One of the most popular topics clients often wish to discuss is whether to pay extra on a home mortgage or to invest those extra funds in another kind of asset. For some, the idea of having debt of any kind is stressful, and they feel compelled to pay down the debt at all costs. For others, the idea of having some liquidity built up while continuing to make regular mortgage payments contributes to their peace of mind. While there is not a right or wrong answer, you can do both: build assets while systematically reducing debt.

The price of oil has dropped by about 55% in the past year, causing a great deal of disruption. The economies of many oil producing countries are being devastated by the drop. The cost to produce the product has become greater than the selling price in many places, resulting in an economic imbalance. To mitigate this price drop, a reduction in staffing and production by oil companies might help, but in third world countries, a significant reduction in employment could result in some form of uprising.

For some it was a good year, for others not so much. For investments, it was mostly a good year, with both stocks and bonds benefiting from the growth of the U.S. economy. Foreign investments did not fare very well, as currency values shrank relative to the dollar, and foreign economies were stagnant. Commodities were mixed, with oil being the major game changer, as the price fell by more than 30%. What will 2015 bring? Will we see oil rebound, the U.S.

At this time of year, I like to look back to a year ago and see if we are better off now than we were then. On balance, it appears that, both economically and financially, we are better off this December than we were a year ago. Many jobs have been created, unemployment is lower, consumer confidence is greater, factory production is higher, and all of this is happening as the Federal Reserve withdrew its economic stimulus. Not bad! If I were looking at Europe, China, Japan, Russia, or most of the rest of the world, I could not say the same.

At this time of the year we get an opportunity to take some quiet time and count our blessings. As for myself, I have many blessings to be thankful for this year. Above all others is my oldest daughter’s most recent MRI, showing her to be cancer free. I have many other things for which I am grateful, such as living in this country, having a caring and loving family and fellow workers, whom I enjoy being with each day. Much of what I am grateful for would not be possible without the support of you, my clients and friends.

A great deal of economic data has been released in the past couple of weeks. The most important news was a report from the Commerce Department indicating that the GDP of the U.S. grew at a rate of 3.5% during the third quarter of this year. Thus far in 2014, the growth rate for the three quarters has now averaged 3.5%. 

Let’s go way, way back in time and look at the stock market. I’m talking about that time long ago when the S&P 500 had dropped through the floor and had “crashed” down to 1863. Now to understand the significance of the “crash”, you must remember that--back even farther--the S&P 500 stood at about 2011. This means that the S&P 500 had dropped more than 7%.

I always find it interesting to listen to news reports about the stock market. When it is just coasting along, it is not newsworthy. When it is going up, it does not appear to be newsworthy. But, when the markets move down – it is newsworthy! Thus we have been hearing a great deal about the recent market swoon. To put this in perspective, consider that since the middle of last year the market has been moving up quite nicely. This isn’t to say that there haven’t been some bumps along the way. From mid-January to mid-February the market dropped about 7.2%.

A leading indicator is an economic factor that changes before the economy starts to follow a trend. Examples of leading indicators include: production workweek, building permits, unemployment insurance claims, money supply, inventory changes, and stock prices. The Federal Reserve watches all of these in determining the direction of interest rates. Last year we watched as stock market prices increased sharply. This was a harbinger of better economic news for 2014.

The inflation rate for August is likely to be reported as about 1.9%. What does this mean relative to the value of your investments? From time to time, I still have people telling me how they remember the “good old days” when they were making 16% on their CDs.  The only problem with that memory is that they have forgotten that, at the same time, the inflation rate was 18%! As fast as your money was growing, it was losing purchasing power faster.  If you buy a CD today that is paying, say, 0.5%, and inflation is at 1.9%, your loss of purchasing power is only 1.4% vs.