SFM Observer - November 2019
Sweeney Financial Management
Issued: December 3rd, 2019
The Dow closed the month of November at 28,051 for a large monthly gain of 1,005 points or 3.7%. Many of the U.S. stock indices are at all-time highs as the equity markets continue to confound the skeptics. Merger and acquisition activity has been increasing due to very low financing costs and companies desire to maintain growth and reinvest retained profits. Due to the late Thanksgiving holiday, the Christmas shopping season is short and set up to be hectic for retailers and all of the delivery companies trying to fulfill all of those online orders. Don’t wait until the last minute!
Some interesting events from the month just passed:
• Google is buying the wearables company Fitbit for $2.1 billion. Fitbit has 28 million active users recording their daily health stats and being encouraged to take more steps or stay active in other ways. Google has stated that they will not sell the personal health information they are gathering to advertisers. Time will tell.
• Homeowners in the U.S. are staying in their homes for an average of 13 years. In 2010, the average length of homeownership was 8 years. Empty nesters are not leaving their large homes and smaller homes are being bid up in price by first time home buyers. Outside of the national averages, there are some extreme markets. In Salt Lake City the average time spent in a home is 23 years due to a severe lack of other housing opportunities.
• Amazon reported a 26% decrease from the prior year as the company invested heavily in one-day shipping for its Prime customers. The company is planning on spending $1.5 billion on one-day shipping during the important holiday quarter we are presently in.
• 33% of people who traded in a car in 2019 for a new one had negative equity on the trade vehicle. They owed an average of $5000 on the car after deducting the value of the trade. So the new $35,000 car starts out with a $40,000 loan. The new loan has a seven-year term, so the problem will repeat when the new car gets traded. This could be a problem area in the next recession when people start losing jobs.
• Charles Schwab has reached an agreement to buy TD Ameritrade in a deal valued at $26 billion. Charles Schwab is the number one discount broker and TD Ameritrade is the number two discount broker. Together the two firms custody $5 trillion dollars in client assets. The deal has to go through an antitrust review and a lengthy closing process.
• Best Buy is gathering steam heading into the fourth quarter. The company reported good sales of appliances, tablets, and headphones despite the increased cost of these items caused by the tariff war with China. Best Buy is offering free shipping and in-store support for many products as well as a one-hour pickup service for online purchases.
Thank you for reading this issue of the SFM OBSERVER.
Until next month,
Glenn Sweeney