THE WEEK ON WALL STREET
Stocks notched a solid gain last week in a mega-cap, tech-led rally bolstered by positive inflation news.
FACT OF THE WEEK
On May 20, 1873, San Francisco businessman Levi Strauss and Reno, Nevada, tailor Jacob Davis are given a patent to create work pants reinforced with metal rivets, marking the birth of one of the world’s most famous garments: blue jeans.
In San Francisco, Strauss established a wholesale dry goods business under his own name and worked as the West Coast representative of his family’s firm. His new business imported clothing, fabric and other dry goods to sell in the small stores opening all over California and other Western states to supply the rapidly expanding communities of gold miners and other settlers. By 1866, Strauss had moved his company to expanded headquarters and was a well-known businessman and supporter of the Jewish community in San Francisco.
Jacob Davis, a tailor in Reno, Nevada, was one of Levi Strauss’ regular customers. In 1872, he wrote a letter to Strauss about his method of making work pants with metal rivets on the stress points—at the corners of the pockets and the base of the button fly—to make them stronger. As Davis didn’t have the money for the necessary paperwork, he suggested that Strauss provide the funds and that the two men get the patent together. Strauss agreed enthusiastically, and the patent for “Improvement in Fastening Pocket-Openings”–the innovation that would produce blue jeans as we know them–was granted to both men on May 20, 1873.
Strauss brought Davis to San Francisco to oversee the first manufacturing facility for “waist overalls,” as the original jeans were known. At first, they employed seamstresses working out of their homes, but by the 1880s, Strauss had opened his own factory. The famous 501 brand jeans—known until 1890 as “XX”—was soon a bestseller, and the company grew quickly. By the 1920s, Levi’s denim waist overalls were the top-selling men’s work pant in the United States. As decades passed, the craze only grew, and now blue jeans are worn and beloved by people old, young, and everything in between around the world.
MARKET MINUTE
Dow 40,000
The week began quietly as market averages traded in a tight range, awaiting fresh inflation news.
On Tuesday, markets rose steadily throughout the day after digesting a mixed wholesale inflation report. The next day, a cooler-than-expected Consumer Price Index (CPI) report sparked a broad-based rally as the upbeat news raised investors’ hopes for a rate cut. The Nasdaq Composite and Standard & Poor’s 500 (which ended above 5300 for the first time) closed the day up 1.4 percent and 1.2 percent, respectively. Meanwhile, the bellwether 10-year Treasury yield fell to 4.35 percent.
Investors took a break as the week ended, mostly yawning at mixed economic data. Notably, the Dow closed just above 40,000 on Friday.
Inflated Expectations
With the two critical inflation updates last week, attention shifted to the Federal Reserve’s next steps with interest rates.
The top-level CPI numbers (known as headline inflation) tend to be less important than what’s underneath: core inflation (CPI minus volatile food and energy prices) in the Fed’s eye. Core CPI came in at 0.29 percent for April, just below the 0.30 percent from Wall Street. It was the first time the core CPI was lower than forecasts in three months. The news revived speculation that the Fed might consider a rate adjustment as early as September.
FINANCIAL STRATEGY OF THE WEEK
The Cost of Procrastination
Some of us share a common experience. You're driving along when a police cruiser pulls up behind you with its lights flashing. You pull over, the officer gets out, and your heart drops.
“Are you aware the registration on your car has expired?”
You've experienced one of the costs of procrastination. Procrastination can cause missed deadlines, missed opportunities, and just plain missing out. Procrastination is avoiding a task that needs to be done—postponing until tomorrow what could be done today. Procrastinators can sabotage themselves. They often put obstacles in their own path. They may choose paths that hurt their performance.
Though Mark Twain famously quipped, “Never put off until tomorrow what you can do the day after tomorrow,” we know that procrastination can be detrimental, both in our personal and professional lives. Problems with procrastination in the business world have led to a sizable industry in books, articles, workshops, videos, and other products created to deal with the issue. There are a number of theories about why people procrastinate, but whatever the psychology behind it, procrastination may cost money—particularly when investments and financial decisions are put off.
If you have been meaning to get around to addressing some part of your financial future, maybe it's time to develop a strategy. Don't let procrastination keep you from pursuing your financial goals.
Early Bird
Let's look at the case of Cindy and Charlie, who each invest $100,000.
Charlie immediately begins depositing $10,000 a year in an account that earns a 6% rate of return. Then, after 10 years, he stops making deposits. Cindy waits 10 years before getting started. She then starts to invest $10,000 a year for 10 years into an account that also earns a 6% rate of return.
Cindy and Charlie have both invested the same $100,000. However, Charlie's balance is higher at the end of 20 years because his account has more time for the investment returns to compound.