Wall Street Falls; Pfizer, Allergan Drag

US Markets Open For Shortened Thanksgiving Holiday Week
NEW YORK — U.S. stock indexes closed slightly lower in quiet trading Monday on Wall Street after last week’s strong gains, while a big health care deal failed to impress investors.

Pfizer’s (PFE) announcement of what is expected to be the biggest-ever health care deal pushed its shares down 2.6 percent making it one of the biggest drags on the S&P. Target company Allergan (AGN) closed 3.4 percent lower after the $160 billion deal announcement.

“Today was a dull day unless you’re involved in Pfizer or Allergan. Away from that, it’s kind of aimless,” said Brian Fenske, head of sales trading at ITG in New York. “Nobody was panicking when the market was going lower. It wasn’t really on heavy volume.”

The Dow Jones industrial average (^DJI) fell 31.13 points, or 0.2 percent, to 17,792.68, the Standard & Poor’s 500 index (^GSPC) lost 2.58 points, or 0.1 percent, to 2,086.59 and the Nasdaq composite (^IXIC) dropped 2.44 points, or less than 0.1 percent, to 5,102.48.

Disappointment in the Pfizer-Allergan deal was driven by weaker-than-hoped-for projected savings from the complex deal, antitrust issues, along with a possible delay in Pfizer’s plan to split into two companies, according to analysts.

A few days ahead of the Thanksgiving holiday, when markets are closed and traders take time off, about 6.18 billion shares changed hands on U.S. exchanges, below the 7.2 billion average for the 20 sessions, according to Reuters data.

Unimpressive Data

After a week when the S&P 500 had its best performance of the year, investors were unimpressed by Monday’s economic data and some were concerned that economic growth may be slower than expected, said Stephen Massocca, Chief Investment Officer of Wedbush Equity Management in San Francisco.

“We had a very large rally last week and it’s not surprising to see the market correct after that,” said Massocca.

Sales of existing homes fell in October as a persistent shortage of properties limited choice for potential buyers and pushed up prices, suggesting some softening in the housing market recovery after strong gains early this year.

A separate report showed Markit’s Purchasing Managers Index hit a 25-month low in early November, highlighting continued weakness in the factory sector.

S&P utilities were the worst performer with a 1 percent decline, followed by telecommunications services. Those sectors tend to be affected by expectations for a U.S. Federal Reserve hike in interest rates.

The staples was the strongest, led by a 10.2 percent increase in shares of Tyson Foods (TSN) to $48.09 after its quarterly sales beat estimates.

The energy sector rose 0.7 percent, as crude prices were volatile after Saudi Arabia agreed to cooperate with other oil producers to stabilize prices but traders worried about a global supply glut and signs of rising U.S. stockpiles.

Advancing issues outnumbered decliners 1,581 to 1,466, for a 1.08-to-1 ratio; on the Nasdaq, 1,566 issues rose and 1,236 fell, a 1.27-to-1 ratio favoring advancers. The S&P 500 posted 25 new 52-week highs and 4 lows; the Nasdaq recorded 77 new highs and 77 lows.

Steps You Must Take Before the Next Financial Crash

Financial sign post against cloudy sky

You’ve probably been seeing headlines about yet another financial crash on the horizon. It’s true, the International Monetary Fund has released grim projections for the immediate future of world finance. Why? Well, it’s complicated. Basically, the forces which were put in place to fix the last recession may just have caused another bubble in another sector.

The 2008 Recession

The last bubble and subsequent recession were caused when Wall Street took on huge amounts of cheap debt. This debt, as it was repaid, was meant to pay off many times over. But the reality of the situation was much different. In many cases, the debt was put on the back of private individuals who couldn’t handle it, who shouldn’t have been offered a loan in the first place. They defaulted en masse and — among many other factors — it caused the bubble to pop. Debt is only worth something if it gets paid back, plus interest. In 2008 the whole house of cards collapsed. Massive firms like Lehman Brothers went under and a lot of money just disappeared.

The ‘Brittle’ 2015 Global Market

Things are different this time around and Wall Street isn’t on the hook. In an attempt to stabilize global markets following the last recession, borrowing has been made extremely cheap in developed economies like the United States. Economists thought this would shock the heartbeat of the pre-Crash economy back to life, but the U.S. was never able to wean borrowers off of ultra low rates. Investors of all sizes have been snapping up this cheap debt for several years now, causing many to worry that these are exactly the same conditions that caused the 2008 crash.

There are other global factors which make this scenario different from that of 2008. This time, Wall Street isn’t the one holding all of this cheap debt. This time it’s spread all around the world, in companies, private investors and world governments. Many of the nations involved are so-called “developing” economies, which have been using cheap borrowing to fund expansion.

What Does This Mean for You?

Feel free to frolic down the personal finance blog rabbit hole to better understand what’s happening and why. But for now, let’s move our attention from the problem to what you should do if something should hit the fan.

  1. All the basic rules of personal finance still apply. Continue eliminating debt, budgeting, saving and investing as normal. Always have an emergency fund in a savings account, enough to cover your basic expenses for 6 months or more. If you are consider yourself low or middle class, you likely won’t be hugely vulnerable in the event of a global financial event. Stay calm, carry on.
  2. If you’re an investor, don’t freak out. If you have money in the stock market, this isn’t time to lose your cool. If the bottom falls out of the major markets, yes, you will lose money. But the last thing you want to do is sell out of panic when things start going south. All this does is lock in your losses. If anything, double down during a bear market. Best case scenario: The stocks you buy during a recession will increase in value a lot over the next few years. Worst case scenario (unlikely): Civilization as we know it falls apart and your money isn’t worth anything anyway.
  3. Don’t try to beat the markets. Invest when you have money, not according to how the market is doing. Many people lose a lot of money buying up “cheap” stocks, only to have them lose a lot more value the next day. Markets are inherently volatile. Investing regularly, regardless of what is going on, has been proven to work better over decades than only buying when the price seems right.
  4. Allocate your investments wisely. One great way to lock in investment values which you can’t afford to lose is to put them in stable bond markets. A good rule of thumb is to make your bond allocation percentage the same as your age (e.g., if you are 32 years old, allocate for 68 percent stocks and 32 percent bonds). Assuming a normal lifespan, you’ll have time to recover your losses in the stock market, with the assurance that your bond investments are high and dry.
  5. Have a nice day. If you’ve taken care of all of the above, there’s little else that you can do. If so, don’t let bad news in big finance ruin your day. You may have more complex financial needs than the ones described above, but if you don’t, try not to worry so much about the aspects of Finance which don’t directly affect you and which are beyond your control. An upcoming financial crash is by no means inevitable, even though it makes better headlines to say that it is.

As global finance continues to become more complex, there will be growing pains. Put yourself in a position to ride out the hard times that will come, and you’ll be able to get through rough patches without losing too much sleep (or net worth). Like Warren Buffett said, “Be fearful when others are greedy, and be greedy when others are fearful.”

Wireless Bills Falling, but You Still Pay More for This

woman shocked at reading her credit card bill / bank statement
Your wireless bill may have fallen in recent years, but costs are increasing in one area.
The taxes and fees tacked onto wireless bills have increased in all but one state this year — and increased to a record high average, the Tax Foundation reports.

Federal, state and local fees now amount to nearly 18 percent of the average U.S. wireless customer’s bill, an increase of about 1 percent from last year and “almost two and one half times higher than the general sales tax rate imposed on most other taxable goods and services,” the foundation reports.

The nonprofit research and educational group explains in a blog post:

Wireless industry competition has led to significant reductions in average monthly bills, even as consumers get new and expanded wireless plans. However, the consumer benefits of lower wireless prices have been partially offset by increases in government taxes and fees.

From 2008 to 2015, for example, the average monthly wireless bill decreased from just under $49.94 to $46.64, or nearly 7 percent.

But going back to 2003, the combined federal, state and local burden increased from an average 15.27 percent to 17.96 percent.

The only state that didn’t increase its wireless taxes this year is Florida. The governor and Legislature opted to reduce Florida’s Communications Services Tax to 7.44 percent from 9.17 percent, which the Tax Foundation reports will provide more than $100 million in tax relief for wireless customers and businesses in the Sunshine State.

Partially as a result of that decrease, Florida is no longer among the five states with the highest wireless taxes, but it remains among the top 10 states:

  1. Washington – 25.15 percent
  2. Nebraska – 24.99 percent
  3. New York – 24.36 percent
  4. Illinois – 23.92 percent
  5. Missouri – 21.25 percent
  6. Rhode Island – 21.16 percent
  7. Florida – 21.12 percent
  8. Arkansas – 20.77 percent
  9. Pennsylvania – 20.60 percent
  10. Kansas – 19.99 percent