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Economy Still Recovering from Frigid Winter

by Anirban Basu 8. August 2014

Anirban Basu

The winter of 2013/14 was brutal. Construction starts were delayed. Merchandise sat idly at ports. Consumers stayed indoors and local government budgets were hammered by snow removal costs. For roughly three months, forward economic momentum was stymied. According to the Bureau of Economic Analysis, the U.S. economy contracted at a 2.9 percent pace during the year’s initial quarter.

For a time, economists debated whether or not first quarter weakness was attributable to the weather or to economic fundamentals. We can now say with some degree of confidence that atmospheric conditions are largely to blame. Consumer spending began to trend higher as early as March. According to the Bureau of Labor Statistic’s initial estimate, the nation added 288,000 jobs in June and has now added more than 200,000 jobs for five consecutive months, the first time that’s occurred since the late-1990s. While the quality of jobs being added to the economy is generally quite poor, more Americans enjoy employment opportunities and the unemployment rate (6.1 percent) is now at its lowest level since September 2008.

That said, the first quarter was so bad from an output perspective that it has altered the forecast for 2014. As of March, the Federal Reserve’s forecast for growth was in the 2.8 to 3.0 percent rate. It has now been revised to a range of 2.1 to 2.3 percent.

A key implication pertains to interest rates. With growth continuing to remain at or below America’s long-term potential, the Federal Reserve is likely to remain accommodative. Even though its QE3 program is being wound down, investors probably don’t have to worry about increases in short-term rates until very late in 2014 or next year, though this view is certainly not universal.

A bright spot is the apparent health of capital markets. The first half of 2014 saw a record number of IPOs. While U.S. companies accounted for six of the top ten performing initial stock offerings, Europe—now recovering from its debt crisis—recorded the most IPOs of any region in absolute terms. The total value of initial public offerings was up 54 percent during the first half of 2014 compared to the same period one year prior. Life sciences companies raised more money through initial public offerings during the first half of 2014 than they did during all of last year.

America’s energy production renaissance arguably represents an even brighter spot. A recent report by the U.S. Energy Information Administration indicates that U.S. energy production met 84 percent of the nation’s demand in 2013. The fraction of U.S. energy consumption satisfied domestically has been rising since 2005, when it stood at 65 percent. Job growth remains strong in many of the nation’s energy-intensive markets, including Texas, Oklahoma, Louisiana and North Dakota. Last year’s rise in natural gas prices has even helped to support a resurgence of demand for coal.

That does not suggest, however, that it will be smooth sailing for equity investors. The run-up in stock prices has stretched P/E ratios in many industry segments. To justify those and higher valuations, corporate profits need to bounce back in the second half of 2014. Profits from current production fell from $198.3 billion during the first quarter of 2014 after rising $47.1 billion during the prior quarter. Equity prices continued to expand nonetheless. Correspondingly, the Dow Jones Industrial Average’s P/E ratio rose from 15.0 at the end of 2013 to 16.5 as of July 1st. As the market creeps higher, weak earnings reports stand to become more impactful and market performance could become less stable. If the Federal Reserve begins raising short-term interest rates sooner than expected, the need for more impressive earnings growth becomes even more urgent.

Economic Winter in Maryland

Maryland's job growth continues to underwhelm. The Free State added 22,100 jobs between May 2013 and May 2014. That translates to 0.9 percent growth, ranking 37th among all states over that period. Month by month job growth has remained incredibly inconsistent; the State lost 1,300 jobs in May after adding 10,600 jobs in April. While weather was a convenient scapegoat for the subpar job growth in the first quarter, recent data reflect a lingering malaise.

To the extent that there has been job growth in Maryland, it has been primarily in the Baltimore metropolitan area. Suburban Maryland has been hammered by sequestration and most rural Maryland economies continue to underperform by both national and statewide standards. Development momentum, meanwhile, has been building in the Baltimore area, including in hotspots like Baltimore’s waterfront, Owings Mills, Towson and Columbia.

The housing market, while slightly improved, continues to be at least partially responsible for Maryland’s lackluster performance. One in every 621 housing units in Maryland reported a foreclosure filing in May. That translates to 0.16 percent of total units being foreclosed, exactly double the national average according to RealtyTrac data. Home sales in Maryland were up 17 percent on a month-to-month basis in April, but are down 12 percent compared to one year ago.

Anirban Basu is Chairman & CEO of Sage Policy Group, Inc., an economic and policy consulting firm in Baltimore, Maryland. Basu is one of the Mid-Atlantic region's most recognizable economists, in part because of his consulting work on behalf of numerous clients, including prominent developers, bankers, brokerage houses, energy suppliers and law firms. On behalf of government agencies and non-profit organizations, Basu has written several high-profile economic development strategies, including co-authoring Baltimore City's economic growth strategy. His opinions do not necessarily reflect the opinions and beliefs of 1st Mariner Bank.

Down Payment Savings Tips for the Newbie Home Buyer

by John Stephens 31. July 2014

Down Payment Savings Tips

Saving enough for a 20% down payment on a home can be one of the toughest financial challenges most people will ever take on. With the median existing U.S. single-family home price at about $213,000, that means pulling together more than $40,000 – a veritable mountain of cash.

Yet reaching that goal can be done. It just takes planning, patience and discipline. Here are some tips to help you map your path to home ownership:

Set a Goal

What you need depends on local home prices and how much you can finance. For many programs, a 20% down payment is needed to avoid paying private mortgage insurance (PMI). Not paying PMI can save hundreds of dollars a month and enhance your buying power. Generally, your monthly mortgage payment shouldn’t be more than 28% of your gross income.

Once you’ve figured out how much you’ll have to come up with when it comes time to buy, you can draw a plan to get there based on your income and expenses. Keep in mind prices change, so check the market regularly to be sure you’re saving enough.

Open a New Savings Account

Start a house-fund savings account and have part of your paycheck deposited into it. Safely tucking away the money like this may help you keep your fingers off it, even under tempting circumstances.

Cut Your Expenses

It's easy to get comfortable with routine monthly expenses, such as the cost of cable television, phone services and insurance. But often, you can find a way to pay less after taking a close look at what you’re getting and what you really need.

You may find ways to save money on insurance, for instance. Some consumers are dropping cable in favor of online TV from companies like Netflix, and there may be an alternative phone plan that will net you another $10 a month. Be brutal when it comes to discretionary expenses like manicures, haircuts, memberships and subscriptions.

Don't Forget the Incidentals

It may seem like a major chore, but taking the time to determine all the ways you spend money over a typical month – right down to the coffee breaks, candy bars and other incidental expenses – can help identify ways to save.

For instance, you may be able to put aside an extra $20 a week just by making a sandwich each day instead of buying lunch. Skip the doughnut, bring a thermos and add another $10 – totaling $120 a month extra for your savings.

Keep the Change

Little things – including coins – add up. Collect the pennies, quarters and other coins that come your way. Deposit them each month. Some banks, including several 1st Mariner branches, let you avoid the hassle of sorting and rolling loose change. You may be surprised at how much you come up with each month.

A Taxing Experience

If you can’t keep your mitts off your house fund, consider increasing tax withholdings from your pay. That puts the Internal Revenue Service in charge of part of your money, but you’ll get the excess back after filing your tax return.

Make sure your refund is deposited directly into your savings account too – you don't want to be tempted by a big check. Once the cash lands in the bank, consider investing in a certificate of deposit. CDs generally require you to keep your hands off the funds for the term of the deposit, and they generally pay a much better interest rate than a standard savings account.

More Work

It may seem excessive to go moonlighting, but if you work 9-to-5 weekdays, you may be able to significantly shorten the time it takes to reach your goal by picking up a part-time job. Using a particular skill or hobby can be another way to enhance income and savings – sell your work, look for performance gigs, teach others. If you have an advanced degree, consider tutoring.

Long Haul

Keep in mind that this is probably one of the toughest personal-finance nuts you’ll ever have to crack, so give yourself time.

John Stephens is a Los Angeles-based writer and editor covering banking and finance for NerdWallet. He previously worked for the Huffington Post and Bravo.

If you found this article useful, be sure to check out these related articles:

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It's Fraud Season: Protect Yourself

by Stacy Tharp 25. July 2014

Who doesn't love summertime at its prime? Long bright days, cheerful singing birds, crab feasts with family and friends, and of course a spike in crime. Summer is an especially big season for debit card fraud. Our security team works hard to prevent you from becoming a victim of debit card fraud so that even if your wallet is lost or stolen, no one else is able to make purchases on your card. It’s equally important that you take action to help protect yourself. Here is a list of things you should do to help protect yourself from being a victim of debit card fraud:

1) Use your debit card often.

If you use your debit card for the majority of your purchases, we’ll be able to get a good sense of your normal spending patterns. If you only use your debit card once in a blue moon, it becomes more difficult to know whether an attempted transaction may be fraudulent.

2) Alert us when you will be out of town.

Most people know to alert their bank when they are leaving the country, or even the state. But even if you are going to Ocean City for the weekend, this may be considered abnormal for you. It’s easy to alert us of a trip, simply give us a call, email a customer service representative or stop in your local branch.

3) Make sure we have your correct phone number(s).

If we think there has been unusual activity on your debit card, the first thing we’ll do is call you to find out whether or not it was you who made the purchase. If we cannot get in touch with you, we’d rather be safe than sorry, and we temporarily shut down your card so transactions cannot be completed. Call a customer service representative or stop in your local branch to verify or update your phone number.

4) Be smart about your personal identification number (PIN).

Do not choose something that is easy for others to guess, such as your birthday. Do not share your PIN with anyone and do not keep the number in your wallet.

5) Store your debit card in a secure place.

A card holder in your wallet is a good place to keep your debit card because that makes it difficult to fall out. If you keep your debit card loose in your pocket, it can easily fall out without you noticing when you pull out your keys or phone (this goes for cash too!).

6) Monitor your debit card transactions.

Use Online Banking and/or Mobile Banking to monitor your transactions. If you have debit cards with multiple banks, use Mariner360 to monitor all of your transactions in one place. If you notice any transactions that you did not authorize, contact us immediately.

If you found this article useful, be sure to check out these related articles:

Things to Do before You Leave the Country

How Identity Thieves Steal Your Information

5 Mobile Banking Security Tips



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