Let There be Light...at the End of the Tunnel

by Anirban Basu 24. January 2014

Anirban Basu

The U.S. economy had been stuck at 2 percent growth for several years and throughout much of 2013. Imagine a sports car with incredible get up and go, but one that had to constantly negotiate a series of speed bumps that permit it to only travel between 30 and 40 miles per hour. To complete the analogy, that translates into sub-par economic growth and an unemployment rate still hovering around 7 percent after more than 4 years of economic recovery.

However, the outlook for 2014 is as positive as it has been for any year since the onset of the financial crisis. There are a number of relevant factors at play. The world economy is now strengthening, with accelerating growth apparent in China, parts of Europe, the U.S., and in a host of emerging nations. Accordingly, the International Monetary Fund projects that the global economy will expand 3.6 percent in 2014 after expanding closer to 3 percent in 2013.

There are other tailwinds that more specifically impact the U.S. economy. The nation now enjoys greater certainty regarding its federal budgetary and Federal Reserve monetary policies. Seemingly against all odds, the federal government recently passed a budget that guides spending into 2015. On December 18th of last year, the Federal Reserve announced that it would begin to taper its bond purchase program beginning in January. Rather than purchasing $85 billion each month in assets, the Federal Reserve will taper its purchases to $75 billion per month. Specifically, the FOMC will reduce its purchases of Treasuries and mortgage-backed securities to $40 billion and $35 billion per month.

Equity investors cheered the policy announcement for at least three reasons. First, the Federal Reserve introduced language suggesting that short-term rates will remain low for many quarters to come. The announcement also reduces the level of policy uncertainty, and markets don’t like uncertainty. Finally, the decision to taper implies that the Federal Reserve’s forecast for U.S. economic activity has improved since its September 2013 meeting.

There’s more at work than policy shifts. Gas prices have fallen, helping to increase consumer disposable spending power. Corporate performance remains solid. A majority of large U.S. corporations beat their earnings estimates during last year’s third quarter. However, a materially smaller share beat their revenue estimates, implying that companies continue to aggressively manage costs to boost bottom line performance. With economic growth now accelerating both nationally and globally, corporate America may have an opportunity to rapidly expand both their respective bottom and top lines.

The stock market has simply boomed as a result of the confluence of many factors, with the S&P 500 surging nearly 30 percent in 2013. While 2014 is unlikely to generate anything close to that return, the stock market’s performance has added both capital and confidence to the U.S. economy, which in turn creates a better environment for the broader market.

In general, regions of the nation enjoying the fastest recovery are those that are associated with rapidly rising populations (e.g., Texas, Florida), surges in energy production (North Dakota, Texas, Louisiana), increased industrial output (Indiana, South Carolina) and rapidly recovering housing markets (Florida, Georgia, Arizona). These regions are likely to continue to expand more rapidly in 2014.

Will Maryland Catch the Tailwinds?

Maryland was a willing participant in the nationwide recovery and continued to post solid economic performance numbers throughout 2013. For instance, between November 2012 and November 2013, the state added 33,500 jobs or 1.3 percent according to the Bureau of Labor Statistics. The State ranked 28th in the nation with respect to year-over-year percentage job growth over that period, down from 22nd in May of 2013. Despite the dip in relative job growth, the Free State ranked ahead of Virginia. Statewide aggregate employment has now surpassed its December 2007 level, the month during which the Great Recession began.

Despite a promising outlook for the global and national economies, there is cause for concern in Maryland. Like a facemask-wearing stalker in a 1980s horror movie, the State’s structural deficit refuses to permanently disappear. What was once estimated to be a $300 million surplus for FY2014 is now an $87 million deficit. The budgetary gap rises to $400 million for FY2015. It is critical that Annapolis resolve these shortfalls without further impacting the state’s business climate and reputation.

Moreover, Maryland does not fully participate in many of the economic segments that are likely to drive the U.S. economy forward in 2014, including industrial and energy production. As a wealthy state, Maryland does benefit from disproportionate impetus from stock market-induced wealth effects, however. It also helps that sequestration has been relaxed a bit. The distribution, medical research and financial service intensive Baltimore metropolitan area has arguably been the healthiest economic region within Maryland of late in terms of pace of recovery.

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.

Traditonal vs. Roth IRAs: How to Choose

by Marylove Moy 23. January 2014

Roth vs Traditional IRAs

One of the most frequent questions asked to our 1st Mariner Financial Advisers is regarding the choice of a Traditional or Roth IRA*.

It is complicated...

At first glance, the Roth IRA is very appealing since it offers the long term investor the ability to withdraw funds TAX FREE (after age 59 ½, a holding period of 5 years or for very specific exception situations). Investors must bear in mind that the Roth does not offer the possible tax deduction of the Traditional IRA.

In reality, it usually comes down to numbers. However enticing the idea of the Roth IRA may be, in many situations an investor is better off contributing to a Traditional IRA.

Therefore, the first step in deciding which IRA is better for you, is to determine if you are eligible to contribute to a Roth IRA. (There are strict income limits which apply to Roth IRAs.) Higher income earners have IRS-imposed limits governing their ability to make a Roth IRA contribution. For example, in 2014, individuals earning $112,000 and couples earning $178,000 begin to have their dollar amount contributions limited and ultimately phased out at higher income levels.

There are many online calculators offered that assist you in making the decision. I urge you to take the time to work through this calculation! The calculator can determine your eligibility and project the long term values of both a Traditional and Roth IRA using your age, salary, percentage contribution and expected rate of return. These values are only projections, but you owe it to yourself to complete the exercise. It is your future!

Both types of IRAs offer similar contribution amounts and investment options.

These are but a few of the many considerations in your retirement planning. For most individuals, their 401(k)s and IRAs represent the single largest part of their net worth (aside from personal residence); I urge you to seek the guidance of a financial professional in making these important decisions.

*Not insured by FDIC or any Federal Government Agency.

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5 Inexpensive Ways to Improve the Look of Your Home

by Sara Seeger 22. January 2014

Home Improvements

It's a new year, which for most of us means it’s time to make a new resolution. Perhaps you want to eat healthier, or go to the gym more frequently, or be a more patient person. How about a resolution that results in not only a better you, but a better home? Make a resolution to dedicate your time and energy to one project each month that improves the look of your home (for those of you who refuse to make resolutions, call it a “plan”). There are many small, inexpensive fixes that can be done to the inside and outside of your house to improve its overall look and value! While you’re stuck inside this winter you can channel your inner creativity and put some of those Pinterest ideas to work.

1. Freshen up Walls with a New Color

Tired of your bland eggshell bedroom walls or bright lemon bathroom walls? Paint is a great, low-cost option to improve the overall look of your home. Changing the color of your walls changes the entire personality of the room. Not sure how a color will look on your walls? The Behr Paint website offers customers the option to preview their vision with a tool that simulates the look of their choice of paint color. Paint stores also sell small jars of paint for you to test-run on a small wall area before committing to the color. The cost of paint and supplies will depend upon the size of the space and the quality of the paint and could cost as little as $100-$150 for an average-size room.

*Hint: Don't just stop at painting your walls. You can also update your front door with fresh paint, or update your kitchen by painting the cabinets which is much more cost effective than a total kitchen restoration!

Crown Molding

2. Add Personality with Decorative Molding

Decorative molding offers a more finished, put-together look. While many homes have baseboards, newer homes often lack the decorative touch of ceiling molding. Once you have the proper amount of molding, you can easily install it yourself. The cost of molding depends upon the size of the room and the style of molding and typically averages $3 a foot. I added decorative crown molding to my half bath to give it a more defined, nautical look (after a fresh coat of paint, of course).

3. Throw Down an Area Rug

Are there stains on the carpet or scratches on the wood floor? Replacing carpet or wood floors can be extremely expensive and time consuming, and in many cases will require the skills of a professional. A more cost-effective solution to this problem is to purchase an area rug. An area rug adds a splash of color to your room and serves to easily hide any unsightly stains and blemishes. Target, HomeGoods, and Bed Bath and Beyond have fairly inexpensive area rugs. Remember to take advantage of sales and discounted coupons!

Crown Molding

4. Accent with a Backsplash

Two rooms in a home that really add value are the kitchen and bathroom. What better way to add a touch of elegance to these rooms than by adding a pop of color in the form of a backsplash. At first thought, adding a backsplash sounds like an intimidating do-it-yourself project, but I decided to dive in and try it. To my surprise it was much easier than I expected! I found the cost of most tile to be about $10 a sheet (I used two sheets), a tub of grout runs about $8, and two self-adhesive panels for the tiles cost me $2/sq. ft. For me, the result was a very affordable bathroom transformation!

5. Plant a Garden

Spring will be here before you know it. Landscaping your front or backyard doesn’t have to be expensive to improve the overall look of your home. Visit your local nursery and grab some colorful flowers. You can plant them around the front of your house or even edge your walkway. Add some fresh mulch to help curb appeal. Don’t have room for a garden? I live in a row home in the city with no grass, so I bought a big, decorative flower pot to sit outside my home. I’m able to change the plants and flowers depending on the time of the year, and a decorative solar light adds interest and showcases the plants.

For more cost effective ways to improve the look of your home- check out our Pinterest board!

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Home Improvements You Never Knew You Could Do Yourself

5 Home Improvements That Add Value

How to Decide: Home Equity Loan or Line of Credit



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