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“A penny saved is a penny earned.” - Benjamin Franklin

Americans, in particular, have long been challenged when it comes to saving money. And, psychologists and economists are still striving to pinpoint concrete root causes for why this is the case. Some blame the housing bubble, others the ill-framed 401(k) clause and then there are those who think it’s ‘frugal fatigue’—so long as there are different pundits there will be differing opinions.

But, fear not as help is here…and, we’re not talking about swear jars or piggy banks. For those who struggle to save money the ‘normal’ way, new applications like Digit, Dyme, Acorns and Qapital have arrived to assist.

The timing couldn’t be better. Just consider the numbers: 60% of the Americans who are in their twenties save 5% or less of what they earn monthly while the rest don’t even have a piggy bank to bank on (according to Money Under 30). According to a survey by Bankrate, 76% of the Americans live pay-check to pay-check while 50% of Americans have less than a 3-month cushion in their savings account and 27% have no savings at all.  

Granted, it’s hard to save when most people have to deal with a number of loans along with bill payments. Millennials, in particular, face an uphill battle with a tough job market often coupled with crushing student loans. And, when you’re living pay-check to pay-check, spreadsheets aren’t always the first thing on your mind. Unless, of course, you let technology do the hard work for you.

Breaking news: smartphone apps can help you save money! Taking a cue from the old advice to ‘save small but daily,’ these apps attempt to eliminate the human factor to make savings more effortless. Although these apps have yet to gain wide adoption, those who are using them are reported to be seeing some success.

Case in point: Digit is one savings app which uses an ‘out of sight, out of mind’ approach. It uses an algorithm to analyse how much one might save in a month by reviewing your income and expenses. Since the app’s launch in February 2015, it has reportedly been successful helping users save more than $125 million. Then there’s’ Qapital, which helps users set up savings triggers to automatically put money toward a savings goals each time they buy from Starbucks or walk another mile. Qapital hopes this new feature gets more millennials saving toward their goals—and maybe paying more attention to how they’re spending money. While most of the apps give savings advice for free, some, like Acorns, go a step further and transfer funds into an investment account for a small fee.

Bottom Line for Investors

As the majority of Americans are challenged when it comes to saving, these free apps provide unique ways of overcoming these challenges. Additionally, these apps can work both for the not-so-good savers and the flagrantly extravagant and can provide inexpensive and low-risk ways to save. Best of all, you won’t have to go all Ebenezer Scrooge on your friends and loved ones—just a smartphone and the right app for you will work.

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It will come as no shock to you that coffee is one of the most popular hot beverages among consumers. The result—coffee is expected to garner record high global consumption at 150.8 million bags (each weighing 60 kg) in the 12 months starting October 1, a +1.2% increase from the preceding period, as indicated by the U.S. Department of Agriculture (USDA) estimates. However, production levels may be finding it hard to keep up. The global deficit could widen to 2.2 million of 60-kg bags for the 2016-17 season, from 800,000, as suggested by Rabobank International.

Surging global demand is expected to shoot coffee prices up, with inventories predicted to hit a 4-year low in 2016-17  amid heavy rains in Colombia, dry spells in Vietnam and Indonesia, and coffee rust in Central American/Mexico plantations predicted to dampen production (according to USDA reports).

U.S., the biggest consumer of java after the whole of the European Union, is estimated to increase its consumption by +1.5% in 2016-17, to record highs. Also predicted to reach their peaks are demand from China and India at expected +5.3% and +3.7% growth rates respectively (USDA forecasts).

Data source: U.S. Department of Agriculture (June 2016 estimates)

A Brief History of Joe

With the current explosion of java chains serving gourmet/exotic preparations and cold brews, coffee drinking has come a long way. Although apocryphal, legend has it that the stimulant powers of coffee beans were first discovered in Ethiopia by a goat herder who noticed his goats becoming more energized after eating the coffee beans. It’s said to have spread to other parts of the world including Arabia by the 15th century, and to Persia, Egypt, Syria and Turkey by the 16th century. The beverage made its way into Europe by the 17th century. In Europe, coffee quickly began to replace the common breakfast drinks of the time (beer and wine) as those who drank it found themselves more alert and their work greatly improved.

Reaching America around mid-1600s, a major turning point for coffee’s proliferation in the U.S. mainstream was the Boston Tea Party (1773). Colonists decried an exorbitant tea tax, following which people’s growing preference for java even led to taverns increasingly being used as makeshift coffee houses.

Further, as U.S. soldiers took to drinking the stimulating beverage, thanks to military rations during the Civil War and WWI, their habit sustained even after, spurring a +450% influx of coffee houses during 1920-1930s.

One of the earliest shops offering specialty coffee was Peet’s Coffee & Tea founded in Berkeley, California in 1966. In fact, two regulars at the café were Gordon Bowker and Jerry Baldwin, who would later go on to found the coffee retailer which practically revolutionized the way America has its coffee—Starbucks Coffee.

Bowker and Baldwin, along with Zev Siegl, opened the first Starbucks in 1971 in Seattle, Washington. Initially it sold only coffee beans and coffee-making equipment. Starbucks expanded into a full-fledged coffee house chain brewing specialty java, mainly under the initiative of Howard Schultz (who was previously the Director of retail at Starbucks) who bought the company in 1987. Its novel delicacies of Frappuccino and Latte, with emphasis on personalized servings, rapidly got imbibed into the urban population’s daily fare. The chain now has over 23,000 stores across the globe.

Trendsetting coffee house chains with origins in other parts of the world include India’s Café Coffee Day and China’s Momi café.

Bottom Line for Investors

Coffee houses’ evolving roasting/brewing methods have had a big role in whetting people’s appetite for caffeine across the globe. The beverage’s energizing properties coupled with café’s exotic/innovative preparations have made the drink an indispensable staple in our daily lives. Also, the laid-back cozy ambiance of coffee shops has added to their popularity among the socializing youth.

The burgeoning demand for coffee is already being reflected in prices/price expectations: Arabica coffee futures traded in New York soared +20% in June, the biggest monthly increase since February 2014. Robusta, used in instant coffee, experienced around +4.2% rise last month in London. As coffee’s popularity continues to expand, this is a market to keep an eye on.

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Past performance is no guarantee of future results. Inherent in any investment is the potential for loss. Zacks Investment Management, Inc. is a wholly-owned subsidiary of Zacks Investment Research. Zacks Investment Management is an independent Registered Investment Advisory firm and acts an investment manager for individuals and institutions. Zacks Investment Research is a provider of earnings data and other financial data to institutions and to individuals.

Technology has evolved to become what it is today—an integral part of human existence. And, while technology benefits society in many ways, its increasing sophistication will likely put a broad set of jobs at risk.

Case in point

Automated systems have begun to replace humans, or help reduce the work load, in many industries. These automated systems or robots have long been an area that many tech giants have been exploring. Below are two examples:

1. For years, e-discovery software has helped lawyers manage the electronic records that need to be produced at the beginning of an investigation or law suit—a job originally done by clerical assistants.

2. Fast-food giant Wendy’s announced that it would replace cashiers with automated kiosks for taking customers’ orders at its restaurants.

Recent developments in the fields of artificial intelligence (AI) and robotics have led many experts to believe that they could help solve productivity gap issues, where they exist. At the same time, this could mean more white-collar jobs could be lost to AI enabled robots. According to Forrester market research, the number of job cuts attributed to robotic automation in the U.S. could grow to 12 million by 2025. White collar jobs most likely to be affected are in customer service and office administration; areas where fresh graduates are most likely to apply for entry-level positions.

Bottom Line for Investors

For centuries, new technology has resulted in swaths of jobs becoming obsolete. However, new and evolving technology has also created jobs as well. Case in point: after analyzing 140 years of data, a study by economists at Deloitte reported that technology has created more jobs than it has displaced since 1871.

Still, a major concern is the pace at which technology is advancing. In some economies, like the U.S., the recovery phase may be slower than is ideal. This begs the question, will new jobs be created fast enough to replace those displaced by technological advancement? We shall see. Regardless, investors are encouraged to remain aware of the balance between technology innovation and employment trends as the state of both can impact investments.

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Electricity is a lifeline of the modern world and its evolution is toward being produced ‘clean.’ Thanks to its clean burning, predictable and flexible nature coupled with a production boom and lower prices, natural gas has become an increasingly attractive fuel for the electricity generation. Evolving technologies will continue to enable natural gas to play an ever increasing role in the clean generation of electricity.

The early 1970’s saw a growth spurt in the use of natural gases largely due to its diverse applications and attractive prices. But, for most of the 150 years of U.S. oil and gas production, natural gas has played second fiddle to oil and coal. In the decades following the 1970s, natural gas didn’t re-emerge notably until 2003 when we saw cyclical demand in the U.S. rise highlighted in context of limited availability and multi-year ‘take or pay’ contracts emerge (agreements where buyers agree to either: 1) take, and pay the contract price for, a minimum contract quantity of commodity each year (‘TOP Quantity’); or 2) pay the applicable contract price for the TOP Quantity if it is not taken during the applicable year).

Over the years, as natural gas gained popularity in terms of its varied usage capabilities—eight of every 10 rigs were chasing gas targets. After 2003, and with the onset of the shale revolution, we saw both production and consumption of natural gas rise at a fast pace. Natural gas production increased from less than 50 billion cubic feet a day (Bcf/d) in 2005 to about 80.1 Bcf/d in February 2016; an increase of nearly 60% over 10 years. February 2016 recorded the second-highest production level ever, and there is no indication that this rate of increase is slowing. In fact, with continuing improvements in drilling efficiency and effectiveness, natural gas production is forecasted to reach almost 90 Bcf/d by 2020 (according to the U.S. Energy Information Administration).

On the consumption side, total natural gas consumption averages for 2016 stood at 76.5 Bcf/d compared to 75.3 Bcf/d in 2015. Despite a minor increase in consumption, adverse weather conditions, over-supply, record low oil prices and limited storage facilities have dampened natural gas prices (which have hovered around record lows achieved in December 2015 of $1.70 per MMBtu. The Henry Hub natural gas spot price averaged $1.92/million British thermal units (MMBtu) in April 2016, an increase of 19 cents/MMBtu from the March price.

Over-supply coupled with a warm 2015-2016 winter has resulted in low gas prices, but the scenario is expected to change in 2016 as we see a dip in the supply of natural gas. Overall dry gas production and imports have been on a decline since last October, and in the meantime exports have also gone up. As a result, it is expected by the EIA (U.S. Energy Information Administration) that the supply surplus that has existed since December 2014 will slowly disappear and move into a deficit by November 2016. This change in the demand and supply dynamic is expected to improve the overall economics of the U.S. natural gas market in the latter half of 2016 and 2017.

Henry Hub spot prices averaged $1.99 per MMBtu in the first quarter of 2016, but with a change in the supply and demand equation, prices are expected to double during the deficit period as seen during the last supply deficit from December 2012 to November 2014.

Bottom Line for Investors

A decade of declining natural gas prices has led to a decline in investor confidence. Lack of profit led many energy companies to divest natural gas assets and reinvest in oil instead. However, the tide seems to be turning as incredible reductions in drilling costs have made it possible for many natural gas wells to break even or turn a profit at current levels. Around 2008, 1,560 rigs were required to produce 2.9 trillion cubic feet of shale gas, but today only 189 rigs are giving 5 times higher production. Leveraging the benefits of game-changing technology is making the industry’s presence felt again.

A number of other factors are expected to drive demand for this reliable, cheap and abundant source of energy and provide a compelling long-term investment opportunity:

A rise in exports due to growing demand for U.S. natural gas from Europe and Asia

Gas replacing coal as the primary source of U.S. power

Increased investments in pipelines and infrastructure in order to remove major bottlenecks

Zero dependence on any cartel

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Experiencing positive earnings for the fourth straight quarter in Q1 2016, Amazon may have received added vindication of its long-standing core business strategies. Born out of Jeff Bezos’ vision of forming an ‘exotic and large’ company (metaphorically like South America and its Amazon River), America’s largest online retailer has come a long way since Bezos started the company when he was only 30 years old.

Fascinated by the internet revolution, Bezos quit his job as Vice President of a Wall Street firm in 1994 to build his dream company. Beginning in the garage of his Seattle home, the first round of start-up funding came from his parent’s personal savings (his father had little knowledge of the internet at the time, as revealed by Bezos in an interview.

Beginning as an online bookstore, Amazon garnered sales up to $20,000 per week after only a few months in business. In 1997, it went public at $18 per share on the NASDAQ. Kleiner Perkins Caufield & Byers saw a 55,000%+ return by 1999 on their $8 million investment made in 1995.

Innovation and Expansion Drive Future Profits

Though Bezos’ unusual strategy of prioritizing investments in expansion/innovation for long-term growth over profit-making may have made some investors skeptical, the e-commerce giant’s survival through the dot com bust proved it to be a force. Amazon generated its first profit-amounting to $5 million in Q4 2001, on revenues exceeding $1 billion.

Heralded by Time magazine as the “Person of the Year” in 1999 for his success in e-commerce, Bezos expanded his business to include electronics, apparels, jewelry, and more alongside books. Also noteworthy are the host of acquisitions, Amazon has made so far (close to 5), including Junglee, IMDb and Zappos.

Launching a convenient mode of e-reading through Kindle, introducing customer ratings on books and renting out computer server space as part of its cloud services, Amazon has been a pioneer in many areas. Its innovations are reaping huge benefits for the company with profits soaring to an all-time quarterly high of $513 million in Q1 2016 (compared to losses of $57 million a year ago). This surge was largely driven by cloud computing services.

Bezos to Expand Worldwide Networks

Furthermore, Amazon is set to launch in-house shipping and logistics services to connect factories in China and India to customers in the New York, Atlanta and London (according to a 2013 report to Amazon’s senior management team). The proposed project, named Dragon Boat, could potentially give some serious competition to incumbents like UPS and FedEx.

Its global expansion plans also include a $5 billion investment in India. In a recent meeting with global leaders in Washington, Bezos stated his intentions to inject $3 billion in the company’s rapidly growing Indian market, adding to the previously committed $2 billion. He further expressed his vision to have Amazon’s largest software engineering and development center placed outside the U.S. in Hyderabad, India. Bezos particularly emphasized the 45,000 jobs already created by his organization in India, and that he continues to see a lot of promise in the country.

Bottom Line for Investors

Amazon is the epitome of a start-up success story. Notwithstanding early criticisms, the online retailer has emerged as one of the fastest growing companies while staying true to its core philosophy of encouraging innovation above everything else. With recent earnings results bearing further testimony to the juggernaut, it shouldn’t be too surprising if its stock prices reach new highs in coming weeks.

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Past performance is no guarantee of future results. Inherent in any investment is the potential for loss. Zacks Investment Management, Inc. is a wholly-owned subsidiary of Zacks Investment Research. Zacks Investment Management is an independent Registered Investment Advisory firm and acts an investment manager for individuals and institutions. Zacks Investment Research is a provider of earnings data and other financial data to institutions and to individuals.

Breaking from 20-year historical precedent, dividend yields have now surpassed government bond returns. Currently, the S&P 500 dividend yield stands at about 2.1% versus the 10-year U.S. Treasury yield which is around 1.7%. This trend is occurring globally as equity yields have exceeded government bond yields in most developed economies; Australia, the U.K., Switzerland and France are churning out the highest yielding dividends.

Sources: MSCI; Bloomberg

Dividend per Share Outpaces Earnings per Share

While dividend per share (DPS) has increased approximately +5%, earnings per share (EPS) has slipped -11% since February 2015. Major contributors to this divergence include the U.S., U.K., and Australia. Even though Japan has experienced positive EPS growth, it’s still slower than the DPS upward momentum.

Source: CITI’s Research Report

Here’s the problem: with the pace of DPS growth outstripping that of EPS, payout ratios (DPS/EPS) have been bumped up from 43% two years ago to 51%, rising above the long run median of 46%. Leading the pack is the U.K. with currently about a 90% payout ratio (far ahead of its long run median of around 50%), followed by Australia and Latin America. The U.S. payout ratio is still close to, if not less than, its long term median level.

Among sectors, energy and materials payout ratios are at lofty levels, as earnings take a beating from the commodity rout. On the other hand, IT, Consumer Discretionary and Financials are recording the lowest payout ratios—in-line with their long run trends.

A corporation often feels pressed to payout higher dividends to appease income-seeking shareholders, leaving the business with less capital to invest in growth opportunities. So, when earnings fall, it means that they’re generally paying out too high a percentage of earnings; this may cause corporations to change their dividend plans. With that in mind, dividends could theoretically be in danger of falling.

But, with earnings growth set to recover, the trend could see some reversing. According to some estimates, global DPS could grow by +3% in 2016 and +6% in 2017, while EPS is expected to rise by +3% and +13%, respectively. That should cool off the payout ratio—from 51% to 47%. If these predictions hold, sustainability of current dividends could actually improve.

Bottom Line for Investors

Regions that are expected to be in the optimal “high yield/high dividend growth” include Europe (excluding the U.K.), Emerging Market Asia, Central & Eastern Europe, Middle East and Africa. While the U.S. and Japan are likely to generate sufficient dividend growth, they offer relatively low yields. Overall, investors should remain wary of dividend cuts by companies with underwhelming profits and/or limited expansion opportunities.

FREE Download – Zacks Economic Outlook: July, 2016

Past performance is no guarantee of future results. Inherent in any investment is the potential for loss. Zacks Investment Management, Inc. is a wholly-owned subsidiary of Zacks Investment Research. Zacks Investment Management is an independent Registered Investment Advisory firm and acts an investment manager for individuals and institutions. Zacks Investment Research is a provider of earnings data and other financial data to institutions and to individuals.

Central banks and government institutions around the world are aggressively selling off U.S. Treasury debt and other notes, in what appears to be an effort to save cash for their struggling local economies. Major emerging economies like China, Brazil and Russia have aggressively dumped U.S. Treasury bonds in the last few months, marking the fastest pace for a U.S. debt selloff by global central banks since at least 1978. For 2016, the global bank debt dump has already reached $123 billion.

U.S. Treasury Bond Net Purchases per Year by Foreign Central Banks

                                        Source: Treasury Department

China, the biggest overseas creditor to the U.S. (with U.S. debt worth $1,244 trillion), initiated the sell-off to prevent the yuan from weakening beyond its target point versus the U.S. dollar. The People’s Bank of China also sought to boost the slowing economy in the process, but the jury is still out on how effective this has been. At the same time, oil price declines have also contributed to the sell-off. Countries like Norway, Mexico, Canada and Colombia all saw fiscal revenues drop with falling oil prices and weaker demand. These countries are arguably using the cash generated from the sale of Treasuries to fill giant holes in their budgets.

The question is, how far will this go?

Bottom Line for Investors

Though U.S. Treasuries are being sold off at a relatively quick pace, they are still among the safest securities in the world. What many fear, however, is that a massive debt dump could set-off a panic in the global financial markets and create additional stock market volatility, both of which could lower confidence in the ongoing economic expansion.

Those fears are likely overblown. For the U.S., China’s debt dumping actually does not amount to a whole lot—China only holds around 9%[IB1]  of the total U.S. foreign-owned debt, and it’s not as though they are selling all of their holdings (just a small percentage). What’s more, it is also true that, while China sells, other countries are stepping-in to buy. Case in point: India increased its Treasury debt holdings to $116.3 billion at the end of July 2015 (up from $79.7 billion the year prior).

While central bankers in Europe and Asia experiment with negative rates, it also means that the interest rates on alternatives to U.S. Treasuries like German and Japanese bonds are less desirable. That should help demand going forward, particularly as the Fed incrementally looks to raise rates over the course of the year.  

FREE Download – Zacks Economic Outlook: July, 2016

Past performance is no guarantee of future results. Inherent in any investment is the potential for loss. Zacks Investment Management, Inc. is a wholly-owned subsidiary of Zacks Investment Research. Zacks Investment Management is an independent Registered Investment Advisory firm and acts an investment manager for individuals and institutions. Zacks Investment Research is a provider of earnings data and other financial data to institutions and to individuals.