America Saves Week

This week is officially “America Saves Week” and is a nationwide initiative that started in 2007 aiming to promote healthier personal financial decisions and boost attention paid to financial responsibility.

Continued economic challenges, shifting responsibility from the government and corporations to the individual, and constrained personal balance sheets make this initiative more timely today than ever.

For more information see a related article released by the CFP® board here: http://tinyurl.com/4bu2wyk

Fed Meeting Minutes

The Federal Open Market Committee (the Fed) released their minutes from January’s meeting this past Tuesday. They revealed that the improving economic data had left them more confident that the recovery was “on a firmer footing” and “would be sustained and would gradually strengthen over the coming quarters.” As a result, “the downside risks to forecasts of both economic growth and inflation, as well as, the odds of a period of deflation had diminished.”


The Fed now expects GDP to expand by 3.4% to 3.9% this year, compared with November’s projection of between 3.0% and 3.6%. Even though the outlook for economic growth is improving, Fed officials are still forecasting that the unemployment rate will decline only gradually and that core inflation will remain muted for the next couple of years.

Given their outlook, we don’t anticipate that the Fed will halt its plan to buy a total of $600 billion of Treasury securities by mid-year (a.k.a QE2).

January 2011 Market and Planning Update (Posted to our blog two weeks after sending to clients.)

Though Civil Disobedience seems to call for improving rather than abolishing government – “I ask for, not at once no government, but at once a better government” – the direction of this improvement aims at anarchism: “That government is best which governs not at all; and when men are prepared for it, that will be the kind of government which they will have.”

Henry David Thoreau (July 12, 1817 – May 6, 1862) was an American author, poet, abolitionist, naturalist, tax resister, development critic, surveyor, historian, philosopher

Mr. Thoreau, who is sometimes cited as being an individualist anarchist, spoke those words more than 150 years ago. With the debt and budget deficit problems we face today we are once again hearing the populous cry for a better government. A message was sent to Washington with the November elections, and we continue to hope that our elected leaders are hearing the cry for a better government – one that will tackle our debt and deficit problems sooner rather than later. However, our concern continues to be that even though many are talking about change, it seems that most are not really ready for the sacrifices necessary to create true change.

PLANNING COMMENTARY

“Better government,” like so many things is rather subjective. While many would agree with our idea of “better government” (one that would tackle the debt and deficit problems sooner rather than later) many would also disagree as to the sacrifices necessary to make that happen. As time passes while our country wrestles with the direction and steps to take in this regard, the financial burdens will continue to compound.

This is precisely why making the right decisions as to things we control in our personal financial lives is so crucial. Management of the assets on your balance sheet and a structured approach to cash flow allocation are principles we continue to provide guidance to our clients on. Key themes we are communicating to our clients in relation to their wealth plans include:

• Tax law changes, both income and estate related, are certain to continue (for certain there will be changes as early as 2013). This increases the value associated with wealth transfer and tax protection strategies given a multi-generational focus.

• Demographic issues related to the baby boomers and budget deficit fixes will continue straining public finance and put wealth at risk. Specifically, entitlement programs must eventually change and this impact will materially affect our planning for every client.

• An increasingly complex world demands holistic planning to deal with ever-changing challenges. Constant evaluation of our clients “big picture” is required to ensure long-term success for a family and future generations.

MARKET COMMENTARY

The fourth quarter rally in the U.S. stock market has continued into 2011 with an additional gain of 2.4% in the S&P 500 index for January. The bond market returned about 0.3% for the month as measured by the Barclays Capital Aggregate Intermediate Bond index. International equity markets were mixed during January. The MSCI EAFE Developed Market stock index was up 2.3%, but the MSCI Emerging Market stock index saw a loss of – 2.2%.

The markets have been climbing a wall of worry, and we have experienced a four month rally in US stock prices. So what factors are moving the market higher? We believe that stock prices have appreciated for the following reasons:

• Stronger corporate profits

• Improving global GDP growth

• Attractive stock valuations

• Improving consumer confidence

• Extension of the Bush tax cuts, and

• A move to the center on government policy (as a result of the November elections)

We continue to advise following a disciplined and well-diversified asset allocation strategy. Rest assured that we will continue to look for tactical investment opportunities as certain asset classes may reach extreme levels of overvaluation or undervaluation.

Cost Cutting

While our country needs more fiscal conservatism there are always limits to the amount of cost cutting a family, company or our government is able to manage and still remain healthy. 

At the annual Conservative Political Action Conference in Washington ideas were a dime a dozen when it came to cutting budgets and deficits.  Many have promise yet others are rather extreme- getting rid of the IRS and the EPA were two head-turners.   

While Republicans determine how to fulfill a campaign promise to reduce the budget by $100 billion, some of these ideas likely won’t make their cut.  See http://tinyurl.com/6dvo9qb for more information.

Unrest in Egypt

We have been intently watching the events in Egypt unfold over the past week trying to understand the possible implications on the price of oil, the global economy, and whether or not the instability could spread to other countries in the region.


Yesterday, we came across a very insightful bulletin from Joseph Tanious, a market strategist from J.P. Morgan Funds. Joseph’s parents immigrated to the US from Egypt in 1974 to create a better life for themselves. They still have family in Egypt, and Joseph has been in contact with his relatives throughout the crisis. We think you’ll find his comments and analysis helpful in understanding the situation today and its possible future ramifications.

Please copy and paste the link below into your internet browser to read his bulletin.

https://www.jpmorganfunds.com/cm/Satellite?UserFriendlyURL=insidemarket_exploreatopic&pagename=jpmfVanityWrapper#1296257124923