FORECASTS & TRENDS E-LETTER
By Phil Denney
March 12, 2024

IN THIS ISSUE:

1.  Half of College Grads Don’t Use Their Degrees

2.  Is The Dow Jones Average Still Relevant?

3.  Congrats on Your Retirement. Time to Find a Job?

Half of College Grads Don’t Use Their Degrees

In a WSJ article called Half of College Grads Are Working Jobs That Don’t Use Their Degrees, the authors state, “Roughly half of college graduates end up in jobs where their degrees aren’t needed, and that underemployment has lasting implications for workers’ earnings and career paths. More than any other factor analyzed including race, gender and choice of university what a person studies determines their odds of getting on a college-level career track.”

So what is the real value of a college education? Why are our college graduates failing to launch a career that uses what they learned in college? Then add the impact of student loan debt. It’s a real crime to have a large debt load at graduation, and you can’t even use your degree, praying the government will bail you out.

In this space Gary has often written about the Johnson O’Connor Research Foundation. I can personally attest to the value they can bring to help a person reach the full potential from an education beyond high school. My daughter Sarah was tested in her junior year and the results were very helpful in selecting her major. One big point made by the counselor was to focus on your passion first and the money will follow.

Sarah’s passion ended up being an advertising executive. She graduated with a bachelor’s degree in advertising from the Communications School at the University of Texas at Austin. She initially worked for three different advertising agencies and now works on what is called the “client side” doing marketing for a well-known company. I can tell you that the money did follow. She is married, a successful businesswoman and a mother of two young ones. She will soon graduate with an MBA from the University of Arkansas.

Who is a fit for Johnson O’Connor? High school students, college students and graduates and working adults who need help planning their career path. Adults who decide to take advantage of the Foundation’s aptitude testing program include people unhappy or dissatisfied with their current jobs, those facing promotions or transfers, and those who are facing downsizing or other types of career transitions. It is possible that their testing will confirm you are already on the right path.

Is The Dow Jones Average Still Relevant?

Yahoo Finance published an article last month by Allan Sloan on the relevance of the Dow Jones Industrial Average (DJIA). Walmart had just done a 3-for-1 stock split so the Dow Jones folks replaced Walgreens with Amazon. “Adding Amazon to the Dow, the folks at S&P Dow Jones Indices say, was done to keep retail companies’ weight in the average from falling sharply because of Walmart’s stock split. Walgreens’ Dow tenure lasted less than six years — an extraordinarily short time for a market metric that doesn’t change its component stocks very often. But its exit, S&P Dow Jones Indices senior analyst Howard Silverblatt insisted to me, isn’t because Walgreens has slumped and Amazon has soared. “We think it’s a better fit,” Silverblatt said. “We’re not saying it’s a better investment.”

The Dow Jones Industrial Average is an index of 30 of the largest blue chip stocks in the market. The DJIA is a price-weighted index, as opposed to one that is market-cap weighted, such as the S&P 500. The index is calculated by adding the stock prices of the 30 companies and then dividing by a divisor. The divisor changes when there are stock splits or dividends or when a company is added or removed from the index. The Dow was founded in 1896 and in the beginning was a simple average of the share prices of the companies in the index.

The S&P 500 on the other hand, which was founded 61 years later, measures companies by their total stock market value, not their share price. So the Dow had to go through some contortions to offset the impact of Walmart’s stock split while the S&P 500 did nothing. Walmart’s market cap didn’t change, just the number of shares outstanding.

To be honest, the S&P 500 is more relevant to me in the modern market than the Dow. Yes, I know the Dow is more popular with the financial media. It is more fun to say an almost 40,000 point index PLUNGED 500 points than saying the S&P 500 at about 5,000 points plunged 65 points (about a 1.25% drop for each). Maybe referring to the DJIA grabs attention better, generating more advertising dollars.

Keep in mind that what the market is doing today only matters if you need your money today. It is just a way of keeping score on the stock market in either case. That said, a 500-point drop in the S&P 500 would be very meaningful and would most definitely get my attention!

Congrats on Your Retirement. Time to Find a Job?

In a WSJ article by Clare Ansberry she states, “The rising cost of living, combined with restlessness, is spurring older Americans to consider coming out of retirement. More than four million Americans will reach 65 this year, the age associated with retirement. Yet many of them will be working. Overall, about one-third of adults 65 to 69 have jobs, up from less than one-quarter in 2000, according to a Federal Reserve Bank of Minneapolis report.”

The reasons are unforeseen expenses, the sky rocketing cost of living, and seeking a sense of purpose. Unforeseen expenses can be caregiving for aging parents and adult children failing to launch.

“The costs of groceries, owning a car, insurance and housing have increased significantly in the past three years. Caregiving costs more, too. The median cost of a home health aide increased 12.5% between 2020 and 2021, according to Genworth, a long-term-care insurance company.”

People who retired or are close to retirement age often underestimate their expenses. Those still working expect to spend 42% of their income on food, housing, and other basic expenses, but retirees spend 53% on those expenses, according to a survey done on behalf of Nationwide Financial.

Some people barely retire, says Suzanne Scullion, a financial coach in Virginia Beach, Va. They leave their career one month, and start working the next, often taking hourly jobs in retail or offices. Increases in minimum wages made some of those jobs more enticing.

“They’re not getting paid $7.50 an hour. They’re making $15, $16 or $18 an hour,” she says. Jim Stahl began driving a school bus a month after he retired. Now 65, he retired from a career installing and replacing glass on his 63rd birthday. The next month, he was driving a school bus for Lamers Bus Lines. Stahl obtained a commercial driver’s license, works 2.5 hours in the morning and two hours in the afternoon driving elementary- and middle-school students. His pay: $22 an hour.

For some, returning to work is less about money and more about a continued desire to contribute.

Beth Conley retired in 2019 as a church administrator and came out of retirement in 2022 to take a similar job. At 76, she came out of retirement in September 2022, taking a part-time job as an administrator at her Tampa, Fla., area church. A widow, she says she was “floundering” after retiring in 2019 from her church administration position in Chicago and moving to Florida to be near her son and his family just before the pandemic hit. “I was watching way too much TV in my apartment,” says Conley. “I’m one of those people who need to feel needed.”

How about you? I hope you don’t have to go back to work after retirement, but do you lack a sense of purpose in retirement? Perhaps you don’t want to be a Walmart greeter (hey, many people could use your smile when they enter the store). You can choose to seek out a non-profit or your local church to fill your desire to still contribute. It doesn’t have to be for extra income. I am reminded of the Farmer’s Insurance saying, “we know a thing or two because we’ve seen a thing or two.” It is a shame to let a wonderful mind go to waste. 

Words of wisdom: “But  divide your investments among many places, for you do not know what risks might lie ahead.”

Take care,

Phil

 

Forecasts & Trends E-Letter is published by Halbert Wealth Management, Inc., a Registered Investment Adviser under the Investment Advisers Act of 1940. Information contained herein is taken from sources believed to be reliable but cannot be guaranteed as to its accuracy. Opinions and recommendations herein generally reflect the judgement of the named author and may change at any time without written notice. Market opinions contained herein are intended as general observations and are not intended as specific advice. Readers are urged to check with their financial counselors before making any decisions. This does not constitute an offer of sale of any securities. Halbert Wealth Management, Inc., and its affiliated companies, its officers, directors and/or employees may or may not have their own money in markets or programs mentioned herein. Past results are not necessarily indicative of future results. All investments have a risk of loss. Be sure to read all offering materials and disclosures before making a decision to invest. Reprinting for family or friends is allowed with proper credit. However, republishing (written or electronically) in its entirety or through the use of extensive quotes is prohibited without prior written consent.