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U.S. Labor Market Continues to Strengthen: 235,000 New Jobs in February

March 13, 2017

Marcus Winbush, CFP® — CEO, True North Capital Alliance

The February jobs report issued by the U.S. Labor Department on Friday, March 10th exceeded analysts’ projections by a long shot. Including February’s data, total nonfarm payroll employment has been on a rising trend, averaging 209,000 new jobs per month over the past three months. That’s a significant tick up from last year’s pace of 180,000 net new jobs per month, which Fed Chair Yellen noted as satisfactory when she spoke in Chicago on March 3rd. Chair Yellen noted that “economic developments since mid-2016 have reinforced the Committee’s confidence that the economy is on track” to achieve the Fed’s statutory goals of maximum employment and price stability.

Given the strength of the February jobs report, most analysts expect the Fed to make the first of this year’s projected rate increases when the policy committee meets this week (March 14-15).

February Jobs Report by the Numbers

In February, total nonfarm payroll employment increased by 235,000 jobs:

  • Sectors: Strongest growth was in construction (up 58,000), private educational services (up 29,000), manufacturing (up 28,000), and health care (up 27,000).
  • Unemployment Rate: The unemployment rate went down slightly from the previous month to 4.7 percent. Compared with 4.9 percent a year earlier, overall unemployment is continuing a stable downward trend. Although the overall employment picture is brighter, jobless rates for some segments of the population continue unchanged (Blacks at 8.1 percent; Hispanics at 5.6 percent).
  • Labor Participation Rate: The labor participation rate sits at 63.0 percent. This measure reflects an additional 447,000 people in the labor market over the January total.
  • Long-Term Unemployed: The number of individuals who have been jobless for 27 weeks or more was essentially unchanged at 1.8 million (23.8 percent of those who are unemployed). However, the total number of long-term unemployed declined by 358,000 over the past year.
  • Involuntary Part-Time Workers: Workers in this category would have preferred full-time employment but were working part-time for economic reasons. The number of people in this category showed little change at 5.7 million.

The earnings data was an especially bright spot in the February report. Average hourly earnings across all employees increased by 6 cents to $26.09; this growth follows a 5-cent increase in January.

Thus, overall job gains remain solid and broad-based, and unemployment is in line with Fed expectations for the longer run.

Case for Scaling Back Monetary Policy Accommodations

Since 2014, the Fed has been gradually scaling back monetary policy accommodations, such as quantitative easing and low federal funds rate, previously needed to support the U.S. economy through the aftermath of the 2008 financial crisis. This process has been slower than many expected, but the Federal Open Market Committee (FOMC) were determined to proceed with caution giving the U.S. economy time to strengthen. In her March 3rd comments, Chair Yellen noted that the “U.S. economy has exhibited remarkable resilience” in recent years.

Yellen gave her clearest signal yet of the Fed’s next move: “…we currently judge it will be appropriate to gradually increase the federal funds rate if the economic data come in about as we expect.” Certainly, the February jobs report will be viewed as a strong confirmation.

Heading into the March 14-15 meeting, the FOMC seems to be lining up in favor of raising rates—likely another quarter-percent increase taking rates to a range of .75 to 1.00 percent.


True North Capital Alliance is registered as an investment advisor with the states of Minnesota and Texas. The firm only transacts business in states where it is properly registered, or is excluded or exempted from registration requirements. Registration as an investment advisor does not constitute an endorsement of the firm by securities regulators nor does it indicate that the advisor has attained a particular level of skill or ability.

Past performance is not a guarantee of future results.

All expressions of opinion are subject to change. This content is distributed for informational purposes, and it is not to be construed as an offer, solicitation, recommendation, or endorsement of any particular security, products, or services.

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Investment Shock Absorbers

By Jim Parker, Vice President DFA Australia Limited, a subsidiary of Dimensional Fund Advisors LP

Ever ridden in a car with worn-out shock absorbers? Every bump is jarring, every corner stomach-churning, and every red light an excuse to assume the brace position. Owning an undiversified portfolio can trigger similar reactions.

In a motor vehicle, the suspension system keeps the tires in contact with the road and provides a smooth ride for passengers by offsetting the forces of gravity, propulsion, and inertia. You can drive a car with a broken suspension system, but it will be an extremely uncomfortable ride and the vehicle will be much harder to control, particularly in difficult conditions. Throw in the risk of a breakdown or running off the road altogether and there’s a real chance you may not reach your destination.

In the world of investment, a similarly bumpy and unpredictable ride can await those with concentrated and undiversified portfolios or those who constantly tinker with their allocation based on a short-term rough patch in the markets.

Of course, everyone feels in control when the surface is straight and smooth, but it’s harder to stay on the road during sudden turns and ups and downs in the market. And keep in mind the fix for your portfolio breaking down is unlikely to be as simple as calling a tow truck.

For that reason, the smart thing to do is to diversify, spreading your portfolio across different securities, sectors, and countries. That also means identifying the right mix of investments (e.g., stocks, bonds, real estate) that aligns with your risk tolerance, which helps keep you on track toward your goals.

Using this approach, your returns from year to year may not match the top performing portfolio, but neither are they likely to match the worst. More importantly, this is a ride you are likelier to stick with.

Just as drivers of cars with faulty suspensions change their route to avoid potholes, people with concentrated portfolios may resort to market timing and constant trading as they try to anticipate the top-performing countries, asset classes, and securities.

Here’s an example to show how tough this is. Among developed markets, Denmark was number one in US dollar terms in 2015 with a return of more than 23%. But a big bet on that country the following year would have backfired, as Denmark slid to bottom of the table with a loss of nearly 16%.1)In U.S. dollars. MSCI-developed markets country indices (net dividends). MSCI data © MSCI 2017, all rights reserved.

It’s true that the US stock market (by far the world’s biggest) has been a strong performer in recent years, holding the number three position among developed markets in 2011 and 2013, first in 2014, and sixth in 2016. But a decade before, in 2004 and 2006, it was the second worst-performing developed market in the world.2)In U.S. dollars. MSCI-developed markets country indices (net dividends). MSCI data © MSCI 2017, all rights reserved.

Predicting which part of a market will do best over a given period is also tough. For example, while there is ample evidence to support why we should expect positive premiums from small cap, low relative price, and high profitability stocks, these premiums are not laid out evenly or predictably across the map. US small cap stocks were among the top performers in 2016 with a return of more than 21%. A year before, their results looked relatively disappointing with a loss of more than 4%. International small cap stocks had their turn in the sun in 2015, topping the performance tables with a return of just below 6%. But the year before that, they were the second worst with a loss of 5%.3)In U.S. dollars. U.S. Small Cap is the Russell 2000 Index. Frank Russell Company is the source and owner of the trademarks, service marks, and copyrights related to the Russell Indexes. International Small Cap is the MSCI World ex USA Small Cap Index (gross dividends). MSCI data copyright MSCI 2017, all rights reserved.

If you’ve ever taken a long road trip, you’ll know that conditions along the way can change quickly and unpredictably, which is why you need a vehicle that’s ready for the worst roads as well as the best. While diversification can never completely eliminate the impact of bumps along your particular investment road, it does help reduce the potential outsized impact that any individual investment can have on your journey.

With sufficient diversification, the jarring effects of performance extremes level out. That, in turn, helps you stay in your chosen lane and on the road to your investment destination.

Happy motoring and happy investing.4)Published in the February 2017 issue of “Outside the Flags,” which began as a weekly web column on Dimensional Fund Advisors’ website in 2006. The articles are designed to help fee-only advisors communicate with their clients about the principles of good investment–working with markets, understanding risks and return, broadly diversifying and focusing on elements within the investor’s control–including portfolio structure, fees, taxes, and discipline.


Past performance is no guarantee of future results. There is no guarantee an investing strategy will be successful. Diversification does not eliminate the risk of market loss.

Indices are not available for direct investment; therefore, their performance does not reflect the expenses associated with the management of an actual portfolio. Frank Russell Company is the source and owner of the trademarks, service marks, and copyrights related to the Russell Indexes. MSCI data © MSCI 2017, all rights reserved.

All expressions of opinion are subject to change. This article is distributed for informational purposes, and it is not to be construed as an offer, solicitation, recommendation, or endorsement of any particular security, products, or services.

Dimensional Fund Advisors LP is an investment advisor registered with the Securities and Exchange Commission.

True North Capital Alliance has no affiliation with DFA; however, the firm uses DFA funds and strategies in developing its investment models.

©2017 Dimensional Fund Advisors LP. All rights reserved. Unauthorized copying, reproducing, duplicating, or transmitting of this material is prohibited.

References   [ + ]

1, 2. In U.S. dollars. MSCI-developed markets country indices (net dividends). MSCI data © MSCI 2017, all rights reserved.
3. In U.S. dollars. U.S. Small Cap is the Russell 2000 Index. Frank Russell Company is the source and owner of the trademarks, service marks, and copyrights related to the Russell Indexes. International Small Cap is the MSCI World ex USA Small Cap Index (gross dividends). MSCI data copyright MSCI 2017, all rights reserved.
4. Published in the February 2017 issue of “Outside the Flags,” which began as a weekly web column on Dimensional Fund Advisors’ website in 2006. The articles are designed to help fee-only advisors communicate with their clients about the principles of good investment–working with markets, understanding risks and return, broadly diversifying and focusing on elements within the investor’s control–including portfolio structure, fees, taxes, and discipline.
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Personal Finance: How Is Your Financial Wellness?

February 27, 2017

Marcus Winbush, CFP® — CEO, True North Capital Alliance

Have you ever wondered why some people seem to manage well on their income while others struggle financially no matter how much they earn? The secret likely has much to do with what we might call “financial wellness.” By “financial wellness,” I don’t mean wealth; rather the term refers to a state of financial health. Financial wellness involves living within your means and making sound financial decisions that enable you to achieve the short- and long-term goals that are important to you.

Achieving financial wellness is an ongoing process. No matter the state of your financial wellness today, the important thing is to start where you are, do a thorough check-up of your financial tendencies, and put plans in place to move steadily toward wellness.

Take stock of how you spend money

Do you know with reasonable certainty where your money goes each month? Most of us can rattle off the amounts we spend on the big budget categories such as housing, transportation, utilities, grocery, loan/credit card payments, savings, and investments. But we often lose sight of many other expenditures that sometimes drain more of our money than we anticipate.

The first step toward financial wellness is to understand precisely how you spend money on a regular basis. Conduct your own spending review using your bank statement and credit card statements for the last one or two months. Make a list of your expenditures, paying close attention to the amounts you spend on daily living expenses (e.g., dining out, coffee, clothing, grooming, entertainment, impulse spending). Look for obvious places where you can eliminate or reduce spending.

Such a review can be eye-opening; it may be just what you need to pinpoint the gap between what you think you spend each month and what you actually spend. For most of us, this gap amounts to “spending leaks” in our finances, and these leaks can undermine the progress we hope to make toward our savings and investment goals.

Develop a budget: income, spending, and saving

With the insights gained from your spending review, create a workable, realistic budget for your monthly spending, saving, and investing. If your spending review revealed a shortfall in your monthly finances, you may need to take immediate steps to reduce spending, create additional income, or get out of debt. If debt reduction is a pressing need, consider the strategy described in our earlier post, “Saying Goodbye to Debt: A Simple Method That Works.”

If your income is adequate, the challenge may simply be a matter of committing to live within your means. Be sure your budget accounts for regular monthly expenses as well as larger expenses that occur quarterly or semi-annually (e.g., car insurance, homeowners/renters insurance, life insurance, etc.). An effective way to deal with these periodic expenses is to calculate the monthly average for these items and set up a special savings account where you can accumulate the monthly average amount until the payment is due. This lets you smooth out your budget and avoid spikes in your expenses.

Another potential budget-busting snafu is out-of-control discretionary spending. At the beginning of the month, consider setting a limit for discretionary spending each month and then create an “allowance,” which you take in cash for such spending.

Continue to track your spending and review how well your plan is working. Make adjustments as needed to stick to your budget, and resist using credit or making unnecessary purchases.

Set Long-Term and Short-Term Goals

Getting a handle on your monthly spending and saving is a significant step, which allows you to confidently set short- and long-term goals that are important to you. You may choose to set short-term goals (2-5 years) for any number of things such as paying off debt, traveling to special destinations, purchasing big-ticket items, and so on.

Money management experts recommend making emergency savings a top priority short-term goal. Having emergency savings to cover living expenses for three to four months is the best way to prepare for unexpected events such as a job loss, medical emergency, major car repairs, or similar events. To ensure that you reach your savings goal, pay yourself first with automatic transfers from your checking account to your saving account as you receive your paycheck(s).

You will no doubt set long-term financial goals for bigger items such as a home, college education for children, retirement, and assets you wish to pass to future generations. To address your long-term goals, consider working with a trusted financial advisor to develop the best strategies for your specific dreams and goals.

Financial wellness is achievable, but it takes commitment, time, and perseverance. The benefits of good financial management are many: improved cash flow, savings, peace of mind, and a strong sense of confidence as you make progress toward financial wellness. The benefits are clearly worth all the effort you put into the process.


True North Capital Alliance is registered as an investment advisor with the states of Minnesota and Texas. The firm only transacts business in states where it is properly registered, or is excluded or exempted from registration requirements. Registration as an investment advisor does not constitute an endorsement of the firm by securities regulators nor does it indicate that the advisor has attained a particular level of skill or ability.

Past performance is not a guarantee of future results.

All expressions of opinion are subject to change. This content is distributed for informational purposes, and it is not to be construed as an offer, solicitation, recommendation, or endorsement of any particular security, products, or services.

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Financial Resolutions: Making Them Work

February 6, 2017

Marcus Winbush, CFP® — CEO, True North Capital Alliance

Are you among the many Americans who began 2017 with financial resolutions you hope to achieve by year end? If so, I applaud your forethought: Setting a goal is key to making progress in any area of life—none more so than personal finances. According to a survey of consumers conducted for Fidelity Investments in October 2016, 37 percent of Americans made financial resolutions for 2016, and about the same number will likely make financial resolutions for 2017.

If you haven’t set financial goals for the year, now is a great time to do so.

Top Financial Resolutions for 2017

In addition to the survey cited above, Student Loan Hero and GoBankingRate.com also surveyed consumers to gather insights about their priorities and prior success with New Year’s resolutions. All three surveys are remarkably consistent in identifying the top five financial resolutions for 2017:

  • Save more (spend less).
  • Pay down (or pay off) debt.
  • Build an emergency fund.
  • Improve credit.
  • Save for retirement.

These are admirable goals, but without proper preparation, the odds may work against bringing them to fruition. After all, New Year’s financial resolutions usually require significant change in a person’s attitude and lifestyle, and change is seldom easy.

Do New Year’s Financial Resolutions Really Work?

Contrary to popular opinion, the answer is a resounding, “Yes.” Many survey participants reported considerable success in sticking to their resolutions from year to year. For example, almost half of those participating in the Fidelity Investments survey said they had “managed to achieve 80 percent or more of their goal” from the previous year. Therefore, they were quite optimistic about the goals they set for 2017.

From the outset, it’s important to count the cost, lay out a game plan, review progress regularly, and make changes if something isn’t working. People who make and keep their resolutions have identified several keys to success:

  1. Write your goals down. Someone famously said, “Goals that are not written down are just wishes.” Studies show that people who write their goals are more apt to accomplish them; there is a certain power in taking the time to formulate clear, precise goals for yourself. In the case of your new year’s financial resolutions, you may simply need to refine your goals to be sure they are specific enough for you to take action and measure your progress along the way. If one of your financial resolutions is to save for retirement, for instance, you would do well to consult with a trusted financial advisor who can help you frame such a long-term goal and create a comprehensive plan.
  2. Refine your goals if necessary. Goals should be specific and measurable. It’s not enough to say, “I want to save more money this year.” A more useful goal would be, “I want to save $200 each month this year.” Or “I want to build an emergency fund equivalent to two months’ take-home pay by the end of the year.” Specific goals are very powerful motivators; they help us envision what it is we want to achieve, and they seem to pull us into the process. The more specific your goal, the easier it is to know what you need to do. For instance, for your savings goal, you might set up automatic transfers from your checking account to your savings account based on your pay schedule. You may also identify other funds to help you realize your goal (e.g., a percentage of your income tax refund or bonus).
  3. Share your goals with someone you trust. Having an accountability partner is another critical success factor. In the Fidelity Investments survey, 53 percent of the participants said, “Talking with friends or family can help you stay focused on your goal.” The person you choose may be a trusted friend, family member, or financial advisor—someone who wants to help you succeed and who can give sound advice if needed.
  4. Check your progress regularly, but give yourself room to “fall.” Major life changes usually do not proceed in a straight line. Expect some setbacks, and be prepared to rebound should you experience setbacks. Draw on your own resilience and support from your accountability partner(s) to help you get back on track as quickly as possible.
  5. Reward yourself along the way. Pursuing a financial goal requires sacrifice, and behavior changes are never easy. Keep your focus on achieving your big goals, but reward yourself when you reach checkpoints along the way. Set up rewards that are meaningful to you without taking you off your financial goals.

Finally, learn as much as you can about what it takes to win in this important area of life—personal finance. From time to time, we publish informative posts on personal finance topics such as getting out of debt, monitoring credit information, and retirement planning/investing. And, of course, you can find reputable tools and information sources online to address your specific areas of interest.

Feel free to contact me if you have questions (marcus@truenorthcap.com).


True North Capital Alliance is registered as an investment advisor with the states of Minnesota and Texas. The firm only transacts business in states where it is properly registered, or is excluded or exempted from registration requirements. Registration as an investment advisor does not constitute an endorsement of the firm by securities regulators nor does it indicate that the advisor has attained a particular level of skill or ability.

All expressions of opinion are subject to change. This content is distributed for informational purposes, and it is not to be construed as an offer, solicitation, recommendation, or endorsement of any particular security, products, or services.

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Beware of Tax Scams

January 25, 2017

Marcus Winbush, CFP® — CEO, True North Capital Alliance

The Internal Revenue Service has started accepting and processing 2016 federal individual income tax returns. They expect more than 153 million returns to be filed this year. For most taxpayers, the process will be routine and uneventful. However, the IRS warns taxpayers to be aware that the tax-filing season is also prime time for tax scams.

Tax scams take many forms, and criminals continue to refine their tactics for taking advantage of unsuspecting taxpayers. Be alert for these common telephone and email phishing scams.

Callers Pretending to Be IRS Agents

In the last few years, taxpayers have reported an increasing number of automated calls from people claiming to be IRS agents. Typically, these callers leave a voicemail message urging taxpayers to call immediately to settle their tax bill or face drastic consequences. Often the caller claims that this message is the final warning before the IRS or another agency takes legal action against the taxpayer. These callers can be aggressive and threatening. According to the IRS, taxpayers also receive live calls from scammers claiming to be IRS agents demanding tax payments via “prepaid debit cards, iTunes, and other gift cards or wire transfer.” In another variation of this scam, IRS impersonators call taxpayers claiming they have the person’s tax return and need to verify some information before the person’s return can be processed.

Unless you are expecting a follow-up call from the IRS, these calls are almost certain to be scam attempts as our post, “Is the IRS Calling You?” explained.

Phishing

The IRS reported roughly a “400-percent surge in phishing and malware incidents in the 2016 tax season.” To “phish,” scammers create emails that appear to be an official communication from a well-known organization such as the IRS, other government agency, or business. A tax-related phishing email may claim, for example, that you are entitled to an unexpected refund that requires you set up a special “e-Refund” account to have funds transferred to your bank account. For phishing to work, scammers must get you to go from the phony email to a website they control. Thus, phishing emails almost always include a website link for you to click on. If you do so, it takes you to their site and asks you to provide personal information such as account numbers or passwords, which can then be used fraudulently. These sites may also have malware that can infect your computer allowing criminals to access your files and track your keystrokes to gain information.

Like phone scams, phishing scams are designed to gain access to your personal information. Taxpayers should be aware that the IRS does not initiate contact with taxpayers by email, and legitimate businesses do not request personal or financial information by email.

Identify Theft

In all these tax scams, the goal is to get you to provide personal and financial information such as your social security number, bank account numbers, or credit card numbers. In the hands of criminals, your personal information can be used to file fraudulent tax returns or to open accounts in your name—perhaps using your identity for countless fraudulent transactions.

Be Vigilant

The best offense is a strong defense to protect your essential data. If someone claiming to be an IRS agent contacts you requesting personal information or demanding immediate payment of taxes, the IRS recommends the following actions:

  • Hang up immediately and report any suspicious call as outlined below.
  • Do not give out any personal and financial information over the phone or respond to requests via email.
  • Instead of responding to a phishing email supposedly from the IRS, forward the email to the IRS at phishing@irs.gov.
  • For suspicious phone calls, file a report on the IRS’s Impersonation Scam Reporting site, or call 800-366-4484. Report the incident to the Federal Trade Commission using their FTC Complaint Assistant. Be sure to add “IRS Telephone Scam” in the notes.

Scammers continue to modify their approaches, so vigilance is essential.

I encourage you to share this information with others in your circle of influence—particularly those who may be especially vulnerable to the deceptive, high-pressure tactics that scammers use.


True North Capital Alliance is registered as an investment advisor with the states of Minnesota and Texas. The firm only transacts business in states where it is properly registered, or is excluded or exempted from registration requirements. Registration as an investment advisor does not constitute an endorsement of the firm by securities regulators nor does it indicate that the advisor has attained a particular level of skill or ability.

All expressions of opinion are subject to change. This content is distributed for informational purposes, and it is not to be construed as an offer, solicitation, recommendation, or endorsement of any particular security, products, or services.

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