1. What is a myRA?

The myRA (rhymes with IRA) is a new workplace retirement savings account discussed by President Obama in the State of the Union address and subsequently authorized by executive order. The administration hopes that employers who currently don’t offer a workplace retirement plan will make myRAs available to their employees. Only limited details are currently available.

The myRA is a regular Roth IRA with some special features. Your contributions are made on an after-tax basis through payroll deduction. Your contributions are tax-free when withdrawn, and earnings are also tax-free if certain requirements are met. Contributions are invested in newly created government bonds that earn the same variable interest rate that’s available through the government’s Thrift Savings Plan Government Securities Investment Fund (G Fund). For reference, the G Fund earned 2.45% in 2011 and 1.47% in 2012. Your account principal is fully protected — the value of your account can never go down, and the bonds are backed by the full faith and credit of the U.S. government.

2. Is it available now?

No. It is anticipated that the program will start in 2015.

3. Do employers have to offer the myRA?

No. The plan is voluntary. Employers need to sign up by the end of 2014 in order to participate in the pilot program.

4. Do employees have to contribute?

No. Unlike the Auto-IRA that has also been proposed by President Obama, but not yet enacted, employee contributions are totally voluntary.

5. Who can contribute?

According to the White House, myRA accounts are available to “households earning up to $191,000.”

6. Will employers contribute to the myRA?

No.

7. How much can I contribute?

You can open an account with as little as $25, and additional contributions can be as little as $5. You can keep your account if you change jobs. Again, details are limited, but presumably you can contribute up to the annual IRA limit (the limit for 2014 is $5,500), and that would include all of your myRA, traditional IRA and regular Roth IRA contributions. However, once your account reaches $15,000 (or you have had the account for 30 years, whichever comes first) you’re required to transfer the account into a private-sector Roth IRA.

8. When can I access my funds?

This is not entirely clear. According to the Obama administration’s instructions to the Treasury, you can access your funds if you have an emergency. It is not currently clear, however, if the regular Roth IRA distribution rules — which don’t limit withdrawals to emergencies — also apply. (The regular rules allow you to access your funds at any time. Your own contributions are tax-free when withdrawn; earnings are tax-free if you are at least 59½, or disabled, or a first-time homebuyer, and you also satisfy a five-year holding period.) You can transfer your myRA account balance to a private-sector Roth IRA at any time.

9. Why should I invest in a myRA instead of a regular Roth IRA?

The distinguishing features of a myRA are the ability to contribute through payroll deduction, access to the new retirement bond, safety of principal, and the ability to make very small contributions. There will also be no fees to establish or maintain the myRA. However, the myRA, with its single investment option and $15,000 cap, lacks the flexibility of a regular Roth IRA. If you can afford the minimum investment to establish an account, a regular Roth IRA may be the better option.

http://www.nerdwallet.com/blog/finance/2014/myra-what-need-to-know/

Equity valuations are still reasonable, especially when considering the inflation environment. Historically, inflation between 0%-2% (CPI is currently running at 1.2% year over year) has been a sweet spot for valuations. Even inflation readings up to 4% have been supportive for valuations. Concerns for multiples would arise if we see either deflation or inflation greater than 4%.

(Sources: Strategas Research Partners, LLC &  Brinker Capital, Inc.)

The average dispersion between S&P 500® stocks over the twelve months of the year was just below 5%, which is the lowest value across the 23-year data.

In such circumstances, the relative value of active management in the equity markets is constrained.  Simply put, accurate bets deliver less alpha.

The Fed has begun tapering asset purchases, starting with $10 billion in January, split evenly between U.S. Treasuries and mortgage-backed securities. If the Fed continues to taper by an additional $10 billion at each meeting, QE3 would end in October 2014, still providing liquidity throughout most of the year. The Fed is expected to keep short-term rates near zeor until at least 2015.

Do you think that the high Operating Margins will hold in 2014?

The major drivers for the high Operating Margins in 2013, viz. productivity, technology and cheap imports, should help again next year.  Other factors like cheap energy and lower effective tax rates should continue to help as well. Plus, we do not see excesses in business investment, inventory or debt (personal or commercial) in 2014.

Persistently high profit margins should help equities in 2014.

The BalticDry Index is issued daily by the London-based Baltic Exchange and provides “an assessment of the price of moving the major raw materials by sea”, like, iron ore, coal, grain, cement, copper, sand and gravel, fertilizer and even plastic granules.

Since it targets real-time shipping rates, which fluctuate based on supply and demand, subjectivity can’t creep into the readings. Day in and day out, it provides a snapshot of global economic activity at the earliest possible stage.

Year-to-date, the index is up nearly 230%. It now rests at its highest level since late 2010.

Can this be a sign of global recovery improving in 2014?

Inflation in the U.S. has been tame. According to the Consumer Price Index (CPI), prices have increased only +1.2% over the last 12 months, below the Fed’s target of 2% inflation. Tame inflation will allow the Fed to remain accommodative for longer.

This chart clearly shows that real interest rates in the US look to have bottomed for now. As real interest rates begin to rise further, the tail wind for gold will become a head wind going forward.