February 19, 2013

U.S. vs. European Economy

Stocks delivered mixed performance last week.The Dow Jones Industrials and NASDAQ Indices moved lower while the Standard & Poor's 500 and Russell 2000 Indices moved higher for the week. Stocks were helped by positive economic news in the United States, including modestly positive retail sales for January, improved consumer sentiment, and a decline in initial jobless claims. However, these positives were offset to some extent by concerns about weakness overseas. Germany reported that its economy contracted during the fourth quarter of 2012. It's the country's worst economic performance since 2009.

Overall, the major stock indices remain in positive territory for the year. They've been buoyed, in part, by better than expected fourth quarter earnings. On January 1, 2013, analysts expected profitability of companies in the S&P 500 Index would increase by about 2.9 percent year-to-year. As 2012 fourth quarter's earnings season headed toward the finish line last week, that estimate had almost doubled to 5.6 percent. About 70 percent of companies have exceeded analysts' expectations so far. On average, over the long term, about 62 percent of companies beat expectations.

The yield on benchmark 10-year Treasury bonds continued to hover around 2 percent during the week. Reports of weaker than expected economic growth in Europe during the last quarter of 2012 may have increased demand for Treasuries. When demand increases, prices often go up and yields go down. Bond yields also have been affected by the Federal Reserve's quantitative easing program. The Fed has been buying Treasury bonds in an effort to help support the economy. In general, these purchases are believed to be keeping bond yields lower than they might be otherwise. Quantitative easing will not continue indefinitely which may be the reason the Financial Industry Regulatory Authority issued a statement last week that said, "Many economists believe that interest rates are not likely to get much lower and will eventually rise. If that is true, then outstanding bonds, particularly those with a low interest rate and high duration may experience significant price drops as interest rates rise along the way."

Data as of 2/15/13	1-Week	Y-T-D	1-Year	3-Year	5-Year	10-Year
Standard & Poor's 500 (Domestic Stocks)	0.1%	6.6%	13.1%	11.6%	2.4%	6.0%
10-year Treasury Note (Yield Only)	2.0	N/A	1.9	3.7	3.8	4.0
Gold (per ounce)	-3.4	-4.8	-7.0	13.7	12.1	16.6
DJ-UBS Commodity Index	-1.4	0.1	-3.8	1.2	-7.0	1.5
DJ Equity All REIT TR Index	0.4	5.0	18.2	22.5	7.6	12.7

Children are targeted for identity theft far MORE OFTEN than you might think. That's right. A 2012 report from Carnegie Mellon CyLab found children are targeted for identity theft 35 times more frequently than adults. That's because the unused social security numbers assigned to children for tax purposes are uniquely valuable to identity thieves. These numbers can be paired with any name and address and used for many years. Often the theft isn't discovered until a child applies for a student loan or a job, or tries to buy a mobile phone or a car.

The report is based on 42,000 identity protection scans of children, ages 18 and under, that were completed during 2009 and 2010. Researchers found social security numbers for more than 4,300 children - 10.2 percent of those scanned - were being used by someone else (a stranger, a parent, or another family member) to:

• Buy homes and automobiles
• Establish credit card accounts
• Secure employment and get driver's licenses

Source: Child Identity Theft, Richard Power, Carnegie Mellon CyLab

The youngest victim was five months old. The victim of the largest fraud (about three-quarters of a million dollars) was a 16-year-old girl.

The first step in protecting your child's social security number is to check with credit bureaus and find out whether a file has been opened using your child's social security number. In many cases, even if the number is being used, your child's full identity has not been stolen. In addition to contacting credit bureaus, watch for warning signs your child's social security number may be in play. These include receiving:

• Pre-approved credit card offers in your child's name
• Notices from the IRS indicating your child didn't pay income taxes
• Calls from collection agencies asking for your child

Source: Child Identity Theft, Richard Power, Carnegie Mellon CyLab; Federal Trade Commission Consumer Information, Child Identity Theft, August 2012

If you would like to learn more about how to protect your child from identity theft, visit the Federal Trade Commission's web site at www.ftc.gov, and click on Privacy and Identity, Repairing Identity Theft, and then Child Identity Theft.

Weekly Focus - Think About It

"The greatest pleasure in life is doing what people say you cannot do."

—Walter Bagehot, British economist and journalist

Best regards,
Sean M. Dowling, CFP, EA
President, The Dowling Group Wealth Management

Please feel free to forward this commentary to family, friends, or colleagues. If you would like us to add them to the list, please reply to this e-mail with their e-mail address and we will ask for their permission to be added.

---