"Better three hours too soon
than a minute too late”
William Shakespeare (birthdate unknown – April
23, 1616 - Famed English poet and playwright
We selected this quote for our last 2011
commentary because of the temptation everyone has to wait until the perfect
time to act, which is invariably too late. Whether it is in planning
steps or investment decisions, our belief is that acting sooner than the crowd will
provide long-term benefits.
PLANNING COMMENTARY
As we approach the end of the year there are
certain planning strategies that should be implemented or evaluated. While many of the items below may have been
crossed off your list earlier in the year, some may still remain. While this may be the busiest time of year
for many, taking some time out of your schedule to cross some of these year-end
planning items off the list will surely provide lasting benefits.
If you have any questions or want to discuss how
one of these items may apply to you, please call us!
- Fund your Indiana CollegeChoice 529 plan
to obtain the 20% state tax credit.
Remember that your first $5,000 of contributions qualify for the
credit.
- Make a contribution to your favorite
charity. If it will be a
particularly bad tax year you may consider making some of your planned
2012 donations by the end of this year to reap the benefit of the
deduction a year earlier when it is especially needed.
- Consider a tactical contribution to your
Donor Advised Fund or Family Foundation.
You should be sure this makes sense from a tax perspective and fits
in your intermediate and long-term charitable giving plans.
- As you set your 2012 company-sponsored
retirement plan contribution rate, consider other retirement funding
strategies you will use in conjunction with your contributions to this
plan.
- Start a budget. If you have been considering a new
household budget and want to better understand how you use your cash,
start the year fresh and use a tool like mint.com to help you
dissect your spending habits.
- Make a Roth IRA, Traditional IRA and/or
Health Savings Account contribution if you are eligible. Note the deadline for contributions to
IRAs and HSAs is generally your tax-filing deadline.
- Use the remainder of your Flexible
Spending Account. If you have
residual balances available they will be forfeited if not used prior to
year-end.
- Take your Required Minimum Distribution
from your IRA (if older than 70.5) or Inherited IRA.
- Make a family gift. If you planned on taking advantage of
the annual gift exclusion of $13,000 this gift must occur by year-end to
utilize the 2011 exclusion.
INVESTMENT COMMENTARY
With world events continually evolving and the news changing from
day to day, we thought it would be important to highlight recent action taken
by the central banks of developed nations on Wednesday. The
U.S. Federal Reserve, the Bank of Canada, the Bank of England, the Bank of
Japan, the European Central Bank and the Swiss National Bank agreed to lower
the interest rate charged on existing temporary U.S. dollar liquidity swap
arrangements by one-half of one percent (50 basis points). This joint action provides cheap, emergency U.S.
dollar loans to banks in Europe and elsewhere.
The coordinated action doesn't directly address Europe's government debt
and budget woes. Instead, it is aimed at
alleviating the impact of those troubles on global markets. In another move,
the Bank of China lowered its reserve requirement after three years of a tightening
monetary policy. Stock prices worldwide
surged upward on this news and the euro also strengthened.
How will this impact the markets going forward? We believe fixed investments could suffer and the growth potential of equities, from depressed valuation levels, is even more compelling. There is an old saying "don’t fight the Fed." We think it is even tougher trying to fight seven different central banks. The coordinated printing of money will eventually result in long-term inflation. The US government has recently reported that inflation is running at close to 4%. This shows that most fixed income investments could lose wealth to inflation going forward. In our client portfolios we have greatly reduced the average maturity of our fixed income holdings to protect against rising interest rates and inflationary pressures. Given historically low equity valuation levels, we are slightly overweight stocks.
How will this impact the markets going forward? We believe fixed investments could suffer and the growth potential of equities, from depressed valuation levels, is even more compelling. There is an old saying "don’t fight the Fed." We think it is even tougher trying to fight seven different central banks. The coordinated printing of money will eventually result in long-term inflation. The US government has recently reported that inflation is running at close to 4%. This shows that most fixed income investments could lose wealth to inflation going forward. In our client portfolios we have greatly reduced the average maturity of our fixed income holdings to protect against rising interest rates and inflationary pressures. Given historically low equity valuation levels, we are slightly overweight stocks.
Financial Market Indices as
of November 30, 2011
|
November 2011
|
Last 3 Months
|
Year to Date
|
Last 12 Months
|
S&P 500 Total Return (US Stocks)
|
- 0.2%
|
2.9%
|
1.1%
|
7.8%
|
MSCI Developed EAFE (foreign stocks)
|
- 4.8%
|
- 5.6%
|
- 10.9%
|
- 3.7%
|
MSCI Emerging Mkt. Equities (emerging
country stocks)
|
- 6.8%
|
- 10.1%
|
- 19.4%
|
- 13.7%
|
Barclays Capital Aggregate Bond –
Intermediate Term
|
- 0.1%
|
0.1%
|
5.2%
|
4.2%
|
Barclays Capital Municipal Bond Index
|
0.6%
|
1.3%
|
8.6%
|
6.5%
|
EMPLOYEE ANNOUNCEMENTS
During November Taylor attended Schwab’s annual IMPACT conference
in San Francisco, CA. This event was
held over three days and attended by approximately 2,000 advisors and an
additional 3,000 vendors and Schwab employees.
He spent much of his time learning more about Schwab’s efforts to help
independent advisory firms integrate their various software technologies to
best serve clients. The highlight of the conference was a general session
with Tony Blair, former UK Prime Minister, who gave tremendous insights to
global issues, particularly the challenges Europe is facing.
Perry, Terry and Ann attended the 22nd Annual
Evansville Bar Association Estate and Business Planning Institute on November
18. Topics covered included, business
owner succession and estate planning, IRA Trust planning, business valuation
techniques and recent developments of interest to estate planners.
OTHER ANNOUNCEMENTS
Payne Wealth Partners believes in giving back to the community. Please enjoy the short story and pictures of
the Big Brothers/Big Sisters bike rodeo that Ann Pendley coordinated on
November 5th on our website at paynewealthpartners.com
We recognize there are many in need during this holiday
season. In lieu of sending baskets or other holiday gifts to clients, we are
sending donations to the following charities:
Boys & Girls Club of Evansville
Evansville Rescue Mission
Evansville Ronald McDonald House
Gilda's Club Evansville
Santa Clothes Club
You can see more about some of the charities we support on our
website at paynewealthpartners.com
