Wednesday, August 31, 2011

An Estate Plan Designed for Reversal

Click here to read the full Dow Jones Newswire article "An Estate Plan Designed for Reversal" quoting Perry Moore, Director of Wealth Planning at Payne Wealth Partners.

Thursday, August 25, 2011

Your Last Act

When Steve Jobs announced his departure as Apple’s CEO, the majority of shareholders, members of the press and Apple enthusiasts were taken aback.  When such an iconic figure steps away from the helm of a company like Apple, many ask questions like “what’s next for Apple?” and “will the company survive?”  This prompts another question that we should all be prepared to answer- “when the time comes to declare your last act, how will your company, family, or small business fare in your stead?”  

While Steve Jobs is not entirely out of the picture at Apple, his role will become something entirely different as Chairman of Apple’s Board of Directors.  We all have a responsibility to the companies for which we work, small businesses we own, and families we love to have our “succession plans” firmly in place and understood by each stakeholder.    

Wednesday, August 17, 2011

Monday, August 15, 2011

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

“If a window of opportunity appears, don't pull down the shade.”

Tom Peters, Author and Businessman

We selected the quote above for this month’s commentary because in both our wealth planning recommendations and in our investment management work we are continually seeking opportunities to improve your financial life.  Some opportunities appear quickly and are available for only a short time period while others are slow to develop and don’t carry a sense of urgency.  When the right opportunity presents itself our task is to help you implement it and benefit from it. 

PLANNING COMMENTARY

Many do not know all the ways to maximize their benefit received under the Social Security system.  When looking at this government program the view from the window would seem to be filled with a torrent of bad weather and danger.  For example, according to the most recent actuarial calculations the Social Security system will be “broke” in 2037.  This is when the Social Security Trust Fund is expected to be depleted (note that the Trust Fund consists entirely of Government “I Owe You’s”).  Costs associated with the program exceeded revenues generated from Social Security taxes collected last year by $49 Billion and this deficit is projected to continue this year at $46 Billion.  Understandably, these fears lead many to claim their benefits as early as possible and automatically opt - into the highest benefit they are eligible for (usually that which is based on their own earnings record). When looking at this system more methodically you notice that there are ways to maximize your benefit if you can look past those immediate fears.  For example:

·         If you are married you may be eligible for a “spousal benefit” based on your spouse’s earnings record.  This is an entirely separate benefit from that which you qualify for given your own earnings record.
·         If you are a widow you may be eligible for your deceased spouse’s full retirement benefit based on their earnings record.  This is an entirely separate benefit from that which you qualify for given your own earnings record!
·         The old rule of thumb that states “if you think you’ll live past 78, delay starting benefits; if you think you will pass away prior to age 78 start benefits as early as possible” just isn’t true anymore!  There are a myriad of complexities that this simple rule of thumb never contemplated - all of which change based upon your particular situation.

If you can look past all of the noise and distractions and instead approach these decisions with logic and discipline, the opportunities that fit your situation and goals will become clearer and well within reach. 

INVESTMENT COMMENTARY

For the month of July, as well as, over the past three months we have seen a pullback in equity markets around the world due to ongoing concerns about the health of the global economic recovery, uncertainty over whether Congress will raise the debt ceiling and begin to seriously address our budget deficit, and the ongoing fears about debt issues in Europe.  Bonds have served their purpose of reducing volatility in portfolios during uncertain times (see positive bond index returns in the chart below for July and the past 3 months versus stock indexes which were negative).  

Financial Market Indices
July 2011
Last 3 Months
Year to Date
Last 12 Months
S&P 500 TR (US Stocks)
-2.0%
-4.8%
3.9%
19.7%
MSCI Developed EAFE (foreign stocks)
-1.6%
-5.5%
3.7%
17.7%
MSCI Emerging Mkt. Equities (emerging country stocks)
-0.7%
-5.5%
-1.2%
14.9%
Barclays Capital Aggregate Bond – Intermediate Term
1.2%
2.2%
3.9%
4.2%
Barclays Capital Municipal Bond Index
1.0%
3.1%
5.5%
3.2%

Many expected a “relief-rally” in the stock market when a deal was reached on the debt ceiling.  Unfortunately, that did not occur.  Positive news out of Washington this week has been overwhelmed by a downward revision to GDP and an ugly manufacturing number.  These most recent economic releases indicate that the economy is still in recovery mode and not in expansion as many had believed.  We can point to the disaster in Japan (and its impact on the global supply chain), severe winter & early spring weather, a spike in oil prices and then the recent debt ceiling / deficit debate as reasons for the economy to slow and confidence to wane.  The good news is that corporate earnings have continued to strengthen even though the economy has softened.  We don’t believe we’re about to enter a second recession, and we continue to look for an improvement during the second half of this year.

With the recent decline in stock prices, we are once again looking for opportunities that may help improve your long-term returns.  We will keep you posted as our thinking and research progresses. 

Thursday, August 11, 2011

Stock Market Reactions to Past Downgrades

To help us evaluate and understand the implications of current events we find it helpful to look at past market behavior.  With Standard & Poor’s downgrade of the U.S. debt rating from AAA to AA+ we were interested in learning how other markets fared after a downgrade to their credit worthiness. 

Interestingly, there have been 11 downgrades of sovereign country debt ratings over the past 25 years.  In 8 of those 11 cases, the stock markets of the affected countries were higher 12 months after the downgrade occurred, and the average stock market increase was 17%.

Source:  BlackRock, Inc.

Evansville Courier & Press Article

"But there's more to it than just riding it out. That's incomplete and overused," said Taylor Payne - read the full article here Evansville Courier & Press Article

Wednesday, August 3, 2011

Drop in the Bucket

Once again at the eleventh hour, Republican and Democratic leaders found enough common ground to avert complete gridlock past a tight deadline as they passed a bill that would allow the debt ceiling to continue to climb.  The bill promises spending cuts of $2.4 Trillion over ten years, equaling the debt ceiling increase (the debt ceiling will rise in three steps).