The Fed's Own Data Show U.S. Manufacturers Don't Share Its Optimism

Factories are cutting expansion plans just as the Fed sees stronger growth

Tucked away in last week's report on industrial production from the Federal Reserve was an important piece of news: Manufacturers, miners and utility companies don't seem as optimistic as monetary policy makers are that 2015 will be a markedly better year for the economy.

Industrial producers are scaling back their expansion plans for this year even as Fed officials forecast faster economic growth. Since less investment is often interpreted as diminishing confidence for future demand, the two outlooks are a little hard to square.

Industrial companies will raise capacity by 1.8 percent in 2015, the smallest increase since 2011, after boosting it 3.1 percent in 2014, the Fed said in its Feb. 18 release on production.  

The central bank's projections are based on an amalgam of information from trade associations and its own forecasts. They are carried out separately from the economic forecasting process undertaken by staff for the central bank's Federal Open Market Committee.

The projections are important nonetheless because they provide a clue to companies' capital spending plans, a key component of gross domestic product. Such outlays by industrial companies accounted for more than a third of business investment in 2013, according to the Census Bureau.

The slowdown in expansion plans is surprising in that companies are running their factories and plants closer to full capacity than before. Those facilities operated at 79.4 percent of capacity in January, up from 78.1 percent a year earlier, based on data from the central bank. 

The steepest reduction in spending intentions is coming in the mining industry, which includes oil producers sideswiped by tumbling prices. Miners will raise capacity by 3.3 percent in 2015, after expanding it 9.2 percent in 2014, the Fed said.

Manufacturers also are scaling back their expansion plans, expecting a 1.7 percent advance this year, the smallest since 2011, from a 2.2 percent gain in 2014.  So too are utilities, to a 0.3 percent increase from a 1 percent rise in 2014.    

Most Fed policy makers are forecasting that economic growth will accelerate, not decelerate, this year, to 2.6 to 3 percent, from 2.5 percent in 2014, according to material released by the central bank on  Dec. 17.   Judging by the estimates of capacity that central bank staffers came up with, the policy makers might well have to curb that enthusiasm in the future.   

Five Ways Your Financial Adviser Can Screw Up Your Retirement, Legally

Investment advisers should act in their customers’ best interests, President Obama says. Here's how they don't, and how it can hurt you.

Right now, only some advisers are fiduciaries, required to put their clients’ needs first, while many brokers and advisers need only to recommend “suitable” financial products. On Monday, the White House said it would support a plan to change that.

Wall Street industry groups warn that new rules could raise costs and thus make advice unaffordable to many middle-income Americans. It’s not clear what the final administration proposal will look like—Labor Secretary Thomas Perez says it will be “very different” from previous proposals. But the goal is to end biased advice that the administration estimates costs investors $17 billion a year. 

Here are five ways that, under current law, advisers can put their clients at a disadvantage:

401(k)-IRA rollovers

For many workers with a 401(k) who are approaching retirement, the best option is to do nothing. Their employers offer 401(k) plans with low fees and great investment choices. There’s no reason to move the money to an individual retirement account, or IRA. But as Bloomberg’s John Hechinger reported last year, investment firms push workers to do just that. For example, federal employees are urged to shift assets into IRAs with fees that are 20 times as high as those in the Federal Thrift Savings Plan.

Load fees

When customers buy a mutual fund from a broker, they’re still often charged a front-load fee—a one-time fee that can swallow up more than 5 percent of their money before it’s invested. The proceeds from load fees help compensate advisers for their time, though there are often far more efficient ways to get advice. More and more investors are asking for no-load mutual funds, but the Investment Company Institute estimates that $630 billion in load funds were sold in 2013, the latest data available. That was up 19 percent from 2012 and the most since 2008. 

Opaque fees

While you might notice a 5 percent load fee, many other commissions charged by advisers are hard to spot. For example, a “12b-1 fee” can be tacked on to a fund’s expenses every year, with the proceeds often going to an adviser years after he or she sold the fund. Most of these charges should be disclosed somewhere, but it can be very difficult for clients to add up all the various ways an adviser is making money off them. 

Active fund bias

In many investment categories, low-fee index funds have historically performed better than actively managed mutual funds. But when an adviser meets a client with lots of assets in index funds, he or she often urges the client to reallocate into higher-fee funds. When mystery shoppers visited advisers for a 2012 study, 85 percent were told to ditch their diversified, low-fee portfolios.

Poor performance

Commissions, including load fees and 12b-1 fees, give advisers an incentive to recommend certain investment products over others. Firms can also give advisers bonuses for steering client money into the firms’ own funds. The result of this biased advice is that investment performance suffers, academic studies show—and not just because fees eat into returns. A 2014 study compared self-directed investors with clients who received advice with conflicts of interest. The self-directed investors performed an average of 1.25 percentage points better annually. A 2009 study found that direct-sold funds beat broker-sold funds by 0.14 to 0.9 percentage point per year, even disregarding the broker funds' higher fees. Over time, that performance gap can cost you thousands, or tens of thousands, of dollars.

Economic Activity of Millennial

Millennial  have been succumbed to one of the greatest recession in the history of the man kind in recent decade and as a result Millennial  still live with double cross attitude towards risk taking compared to former.
Below is a one of best articles i came over cross in the net.

Four Ways Millennials Are Still Scarred From the Recession

You should read this if you're a young person

Young U.S. workers still face some long-lasting effects of the financial crash

With the U.S. economy gaining steam, employers are finally hiring -- and those benefits have spread to most corners of the job market.  Even America's young adults, who bore the brunt of the downturn, are starting to regain their economic footing. 

That doesn't mean all is well for millennials, especially those who entered the workforce when things were at their worst. Improvements in the headline statistics mask some of the longer-lasting effects of the recession.  Here are some of the scars that recession graduates may bear for a long time to come. 

They may never make as much money

When you're desperate for a paycheck, you take whatever you can get. During periods of economic turmoil marked by high unemployment, job-seekers are more likely to take roles at lower paying companies, because that's what's available to them, according to a National Bureau of Economic Research paper by Yale Economist Lisa Khan. The pool of talent is bigger and more competitive, allowing employers to cut salaries.

A depressed starting salary could mean less income for decades, Khan's research showed. Setting a low bar on your payscale to begin your career makes it harder to climb the ladder. Another study found the initial losses in income endured by new graduates entering the labor force during a downturn are significant and persist for 8-10 years.  It also means your annual raise could be incrementally smaller for years thereafter,  eroding your lifetime earnings. 

They're not leaving their low-pay jobs  

Of course, you could change jobs when a more lucrative opportunity comes along, as that's often the best way to get a meaningful salary bump. The quits rate, which shows the willingness of workers to leave their jobs, held at 1.9 percent in December for all U.S. workers. Even six years into the recovery, that's still down from the pre-recession average of 2.1 percent.

Looking at job tenure, millennials were more likely than older generations to hold onto their jobs early in their career, the Washington Post reported, citing Census data.  Jobs were hard to come by during the slump, and now young people may be too scared to let them go. 

What's more, the jobs they're clinging to are probably wrong for them. One study led by Ohio University professor emeritus Richard Vedder found that a larger share of graduates have taken jobs that require less than a college education. Vedder's research showed the pool of college-educated workers was disproportionate to the demand for skilled laborers, forcing a growing number of graduates to take jobs which historically have been filled by those with lower levels of educational attainment.  

By being less picky and taking jobs out of necessity during the recession, many graduates pigeon-holed themselves to industries they weren't interested in or jobs below their skill level. 

It's  been even worse for low-end workers. They had to contend with higher-skilled workers who were pushed out of better-paid positions in the recession--think of the college-educated 20-something who got fired by his advertising agency and resorted to waiting tables to pay the bills. BLS data show 20.4 percent of bartenders 25  and older have a bachelor's degree or higher. That pushes lower-skilled workers into even lower paying jobs -- or even worse, unemployment. 

They turned into awful investors 

Their risk aversion extends beyond job hopping.  The economic circumstances we live in have a major impact on how people spend and invest their money. For young people, many of whom don't remember or weren't alive during boom times, putting money in the stock market is too dangerous of a proposition.

Millennials have continued to forsake the stock market, a Gallup poll from last April shows. Instead of plunging into equities, which can provide better returns over the long run, young people are stashing savings in bank accounts and securities that pay near-zero interest.  

A UBS Wealth Management survey last year found that millennials hold 52 percent of their assets in cash and 28 percent in stock, while older cohorts hold 23 percent in cash and 46 percent in stocks.  

The effect is exacerbated by the fact that young people have a shorter frame of reference. While their older counterparts saw some ups and downs in their day, young adults are more likely to change their behavior based on one bad year because of limited experience, according to a paper from National Bureau of Economic Research. 

They're drowning in student debt 

During the recession, education loans became the largest share of household debt excluding mortgages. Balances more than tripled to $1.2 trillion in 2014 from 2004. In that time period, the average balance increased 74 percent to $27,000,  and the number of borrowers skyrocketed 92 percent. It's the 800-pound gorilla on young adults' backs. 

Among the consequences: Young people will probably need to work for so much longer than previous generations. NerdWallet, a personal finance website, estimated that the average retirement age for recent college graduates will be 73, or 12 years older than the average age of today's retiree--mostly due to higher levels of education debt.  

A misstep in paying off student loans can also imperil young people's home ownership prospects, New York Fed researchers also found. Delinquencies can destroy a person's chances of getting a mortgage, especially at a time when credit is tight. 

The share of loans that were officially delinquent—at least 90 days overdue—rose to 11.3 percent in the last three months of 2014, up from 11.1 percent the previous quarter.