time, an array of issues impacting small businesses and independent professionals signals that much work remains.

There are good tidings for Rockland. Michael DiTullo, president and CEO of the Rockland Economic Development Corporation, spoke with the Women’s Entrepreneur Group (WEG) and offered an upbeat assessment of the county. Key takeaways were:

• Corporations are relocating to and expanding in Rockland, including Fed-Ex, furniture retailer Raymour & Flannigan, window treatment manufacturer Hunter Douglas; Bloomberg Communications.
• Pfizer’s Pearl River facility is transitioning into a medical/tech R&D campus. As Pfizer reduces its presence in the county, a range of smaller firms have hired many of those downsized. It is hoped that by dividing our “eggs” among many baskets, this diversity spreads risk and helps stabilize the tax base.
• Sales tax receipts are higher (so far) in 2013. Speaking of taxes, the New York State Department of Taxation & Finance Quarterly Tax Report (cash comparison) shows sales first quarter 2013 tax receipts up 6.66 percent year on year through March, more than neighboring counties.
• Unemployment is among the lowest in New York state: The Bureau of Labor Statistics reported that the jobless rate fell to 5.8 percent (preliminary) in Rockland County, well below upstate levels or the national rate, currently at 7.6 percent. [A broader measurement of unemployment and “underemployment” remains elevated, at 13.8 percent nationally.]

Left behind?

It’s a great story, yet it reflected a macro, big-business view. Ask small businesses, and most will tell you the world changed for them since the Great Recession. Feminomics, which offers female-friendly advice and new media content on money basics, produced a short film in which we interviewed female small business owners in late 2011. Several have since closed, while others believe leaders focused on the “big fish,” leaving them out to dry. It’s also clear that the transmission mechanism between Wall Street and Main Street has sped up, so if U.S. financial markets sneeze, Rockland gets a cold.

Weather issues also loom large, challenging the traditional economic view that “acts of God” are one-off events, with a short-term dip followed by recovery. Whether you look at the flooding issues in our towns along the Hudson, problems along Route 59 and the New York State Thruway, or freak storms in October and March, small businesses have been hit hard with lost inventory, business disruptions, and extended outages. And when local government punts on addressing infrastructure changes, small businesses (and homeowners) pay the price.

Rockland small businesses also face a variety of competitive challenges. Locally, they have had to adjust to the Palisades Center and soon to the Shops at Nanuet, while neighboring Bergen and Orange counties offer strong initiatives to attract business. Online activity grows steadily, impacting both retail and professional services. With many businesses in our villages already experiencing a reduction in foot traffic, if toll increases cited for a new Tappan Zee Bridge take place, the Lower Hudson Valley will likely see visits and spending by “day trippers” decline further.

Ideas for solutions

One thing budding entrepreneurs, tradespeople, small retailers, medical, service and creative professionals have in common is limited time, resources and ability to leverage the benefits of size. They can benefit from:

• One-stop shopping: It’s not just larger companies that need help with red tape. Even if everything is not concentrated physically in one location, it would make sense to have a central address (online perhaps) for small businesses to go countywide — and for larger ones to reach out to if they seek contractors, bidders for requests for proposals, professional services, etc. This also goes for education and events — for example, letting people know a “social media for dummies” class is available on Monday morning at RCC, Wednesday evening in the New City Library, or Saturday morning at Nyack College broadens access and potentially participation, too.
• Business groups for insurance: All firms grapple with costs, but smaller businesses face added penalties for size. A small business center could explore whether it can serve as an umbrella, helping reduce premiums for health, life, disability or professional liability insurance.
• Education/internships: An umbrella organization could bring community colleges and vocational schools together with local businesses to ensure curriculum and training focuses on the specific skill sets needed by those who can hire them. Rockland could also benefit from a more central repository for summer jobs, internships and retraining opportunities, such as the Westchester Private Summer Jobs Initiative.
• Incubators: Rockland County could benefit from targeted “incubators.” REDC talks about a medical/tech “campus” in Pearl River; one could also envision a creative arts/professional center in Nyack. Gov. Andrew Cuomo’s new initiative, Start Up NY, is another step in the right direction, offering R&D-focused businesses ventures the opportunity to align with upstate public sector universities and operate in special tax-free zones.
• Government certifications and resources: Programs about applying for women/minority owned status, certification to bid on government contracts, and resources from established groups like SCORE should be offered at regular intervals, rather than occasional ad-hoc events.

In the end, the objective is to collaborate and share information where possible to address deficiencies. As it stands, established business groups focus on larger businesses, smaller ones on networking, while Chambers of Commerce tend to their own town or village. The Women’s Entrepreneur Group members welcome a dialogue to see if the Rockland Economic Development Corporation or other countywide entity might enhance the local economy further by extending an umbrella to better serve the thousands of small businesses existing today all around them. We’ve got nothing to lose but jobs, tax receipts, and talent — lots of it.

The writer, a Piermont resident, launched Feminomics in 2012, and has worked as an economist and consultant in international finance.

A Change ‘Gonna Come**

It’s been a long, a long time coming
But I know a change gonna come
(Sam Cooke – 1963)

From civil unrest around the globe, prayers for the ailing Nelson Mandela, to landmark Supreme Court decisions, we are witnessing chapters drawing to a close as others struggle to emerge. With change comes uncertainty and volatility, which could also describe financial markets of late. Yields on US Treasury securities were backing up for weeks, but Federal Reserve Chairman Ben Bernanke’s announcement that the Fed could begin tapering down its purchases of fixed income securities later this year sent yields sharply higher. The US Treasury 10-year note yields 2.48%%, up from 1.6% in early May; this in turn pushed the average 30 year mortgage rate to 4.375%, versus 3.75% a month ago.

Current economic conditions hardly justify such a swing. The Federal Reserve’s survey of activity noted modest improvement in May, with interest rate sensitive sectors rebounding sharply. Existing home sales rose at a 5.18 million annual rate in May, new home sales rose at a 476,000 annual rate, with average home prices up about 12% year on year, (even more in Florida and Western cities). Auto sales, which have averaged just over a 15 million units annualized sales pace this year, could reach 15.7 million units in June, their best showing in 6 years. Nevertheless, higher taxes, ongoing public sector budget cuts, and limited wage gains continue to temper any economic upswing. Growth (using gross domestic product or GDP) was revised down in the first quarter to a 1.8% annual rate (from 2.4%); forecasts for the second quarter growth remain below 2%.

Let’s be clear – the Fed has not taken any action yet. Its purchases of US Treasuries and mortgage securities, which are running at $85 million per month, will remain steady for now, with the plan to slowly reduce them later this year – should conditions warrant. Chairman Bernanke and senior officials have emphasized its Fed Funds target rate remains unchanged at 0 – 0.25%. Fed parameters say it will consider raising benchmark rates when headline unemployment falls below 6.5% and inflation rises about 2.5%. With inflation subdued for now at less than 1.5% annual rate, and headline unemployment a full percent below the Fed’s target, we’ve got a ways to go. Forecasters anticipate a gradual acceleration in US growth starting later this year, leading to an eventual tightening of monetary policy later in 2014 to early 2015.

So if growth remains modest and the Fed’s overnight borrowing rate will remain near zero, why the sell-off? The chart below of 10 Year US Treasury yields, shows that in the big picture, US interest rates have steadily moved lower since the mid-1980s. While some investors may be perfectly willing to hold their securities to maturity, others – especially those who trade regularly – read the Fed’s announcement as a signal that this trend has likely run its course. So they’ve begun to sell their holdings to lock in profits.

Are we witnessing the end of an extended decline in US bond yields?
(Source Federal Reserve Bank of St. Louis)

And the numbers confirm this move — bond funds and exchange traded funds faced record redemptions of $61.7 billion through June 24th, surpassing the previous record of October 2008. At the same time, money market funds saw assets rise by over $8 billion in the week ending June 25, indicating some investors have decided to get out of the market and hold their money in these low yielding short term funds to keep their options open.

That makes good sense, because a number of wildcards continue to concern markets. Once again international events and geopolitical pressures pose more of a threat than economic imbalances, though global growth forecasts have been revised lower. For example, Chinese authorities, in an effort to send a message to banks that it intends to rein in lending excesses, Chinese did not step in at quarter-end to address rising cash needs, resulting in a spike in short term interbank lending rates. With Chinese banks needing liquidity, they sold US Treasuries (and other holdings), exacerbating a spike which sent the 10 year yield to 2.71%, with some watchers speculating that cash strapped Chinese might have sold US Treasuries temporarily to raise liquid funds. Having made their point, the Peoples Bank of China intervened on June 25th, providing liquidity to the market, easing pressures.

We are reminded that just as early signs of recovery were derailed in 2011 by the Arab Spring and tsunami in Japan, civil strife in a number of countries, slower growth in China, and other surprises could potentially rain on our parade again. As events in Egypt have deteriorated rapidly, investors fled mutual funds focusing on emerging market bonds, withdrawing estimated $5.6 billion in the week ending June 26.

Ironically, the Fed’s discussion on withdrawing its unprecedented support of financial markets represents a sign of healing. And with the US budget deficit shrinking rapidly, authorities may reduce auction sizes in coming months, so that the ‘tapering down’ of extraordinary bond purchases would coincide with a period of dwindling supply. Nevertheless markets have become accustomed to this IV drip of money, and they are demonstrating symptoms of withdrawal. These developments remind us linkages in our markets and global economy tether us closer together than ever. And given the rise in foreign holdings of US Treasury securities, the impact now goes in both directions. So take a deep breath, because a change ‘gonna come.

** Sam Cooke’s classic, A Change Gonna Come (listen here), became an anthem of the US civil rights era, and adopted by agents of change around the world.

De-clutter Made Simple, Higher Mortgage Rates, & More!

Watch Out –Rates are backin’ up, backin’ up…

Interest rates have backed up markedly in the last month, as stronger economic data prompted investors to leave the relative ‘safety’ of bonds. This has raised concerns that the Federal Reserve will soon curtail its large scale purchases of securities as part of their efforts to keep rates low and support growth. Other investors have watched equity markets rally sharply this year in the US and overseas, and decided that at this juncture to move funds back into stocks.

As a result, yields on US government bonds AND mortgage rates have risen sharply in a month, with the national average on a 30 year fixed rate mortgage hovering near 4% (from under 3.5%), while 15 year mortgages hover near 3%.

With growth likely to remain subdued in the months ahead due to the ongoing drag resulting from government spending cuts, it is premature to call the end to this extended period of historic low rates. The latest employment report indicated that non-farm payrolls rose by a net 175,000 in May, with a slight downward revision to figures for the previous two months. This is what some pundits are calling the ‘sweet spot’ — growth that is strong enough to generate modest activity, but not enough to cause the Federal Reserve to withdraw its stimulus just yet. US stock market indices rallied in response to the news — with the the Dow Jones Industrial Average ending the week at 15,248, while the S&P 500 index closed at 1,643.

Just as the more stable US economic environment has helped ignite a stock market rally and led to questions regarding how much longer the Federal Reserve will maintain its extraordinary support measures, households and businesses should plan for higher borrowing costs in the future. Wall Street analysts are forecasting the yield on the 10 year Treasury note (currently 2.17%) will rise to 2.5% later this year, and 3% in 2014. If you’d like to take advantage of historic low rates to purchase/sell a home, or borrow for other reasons, consider this your wake up call.

More details in our Case by Kaess Commentaries.

Our Latest Segment: Feminomics Meets the Feng Shui Guy

Highlights from our Feminomics evening with the Feng Shui Guy, Ariel Joseph Towne, can be seen in the on our Feminomics You Tube Channel. CLICK HERE to WATCH.

(For more on Ariel, go to www.thefengshuiguy.com)

Newsflash: 40% of US Households with Children Headed by Female ‘Breadwinners’ and Single Moms

You’ve come a long way baby.

A new study by Pew Research has found that 4 in 10 children are being raised in households where women act as the sole or primary provider. That’s up from 10.8% in 1960 and just over 20% in 1980.

They divide up into two distinct groups; married women with children, where mom serves as ‘breadwinner’, and single mothers. The households with a married mom serving as breadwinner earned about $80,000 well above the national median income of $57,100 for all families with children. Families with two parents at home earned a multiple of the $23,000 median income for families led by a single mother.

Researchers cite the entry of women into the workforce over the last 40 years, with women now making up nearly half the total workforce. The 2008 downturn may have also had an impact, with more mothers saying that ideally they would like to work full-time rose to 32% in 2012 from 20% in 2007. The share of those saying they prefer not to work at all fell to 20% from 29% in 2007.

It’s no surprise that working mothers still face an uphill battle at home and in society. While the study found that 79% of those surveyed do not want women to return to a ‘traditional’ role, double-standards are alive and well. Just over half said children are better off with mom at home, while only 8% felt that way if about having the father at home.

For a link to the study CLICK HERE.

UPDATE: Senate Hearings on Sexual Assaults in the Military

The Senate Armed Services Committee hearings this week on the epidemic of sexual assaults in the Military highlighted the disconnect between Pentagon brass and civilians. Senator Claire McCaskill of Missouri (pictured) warned the Generals who testified that ‘training’ is not enough to change a military justice system that tolerates a culture of widespread abuse and crimes of “assaultive domination and violence”. Senator McCaskill highlighted that current data gathered in the military do not differentiate between actions that threaten the workplace environment and felony crimes like rape.

In an op-ed this week, Kirby Dick, director of the film, “The Invisible War” – which examines this issue, noted, “the Pentagon is resisting this reform, just as it resisted reforms after the Tailhook episode in 1991, over sexual assaults at a gathering in Las Vegas; sexual assaults on female Army recruits at the Aberdeen Proving Ground in Maryland in 1996; and a 2003 investigation of rapes and attempted rapes at the Air Force Academy, near Colorado Springs.”

We continue to follow this issue to support the bi-partisan efforts underway in Congress to enact meaningful change in the US Armed Forces. Let’s make this time different. For coverage of this week’s hearings, click HERE.

Will there be growth in the spring?**

We welcome the inevitable seasons of nature,
But we’re upset by the seasons of growth in our economy.

(From the film, Being There – click HERE for clip)

After an unexpected pull-back in the economy late last year as the US teetered on the ‘fiscal cliff’, politicians, analysts, investors, and gardeners shared the view that yes, there will be growth in the spring. Stronger demand for housing and autos, a catch-up spurt in manufacturing to replenish low inventories, and ongoing business investment combined to offset tighter fiscal policy. Growth in the first quarter of 2013 (due out April 26) will rebound sharply from the paltry 0.4% gain (itself an upward revision) posted in late 2012, with some analysts forecasting a 3% annualized rate. While Americans did not feel the impact of spending cuts that went into effect last month (see Crying Wolf? commentary ), they have begun to surface. The combined impact of $85 billion in automatic spending cuts which came into effect last month together with earlier budget cutting agreements will effectively cancel out the extra momentum that had begun to build. That keeps the US stuck in a slow growth loop.

The March employment report is a case in point. Payroll job gains slowed substantially, up only 88,000, less than half the average gain of the past 12 months (169,000), with weakness in the retail sector, sluggish gains in manufacturing, and ongoing trimming of public sector payrolls. Unemployment ticked down to 7.6%, not because of job gains, but because nearly ½ million people stopped looking for work altogether. One report does not make a trend, and need a bit more time to see how much of this may be attributed to the harsher weather in March, early Easter, and the impact of budget cuts.

Different year, same pattern – activity begins the year on a positive note and slows into the spring. In 2011 it was the earthquake in Japan and Tsunami combined with the Arab Spring, and in 2012 growth slowed in China while the Greek financial crisis and its impact on the Euro took center stage. And fiscal tightening and debt drama has taken its toll on US growth. Less than a fortnight ago Chairman Ben Bernanke and senior policy makers at the Federal Reserve began discussing how they might eventually begin to withdraw the extraordinary stimulus measures taken to support growth. If the latest data indicating some softening of the labor market and a somewhat slower growth momentum going into the spring hold true, we could see yet another ‘spring slowdown’.

The same holds true for Europe, where the financial sector meltdown in Cypress looks unlikely to rock the core of the Eurozone, however the deep spending cuts imposed by governments to close large budget gaps, has the region mired in a vicious negative circle. Unemployment reached 12% for the Eurozone overall in February, the highest level recorded (data since 1995), with sharp regional differences. Youth unemployment topped 55%% in Spain and Greece, 38% in Italy, while unemployment (overall) was 7.7% in the UK an 5.4% in Germany. The European Central Bank forecasts that growth will decline another -0.5% in 2013, with no clear path back to growth.

That is something Japan can also relate to – after all, it has had a lost decade with virtually no growth and is stuck in a deflationary spiral and a series of short-lived governments. Prime Minister Abe has embarked on a bold new policy to jumpstart growth and ‘reflate’ the economy – flip it from a negative spiral of falling prices, wages, and output into a more virtuous circle. Bank of Japan Chief Kuroda has a 2% inflation target , but detractors warn the country risks creating a ‘race to the bottom’ in international currency markets. Already the Yen has fallen sharply against major currencies this year, declining from 86 Yen per dollar in January to 99 Yen to the dollar today.

Source: Federal Reserve of St. Louis

All of these are by-products of structural changes taking place in North America, much of Europe and Japan – which are all grappling with how to provide services to populations that are aging while retooling to compete in a more competitive and more volatile global environment. Central Banks in the US, Japan, and Europe have all undertaken extraordinary measures, buying bonds to keep borrowing rates low in an effort to stimulate growth – with limited success. At the same time, sovereign indebtedness has grown. On a positive note, US leaders have taken steps to enact a budget this year and talk is underway for a possible broad deal on the budget.

This is a delicate dance. The US will need both strength and flexibility to navigate challenges from ‘next wave’ dynamos like Brazil, China, India, and Korea, while avoiding conflict with potential spoilers in North Korea and Iran. Yet fiscal tightening, offset in part by stimulus efforts by the Fed, could keep US growth below 2%, leaving it vulnerable to shocks. Yes Virginia, there will be growth in the spring, but the seasons of growth feel as fleeting as the daffodils. L.K.

** Homage to ‘Being There’, a 1979 film starring Peter Sellers (his final role). Click for a link to its now classic scene; and background.


Analysts had expected that growth in the final quarter of 2012 would come in sluggish, warning about a temporary pullback after Hurricane Sandy, but no one had forecasted that it would actually contract 0.1%, the first outright decline since 2009. A look at the data revealed that this was due mainly to a sudden sharp drop in government spending and a big dip in inventory restocking by businesses.

Federal Government outlays declined -6.6% in the fourth quarter of 2012, compared with a 3.9% increase in the third quarter of 2012, led by a 22% plunge in defense spending. And business inventories rose at one third the rate of the previous quarter and half the rate seen last summer. Households helped offset these declines as personal consumption rose 2.2%, compared with a 1.6% rate in the previous quarter, led by a 13.9% jump in durable goods orders, which may be related to post-Sandy replacement spending. For 2012 as a whole, the US grew at a 2.2% annual rate, versus 1.8% in 2011.

Should we worry about the possibility of a new recession? Not yet. So far, it looks as if this was “shrinkage” – a temporary dip in economic activity due concerns the ‘fiscal cliff’ would hit January 1st, but was averted. And the good news is that 2013 has started on a more positive note. The economy created 157,000 additional jobs in January, close to expectations, but gains were revised sharply higher for latter part of last year, which helped support spending and activity. According to the Bureau of Labor Statistics, these upside revisions helped bump up payroll increases to 180,000 per month, compared to the roughly 150,000 average seen for much of 2012. Hourly earnings crept up 0.2% in January, after a 0.3% rise in December – not huge, but still a plus.

A recovering housing market also helps. Although existing and new home sales both dipped in December, this came after big gains in November. Low inventories of homes for sale (and not weaker demand) was cited as a reason for the drop, with supply of existing homes down to 4.8 months of sales, versus a norm of about 6 months. Much of the extra supply from the housing and foreclosure crisis has been worked off, and this, combined with rising demand has begun to push home prices higher. Auto sales have also benefitted from a more resilient consumer, with January motor vehicle sales rising at a 15.3 million pace, a bit off the peak of 15.5 million in November 2012 (a post-Sandy spike), but still well above the 14.2 million rate of seen a year ago and the strongest performance since 2007.

The housing sector looks like it will continue its rebound in 2013, and stock markets have followed suit. The Dow Jones Industrial Average closed above 14,000 last week for the first time since October 2007, just before the start of the Great Recession.

The main wrinkle is while the private sector and households have been getting their act together, the public sector remains at an impasse over spending. The ‘fiscal cliff’ agreement raised some taxes on wealthy taxpayers and reversed the temporary cut in payroll taxes that fund Social Security, but it will have a limited impact on either the annual budget deficit or the large overhang in existing debt of the Federal government. The ‘fiscal cliff’ deal postponed automatic spending cuts for 60 days, and Congress passed a temporary ‘suspension’ of the debt ceiling for a few months. Both issues will likely remain a driver of sentiment in the weeks and months ahead.

The good news is that the private sector has made slow but steady progress and the US budget deficit is likely to decline below $1 trillion this year according to the non-partisan Congressional Budget Office, but growth remains in low gear. If US leaders take action to address the long term debt issue, it would help resolve the uncertainty holding back the economy, investment, and new hiring. But if Washington continues to kick the can down the road, investors could get skittish again, impacting confidence. And that in turn, leaves us vulnerable to another bout of ‘shrinkage’. Stay tuned.

Lisa Kaess

*Shrinkage can relate to accounting and laundry, but it entered the popular lexicon after an episode of the comedy Seinfeld.

The Sandy Surprise

Having finally made it through the 2012 US elections, one wonders whether 2+ years of campaigning and billions of dollars spent were worth it.  President Obama won reelection to a second term, while the Democrats and Republicans maintained control of the Senate and House of Representatives, respectively, albeit with smaller majorities.   Having said that, several trends did emerge, and as many have warned, markets have already started to pivot to the elephant in the room:  the fiscal cliff.    Here are our four take-aways:

  • Extreme ‘Anti’ Strategies Lost (immigrant, abortion, tax, etc.)  Candidates that adopted virulent ‘anti’ rhetoric were defeated.  Anti-abortion candidates Todd Akin of Missouri and Richard Mourdock of Indiana lost US Senate races after outrageous remarks; anti-immigration efforts hurt Republicans in swing states (Florida, Colorado, Nevada).   In addition, several Tea Party candidates defeated or pressured moderates to stand aside in primaries lost to moderates in the general elections (Maine, Pennsylvania, Connecticut, etc.).

  • Demographics Rule:  Latino voters crossed the 10% threshold in this election, and together with African-Americans, women, and younger voters,were key to President Obama’s win, as well as initiatives on same-sex marriage.  The Republican coalition of older, white, religious, and affluent voters comprised a shrinking proportion of voters and will need to expand to remain viable.  Pundits believe this bodes well for immigration reform.

  • The ‘Sandy’ Surprise:  Hurricane Sandy stopped Mitt Romney’s late surge and helped President Obama.  Exit polls sited by one network said that 4 in 10 voters said the hurricane had a modest or significant impact on their final choice.  Cooperation and effective management of the storm crisis by President Obama and New Jersey Governor Chris Christie won widespread support, with support from New York Governor Cuomo and Mayor Bloomberg, who noted that climate change issues were one factor that tipped him into supporting the President for reelection.

  • Leadership Trumps Partisanship.   Drawing on earlier points, politicians who demonstrated leadership and got things done were seen as a welcome change to the hyper-partisan gridlock.  House Speaker Boehner got the memo, saying the elections were a mandate for the two parties ‘to take steps together’ to boost the economy.   President Obama talked about ‘compromises to move the country forward’.   Others however have not, and has businesses nervous.

Concerns about the ‘carnival life’ in Washington (as well as trouble in Europe) pushed US stock markets sharply lower today (down 2.3-2.5%); their worst session since June.    As we move to year-end investors and money managers will be tempted to lock in profits (and bonuses) and reduce exposure to markets, as we head to the holidays, which could put pressure on stock markets.  This may be exacerbated by investors locking in profits at lower capital gains rates in case those rise in the future.

And with little change in net seats for either party in Congress, the pressure is on for legislators to work immediately toward a ‘grand bargain’, or at least a temporary moratorium on pending spending cuts and tax increases to give the new Congress time to work on a broad-based reform.  This package will need to include a combination of spending limits and revenue increases to reduce the fiscal gap and longer term fixes to reduce the national debt.  It will involve changes to Social Security (a higher retirement age perhaps), cost controls for defense, Medicare and Medicaid (health care costs remain the crux of the problem), and reduction of tax cuts, corporate incentives and other special incentives.  These four areas comprise, together with interest on our existing debt, over 80% of government spending.  Like banks, it’s ‘where the money is’.

Just as Hurricane Sandy demonstrated that environmental ‘events’ carry serious ‘tail’ risk for government, business, and households (low odds, but devastating impact), the fiscal cliff poses serious risks for the US and global economy.  Typically economists talk about hurricanes as a one-off temporary hit to growth (of 0.45%), followed by a bump up when rebuilding efforts get underway. Moody’s Analytics estimates $50 billion in losses from Sandy (versus $80-90 billion from Hurricane Katrina).   Regardless of your views on climate change, businesses will need to think about how to reduce risk from these ‘100 year floods that seem to be happening every two years’.

The good news is that the private sector continues to improve.  Consumers have reduced spending and cut debt to help get their households in order, while the rebound in housing activity has helped reduce roadblocks to growth as sales and construction increase, supply shrinks, and prices rebound.  The Census Bureau announced that the US added 1.15 million households in the 12 months that ended in September, up from 650,000 average of the previous four years.   However until we see constructive action by the public sector, the economy will remain stuck in low gear.

Lisa Kaess