Daily Bullets….for August 21, 2014

·         Yellen won’t be a surprise…..Fed Chairwoman Janet Yellen is scheduled to give a speech on Friday at the annual Jackson Hole annual monetary symposium. Anticipation of her comments is having an impact on trading activity this week.

What’s the point? This is mostly noise. Sure, there is valid reason to be interested in Yellen’s comments; however, given recent economic data for both the U.S. and overseas, we think the Fed (and Yellen) will not change their overall posture very much and therefore, we think Yellen’s comments will continue to be “dovish”. As we’ve said in recent posts, the character of the U.S. labor market remains problematic due to high long-term unemployment, labor force underutilization, and virtually zero real wage growth. This continues to be a major concern for Yellen, which we expect will be reiterated in her speech on Friday. Other FOMC committee members (particularly Plosser) have voiced concerns recently about rates remaining too low, however we think the structural issues of the labor market will continue to cause the Yellen to reiterate the dovish position. Implication: no significant change for the stock and bond markets, i.e. continued accommodative policy favoring financial assets. Link: http://money.msn.com/business-news/article.aspx?feed=BLOOM&date=20140820&id=17871717

·         Retirement catastrophe……This article discusses aspect of what many folks fear on a daily basis: either not having enough savings for retirement or running out of money because of an unexpected financial burden, such as a major medical issue.

What’s the point? All of the suggestions discussed in this article are reasonable. However, all of these items need to be considered in the context for each person’s situation. Decisions made about continuing to own your home, downsizing, assessing probability of major medical expenses, potential changes in social security, estate planning, retirement goals, etc, all require careful consideration, assessment of uncertain outcomes, and making probabilistic judgments. These can sometimes be overwhelming. One of the ways to improve one’s decision and planning process is to engage a financial professional who has experience in understanding the complexities of these decisions and developing a financial plan and investment program that will improve one’s probability of achieving their retirement goals. Financial planning software available today has significant power in handling multivariate decision-making under uncertainty and in modeling multiple potential outcomes (scenario analysis). The process of developing a financial plan can go a long way to relieving anxieties about retirement and thereby improve overall quality of life. Link: http://money.msn.com/retirement/how-to-deal-with-a-retirement-catastrophe