Bob’s Journal
I hope each of you had an excellent July 4 holiday.
In this holiday-shortened week, let’s diverge from our usual Bob’s Journal entry. This week let’s take a look at a crime that has touched or scared almost everyone: identity theft and cybercrime.
Below, I share the insights from a published interview with Frank Abagnale, author of “Catch Me If You Can” and subject of a movie of the same name. Now age 70 and a long-time consultant to the FBI and many financial institutions and corporations, Abagnale has monitored fraud and related criminal activities for decades.
You have to assume that your key personal data has been stolen at least once, says Abagnale. With the large number of thefts from firms with major storehouses of personal data, it is inevitable that almost every one of us has had all or most of our personal data fall into the wrong hands.
Don’t be complacent because your data hasn’t been used yet to steal your identity, take credit out in your name, or commit other crimes. There’s usually a delay between when data is stolen and when it is used. That’s why Abagnale says the one-year credit monitoring services offered by firms that have had their data breached are “absolutely worthless.” The valuable data, your name and Social Security number, is most likely to be used more than a year after the theft. Abagnale says that data isn’t used to commit real ID theft for three or four years.
The good news is that as of September 1, 2018, we’ll all be able to freeze our credit at no charge. Abagnale says you should freeze your credit and only unfreeze it when you are ready to apply for credit to make a purchase or obtain a loan. Once the credit application is processed, freeze your credit again.
Abagnale also uses a credit monitoring service and pays to see his credit reports from the big three credit firms each month, not just once a year. He also shreds pretty much everything using a micro-cut shredder. He says crosscut shredders aren’t as effective.
Don’t think you’re safe by avoiding the online world and paying bills the old-fashioned way — by check. Abagnale advises to avoid writing checks as much as possible, because today’s technology makes it much easier to commit fraud using checks. He also recommends you not own a bank debit card. Credit cards have fraud protection under federal law, but debit cards have no protection.
Technology makes life much easier for thieves and much harder for people to protect their finances and identity. Be sure you’re taking the appropriate steps to avoid identity theft.
The Data
Personal Income had a healthy increase of 0.4% in this month’s report, compared to 0.2% in last month’s report. But Consumer Spending continues its uneven path. It rose only 0.2%, compared to 0.5% last month.
Consumers remain optimistic, but a little less so. Consumer Sentiment, as measured by the University of Michigan, was 98.2, down from 99.3. As with similar surveys, the current conditions component remains strong, but expectations for six months or longer are less optimistic.
The PCE Price Index, the Fed’s preferred measure, made headlines because it finally hit the Fed’s long-time target of 2% over 12 months. The price index rose 0.2% for the month and 2.3% over 12 months. Excluding food and energy, it rose 0.2% for the month and 2.0% over 12 months.
The service sector of the economy continues to grow, according to the two main surveys of the sector.
The ISM Non-Manufacturing Index was reported at 59.1, up from 58.6 last month. There are signs of capacity constraints. Supplier deliveries are slowing, backlogs are increasing and prices are rising.
The PMI Services Index declined slightly to 56.5 from 56.8, indicating continued strong growth. The main negatives in this report were a three-year high in backlogged orders and a two-year high in the rate of increase in selling prices.
There were mixed results in the two national manufacturing surveys. The PMI Manufacturing Index declined to 55.4 from 56.4. That’s still a strong number and also is an improvement from a lower mid-month flash number. However, it is still the lowest reading in four months.
The ISM Manufacturing Index was 60.2, up from 58.7. That is well above expectations and shows strong growth in manufacturing. The major negative features in the report were those indicating the growth could be unsustainable. Delays in supplier deliveries were among the worst in the history of the survey. Comments in the survey indicated that a shortage of truck drivers, plus the new tariffs, were having negative effects.
The Kansas City Fed Manufacturing Index declined slightly to 28 from 29, indicating a steady manufacturing sector in the Midwest.
The Chicago Purchasing Manager’s Index rose to 64.1 from 62.7. It was expected to decline. Many analysts think this level indicates an overheated sector.
Factory Orders were the only hard manufacturing data issued this week, and they supported the optimism in the surveys. Orders increased 0.4% for the month, and last month’s number was revised higher to a 0.4% decline from a 0.8% decline. Also, core capital goods, a good indicator of business investment, increased another 0.3% after a strong 2.0% increase last month.
The third estimate of first-quarter gross domestic product (GDP) showed a slight decline to 2.0% annualized growth from 2.2%. Inflation rose a little, as measured by the GDP price index, to 2.2% from 1.9% over 12 months. Consumer spending remained roughly the same with 0.9% growth instead of 1.0%.
The employment data leading into tomorrow’s monthly Employment Situation reports indicate to expect positive numbers again. The ADP Employment Report found 177,000 private sector jobs were created during the month.
New unemployment claims increased by 10,000 to 228,000 last week and rose 3,000 this week to 231,000. The four-week average of continuing claims, which lags the new claims data by a week, hit a 45-year low.
The Markets
The S&P 500 gained 0.58% for the week ended with Tuesday’s close. The markets were closed Wednesday. The Dow Jones Industrial Average rose 0.22%. The Russell 2000 returned 1.33%. The All-Country World Index increased 0.62%. Emerging market equities added 1.42%.
Long-term treasuries returned 0.14% for the week. Investment-grade bonds rose 0.30%. Treasury Inflation-Protected Securities (TIPS) added 0.15%. High-yield bonds fell 0.41%.
On the currency front, the dollar fell 0.64%.
Energy-based commodities gained 0.17% for the week. Broader-based commodities slid 1.40%. Gold rose 0.08%.
Bob’s News & Updates
The number of regular viewers for my Retirement Watch Spotlight Series continues to increase. The June online seminar is my semiannual detailed economic and investment outlook titled “The Challenging Phase For Investors Begins.” You can watch these seminars from the comfort of your home or office at times you choose. To learn more about my new Spotlight Series, click here.
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I’m now a regular contributor to the Forbes.com blog. You can view my contributor page here.
Do your heirs know how to handle an inherited IRA? If not, they’ll join the long list of heirs who made simple mistakes that triggered additional taxes and penalties. To avoid this result, be sure your heirs have a copy of Bob Carlson’s Guide to Inheriting IRAs.
