The Market

The Federal Reserve announced late Thursday that it would increase its discount rate, charged to banks for emergency loans, by a quarter point to 0.75 percent. The Fed cited improved conditions in financial markets that have decreased the need for government help as the reason for the surprise increase. The Fed said it would leave interest rates affecting consumer loans unchanged. Core inflation – which excludes food and energy costs – fell in January for the first time since December 1982. Overall inflation increased just 0.2 percent. The Commerce Department will release its January durable goods report on Thursday and its revised fourth-quarter gross domestic product report on Friday. For the week, the Dow gained 3.12 percent to close at 10,402.35. The S&P rose 3.19 percent to finish at 1,109.17, and the NASDAQ increased 2.76 percent to end the week at 2,243.87.

Health Cost – Total U.S. health care spending was $2.5 trillion in calendar year 2009, equal to $6.85 billion of spending a day (Source: Centers for Medicare and Medicaid Services, BTN Research).    

More Paid By The Top Group – In 1980, the top 1 percent of taxpayers paid 19.1 percent of all federal income tax (FIT), and the bottom 50 percent of taxpayers paid 7.1 percent of FIT. In 2007, the top 1 percent of taxpayers paid 40.4 percent of all FIT, and the bottom 50 percent of taxpayers paid 2.9 percent of FIT. Thus since 1980, the top 1 percent of taxpayers has gone from paying nearly three times the FIT of the bottom 50 percent of taxpayers to nearly 14 times as much (Source: Tax Foundation, BTN Research).     

Middle Age – If you divide the U.S. population of 309 million into five-year increments (i.e., 0 to less than 5 years old, 5 to less than 10 years old, etc.), there are more Americans age 45-49 years old than any other five-year age group. The 23 million Americans just short of their 50^th birthday comprise a group that is slightly larger than the 22 million Americans age 50-54 (Source: Census Bureau, BTN Research).   

 

WEEKLY FOCUS – Watch Your Credit Card’s Fine Print 

The Credit Card Accountability, Responsibility and Disclosure (CARD) Act’s final provisions take effect today. The law, enacted last May, sought to limit or eliminate many of the worst offenses by credit card issuers, such as retroactively raising interest rates on existing balances and double-billing cycles. Because issuers had almost nine months to digest the new rules, they’ve had plenty of time to look for creative ways to replace the lost revenue streams. To protect yourself, pay close attention to any mailings or statement enclosures from your credit card issuer that might contain the following pitfalls. 

1. Annual fees – According to Lowcards.com, about 20 percent of credit cards have an annual fee, but that will likely increase. Many issuers have already added annual fees to formerly free cards, and you may not even be aware that you’re paying them.

 

2. New fees – The CARD Act eliminated some fees, such as those charged to a card holder for being over the card’s limit. Look for issuers to recoup the lost revenue by increasing other fees – like balance transfers, cash advances and late fees – and to introduce new fees, like account inactivity or paper statement fees. (CARD eliminated an issuer’s ability to charge extra for payments made via phone or web.)

 

3. Variable rates – The CARD Act limits the amount and reasons that issuers can increase fixed interest rates, but it doesn’t limit increases in rates tied to a variable like the prime rate. Watch for your fixed rate card to switch to a variable rate. In addition, CARD limits only interest rates on existing card holders; new credit cards are not subject to rate limits.

 

4. Devaluing rewards – Just like subprime home loans, free money is a thing of the past. Discover has already lowered its cash-back program from 1.5 percent of purchases to 1.25 percent. American Express has limited reward points accruals on late-paying accounts, unless the card holder pays a $29 fee.

 

Credit cards can be an important source for emergency funds, but they should never be a resource for daily living expenses. Like any financial instrument, you need to be an

informed and aware consumer. Take the time to read any notices or communications from your card issuer. If you have questions about how credit card balances can impact your lifestyle, please call us. We’re always happy to help.   

 

 

* The Standard & Poor’s 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general. The Dow Jones Industrial Average is a price-weighted index of 30 actively traded blue-chip stocks. NASDAQ Composite Index is an unmanaged, market-weighted index of all over-the-counter common stocks traded on the National Association of Securities Dealers Automated Quotation System. The Morgan Stanley Capital International Europe,

Australia and Far East Index (MSCI EAFE Index) is a widely recognized benchmark of non-U.S. stock markets. It is an unmanaged index composed of a sample of companies representative of the market structure of 20 European and

Pacific Basin countries and includes reinvestment of all dividends. Barclays Capital Aggregate Bond Index is an unmanaged index comprised of

U.S. investment-grade, fixed-rate bond market securities, including government, government agency, corporate and mortgage-backed securities between one and 10 years. Written by Securities

America. SAI# 303317

 

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The Market

Wall Street ended a four-week losing streak with modest gains last week. Signals from China that it would move to control inflation in its burgeoning economy along with concerns about debt problems in several European countries have kept investors guessing. The Labor Department reported Thursday that U.S. non-farm productivity rose at a 6.2 annual rate during the fourth quarter and ended 2009 with an increase of 2.9 percent over 2008, the largest increase since 2003. For the week, the Dow gained 1.02 percent to close at 10,099.14. The S&P rose 0.97 percent to finish at 1,078.51, and the NASDAQ increased 1.98 percent to end the week at 2,183.53.

Retail Rise – Retail sales rose more than expected in January, according to a report issued by the Commerce Department on Friday. Retail sales increase by 0.5 percent, beating economists’ predictions of 0.3 percent. The increase was the largest since November. 

Needing Help – A 60-year old American has a 40 percent chance of requiring nursing home care at some point during his/her remaining lifetime (Source: MetLife Mature Market Institute, BTN Research).    

The Best and the Worst – In the past half-century (i.e., the 50 years from 1960-2009), the largest percentage gain day for the S&P 500 (up 11.6 percent on Oct. 13, 2008) and the second largest percentage loss day (a drop of 9.0 percent on Oct. 15, 2008) occurred within two days of each other. The S&P 500 is an unmanaged index of 500 widely held stocks that is generally considered representative of the U.S. stock market (Source: BTN Research).     

Thanks a Lot – Of those Americans that work at least 50 hours a week, 56 percent believe technology has increased the stress of their job as opposed to alleviating tension (Source: Money Magazine, BTN Research).   
 

WEEKLY FOCUS – Are Mom and Dad in Debt? 

If you thought your college-bound child’s credit card to be your biggest debt concern, you may want to look at mom and dad’s expenses, too. According to the Employee Benefits Research Institute, the average debt load for households of people age 75 and older grew 160 percent to an average of $20,234 between 1992 and 2004. Research by professors from Ohio University, Harvard Law School and the University of Texas at Austin indicate that people age 65 and older represent the fastest-growing group filing for personal bankruptcy. 

While a few of those debt-burdened seniors may have overextended their credit in pursuit of retirement dreams, most turned to debt in crisis, usually when a medical problem hits for which they have no cash and no insurance coverage – even from Medicaid, a much more limited resource than most Americans think. Living on a fixed income, most seniors have few avenues to increase cash flow to cover unforeseen expenses. Some make attempts to pay off utilities, medical and other bills individually, others resort to a credit card, quick loan or line of credit. 

Just as a child or spouse who runs up a credit card or line of credit may be embarrassed about coming clean, elderly parents may also shy away from sharing that information. However, as part of helping ensure estate documents and arrangements are in order, your parents need to be honest with you and their advisors about their debt. The alternative may be family heirlooms being sold to pay outstanding bills. 

Encourage your parents to share their full financial picture with you and recommend they meet with a financial professional to ensure proper risk management and estate planning. We’re always available to help you with those conversations and the financial analysis that goes with them. Call our office for help or to schedule an appointment. 
 

* The Standard & Poor’s 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general. The Dow Jones Industrial Average is a price-weighted index of 30 actively traded blue-chip stocks. NASDAQ Composite Index is an unmanaged, market-weighted index of all over-the-counter common stocks traded on the National Association of Securities Dealers Automated Quotation System. The Morgan Stanley Capital International Europe, Australia and Far East Index (MSCI EAFE Index) is a widely recognized benchmark of non-U.S. stock markets. It is an unmanaged index composed of a sample of companies representative of the market structure of 20 European and Pacific Basin countries and includes reinvestment of all dividends. Barclays Capital Aggregate Bond Index is an unmanaged index comprised of U.S. investment-grade, fixed-rate bond market securities, including government, government agency, corporate and mortgage-backed securities between one and 10 years. Written by Securities America. SAI# 303236

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The Market

Concerns about U.S. unemployment and European government debt created another volatile week on Wall Street. The Department of Labor reported that U.S. employers unexpectedly cut 20,000 jobs in January, but the overall unemployment rate fell to 9.7 percent, a five-month low. Across the Atlantic, several European countries – most notably Portugal, Spain and Greece – continue to struggle with massive deficits, with Portugal’s government rejecting a plan to curb spending. Americans seem to be doing well on their individual austerity efforts, borrowing less for a record-setting 11^th straight month in December. For the week, the Dow lost 0.49 percent to close at 10,012.23. The S&P fell 0.68 percent to finish at 1,066.19, and the NASDAQ dropped 0.29 percent to end the week at 2,141.12.

Some Disagreement – Ben Bernanke was approved for a second four-year term as Fed Chairman by a 70-30 vote in the Senate on Jan. 28, 2010. The 30 votes against Bernanke’s confirmation were the greatest number of votes opposing a Fed Chairman nominee since 16 senators voted against Paul Volcker’s nomination in 1983. Bernanke’s new term will run through Jan. 31, 2014 (Source: Federal Reserve, BTN Research).   

Rates Going Up? – There are now just two months remaining (i.e., February and March) in the Fed’s program to purchase $1.25 trillion of mortgage-backed securities. The program, which originally began with Fed purchases in March 2009, will stop by the end of next month. Eric Rosengren, the president of the Federal Reserve Bank of Boston, predicted last month that mortgage interest rates will rise by as much as 0.75 percent when the purchase program ends (Source: Federal Reserve, BTN Research).   

Looking Back – Fifty-five percent of retired Americans surveyed (including those that had previously used a planner and those that have never used a planner) wished that they had used or consulted with a financial planner earlier in their life as they planned out the finances of their retirement years (Source: Merrill Lynch, BTN Research).  

    

WEEKLY FOCUS – Passwords: When to Secure and When to Share 

Internet users continue to struggle with the proliferation of sites requiring passwords. While the added security is admirable, keeping passwords straight in your head has become a mind-boggling proposition. Computer security and privacy gurus admonish users to never write down user names and passwords and to never use the same password repeatedly for different accounts. But a recent survey by Trusteer, a technology security firm, found that 73 percent of web users use their online banking password as their password on other websites, and about half use the same password and user name. 

On the flip side, taking your passwords to your grave creates problems for your heirs, who may need to access information from your online accounts. So how do you protect your passwords but make them available to those who need them in an emergency? 

One option is account aggregation websites, which use sophisticated software called “screen scraping” to gather data from those PIN-protected accounts that have been authorized by the individual. Virtually any accounts that report balances on a website can be brought into your account aggregation profile: checking and savings accounts, investment accounts, mutual funds, 401(k) accounts, frequent flier and reward plans, travel reservation services, credit card accounts and loans. Some sites even offer digital document storage, providing a paperless depository for wills, insurance policies, powers of attorney, contracts and other important documents.  

Even with account aggregation, you will still have at least one user name and password to make accessible for your loved ones. You may also need to remind yourself in the event of a hurricane, fire or other natural disaster. As part of your personal disaster recovery plan, put lists of your account numbers, user names and passwords in sealed envelopes. Give one to your attorney or other trusted advisor, place one in your home safe (fire- and water-proof), place one in your safe deposit box and send one to a trusted relative who lives in another state. 

Identity theft has become a growing risk. Be sure that in protecting yourself, you don’t inadvertently make things more difficult for yourself and your heirs in an emergency. If you’d like to learn more about account aggregation, give our office a call. 
 

* The Standard & Poor’s 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general. The Dow Jones Industrial Average is a price-weighted index of 30 actively traded blue-chip stocks. NASDAQ Composite Index is an unmanaged, market-weighted index of all over-the-counter common stocks traded on the National Association of Securities Dealers Automated Quotation System. The Morgan Stanley Capital International Europe, Australia and Far East Index (MSCI EAFE Index) is a widely recognized benchmark of non-U.S. stock markets. It is an unmanaged index composed of a sample of companies representative of the market structure of 20 European and Pacific Basin countries and includes reinvestment of all dividends. Barclays Capital Aggregate Bond Index is an unmanaged index comprised of U.S. investment-grade, fixed-rate bond market securities, including government, government agency, corporate and mortgage-backed securities between one and 10 years. Written by Securities America. SAI# 303132 

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The Market

The markets struggled last week amid concerns about the financial stability of Greece, Portugal and Spain combined with declines in technology stocks. On Friday, the Commerce Department released its report showing that the economy grew at a 5.7 percent annualized rate in the fourth quarter, the second straight quarterly increase and the fastest growth since 2003. Business spending on equipment and software fueled the increase, which analysts said will flatten as companies rebuild inventories and stimulus efforts run their course. The Commerce Department has also reported that consumer spending rose 0.2 percent in December, the third straight monthly increase in spending. On Thursday, the Senate approved a second term as Federal Reserve chairman for Ben Bernanke. For the week, the Dow lost 1.04 percent to close at 10,067.33. The S&P fell 1.62 percent to finish at 1,073.87, and the NASDAQ dropped 2.63 percent to end the week at 2,147.35.

After The Bear Ends – There have been 10 bear markets (i.e., peak to trough drop of at least 20 percent) for the S&P 500 since 1957, the 10^th bear market having bottomed just last March 2009. When reviewing the first and second year performances of the S&P 500 following the bear market lows since 1957, the best first-year performance for the stock index (up 58 percent) from a bear market low was followed by the worst second-year performance for the index (up 2 percent). Not surprisingly, the worst first-year performance for the stock index (up 23 percent) from a bear market low since 1957 was followed by the best second-year performance (up 25 percent) for the index. The results were calculated based upon the change of the raw index value and do not include the impact of reinvested dividends (Source: BTN Research).      

Much Bigger – The market capitalization of the S&P 500 on Dec. 31, 2009, was $9.9 trillion, exactly three times as large as the $3.3 trillion market cap of the Dow Jones Industrial Average. The Dow Jones Industrial Average is a popular indicator of the stock market based on the average closing prices of 30 active U.S. stocks representative of the overall economy (Source: S&P, Dow Jones, BTN Research).   

More At The Top – The four largest banks in the U.S. have 56 percent of all domestic bank assets.  Ten years ago, the concentration of assets in the four largest banks was 35 percent (Source: Wall Street Journal, BTN Research).    
 
 
 

WEEKLY FOCUS – Financial Planning for Nontraditional Families 

Television in the 1950s and ‘60s gave us plenty of images of the “traditional” family – a married man and woman with biological children. Even back then, real life wasn’t quite that clean cut, but U.S. laws typically assumed that model of a nuclear family. 

Whether more prevalent or simply more public, nontraditional families have come further into the mainstream and may often find that the rules – from tax treatment to employee benefits to estate issues – do not exactly fit their needs. Even traditional families may find that subsequent generations create situations – through marriage, divorce, co-habitation or having children – that call for special estate planning considerations. 

While a family may have a nontraditional structure, its financial needs will most likely be similar to those of traditional families – saving for college, planning for retirement, managing risk and transferring assets at death. The path to attaining those goals, however, may require creative thinking and a deeper level of knowledge about available tools. 

For example, for a married couple, a spouse typically has health care and financial powers if the other spouse becomes ill. That’s not the case for a non-married couple, which can create problems when hospitals or banks must follow privacy regulations and withhold information from the partner. An advanced health care directive and a financial power of attorney must be in place to ensure the competent spouse can continue to make decisions. 

Our office can work with other professionals in accounting, legal and insurance to create financial plans and other important documents that fulfill the needs of nontraditional families. Call our office to schedule an appointment for you or your loved one. 

* The Standard & Poor’s 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general. The Dow Jones Industrial Average is a price-weighted index of 30 actively traded blue-chip stocks. NASDAQ Composite Index is an unmanaged, market-weighted index of all over-the-counter common stocks traded on the National Association of Securities Dealers Automated Quotation System. The Morgan Stanley Capital International Europe, Australia and Far East Index (MSCI EAFE Index) is a widely recognized benchmark of non-U.S. stock markets. It is an unmanaged index composed of a sample of companies representative of the market structure of 20 European and Pacific Basin countries and includes reinvestment of all dividends. Barclays Capital Aggregate Bond Index is an unmanaged index comprised of U.S. investment-grade, fixed-rate bond market securities, including government, government agency, corporate and mortgage-backed securities between one and 10 years. Written by Securities America. SAI# 302960

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