Why You Should take a Vacation

Taking a break has many advantages here are 10 courtesy of Fast Company


1. Going on a vacation shows you are competent. It is proof that you are good at your job because you can manage and plan enough to free up some time in your schedule--and not leave a festering mess in your absence. Not being able to take a vacation for years shows that you and your team are so out of control that you can't even be gone for a week.


2. No one is impressed if you don't. Bragging that you have not had a vacation in years or that you have maxed out on vacation days is not scoring points with anyone. If you think your company or your team see it as a super-keen work-ethic, and admires you for it--they don't.


3. Your team is motivated. When you show by example that you support and allow people to have a life, they will be more motivated to contribute. As long as you don't send them email every day while you are "on vacation"! Set the expectation you will be generally out of touch. If you can't stand to let go entirely, arrange 1-2 scheduled check-in points, but don't just go somewhere else and keep working.


4. Your team gets more productive. When you go away, you give your team a break from doing and worrying about all the things you throw in their way when they are trying to get their work done. After about 2 weeks, they will miss you and need you again, but in the mean time, their productivity will actually go up.


5. Being unavailable helps people develop. Being unreachable for periods of time is actually a very effective technique for developing people. It forces them to step up. If they think they can reach you at all times, they will never bother to think bigger, learn, and take risks--they'll just ask you. Just be careful not to un-do everything they did in your absence just because it was different than the way you would have done it.

6. You will be more productive. If you step away from the day to day chaos and give your back-of-mind processes a chance to chew on things while you are in a good (or at least different) mood, you'll think new thoughts. You will solve problems you might not solve if you stay fully engaged at all times.


7. You will prioritize better. Stepping away helps make it clear that some of the things that you thought were vitally important before your vacation don't actually need to get done after all. When you step away, the difference becomes more clear. The most strategic things re-assert themselves and all the clutter drops several notches in volume.


8. You let other people be "important." If you refuse to leave ever, you are sending the message that you are the only important person. Giving others the chance to be in charge, make decisions, speak on your behalf and solve problems sends the message that you have confidence in your team. This builds your credibility with your team, your peers, and your management more than pretending that the business can't live without you for a moment. (Which doesn't really build your credibility at all.)


9. Your company benefits. Your company prefers people who enjoy their life because they have more positive energy for their work. They are more effective and more productive. People who have interests outside of work also deal with pressures and disappointments in the workplace with more resilience and confidence.


10. You need a break, whether you know it or not!

Finally, if something comes up in your business that you really can't avoid handling personally, and you need to cancel your vacation, reschedule another one while you are canceling. This will minimize resentment and disappointment, give you something to look forward to--and ensure you don't get too full of your self-importance, and go too long without a vacation.

Week 27 Performance.....Jobs Report Disappoints Again

The equity market rally came to a screeching halt Friday when yet another disappointing jobs report was released.  All major equity market indices were in rally mode coming off of the July 4th holiday but the DJIA and S&P 500 both cratered under the pressure of the low job creation number.  The NASDAQ was able to get back to break even while the Russell 2000 finished with a strong 1.1% gain on the week.  The DWCM Fund manage a resilient gain of 0.8% for the week


The 80k net jobs created missed expectations of 90k.  The net revisions for April and May were down 1,000.  The unemployment rate remained unchanged at 8.2%

• Relative strength is in the goods-producing sector. Employment in this sector rebounded 13,000 after a 21,000 decline in May. Manufacturing increased 11,000 after a 9,000 rise in May. Construction posted a modest 2,000 gain after dropping 35,000 the month before. Mining edged up 1,000, following a 3,000 advance in May.
• The private service-providing industry is where the June numbers were most sluggish. This sector showed only a 71,000 gain in June after advancing 126,000 the prior month.
• The public sector continued to shrink with a 4,000 dip in government employment-much smaller than the May drop of 28,000. 
• Average hourly earnings improved to a 0.3 percent boost from 0.2 percent in May. Analysts called for a 0.2 percent gain. The average workweek edged up to 34.5 hours from 34.4 in May. The market median forecast was for 34.4 hours. 

This latest data point is just another in a string of points that suggest an economy which is barely sustaining itself.  Although the weekly initial claims and Challenger job cut report both released Thursday indicate that firms aren't cutting back they are certainly not hiring.


Labor productivity has been a major thesis of ours at DWCM since we starting writing over a year ago [see Making It in America].  With sluggish demand employers see no need to higher and with continued uncertainty surrounding increased regulation such as Obama Care companies are just not hiring.


It's tale of two America's with those that do have jobs and those that do not.  Those who have jobs continue to spend albeit at at moderate pace while those without jobs continue to struggle to meet financial obligations.  We believe that we have moved a little beyond the 1% discussion to focus on how the 99% are doing.  We would suggest that half of the 99% are making it while the other half are not depending upon your definition of making it.[see Forget the mortgage, consumers pay car loan first]


With growth stalled do not expect the unemployment or housing picture to change much.  Without jobs demand shrinks.  With uncertainty consumers pull back.  With student coming out of college with an average of $25k in debt without any good job prospects the housing market can't stage a come back even at historically low interest rates.


As we noted in last week's performance report we initiated a short strategy against the home builders which include the following names:

• M/I HOMES, PULTEGROUP, RYLAND GROUP, LENNAR, DR HORTON, KB HOME

Although we finished in the red during the first week of executing this strategy we believe that it will pay dividends throughout the remainder of this year and into next while adding some additional protection to our overall Fund.


Our two tech names Marvel and Riverbed continue to be punished.  We will decided this week weather to exit the positions all together or add to them.  Seasonally we are entering the time of the year where tech names usually start to rebound.  It was our own mistake to enter these names to early in the year although we liked the company.  Lessons learned for going forward.

The Week Ahead
We won't likely have the economic news driving the markets as we did last week.  However that doesn't mean that news out of Europe can't be a disruptor.  We also have the beginning of earnings season here in the US with Aloca releasing results after the closing bell on Monday evening.  Look for the consumer sentiment report to affect trading on Friday.

• Mon -  Consumer Credit
• Tue -  NFIB Small Business Optimism Index
• Wed -  FOMC Minutes
• Thu -  Jobless Claims,  Bloomberg Consumer Comfort Index
• Fri -  Producer Price Index,  Consumer Sentiment

Not knowing where readers live I can no doubt believe that most of you have been scorched by this extreme heatwave that has engulfed the US so far this summer.  I hope that clients and readers are finding some form of relief any way they can.


I not this this because throughout the Midwest there exists extreme drought conditions.  This could have a very damaging impact in several different arenas this fall.

• Lower crop yields will likely lead to higher prices which will likely get pushed onto consumers.
• Higher prices will no doubt affect corporate earnings as well.
• A decrease in farmer income will likely lead to lower spending on equipment.  This is a thesis that I am following close which could affect names like John Deere and Agrium    

DreamWorks Capital Management

DWCM has scheduled our next finance lecture & seminar for Tuesday September 18th at the The Community House located in Birmingham, MI.  This quarters topic will be Balancing Your Changing Investment Needs: Emergency Fund, Investments, Retirement, Education, and Philanthropy.  This is going to be a very broad topic in which we will cover significant points regarding creating, developing, and executing on your wealth management plan.  We should have a very interactive group so be sure to sign up by emailing me directly at pfenner@dwcmllc.com or by contacting The Community House at 248-644-5832

Forget the mortgage, consumers pay car loan first

With the length of time that the foreclosure process can draw out I can understand why people would pay off other liabilities such as car loans and credit card debt first before their mortgage.  We have touched on the "shadow economy" previously when gas was nearing $4 and consumers were still spending.


Living mortgage free could sure boost any one's discretionary spending and help people buy Apple computers or just about any good on Amazon.  Paying off your auto loan provides your access to maintaining your income by getting you to your job each day.  Paying off your credit cards gives you additional access to money your might not have if you chose to pay your mortgage first.


Full piece here from MarketWatch

• According to the latest analysis of open loans by TransUnion, the credit-ratings agency, nearly 40% of some 4 million consumers tracked last year fell behind on their mortgage payments, while keeping both their auto loans and credit-card balances in check.
• The national delinquency-rate average of those behind on their mortgages stands at 6%, compared with 0.78% who are 90 days late on credit cards and an even lower 0.46% (a historic trough) who haven’t made a car payment in 60 days.
• TransUnion refers to this as the “payment hierarchy,” which first shifted away from covering the mortgage as the No. 1 household priority in 2008, at the onset of the recession. The thinking then was that credit-card payments were far more important than mortgage payments because many consumers were using plastic to buy necessities like food and clothing.
• TransUnion attributes that to regional economics and consumer penchants. “The preference for paying auto loans was more pronounced in states like Florida and Michigan, which have seen severe drops in house prices and may have strong consumer affinities for autos,” according to Becker.
• It’s not likely that consumers will return to the so-called traditional payment hierarchy of covering the mortgage first, until the housing market shows some signs of stabilization and then recovery. Add better job gains to that as well, said Matt Komos, a TransUnion consultant who co-authored the study.

Inequality: Mostly Among the 1%

Back on a topic that we have not covered in a while, income inequality.  We have looked at What it takes to be in Top 1%, Who Exactly are the 1%, and The Truth About the Wealthy.  But this article by Kiplinger isn't what you think.


The piece takes a look at the widest discrepancies in the income gap and they fall squarely within the 1% themselves.  Full story here

• The most common measure of inequality is the share of income earned by the top 1% -- the highest-earning 1.5 million individuals and couples. This was about 18% of all income in 2011, twice as much as when Ronald Reagan was reelected president in 1984. Because one-percenters get a large portion of their income from investments, their share of all income fell to 17% after the stock market plunged in 2008.
• The gap between most one-percenters and most of the 99% isn't that wide because the most extreme inequality is at the very top of the income scale. The chasm between the super-rich -- the highest-earning 15,000 tax filers -- and others in the top 1% is so large that it skews the overall result. Factor it out, and even inequality between the poor and the well-off is far less than 10-to-1. Though that's still too much inequality in the view of some people, it's not the extreme inequality that often makes the headlines.
• According to one study, when government subsidies and employer-funded health insurance are included, the ratio of well-off taxpayers at the 90th percentile of income and the poor at the 10th percentile is also about 6-to-1. And this measure of inequality isn't getting wider. That 6-to-1 ratio is unchanged since 1990s, and the ratio was roughly 5-to-1 in the 1980s.
• By contrast, inequality within the top 1% soared over that same period. In 1984, the super-rich 0.01% earned $1 out of every $9 pulled in by all of the richest 1%. By 2010, the super-rich were hauling in $1 of every $5 earned by one-percenters.
• Meanwhile, inequality among the vast majority of people isn't so wide, and it isn't getting wider. Even after a brutal recession that lowered living standards for most people, the average American isn't losing ground compared with most others, even if the gulf between average and very wealthy is growing broader. Cornell University economist Robert Frank, an expert on public attitudes about wealth, argues that perceptions about living standards are based as much on one's relative position compared with neighbors and coworkers than on actual dollars and cents.