August 6, 2013
3D Printing: The Wave of the Future?
The Investment View from Prescott, Arizona
The cost of 3D printing has kept the technology in a select few hands, but all that is changing as 3D printing blossoms into a full-fledged trend, complete with falling prices.
Staples is retailing a 3D printer starting around $1,300 – not cheap, but affordable for tekkies in the early-adopter crowd. If history is any guide, as costs come down, more sophisticated printers will become available allowing more of us to become manufacturers.
I’m not sure what this will do to the global balance of trade, but as more doo-dads can be printed right there in your den rather than shipped all the way from China or wherever, the slope of the playing field will be changing.
I read an article recently about how food can be created from printers using basic proteins which get combined in any combination you ask for. They were talking about space travel and such but I hope it can be programmed to do rib-eyes.
There was a flurry of negative articles a few months back about how 3D printers can now print plastic pistols. Other notable printed productions include a make-it-yourself violin, and a 3D bust of King Richard III of England.
The really exciting uses may be in health care, where 3D printing has been used to create biocompatible implants – body parts, like bones and bionic ears.
You won’t find this in Staples, but scientists have developed a 3D printer for stem cells. Right now they are creating scraps of tissue for research, but the eventual goal is to grow whole organs from scratch.
If you are not yet an HCM client and want to invest in this exciting new technology, call for an appointment to open an account. 3D printing technology is a growth industry we are following.
Using An Allowance to Educate
What We Were Saying Back Then
What is the easiest way to prepare children to handle money? Simple. Give them some and let them make mistakes. By starting young, the mistakes will normally be small, inexpensive ones.
Most kids get allowances, but by getting creative with the process, we have an opportunity to teach them a little about how the world works.
Try having your child split their allowance into 3 equal parts, using jars, envelopes or piggy banks to hold the money. Designate ¼ for long term savings, ¼ earmarked for gifts and taxes (mostly gifts at this age – church, charity, birthday or Christmas presents, etc.), and ½ for spending money.
At our house we used wide mouth glass jars so our son could see his money and get his hands on it easily.
In the process, the child learns that they don’t get to spend everything that comes in (remember the shock of seeing taxes taken out of your first paycheck?), and that supporting those people and institutions that support us is both important and costs money. They get to experience the good feeling of giving their own money to a charity or buying a gift for a child on an Angel Tree. They also learn how to shop for gifts for friends with their own money. With luck they will realize that their friends really don’t need $25 Star Wars light sabers after all.
Long-term savings means that the child will be able to buy his own car when he grows up. This is a good, tangible, long-term goal. As the savings jar fills up, trips can be made to the bank to deposit the savings in his bank account. Although I hate the tiny returns on savings accounts, I think the process of going to the bank is important. When the bank account fills up, money can be transferred to a growth oriented investment such as a mutual fund.
The child’s spending money is just that, his to spend. In our family, Mom and Dad still paid for a lot, but we rarely say no to his requests. When we don’t support the idea of buying a particular item, we just say, “you can buy it if you want to, you have your own money”. Like magic, 9 times out of 10, the item goes back on the shelf. And miraculously we have a discriminating shopper rather than one that wants everything in sight.
Whenever our son needed money away from home, Mom or Dad became the bank and would loan it to him until he got home and “restored his credit” by repaying the loan. The rule is that he doesn’t get a new loan until he pays off the last one. Only a few declined loans and this lesson gets remembered!
Simple accounting sheets help keep track of what is in each jar. The child gets practical lessons on math, accounting, and not casually moving money from one jar to another.
With this simple system, concepts of credit and consumer decision making come to life. Give it a try!
Q: What is next in this sequence: JFMAMJJASON_ ?
A: The letter D. The sequence contains the first letter of each month.
How’s the Market Doing?
Why Weak Economies Can Be Good
As I’ve said many times, this is a crazy business when the markets react exactly opposite to how one would expect given the happenings. The recent Reuter’s report, by Lucia Mutikani, on economic growth is a text book case of this. Let’s look at it.
Economic growth probably slowed sharply in the second quarter and reports coming out in the next few weeks will likely confirm this.
It appears that the Gross Domestic Product probably grew at a 1.0 percent annual rate after expanding at a 1.8 percent pace in the first quarter because government austerity and weak global demand weighed on the economy, according to a Reuters poll of economists. But there is a risk that growth may undershoot expectations, with forecasts as low as a 0.4 percent rate.
If economists are right, it would mark a third straight quarter of GDP growth below 2 percent, a pace that normally would be too soft to bring down unemployment.
Why on earth would this be good for the financial markets? Because in a soft economy, the Federal Reserve is expected to continue to buy billions of dollars of bonds each month, injecting cash into the economy as it does so. The gains of the financial markets have been driven by Fed cash, and with a weak economy and high unemployment persisting, the Fed’s actions are expected to continue. See?
Fed Chairman Ben Bernanke has said the U.S. central bank expects to start cutting back the purchases later this year, and would likely bring them to a complete halt by the middle of 2014, if the economy progressed as expected.
The weak pace of second-quarter growth will reflect a sharp slowdown in consumer spending caused by higher taxes at the start of the year. Consumer spending accounts for more than two-thirds of U.S. economic activity.
What’s Going On In Your Portfolio?
The stock and bond markets are both taking a breather after bouncing back from their June swoon.
Our Flexible Income* accounts showed a small profit in July, mostly due to dividends which all of our holdings deliver. The Flexible Income* model account currently calls for Floating rate, high yield and diversified bond funds. About 1/3 of the portfolio is in cash as I am waiting for the bond markets to show clear trends, either up or down. If the market begins to move up I’ll buy more bond funds. If it moves down I will use the cash to add some hedging positions that will protect us in a down market.
The stock market has performed a little better than the bond market this quarter, partly due to the brief spike up in stocks the past couple of days while bonds tanked during that same period.
Our growth accounts* are showing gains this quarter, also. As of this writing on August 4th, growth accounts* hold retail, biotech, health care, technology, chemical, and small cap stocks, plus a diversified stock fund. Growth portfolios* have about ¼ of their holdings in cash. I have been waiting for a pullback from July’s sharp run up to put the cash to work, but one has not developed – yet.
Adaptive Balance* and Adaptive Growth* accounts are blends of our Flexible Income* and Growth* models. Municipal* accounts are still 100% in cash as we wait for a recovery in the muni markets.
A Slice of Life
On a recent trip into Mexico I began to appreciate the way the locals all rolled through stop signs, especially when there was no one waiting at the cross street. It actually makes things more efficient, and I did not see any accidents as a result.
The payback comes at the border where it took us 1 hour and 45 minutes to inch our way up to the checkpoint. There must be some kind of karma built into that system that balances out the lack of waiting at stop signs.
After being in the Army, waiting is particularly distasteful, too. But all in all it was a fun trip and I got to work on my Spanglish.
Scottsdale Office Date
If you prefer to meet with Will in Scottsdale, he will be there on August 23rd. Please call the office (928 778-4000) to schedule an appointment.
Our Spotlight Strategy
With our Flexible Income Strategy we strive to provide high total return consistent with Capital Preservation.
Your money will be invested in bond or currency funds, including precious metals that may be used as currencies and equity-income investments whose price trend is up. If the price cycles down, holdings are replaced with new investments that are going up. Repeat as needed. Growth stocks are not used.
If you would like a current copy of our SEC Form ADV, Part 2, it is on our website at hepburncapital.com/form-adv.html
* The model accounts mentioned in this article are hypothetical examples of how the strategy may work as designed. Activity in client accounts may be different from that in the model in amount of each investment, specific timing of trades, and actual security used, which may vary from account to account. Not all trades are profitable. It should not be assumed that current or future holdings will be profitable. A list of all trades in these accounts for the past 12 months will be provided upon written request.
** The S&P 500 and Nasdaq Indexes are unmanaged lists of stocks considered representative of the broad stock market. Investors cannot invest directly in an Index.
Shock Absorber Growth
This newsletter may contain forward-looking statements, including, but not limited to, statements as to future events that involve various risks and uncertainties. Forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause actual events or results to differ materially from those that were forecasted. Information in this newsletter may be derived from sources deemed to be reliable, however we cannot guarantee its accuracy. Please discuss any legal or tax matters with your advisors in those areas. Neither the information presented nor any opinions expressed herein constitute a solicitation for the purchase or sale of any security.