Friday, December 14, 2012

Tired of hearing about it!

Are you tired of hearing about it yet?  We first blogged about the fiscal cliff 233 days ago (reprinted verbatim below) and unfortunately, continued political dysfunction, which we correctly cited as a key risk, has prevented any resolution.  We continue to remain hopeful that a last minute compromise will occur but that hope is waning as each day passes.   

Originally posted by Payne Wealth Partners on April 25, 2012

It is looming!!!  In his recent congressional testimony, Fed Chairman Bernanke stated, “Under current law, on January 1, 2013, there’s going to be a massive fiscal cliff of large spending cuts and tax increases.”  This is the date when the Bush-era tax cuts, the temporary payroll tax cut and extended unemployment benefits are all due to expire.  To make matters worse - since the Congressional Super-Committee failed to reach consensus last year on reducing government spending we will also see $1.2 trillion of automatic spending cuts begin on the same date.  Combining tax increases with spending cuts could push our economy back into recession.  It is anticipated that economic output would be reduced by 3.5% next year if all these things come to pass. 

We remain hopeful that a more thoughtful approach is taken regarding spending and tax cuts by Congress and the President prior to meeting the fiscal cliff Chairman Bernanke speaks of.  However, the risk of policy errors and continued political dysfunction, particularly in an election year, remains very high.  We will continue to monitor these issues closely as the year progresses.  

Thursday, December 6, 2012

FDIC Upcoming Changes for Noninterest-Bearing Transaction Accounts

The Dodd-Frank Act provided temporary unlimited deposit insurance (FDIC) coverage from 12/31/2010 until 12/31/2012 for “noninterest-bearing transaction accounts” at all FDIC-insured depository institutions.  This coverage has been available to all depositors:  consumers, businesses and government entities alike.  Without action by Congress, these accounts will lose their unlimited coverage and will no longer be insured separately from a depositor’s other accounts at the same financial institution starting 1/1/2013.  Instead, these accounts would be added to a depositor’s other accounts (in the same ownership category at the same institution) with the aggregate balance being insured up to $250,000 per depositor.
More information on what accounts are characterized as “noninterest-bearing transaction accounts” and the coverage limits on other FDIC-insured accounts can be found here:  http://www.fdic.gov/deposit/deposits/insured/print/LgPrintEng-YID.pdf.

Friday, November 30, 2012

When Markets Become Volatile, Keep Things in Perspective



When the stock market becomes more volatile, it can be easy to lose perspective.  Guard against allowing your emotions to drive your investment decisions!  In just the past few months, we’ve seen pessimism return to the markets – first with uncertainty surrounding the elections and now with concerns over the fiscal cliff.  As a result, the S&P 500 index declined by 8% from September 10 to November 15.  Now in the past two weeks it has risen by 4%.  This type of roller-coaster ride can be unnerving for some investors.  We continue to believe that Congress will come up with a solution to the fiscal cliff – the biggest question is when.  Thus, as uncertainty continues to plague the markets, remember that markets never move higher in a straight line.  Since February 2009, the S&P 500 index has fallen by more than 5% in six different months, but it has also risen by more than 5% in ten different months, and is up over 100% since its March 2009 low.  We expect market volatility to continue until there is compromise in Washington on future tax policy and spending cuts; therefore, it will be important for investors to stay balanced and not panic in the face of choppy markets.