September 9, 2013

Weekly Market Commentary

September 9, 2013

The Markets

Confluences are the building blocks of the world’s waterways. When two or more rivers meet, changes in velocity and turbulence tend to result in geologic scouring; erosive activity that may alter the shape of the river and its bed. The action may produce a ‘scour hole’ downstream from the confluence. For a river runner, a hole creates “potential for trouble and the need for deft maneuvers.” America may be heading toward a scour hole that is being shaped by a confluence of factors and events, domestic and global, economic and demographic.

Several of these factors were highlighted by last Friday’s employment report which showed unemployment has fallen to 7.3 percent. This may seem like a positive development until you realize just 63 percent of working-age Americans have a job or are looking for one. According to The Washington Post, that’s the lowest workforce participation rate in 35 years.

The change in American employment is rooted in the Great Recession and relatively slow pace of economic recovery, as well as a confluence of demographic trends. Younger Americans of working age are staying in school longer before looking for a job. In addition, and perhaps more importantly, the Baby Boom generation has begun to retire at a rate of about 10,000 a day or 300,000 a month, according to PBS NewsHour.

America’s changing employment picture may be a significant challenge to economic growth, but other factors will influence the shape of our future, as well. Congress returned from recess on Monday. They may not get to all of it this week, but their agenda includes determining: America’s response to Syria, the government’s operating budget, the debt ceiling, and funding for the Affordable Healthcare Act.

As if that weren’t enough, next week, the Federal Reserve will be making an important decision about tapering quantitative easing (which could be complicated by a potential government shutdown and debt ceiling expiration if Congress waffles).

We live in interesting times.

IN 1835, IN DEMOCRACY IN AMERICA, ALEXIS DE TOCQUEVILLE SAID:

“AMONG the novel objects that attracted my attention during my stay in the United States, nothing struck me more forcibly than the general equality of condition among the people... it gives a peculiar direction to public opinion and a peculiar tenor to the laws; it imparts new maxims to the governing authorities and peculiar habits to the governed… The more I advanced in the study of American society, the more I perceived that this equality of condition is the fundamental fact from which all others seem to be derived and the central point at which all my observations constantly terminated.”

One wonders what he would make of the difference in pay between lawmakers in various states today. A recent chart published in The Economist showed pay for state legislators ranges from nothing in New Mexico, where the median household income from 2007 through 2011 was about $44,600, to more than $90,500 in California where the median household income was about $61,600 during the same period.

If you believe having a greater number of legislators means the opinions of the masses are better represented, then it would seem citizens in states that pay lawmakers more are less well represented. The average number of legislators per million people in the 10 states that pay the most is about 22. In the 10 states that pay the least, it’s about 112 per million people. The exceptions appear to be Alaska, which pays about $50,000 a year and has about 82 legislators per million people, and Texas which pays less than $10,000 and has about 7 legislators per million.

The Economist pointed out lawmaking may be less costly in other ways, too, in states that offer lower salaries to policymakers. As it turns out, about one-third of state legislatures are part-time. States like Texas, Montana, Nevada, and North Dakota, where lawmakers meet every second year, tend to spend less than states where legislators meet more frequently.

Weekly Focus – Think About It

“Democracy cannot succeed unless those who express their choice are prepared to choose wisely. The real safeguard of democracy, therefore, is education.

--Franklin D. Roosevelt, American President

Best regards,

Suzanne H. Christian, CFP®

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  • Suzanne is a Registered Representative with and Securities offered through LPL Financial, member FINRA/SIPC.
  • This newsletter was prepared by Peak Advisor Alliance. Peak Advisor Alliance is not affiliated with the named broker/dealer.    
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Suzanne H. Christian, CFP ®
LPL Branch Manager

phone 909.625.1052

www.suzanne-christian.com

Email: suzanne.christian@lpl.com

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