Ah, Leap Day is again upon us.  It’s that special day that only happens once every four years.  We have a Leap Baby in the office, Karen was born on the 29th and she’s claiming to be in her teens.  I just thought I would write you some fun facts and events about Leap Day.

History

Leap Years were first introduced over 2000 years ago with the transition from the Roman Calendar to the Julian Calendar in 45 BCE (Before Common Era), Leap Day has been associated with age-old Leap Day traditions and folklore.

Traditions

According to an old Irish legend, or possibly history, St Bridget struck a deal with St Patrick to allow women to propose to men – and not just the other way around – every 4 years.  This is believed to have been introduced to balance the traditional roles of men and women in a similar way to how Leap Day balances the calendar.

In some places, Leap Day has been known as “Bachelors’ Day” for the same reason.  A man was expected to pay a penalty, such as a gown or money, if he refused a marriage proposal from a woman on Leap Day.  In many European countries, especially in the upper classes of society, tradition dictates that any man who refuses a woman’s proposal on February 29 has to buy her 12 pairs of gloves.  The intention is that the woman can wear the gloves to hide the embarrassment of not having an engagement ring.  During the middle ages there were laws governing this tradition.

In Scotland, it used to be considered unlucky for someone to be born on Leap Day, just like Friday 13th is considered an unlucky day by many. In Greece it’s said to be unlucky for couples to marry during a Leap Year, and especially on Leap Day.

Leap Day is also St Oswald’s Day, named after an archbishop of York who died on February 29, 992. The memorial is celebrated on February 29 during Leap Years and on February 28 during common years.

Born On Leap Day

People born on February 29 are all invited to join The Honor society of Leap Year Day Babies.  According to the Guinness Book of Records, there are world record holders both of a family producing three consecutive generations born on February 29 and of the number of children born on February 29 in the same family.

Some famous people born on February 29 include:

• 1468 – Pope Paul III (d. 1549)
• 1792 – Gioacchino Rossini, Italian composer (William Tell, The Barber of Seville) (d. 1868)
• 1896 – Morarji Desai, former Indian prime minister (d. 1995)
• 1916 – Dinah Shore, American singer (d. 1994)
• 1924 – Al Rosen, American baseball player
• 1924 – Carlos Humberto Romero, former president of El Salvador
• 1960 – Anthony (Tony) Robbins, American motivational speaker
• 1964 – Lyndon Byers, Canadian hockey player
• 1972 – Antonio Sabàto Jr, Italian-born actor
• 1976 – Ja Rule, American rapper and actor
• 1980 – Chris Conley, American musician and songwriter/composer
• 1984 – Cullen Jones, American swimmer

Leap Day 2008

The leap year was a problem for  both Delta’s and United Airlines’ kiosk check-in systems creating delays at airports across the country.

Things to do this year, Leap Day 2012

Disneyland Park and Magic Kingdom Park will be open 24 hours for the first time in there history.  (OneMoreDisneyDay.com)

If you’re a survivor of the recent flooding, tornadoes, and thunderstorms that have affected parts of the country, you’ve probably got your hands full getting your life back in order. Unfortunately, the aftermath of these disasters also brings out unscrupulous scam artists looking to prey on disaster victims. Some of the most common scenarios for fraud include home repair, credit fraud, and fraudulent charities for disaster victims.

Home repairs

When dealing with home repair contractors, be cautious. Before hiring anyone, contact your insurance company, which may require that an adjuster appraise the damages before you do any extensive repairs or rebuilding. You may also want to ask your insurance company to recommend reputable contractors. When the adjuster arrives, be sure to check his or her identification and license information. Some scams involve a purported public adjuster disappearing with a victim’s money after charging a large fee to handle the claim. Other potential scams could include filing false or inflated claims against your insurance policy; or worse, getting your personal information such as your Social Security number in order to commit identity theft.

Additionally, beware of contractors arriving in unmarked vehicles, and going door to door offering to help with repairs. Since most states require contractors to be licensed, ask to see a contractor’s license, and if presented, write down the license number.

If you have extensive work to be done, try to get several written bids, then get a written contract that includes all costs, a description of the work to be done, a schedule for completion, and any guarantees that the contractor offers. While it’s not uncommon to pay for a portion of the job up front it’s also not unheard of for a phony contractor to “take the money and run.” So don’t be lured into paying the entire cost before the job is completed, even if it’s to get a “great deal.” And never pay cash; use a check or credit card.

Credit fraud

Surviving a disaster may leave you desperate for cash. Disaster victims may get a phone call offering a “guaranteed” loan or credit card at very low rates to help with the money crunch. While the rates for the purported loan or credit may be low, these offers usually require an up-front security or processing fee. Once paid, neither the loan nor credit card is ever delivered. There are some legitimate companies that do offer loans or credit to disaster victims. Most of these genuine companies will not “guarantee” credit before you apply, and they won’t ask for a credit card number, bank account information, or Social Security number over the phone. And most reputable companies will operate through the mail or via the Internet, allowing you to do some research first. If the company says its offer is a “one time deal” that you can only take advantage of over the phone, chances are it’s a scam.

Charitable fraud

You don’t have to be a victim of a natural disaster to be caught in a related scam. You may want to help disaster victims by making donations to legitimate relief agencies, but there are also scammers looking to prey on your sympathies. Be leery of solicitors going door to door, even if they show credentials. If the solicitation is over the phone, ask for written information about the charity, including name, address, and website if available, and check with your state for information on the charity. Some phony charities will use a name similar to but not exactly the same as a well-known legitimate charity, so do some research before making that donation.

It is an unfortunate fact that there are individuals out there looking to prey on those who are the most vulnerable. Be cautious–if something seems too good to be true, it probably is. A little common sense can help you avoid becoming victimized a second time.

Prepared by Forefield Inc. Copyright 2011

By Steve Davis, Managing Editor

From a financial standpoint, 2010 was a great year to be a lobbyist. Health insurers, providers, pharmacy benefit managers (PBMs) and trade groups with an interest in shaping health policy spent a staggering $122.8 million lobbying Congress, the White House, HHS and other federal agencies in 2010, according to HPW’s analysis of documents released recently by the Secretary of the Senate as required under the Lobbying Disclosure Act. Spending, however, is down slightly from the $127.8 million the same organizations spent in 2009 (see table, p. 7). Industry observers queried by HPW say more lobbying will be directed at state lawmakers and regulators going forward.

While the trade group America’s Health Insurance Plans (AHIP) sunk more money into its federal lobbying efforts in 2010 ($9.3 million) compared with 2009 ($8.8 million), spending by the Blue Cross and Blue Shield Association (BCBSA) decreased from $9.4 million in 2009 to just $6.8 million in 2010. Carmen Balber, director of California-based Consumer Watchdog’s Washington, D.C., office, says the decrease in federal lobbying dollars likely indicates a shift toward a bigger push to influence state rules that can impact Blues plans.

“We definitely expect to see a big increase in health insurance lobbying at the state level. And I think we’re already seeing that as states debate how to set up and regulate [insurance] exchanges and how to regulate” proposed insurance rate hikes, she says.

Lobbying Is Shifting to States

During the year-long debate over health reform legislation, insurers and their trade groups were largely focused on influencing rules that could have a negative impact on their business model. Their efforts were effective at quashing a federally backed public health plan option, which was perceived as a top threat. With the reform law now in place, the industry is turning at least some of its attention to the states.

“Insurance regulation is mostly a 50-state patchwork, where each state has the right to regulate insurance within its borders,” says Devon Herrick, Ph.D., a senior fellow with the Republican-leaning National Center for Policy Analysis. “Now that the federal legislation has been signed into law, insurers now must get back to paying attention to what the states are doing.”

Industry consultant Kevin Wrege agrees and says that because states play such an integral part in how the federal reform law is implemented, the trade groups — and to some extent individual insurance companies — “are looking to more fully integrate their federal advocacy efforts with their state advocacy efforts,” he says. “I agree that there is more energy being focused on state efforts particularly now that the law has been enacted. But there are still important regulatory decisions to be made at the federal level.” Wrege is president of Washington, D.C.-based PULSE Issues & Advocacy LLC and a consultant for the health insurance industry-backed Council for Affordable Health Insurance (CAHI).

But it can be difficult, if not impossible, to track where lobbying dollars are spent at the state level because reporting disclosure rules vary considerably from state to state. Moreover, the National Association of Insurance Commissioners (NAIC), which has significant sway in helping HHS define reform-related regulations, isn’t required to report money spent lobbying its internal staff, Balber contends. “In California, for example, a health insurer would have to report money spent lobbying the state insurance commissioner. However, that’s not the case for the professional staff at NAIC. And that staff is responsible for influencing a lot of the regulations.” NAIC did not respond to a request for comment on that statement by HPW’s press time.

Insurers Outspent by Other Trade Groups

In 2009 and 2010, representatives for more than 1,200 organizations lobbied on the health reform bill, according to the Center for Responsive Politics.

In 2010, 12 of the nation’s largest health insurers collectively spent $24.4 million on federal lobbying efforts, while AHIP and BCBSA spent an additional $16.1 million. But trade groups that represent providers and PBMs had even deeper pockets. The American Hospital Association, for example, spent $17.6 million on lobbying in 2010 — $1.3 million more than in the previous year — and the American Medical Association directed $22 million toward its lobbying efforts, down slightly from 2009. Much of the lobbying done by those two groups was related to Medicare and Medicaid.

And while the Pharmaceutical Research and Manufacturers of America trimmed its lobbying budget by more than $4 million from the prior year, it still spent $21.7 million in 2010.

In January — less than two weeks after formally ending her role as Oklahoma’s Insurance Commissioner — Kim Holland began a new role as the Blue Cross and Blue Shield Association’s (BCBSA) executive director responsible for state affairs (HPW 1/17/11, p. 4). Critics assailed the lack of a “cooling off” period after her position as a regulator ended. Consumer Watchdog says 24 state insurance commissioners worked in some segment of the insurance industry before being appointed to their present posts.

The insurance industry has historically had a lot of influence over NAIC without much public oversight, Balber says. “With NAIC being given more authority over the direction of the reform law regulations, we’ve seen a tremendous push by the insurance industry to press their case there.”

But health insurers and groups that lobby on behalf of insurance agents didn’t have enough influence on a recent push to exclude broker commissions from the medical loss ratio (MLR) formula. On March 27, NAIC opted not to endorse a House bill that wouldn’t count broker commissions as an administrative expense. Such a change would make it easier for health insurers to meet the required MLR minimums. NAIC was expected to adopt language calling for the change to be made, even though it concluded last year it didn’t have the authority under the law to make such a recommendation. Instead, NAIC sent the bill to a committee for further review.

In a letter to the NAIC last month, Sen. Jay Rockefeller (D-W.Va.) warned that he would oppose such legislation because it could eliminate most, if not all, of the $1.4 billion in annual rebates that reform-law sponsors expect to be made by insurers that have MLRs below the required minimum levels (HPW 3/21/11, p. 7).

Lobbying Muscle: AHA, AMA, PhRMA Outspent AHIP, BCBSA in 2010

Here’s a look what health insurers and trade groups spent lobbying Congress, federal agencies and the White House in 2010 and 2009.

On December 17, 2010, President Obama signed the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act (the Act) into law. The Act reinstated the federal estate tax for persons who died in 2010, retroactively applying a 35% maximum estate tax rate and a $5 million estate tax exemption. The Act also allows those estates to opt out of the tax. For some estate executors, a choice must be made between paying the tax or not paying the tax. Why would an executor choose to pay the estate tax? There’s a good reason.

No estate tax, no step-up in basis

If an executor chooses to elect out of the estate tax, estate property will receive a modified carryover income tax basis, and not a step-up (or step-down) in basis. Step-up (or step-down) generally means that the tax basis of the estate’s assets increases (or decreases) to fair market value (FMV) at the date of death. This is important for two types of assets–assets that have greatly appreciated in value and assets that have a cost basis that is difficult to prove. The modified carryover basis regime allows the decedent’s cost basis to be increased by $1.3 million, with an additional $3 million increase for assets received by surviving spouses.

Comparing tax results

Executors will need to evaluate which tax system will be more beneficial to the estate: estate tax or capital gains tax. Estates valued at less than $5 million may want to choose the estate tax system in order to get an income-tax-free step-up in basis on appreciated assets. Certain larger estates might choose the estate tax if the estates calculate that the reduction in capital gains tax on any sale of inherited assets with a stepped-up basis will more than offset the increase in estate tax. Other larger estates might choose no estate tax if the estates calculate that the estate and its beneficiaries will pay less in capital gains tax on any sale of inherited assets than the estate tax that would otherwise be due.

Deadlines

The Act extends the estate tax return filing and payment deadline to September 17, 2011, for the estates of persons who died between January 1 and December 17, 2010. This is also the deadline for filing IRS Form 8939 if the estate elects out of the estate tax in favor of the modified carryover basis regime.

September 17, 2011 is also the deadline for making qualified disclaimers from these estates. Estates should also check state law for the applicable state deadlines for making a qualified disclaimer.

The estates of decedents dying after December 17, 2010 must follow the usual nine-month deadlines for filing tax returns and making tax payments and disclaimers.

Registered Representative. Securities offered through Cambridge Investment Research, Inc., a Broker/Dealer, Member FINRA/SIPC. Investment Advisor Representative, Cambridge Investment Research Advisors, Inc., a Registered Investment Advisor. Cambridge and BGS Financial Services are not affiliated.

Weekly Quote

Weekly Tip

WEEKLY RIDDLE

A BIT OF OPTIMISM AMONG CONSUMERS
The initial November Thomson Reuters/University of Michigan consumer sentiment survey was released Friday. The index rose to 69.3, surpassing the 69.0 forecast by economists polled by Reuters. (Last month’s final reading was 67.7.) On average, respondents expected inflation of 3.0% across the next 12 months, compared to 2.7% in last month’s survey. Will this public perception give retailers a signal to subtly raise prices?^1,2

 WILD WEEK FOR GOLD & OIL
Oil futures hit a 25-month peak last week, and then fell $2.93 on Friday (and $1.97 on the week) to a Friday close of $84.88 per barrel on the NYMEX. Oil lost 2.27% last week for its worst week since mid-September. After cracking the $1,400 ceiling last week, gold fell $37.70 on Friday; it was down 2.28% on the week and settled at $1,365.40 per ounce Friday on the Comex.^3,4

 WHITE HOUSE EYES SAVINGS; USPS CALLS FOR HELP
A White House deficit commission has proposed $200 billion in spending cuts by 2015 in order to reduce the federal shortfall. Some of the listed recommendations include saving $13.2 billion by cutting federal payrolls by 10%, saving $16.0 billion by doing away with all earmarks, and saving $9.2 billion by freezing noncombat military pay at 2011 levels until 2015. On Friday, the U.S. Postal Service claimed it would go broke by the end of 2011 without service cutbacks and postal rate increases, announcing an $8.5 billion loss for the latest fiscal year.^5.6

 EQUITIES STRUGGLE
Two factors weighed heavily on stocks last week: anxieties about China raising interest rates, and worries about the debt burdens of Ireland, Portugal, Greece and Spain. So from November 8-12, the three major U.S. indices performed as follows: DJIA, -2.20% to 11,192.58; S&P 500, -2.17% to 1,199.21; NASDAQ, -2.36% to 2,518.21.²

 COMING NEXT WEEK: Monday, we have reports on October retail sales and September business inventories. Tuesday, we have the October PPI and October industrial output. Wednesday, we get the October CPI data plus reports on October housing starts and building permits. Thursday, we have the latest data on initial and continuing claims and the October leading indicators from the Conference Board. No economic releases are scheduled for next Friday, but Federal Reserve chairman Ben Bernanke will speak at the ECB Central Banking Conference.

 This material was prepared by Peter Montoya Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. This information should not be construed as investment, tax or legal advice. The Dow Jones Industrial Average is a price-weighted index of 30 actively traded blue-chip stocks. The 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 Standard & Poor’s 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general. It is not possible to invest directly in an index. NYSE Group, Inc. (NYSE:NYX) operates two securities exchanges: the New York Stock Exchange (the “NYSE”) and NYSE Arca (formerly known as the Archipelago Exchange, or ArcaEx®, and the Pacific Exchange). NYSE Group is a leading provider of securities listing, trading and market data products and services. The New York Mercantile Exchange, Inc. (NYMEX) is the world’s largest physical commodity futures exchange and the preeminent trading forum for energy and precious metals, with trading conducted through two divisions – the NYMEX Division, home to the energy, platinum, and palladium markets, and the COMEX Division, on which all other metals trade. Additional risks are associated with international investing, such as currency fluctuations, political and economic instability and differences in accounting standards. All information is believed to be from reliable sources; however we make no representation as to its completeness or accuracy. All economic and performance data is historical and not indicative of future results. Market indices discussed are unmanaged. Investors cannot invest in unmanaged indices. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional.

Citations.

1 – blogs.barrons.com/stockstowatchtoday/2010/11/12/stocks-still-struggle-despite-consumer-confidence-rise/ [11/12/10]

2 – cnbc.com/id/40155548 [11/12/10]

3 – cnbc.com/id/40140253/ [11/12/10]

4 – blogs.wsj.com/marketbeat/2010/11/12/data-points-energy-metals-400/ [11/12/10]

5 – blogs.wsj.com/economics/2010/11/10/deficit-commissions-200-billion-in-proposed-spending-cuts/ [11/10/10]

6 – reuters.com/article/idUSTRE6AB4ON20101112 [11/12/10]

7 – bigcharts.marketwatch.com/historical/default.asp?detect=1&symbol=DJIA&close_date=11%2F12%2F09&x=0&y=0 [11/12/10]

7 – bigcharts.marketwatch.com/historical/default.asp?detect=1&symbol=COMP&close_date=11%2F12%2F09&x=0&y=0 [11/12/10]

7 – bigcharts.marketwatch.com/historical/default.asp?detect=1&symbol=SPX&close_date=11%2F12%2F09&x=0&y=0 [11/12/10]

7 – bigcharts.marketwatch.com/historical/default.asp?detect=1&symbol=DJIA&close_date=11%2F11%2F05&x=0&y=0 [11/12/10]

7 – bigcharts.marketwatch.com/historical/default.asp?detect=1&symbol=COMP&close_date=11%2F11%2F05&x=0&y=0 [11/12/10]

7 – bigcharts.marketwatch.com/historical/default.asp?detect=1&symbol=SPX&close_date=11%2F11%2F05&x=0&y=0 [11/12/10]

7 – bigcharts.marketwatch.com/historical/default.asp?detect=1&symbol=DJIA&close_date=11%2F13%2F00&x=0&y=0 [11/12/10]

7 – bigcharts.marketwatch.com/historical/default.asp?detect=1&symbol=COMP&close_date=11%2F13%2F00&x=0&y=0 [11/12/10]

7 – bigcharts.marketwatch.com/historical/default.asp?detect=1&symbol=SPX&close_date=11%2F13%2F00&x=0&y=0 [11/12/10]

8 – ustreas.gov/offices/domestic-finance/debt-management/interest-rate/real_yield.shtml [11/12/10]

8 – ustreas.gov/offices/domestic-finance/debt-management/interest-rate/real_yield_historical.shtml [11/12/10]

9 – treasurydirect.gov/instit/annceresult/press/preanre/2000/ofm11200.pdf [7/12/00]

Just two months shy of CMS’s expected issuance of regulations on accountable care organizations for Medicare beneficiaries, the agency’s staff is reportedly deeply divided over its approach to the task. A former senior federal official, speaking on condition of anonymity, cites “real tension” within CMS, telling ABN that the agency is lacking in coherent direction and still struggling over which ACO payment methodologies to advance….Read Full Story

Beetle.

September 13, 2010

OBAMA PROPOSES NEW TAX CREDITS
Last week, President Obama recommended three new tax measures to Congress and the American people – an extension of the Bush-era tax cuts for all but the wealthiest Americans, an immediate deduction for any capital investment that companies make during 2010 or 2011, and a permanent and expanded R&D credit for businesses. In response, Senate Minority Leader Mitch McConnell (R-KY) called it “a last-minute, cobbled-together stimulus bill” that would not improve a “complete lack of confidence” on Main Street in Democratic Party economic policy.^1,2

TRADE DEFICIT SHRINKS 14%
A report from the Commerce Department says that America’s trade deficit narrowed to $42.8 billion in July, $7 billion less than the June figure. This is a good sign for 3Q growth. It was the biggest month-over-month reduction since February 2009. The report also noted a 1.8% jump in exports, the best monthly gain seen in that category since August 2008.³

WHOLESALE INVENTORIES GROW
Surpassing forecasts, wholesale stockpiles increased by 1.3% in July. That is the best month in two years for this indicator. Durable goods stockpiles maintained by wholesalers increased by 1.0%, and the inventory-to-sales ratio reached its best level since February 2010.⁴

BEIGE BOOK OFFERS MIXED NEWS
The Federal Reserve’s latest snapshot of economic conditions in its 12 districts found “economic growth at a modest pace” in five of them: Kansas City, Dallas, San Francisco, St. Louis and Minneapolis. “Positive developments or net improvements” were also noted in the Boston and Cleveland districts. No improvement was seen in the New York, Richmond, Atlanta, Philadelphia or Chicago districts.⁵

SHORT WEEK BRINGS ANOTHER ADVANCE
In the four market days following Labor Day, the S&P 500 rose 0.46% to 1,109.56. The Dow stayed positive for 2010, rising another 0.14% resulting in a Friday close of 10,462.77. As for the NASDAQ, it gained 0.39% to pull up to 2,242.48 at the closing bell Friday. It was a week of thin volume and mild economic “weather” with no great impact on Wall Street. As of Friday’s close, the S&P 500 was up about 5.7% for the month; the NASDAQ and DJIA were respectively up about 4.5% and 6.1% for September. Next week, we have the latest retail sales and industrial output reports and new CPI and PPI data.⁶

Source: cnbc.com, bigcharts.com, ustreas.gov, bls.gov – 9/10/10^6,7,8,9

Indices are unmanaged, do not incur fees or expenses, and cannot be invested into directly.

These returns do not include dividends.

Please feel free to forward this article to family, friends or colleagues.
If you would like us to add them to our distribution list, please reply with their address.
We will contact them first and request their permission to add them to our list.

7 – bigcharts.marketwatch.com/historical/default.asp?detect=1&symbol=SPX&close_date=9%2F10%2F09&x=0&y=0 [9/10/10]

7 – bigcharts.marketwatch.com/historical/default.asp?detect=1&symbol=DJIA&close_date=9%2F9%2F05&x=0&y=0 [9/10/10]

7 – bigcharts.marketwatch.com/historical/default.asp?detect=1&symbol=COMP&close_date=9%2F9%2F05&x=0&y=0 [9/10/10]

7 – bigcharts.marketwatch.com/historical/default.asp?detect=1&symbol=SPX&close_date=9%2F9%2F05&x=0&y=0 [9/10/10]

7 – bigcharts.marketwatch.com/historical/default.asp?detect=1&symbol=DJIA&close_date=9%2F11%2F00&x=0&y=0 [9/10/10]

7 – bigcharts.marketwatch.com/historical/default.asp?detect=1&symbol=COMP&close_date=9%2F11%2F00&x=0&y=0 [9/10/10]

7 – bigcharts.marketwatch.com/historical/default.asp?detect=1&symbol=SPX&close_date=9%2F11%2F00&x=0&y=0 [9/10/10]

8 – ustreas.gov/offices/domestic-finance/debt-management/interest-rate/real_yield.shtml [9/10/10]

8 – ustreas.gov/offices/domestic-finance/debt-management/interest-rate/real_yield_historical.shtml [9/10/10]

9 – treasurydirect.gov/instit/annceresult/press/preanre/2000/ofm11200.pdf [7/12/00] Tags: Bill, Congress, Finance, precious metals, S&P 500
]]> http://www.bgsfinancialservices.com/blog/2010/09/13/weekly-economic-update-september-13-2010/feed/ 0 http://www.bgsfinancialservices.com/blog/2010/09/13/742/ http://www.bgsfinancialservices.com/blog/2010/09/13/742/#comments Mon, 13 Sep 2010 15:16:39 +0000 Benjamin http://www.bgsfinancialservices.com/blog/2010/09/13/742/ Many Americans are frustrated with the pace of the economic recovery; many Democrats are worried that their party will lose its majority in the House and Senate. As elections loom, President Obama has offered a new platform of tax initiatives for Congress to consider and potentially approve.

Extending the Bush-era tax cuts (for the middle class). President Obama wants to extend the EGTRRA and JGTRRA cuts of the last decade – but not to what Treasury Secretary Timothy Geithner referred to as the “most fortunate 2% of Americans.” Taxpayers who earn more than $250,000 would see those tax breaks disappear in 2011, while others would still benefit from them.¹

Why not extend the Bush-era tax breaks for the demographic that is probably the most economically influential? “We don’t think that’s responsible economic policy,” Geithner commented during an interview on the FOX Business Network. He felt that preserving the cuts for the highest-earning Americans would be analogous to “borrowing hundreds of billions of dollars from our children.”¹

Some contend that EGTRRA and JGTRRA have had broader impact. The Tax Foundation (a non-partisan Washington D.C. think tank which often criticizes tax policy) claims that the Bush-era tax cuts have saved the median U.S. family of four about $2,200 per year.²

However, an August Gallup poll indicated that only 37% of Americans wanted to keep the 2001 and 2003 tax cuts in place for all taxpayers. A plurality (44%) wanted to end them for those earning above $250,000, and 15% wanted them gone altogether. In partisan terms, 60% of the Democrats polled favored extending the cuts for all but the wealthiest Americans; 54% of Republicans polled wanted them retained for everyone.³

Offering tax breaks for capital spending and R&D. President Obama wants to allow businesses to write off 100% of their investment costs through 2011. He also wants to bring back the research tax credit for businesses – it would be expanded and made permanent.

What would a 100% expensing credit do for the business sector? On the right, Harvard economist Greg Mankiw calls it a “good idea” yet feels “the impact will be relatively modest.” In his view, this tax break amounts to “a zero-interest loan if [companies] invest in equipment. But with interest rates near zero anyway, the value of the loan is not that great.” On the left, UC Berkeley economist (and former Labor Secretary) Robert Reich thinks that “the economy needs two whopping corporate tax cuts right now as much as someone with a serious heart condition needs Botox. The reason businesses aren’t investing in new plant and equipment has nothing to do with the cost of capital. It’s because they don’t need the additional capacity.”⁴

Historically, the R&D tax credit has favored larger companies with long track records in research rather than smaller firms. Since 1981, Congress has allowed the R&D credit to sunset 13 times – it expired again at the end of last year. In the Obama proposal, the most popular R&D tax credit offered to businesses would rise to 17% from 14%. Many Silicon Valley firms and biomedical firms would love any break they can get – R&D credits in India, China and Brazil are all greater than in the U.S., and France’s R&D tax credit is six times more generous than ours.⁵

Infrastructure projects to provide added stimulus. The President also wants to devote another $50 billion to infrastructure spending on roads, railroads and airports. The money would be used to repair 150,000 miles of highways and 4,000 miles of railways, among other uses.⁶ Some transportation industry analysts see it as merely a drop in the bucket – but also possibly a step toward the creation of a national infrastructural fund.

What might the effect be? Moody’s Analytics chief economist Mark Zandi thinks the proposed tax breaks would be “helpful but they’re not going to jump start the economy, at least not in the next six to twelve months.” Interviewed by CNN, Zandi noted that “Investment spending has picked up very nicely, that’s not the problem. The problem is a lack of hiring.”⁷

David Rosenberg, chief economist at investment bank Gluskin Sheff, is one voice more skeptical about the business tax breaks. He notes that “We already have business spending running at its fastest rate in three decades … how ridiculous is it for the government to be targeting tax relief to the one part of the economy that needs it the least?”⁷

Standard & Poor’s chief economist David Wyss feels that any new government stimulus is better than none, saying that “going cold turkey” in 2010 would severely damage growth.⁷ The debate on Capitol Hill over these tax initiatives will likely amplify as we head into fall.

This material was prepared by Peter Montoya Inc., and does not necessarily represent the views of the presenting Representative or the Representative’s Broker/Dealer. This information should not be construed as investment advice. Neither the named Representative nor Broker/Dealer gives tax or legal advice. All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy. The publisher is not engaged in rendering legal, accounting or other professional services. If other expert assistance is needed, the reader is advised to engage the services of a competent professional. Please consult your Financial Advisor for further information.. www.petermontoya.com, www.montoyaregistry.com, www.marketinglibrary.net

Citations

1–foxbusiness.com/markets/2010/09/09/treasury-secretary-geithner-urges-approval-economic-tax-package/ [9/9/10]
2–boston.com/business/personalfinance/managingyourmoney/archives/2010/09/expiring_bush_t.html [9/10/10]
3–theatlantic.com/business/archive/2010/09/59-of-americans-want-to-mess-with-bush-tax-cuts/62779/ [9/10/10]
4–economix.blogs.nytimes.com/2010/09/07/reactions-to-obamas-business-tax-write-off-proposals/ [9/10/10]
5–mercurynews.com/politics-government/ci_15990903 [9/5/10]
6–newsweek.com/blogs/the-gaggle/2010/09/08/does-obama-s-infrastructure-proposal-have-the-right-priorities.html [9/8/10]
7–money.cnn.com/2010/09/07/news/economy/obama_proposal_react/ [9/7/10]

Could Medicare soon be in better shape? Maybe. At the start of August, Medicare’s trustees reported to Congress that Medicare should remain financially in the black through 2029, a 12-year improvement over last year’s estimate.¹ They credited the healthcare reforms carried out by Congress and the Obama administration, citing greater efficiency that would translate to savings for the program.

However, there is no guarantee that Medicare will get to retain those federal savings, and no certainty that the savings projected by eliminating subsidies paid to private insurers will result.

Additionally, as Concord Coalition executive director Robert Bixby told the Los Angeles Times, “You can’t spend the same money twice.”² It would seem unwise to use Medicare savings to expand Medicare coverage.

The Medicare trustees claimed that with the projected $192 billion in cuts to Medicare Advantage plans, home health care and hospitals across the next ten years, both the 75-year shortfall for its hospital fund and projected costs of the Medicare Supplementary Insurance program will shrink. More alterations will be needed to keep Medicare running in decades to come, the August report notes.^1,3

Social Security’s fortunes could be enhanced in 2019. Why 2019? In that year, a new tax is scheduled to kick in for so-called “Cadillac plans” – health insurance packages with annual premiums of $8,000 or more for individuals or $21,000 or more for families. In 2019, insurers offering these plans will have to pay a 40% federal tax for every dollar spent over the $8,000 or $21,000 cutoff.^1,4

That tax is projected to give Social Security a bit of relief. In 2010, Social Security is paying out more than it is taking in – and by previous federal estimates, that wasn’t supposed to happen until 2016. According to government forecasts, it can continue using payroll taxes and interest income to cover benefits until 2024.¹

The projection that Social Security’s accumulated surplus will run dry in 2037 is unchanged. After 2037 (assuming things don’t change), Social Security’s program revenues would only cover about 75% of its expenses – so payroll taxes would have to increase, or benefits would have to be scaled down.¹

Until both programs receive true long-term fixes, we will all have to make do with these short-term encouragements.

This material was prepared by Peter Montoya Inc., and does not necessarily represent the views of the presenting Representative or the Representative’s Broker/Dealer. This information should not be construed as investment advice. Neither the named Representative nor Broker/Dealer gives tax or legal advice. All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy. The publisher is not engaged in rendering legal, accounting or other professional services. If other expert assistance is needed, the reader is advised to engage the services of a competent professional. Please consult your Financial Advisor for further information.. www.petermontoya.com, www.montoyaregistry.com, www.marketinglibrary.net

Citations

1 – nytimes.com/2010/08/06/health/policy/06medicare.html [8/5/10]

2 – latimes.com/news/nationworld/nation/wire/sc-dc-0806-social-security-20100805,0,6306255.story [8/5/10]

3 – csmonitor.com/USA/Politics/2010/0322/Health-care-reform-bill-101-What-does-it-mean-for-seniors [3/22/10]

4 – slate.com/id/2232434 [10/14/09]

This material was prepared by Peter Montoya Inc., and does not necessarily represent the views of the presenting Representative or the Representative’s Broker/Dealer. This information should not be construed as investment advice. The Dow Jones Industrial Average is a price-weighted index of 30 actively traded blue-chip stocks. The 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 Standard & Poor’s 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general. It is not possible to invest directly in an index. NYSE Group, Inc. (NYSE:NYX) operates two securities exchanges: the New York Stock Exchange (the “NYSE”) and NYSE Arca (formerly known as the Archipelago Exchange, or ArcaEx®, and the Pacific Exchange). NYSE Group is a leading provider of securities listing, trading and market data products and services. The New York Mercantile Exchange, Inc. (NYMEX) is the world’s largest physical commodity futures exchange and the preeminent trading forum for energy and precious metals, with trading conducted through two divisions – the NYMEX Division, home to the energy, platinum, and palladium markets, and the COMEX Division, on which all other metals trade. All information is believed to be from reliable sources; however we make no representation as to its completeness or accuracy. All economic and performance data is historical and not indicative of future results. Market indices discussed are unmanaged. Investors cannot invest in unmanaged indices. The publisher is not engaged in rendering legal, accounting or other professional services. If other expert assistance is needed, the reader is advised to engage the services of a competent professional. Please consult your Financial Advisor for further information. Additional risks are associated with international investing, such as currency fluctuations, political and economic instability and differences in accounting standards.

Citations.

1 – money.cnn.com/2010/08/06/news/economy/jobs_july/ [8/6/10]

2 – dailyfinance.com/story/investing/services-sector-index-unexpectedly-rose-in-july/19580447/ [8/4/10]

3 – thestreet.com/story/10823959/1/ism-index-growth-slows-to-555.html [8/2/10]

4 – reuters.com/article/idUSN023868020100803 [8/4/10]

5 – suntimes.com/business/currency/2563780,CST-NWS-savings04.article [8/4/10]

6 – seattletimes.nwsource.com/html/businesstechnology/2012519621_apuspendinghomesales.html [8/3/10]

7 – online.wsj.com/article/SB10001424052748703748904575411193528926092.html [8/6/10]

8 – cnbc.com/id/38596993 [8/6/10]

9 – bigcharts.marketwatch.com/historical/default.asp?detect=1&symbol=DJIA&close_date=8%2F6%2F09&x=0&y=0 [8/6/10]

9 – bigcharts.marketwatch.com/historical/default.asp?detect=1&symbol=COMP&close_date=8%2F6%2F09&x=0&y=0 [8/6/10]

9 – bigcharts.marketwatch.com/historical/default.asp?detect=1&symbol=SPX&close_date=8%2F6%2F09&x=0&y=0 [8/6/10]

9 – bigcharts.marketwatch.com/historical/default.asp?detect=1&symbol=DJIA&close_date=8%2F5%2F05&x=0&y=0 [8/6/10]

9 – bigcharts.marketwatch.com/historical/default.asp?detect=1&symbol=COMP&close_date=8%2F5%2F05&x=0&y=0 [8/6/10]

9 – bigcharts.marketwatch.com/historical/default.asp?detect=1&symbol=SPX&close_date=8%2F5%2F05&x=0&y=0 [8/6/10]

9 – bigcharts.marketwatch.com/historical/default.asp?detect=1&symbol=DJIA&close_date=8%2F7%2F00&x=0&y=0 [8/6/10]

9 – bigcharts.marketwatch.com/historical/default.asp?detect=1&symbol=COMP&close_date=8%2F7%2F00&x=0&y=0 [8/6/10]

9 – bigcharts.marketwatch.com/historical/default.asp?detect=1&symbol=SPX&close_date=8%2F7%2F00&x=0&y=0 [8/6/10]

10 – ustreas.gov/offices/domestic-finance/debt-management/interest-rate/real_yield.shtml [8/6/10]

10 – ustreas.gov/offices/domestic-finance/debt-management/interest-rate/real_yield_historical.shtml [8/6/10]

11 – treasurydirect.gov/instit/annceresult/press/preanre/2000/ofm11200.pdf [7/12/00]

What is dental insurance?

Dental insurance is insurance that provides coverage for services relating to the care and treatment of your teeth and gums. Typically, it provides coverage for some or all of the following dental services:

• Diagnostic procedures
• Semiannual checkups (including cleanings) and periodic X rays
• Procedures that restore teeth
• Oral and maxillofacial surgery (teeth extraction and oral surgery)
• Periodontics (treatment of bone and gum diseases)
• Prosthodontics (fillings, dentures, bridges, and crowns)
• Orthodontics (repositioning of the teeth)
• Oral surgery
• Root canal therapy

What does it cost?

Dental insurance can range for around $20 per month up to $70 and above for individual coverage. If you have employer-sponsored dental insurance, the cost to you will usually be much less because you are part of a large group and your employer may pay part of the premium.

How does it work?

Dental insurance may provide direct payment to the dentist for the dental care and treatment that you receive. Or, you may be required to cover your dental expenses out of pocket at the time of service and then file a claim for reimbursement. It depends on the specific plan. The dental plan may also have a list of pre approved dentists, like a health maintenance organization.

With all dental insurance, deductible and co-payment features usually come into play, though the deductible may not apply to routine cleaning and oral examinations. In addition, you may have to pay a separate coinsurance percentage for certain other procedures. Most plans also place a limit on the total amount of dental benefits that you can receive each year. Finally, if you’ve just enrolled in a dental plan, be aware that there may be a waiting period before your coverage kicks in.  Group coverage will often shorten these waiting periods and have high annual maximum with lower copays, deductibles and coinsurance.

Where do you get it?

Dental insurance has become more common in recent years. Of the roughly 55 percent of Americans who have dental insurance, most receive their coverage through their employer. Employer-sponsored dental insurance may take the form of a health insurance plan that includes dental coverage or a separate dental plan. It could also be benefit choices under a cafeteria plan. Health insurance plans are usually limited to routine cleaning and oral examinations. Separate dental plans usually cover additional dental procedures but place restrictions on amount and price of dental benefits for specific dental treatments.

Unfortunately, if you don’t have access to employer-sponsored coverage, you will have a difficult time finding dental insurance. Despite the variety of dental plans available, plans for individuals are rare. Typically, an individual plan will have too high a premium and not enough coverage to make them viable insurance options.  Most individual plans place very low caps on annual payout and do not cover any orthodontia (braces). Dental coverage is seldom found in individual health insurance policies, except maybe coverage for accidental dental injuries.

This doesn’t mean that you’re out of luck if you’re looking for individual coverage, but it does mean that your options may be limited. In fact, one of the few types of plans that’s readily available to individuals is what’s known as a dental discount plan.  Dental discount plans, while not being true insurance, do offer discounted rates with providers and are usually cheap enough to be worth the expense.  We in the office recommend the VitalSavings by Aetna plan.  This plan was recommended to us by our personal dentist Dr. Brandon Alegre.

Who should have dental insurance and who shouldn’t?

If your employer offers dental insurance, you should probably enroll in the plan because the benefits usually far outweigh the cost to you. If coverage is not available through your employer, you should weigh your options carefully.

As mentioned, individual dental insurance is usually quite expensive for the benefit recieved. High deductible and low annual maximums typically make us hesitant to recommend most dental coverages.  Extended waiting periods for major work that can exceed a year combined with a lack of any orthodontia coverage are additional reasons to reconsider purchasing dental insurance.  There’s no reason to throw even a little money away on insurance that you don’t really need. Why pay monthly premiums, deductibles, co-payments, and so on if you have healthy teeth and rarely go to the dentist except for a yearly cleaning? If this is your situation, it’s generally more cost effective to pay as you go or use a dental discount plan to lower your out of pocket expenses.

Selecting a Dentist

When it comes to picking a dentist it is always important to search for a qualified dentist and office.  References are usually the best way to find a dentist, which is why we refer Dr. Brandon Alegre to anyone that asks.  Their office is always immaculate and very modern.  The staff is competent, polite and extremely friendly.  Most importantly, Dr. Algre is very knowledgeable, calming and helpful with all of our dental issues.  We have been patients now for several years and have referred many friends and family, to rave reviews.  If your looking for a great dental experience you can do no better then Algre Dentistry.

Algre Dentistry
Dr. Brandon Alegre
7301 W. Palmetto Park Road
Suite 206 B
Boca Raton, FL 33433
561-347-0105
http://www.alegredentistry.com/

The Act requires originators of residential mortgages to disclose any conflicts of interest and compare costs and benefits of mortgages offered to a potential borrower. Lenders also will be required to verify whether, based on income, credit history, and other data, a borrower has a reasonable ability to repay a loan plus its associated taxes, insurance, and other costs. This could mean that self-employed people and others whose income is undocumented or irregular will need better documentation to qualify for a loan.

Lenders will no longer be able to give loan officers financial incentives that induce them to steer customers to a mortgage with a higher interest rate simply to increase their own commission. Their ability to impose prepayment penalties when a borrower repays a loan early also will be more limited, and a holder of a hybrid adjustable rate mortgage must receive notice of any change in the interest rate six months in advance.

Lenders are prohibited from refinancing an existing mortgage unless the new mortgage offers a net benefit to the borrower, and they may not coerce or induce an appraiser to make a faulty appraisal of a property’s value. Loan applicants must receive a copy of the appraisal on the property no later than three days prior to the closing.

High-cost mortgages are subject to special regulations. Any balloon payments on high-cost mortgages cannot be more than twice as large as the average of earlier payments, and a borrower must receive qualified counseling on the advisability of a high-cost mortgage before credit can be extended.

Homeowners who are unable to make mortgage payments as a result of losing their jobs or because of a medical condition may now qualify for up to $50,000 in assistance loaned through HUD’s existing Emergency Mortgage Assistance Fund.

Increased protection of bank deposits becomes permanent

During the financial crisis, the Federal Deposit Insurance Corp. (FDIC) temporarily increased from $100,000 to $250,000 the amount it will insure on deposit accounts in FDIC-insured banks. The $250,000 limit is now permanent. That means that a couple who each had separate deposit accounts as well as a single joint account could qualify for up to $750,000 worth of protection on those accounts.

Greater transparency and accountability for investments and related services

Institutional investors’ inability to determine the amount of global financial exposure to derivatives–investments based on the value of other investments–contributed to the panic at the height of the financial crisis. Over-the-counter derivatives must now be traded on a public exchange, and trades must be cleared through a registered clearinghouse. Nonstandard derivatives can still be traded privately, but must be reported to a central authority in order to increase regulators’ ability to monitor the overall level of activity.

Hedge funds and private-equity advisors will be required to register with the Securities and Exchange Commission (SEC) and disclose to the commission information such as investment positions and the amount of leverage involved. Also, the $1 million minimum net worth required to be an accredited investor eligible to invest in such funds will no longer include a principal residence, and that $1 million threshold will be reviewed every four years.

Credit rating firms, which were criticized for being too lax in their evaluations of securities based on subprime mortgages, will be subject to oversight by the SEC, which can fine those that issue too many faulty ratings over time. Also, investors will now have the right to sue an agency for issuing ratings it knew or should have known were flawed.

Shareholders of public companies will have the right to a nonbinding vote on compensation for the company’s executives. Also, protections for people reporting securities law violations have been enhanced. Whistle-blowers with information that leads to monetary sanctions of more than $1 million will be eligible for 10 percent to 30 percent of the funds collected from the offender; if an employer retaliates, a whistle-blower can sue without waiting until administrative remedies have been exhausted.

An Investor Advocate office will be established within the SEC to help individual investors resolve significant problems and to promote investor interests.

Risky banking practices are addressed

Banks will be required to hold additional capital to cover potential losses, and some securities are no longer acceptable as vehicles for capital reserves held by large banks. Banks also will be required to retain at least 5 percent of a loan on their books if the loan is sold and/or repackaged with other loans and securitized. (However, some relatively low-risk mortgages, such as fully documented loans with a fixed interest rate, are exempted.)

Banks also will be more limited in their ability to engage in proprietary trading in their own accounts, which could represent a conflict of interest with their responsibility to their clients. They also will have to set up separate operations to handle their most risky derivative trades, such as swaps. A bank will not be permitted to invest more than 3 percent of its core capital in hedge funds and private equity, but it may still organize and offer them as long as certain conditions are met.

A Consumer Financial Protection Bureau overseen by the Federal Reserve will be created to regulate consumer financial products and services.

Systemic risk will be monitored, and liquidation of large banks will be overseen

A new Financial Stability Oversight Council is charged with assessing and managing risks that could threaten the entire U.S. financial system. Also, the FDIC will manage the liquidation of a bank whose failure the Treasury Secretary determines would disrupt the stability of the nation’s financial system. That will include firing corporate management responsible for the failure and prohibiting any payments to shareholders until all other claims are paid. The FDIC may borrow from an Orderly Liquidation Fund to pay for a liquidation, but those costs must be replenished not from taxpayer funds but from claims on the bank and, if necessary, assessments on large financial institutions. The Act does not permit the Federal Reserve or the FDIC to lend to or provide a guarantee for individual or insolvent companies or banks, but both may lend funds to provide liquidity.

These two objectives are not mutually exclusive.

It can be done. All across America, families are meeting a mighty financial challenge – the challenge of paying college costs with retirement potentially on the horizon. How do they do it? They go about it consistently; they also get creative.

First, make sure the priorities are in the right order. Strange as it may sound, your retirement may need to take precedence over your child’s college education.

Think about it. Your son or daughter might qualify for student loans or financial aid. By the time they are 30 or 35, they will have the earnings potential to pay those loans back. Do you see any ads out there for “retirement loans” or “retirement aid”? For most, it is much harder to earn money at age 65 than at age 35. Because of this, many choose to allow the younger generation to assume the debt.

The following are some short-term and long-term ideas you may want to consider if you have college costs on your mind:

Save for college the DCA way. While dollar-cost averaging is a useful way to build retirement savings, its merit often goes unrecognized when it comes to saving for higher education. If you could put $40 a month even in a basic savings account with a tiny interest rate, over 10 years that is approaching $5,000. That’s nothing to sneeze at, and will certainly help out. Move the money from a checking account each month into a savings account, or …

Exploit your credit card. No, don’t pay for college with it … well, at least not directly. Some credit cards give you a cash-back rewards option. You may as well put the rewards toward college. Some of the major banks let you do this and so do online shopping websites such as Upromise.

Keep your income as low as possible in the base income year. That is the calendar year that starts as your child is in the middle of his or her junior year in high school. That is the year when college financial aid departments start to look at a family’s earned and received income. If you can avoid taking capital gains or a distribution from a 401(k) or 403(b) in that year, that will keep your taxable income low. Will Roth IRA conversions raise eyebrows? Yes, they will.

However, don’t stop contributing to your own retirement savings accounts, and feel free to pay off consumer debts with the money from your savings and checking accounts – the assets in these accounts aren’t used in financial aid formulas.¹

Let the college know if your financial situation has changed. Has the value of your home fallen? Is your business netting you far less than it once did? Financial aid departments should be willing to review these developments and may be able to adjust aid for your student accordingly.

Make it a family affair. In some cultures, it is common for all members of a family to pitch in on the down payment or mortgage payments for a home. Consider this strategy as your family saves for college. Close friends and family members may be willing (or even excited) to make ongoing contributions to a college savings plan for your child, and/or an annual “birthday” contribution. They may find giving such a gift to be much more meaningful and fulfilling than a mere toy or item of clothing.

In short, hunting for every scholarship or alumni connection you can and finding a great school at a reasonable price – that’s important. But it may be just as useful (if not more) to be both creative and consistent as you save for college. While it has always been a challenge, by putting some thought into it, most families and students can find ways to respond.

This material was prepared by Peter Montoya Inc., and does not necessarily represent the views of the presenting Representative or the Representative’s Broker/Dealer. This information should not be construed as investment advice. Neither the named Representative nor Broker/Dealer gives tax or legal advice. All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy. The publisher is not engaged in rendering legal, accounting or other professional services. If other expert assistance is needed, the reader is advised to engage the services of a competent professional. Please consult your Financial Advisor for further information.. petermontoya.com,

Citations

1 – articles.moneycentral.msn.com/CollegeAndFamily/CutCollegeCosts/financial-aid-101-how-to-get-more-cash.aspx [7/16/10]

2 – money.usnews.com/money/blogs/On-Retirement/2010/07/23/how-to-pay-for-college-without-sacrificing-your-retirement [7/23/10]

Existing home sales fall … and mortgage rates fall further

The June existing home sales figures from the National Association of Realtors show a 5.1% drop from May, an effect from the closing of the deadline for federal homebuying credits. On the positive side, NAR reports that sales are up 9.8% from a year ago. Interest rates on conventional home loans hit a record low of 4.56% in Freddie Mac’s July 21 survey; average rates on 15-year FRMs also fell to a two-decade low of 4.03%.^1,2

Long-term jobless benefits extended

President Obama extended emergency unemployment benefits for about three million Americans Thursday, not long after the measure made it past strong opposition in the Senate. The program had ended in June; Obama’s signature extends it for six more months.³

FDIC insurance permanently bumped up to $250,000

This is a byproduct of the financial reform bill. The current $250,000 FDIC insurance limit for banks and credit unions was set to expire in 2013. Incidentally, the $250,000 ceiling has been made retroactive with regard to the six U.S. banks that failed from January 1, 2008 – October 3, 2008, such as IndyMac.⁴

Conference Board’s leading indicators retreat 0.2%

They lost a little steam in June, but they beat expectations: economists surveyed by Thomson Reuters had expected the CB index to fall 0.3%. May’s increase was revised upward to 0.5%.⁵

Dow gains 300+ points in a week

The DJIA settled at 10,424.62 Friday, gaining 0.99% last week. The S&P 500 and NASDAQ respectively rose to 1,102.66 and 2,269.47. Strong earnings reports helped the Dow advance by triple digits on Thursday, and when 84 of 91 European banks passed an EU stress test, the DJIA climbed 102.32 on Friday. On the NYMEX, oil futures slipped a little more than 3% last week to close at $78.98 Friday.⁶

Last week’s riddle: Observe the following sequence of numbers: 11, then 1,331, then 161,051, then 19,487,171. Given this sequence, what would the next number be?

Last week’s riddle answer: 2,357,947,691. The numbers are 11 to the first power, 11 to the third power, 11 to the fifth power and 11 to the seventh power. Therefore, the missing number is 11 to the ninth power.

This material was prepared by Peter Montoya Inc., and does not necessarily represent the views of the presenting Representative or the Representative’s Broker/Dealer. This information should not be construed as investment advice. The Dow Jones Industrial Average is a price-weighted index of 30 actively traded blue-chip stocks. The 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 Standard & Poor’s 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general. It is not possible to invest directly in an index. NYSE Group, Inc. (NYSE:NYX) operates two securities exchanges: the New York Stock Exchange (the “NYSE”) and NYSE Arca (formerly known as the Archipelago Exchange, or ArcaEx®, and the Pacific Exchange). NYSE Group is a leading provider of securities listing, trading and market data products and services. The New York Mercantile Exchange, Inc. (NYMEX) is the world’s largest physical commodity futures exchange and the preeminent trading forum for energy and precious metals, with trading conducted through two divisions – the NYMEX Division, home to the energy, platinum, and palladium markets, and the COMEX Division, on which all other metals trade. All information is believed to be from reliable sources; however we make no representation as to its completeness or accuracy. All economic and performance data is historical and not indicative of future results. Market indices discussed are unmanaged. Investors cannot invest in unmanaged indices. The publisher is not engaged in rendering legal, accounting or other professional services. If other expert assistance is needed, the reader is advised to engage the services of a competent professional. Please consult your Financial Advisor for further information. Additional risks are associated with international investing, such as currency fluctuations, political and economic instability and differences in accounting standards. www.montoyaregistry.com www.petermontoya.com

Citations.

1 – realtor.org/press_room/news_releases/2010/07/ehs_june_above [7/22/10]

2 – mercurynews.com/breaking-news/ci_15576555 [7/22/10]

3 – washingtonpost.com/wp-dyn/content/article/2010/07/22/AR2010072203825.html [7/22/10]

4 – usatoday.com/money/industries/banking/2010-07-22-regs22_ST_N.htm [7/22/10]

5 – usatoday.com/money/economy/2010-07-22-jobless-claims_N.htm [7/22/10]

6 – cnbc.com/id/38382997 [7/23/10]

7 – bigcharts.marketwatch.com/historical/default.asp?detect=1&symbol=DJIA&close_date=7%23F2%2F09&x=0&y=0 [7/23/10]

7 – bigcharts.marketwatch.com/historical/default.asp?detect=1&symbol=COMP&close_date=7%23F2%2F09&x=0&y=0 [7/23/10]

7 – bigcharts.marketwatch.com/historical/default.asp?detect=1&symbol=SPX&close_date=7%2F23%2F09&x=0&y=0 [7/23/10]

7 – bigcharts.marketwatch.com/historical/default.asp?detect=1&symbol=DJIA&close_date=7%2F22%2F05&x=0&y=0 [7/23/10]

7 – bigcharts.marketwatch.com/historical/default.asp?detect=1&symbol=COMP&close_date=7%2F22%2F05&x=0&y=0 [7/23/10]

7 – bigcharts.marketwatch.com/historical/default.asp?detect=1&symbol=SPX&close_date=7%2F22%2F05&x=0&y=0 [7/23/10]

7 – bigcharts.marketwatch.com/historical/default.asp?detect=1&symbol=DJIA&close_date=7%2F24%2F00&x=0&y=0 [7/23/10]

7 – bigcharts.marketwatch.com/historical/default.asp?detect=1&symbol=COMP&close_date=7%2F24%2F00&x=0&y=0 [7/23/10]

7 – bigcharts.marketwatch.com/historical/default.asp?detect=1&symbol=SPX&close_date=7%2F24%2F00&x=0&y=0 [7/23/10]

8 – ustreas.gov/offices/domestic-finance/debt-management/interest-rate/real_yield.shtml [7/23/10]

8 – ustreas.gov/offices/domestic-finance/debt-management/interest-rate/real_yield_historical.shtml [7/23/10]

9 – treasurydirect.gov/instit/annceresult/press/preanre/2000/ofm11200.pdf [7/12/00]

Will the goals of the reform bill really be met? On July 15, the Dodd-Frank Wall Street Reform and Consumer Protection Act passed 60-39 in the Senate. Next week, President Obama is expected to sign it into law.¹

“Because of this reform, the American people will never again be asked to foot the bill for Wall Street’s mistakes,” the President said in mid-July. “There will be no more taxpayer-funded bailouts, period.”

Will his words prove true? Some doubt it, while the bill’s adherents think this is a great and necessary step to prevent another Wall Street crisis.

However, the step is still being taken – it remains to be seen how the reforms passed will be implemented, and some may be implemented to a lesser degree than intended. (And there is nothing about Fannie Mae or Freddie Mac in the 2,300 pages of legislation.)

Goal 1: No replay of TARP. In brief, the bill gives federal regulators added power to ward off possible bank collapses. In the near future, these regulators could make too-big-to-fail determinations, set bank capital ratios and ceilings on financial industry CEO compensation, and rule on the types of proprietary investments allowable for banks. The idea is keep financial giants from turning into houses of cards. However, conservatives warn that too much regulation could prompt U.S. financial firms to conduct increasing amounts of business in nations with less-regulated financial markets.²

One of the most vocal opponents of the bill was House Minority Leader John A. Boehner (R-OH), who likened the legislation to “killing an ant with a nuclear weapon.” Boehner thinks that the bill “institutionalizes” the too-big-to-fail notion.¹ Other conservatives agree and think that the federal government might keep the bailout option around for big banks when it should be throwing it away.

Goal 2: Consumer education and protection. The bill creates a Consumer Financial Protection Agency within the Federal Reserve – a new bureau to watch over mortgage lenders, credit card companies and consumer banking practices. The idea is to prevent things like “liar loans” and specious fees. Detractors think the CFPA and its regulations will actually bear a negative byproduct – they think businesses and individuals will have a tougher time getting credit. How big a reach will the CFPA have? How much autonomy will it have? That hasn’t been defined.

Goal 3: Transparent derivatives trading. Most of the trading in the derivatives market happens out of the public eye. No more, according to this reform bill: it will take place on public exchanges, the better to pinpoint systemic risks. Almost everyone applauds this measure.²

Goal 4: Identifying bubbles. No just stock or commodity bubbles, but also real estate bubbles and bubbles in any economic sector.
A new agency, the Financial Stability Oversight Council, will seek to find them. No one knows its regulatory scope yet.²

Goal 5: Double-checking credit ratings. Why did Wall Street fall in love with derivatives? Didn’t the credit ratings agencies warn banks about the peril of such investments? Allegedly not. So an Office of Credit Ratings will be created as part of the Securities & Exchange Commission. The OCR will monitor the big Wall Street credit ratings firms and watch out for possible conflicts of interest affecting ratings.³

Interesting minutiae. When President Obama signs off on the Dodd-Frank bill, it will kill the Office of Thrift Supervision – that’s the office that was supposed to prevent bank collapses. As we can tell by the failure of Washington Mutual and IndyMac, the “supervision” may not have been all that focused. The Office of the Comptroller of the Currency will pick up its duties. (The Dodd-Frank bill also has a nice wrinkle for former IndyMac accountholders: it boosts the FDIC coverage on those accounts to $250,000, retroactive to before IndyMac went bust.)¹

Another consequence of the Dodd-Frank bill: all TARP payments will end immediately. And don’t look for a new futures market in the offing based on Hollywood box office receipts – the big movie studios wanted to try and make that a reality, but the reform bill won’t allow it.¹

This material was prepared by Peter Montoya Inc., and does not necessarily represent the views of the presenting Representative or the Representative’s Broker/Dealer. This information should not be construed as investment advice. Neither the named Representative nor Broker/Dealer gives tax or legal advice. All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy. The publisher is not engaged in rendering legal, accounting or other professional services. If other expert assistance is needed, the reader is advised to engage the services of a competent professional. Please consult your Financial Advisor for further information.. www.petermontoya.com, www.montoyaregistry.com, www.marketinglibrary.net

Citations

1 – latimes.com/business/la-fi-financial-reform-20100716,0,2303004.story [7/16/10]

2 – articles.moneycentral.msn.com/Investing/Extra/what-financial-reform-does-and-does-not-do.aspx [7/15/10]

3 –abcnews.go.com/Business/financial-reform-bill-means-big-consumers/story?id=11012343 [6/25/10]

First and formost, all applicants MUST have a recent decline letter or rider letter dated no more then 6 months ago.  This letter must be submitted with the application.  Applicant’s must also have had no health insurance for at least 6 months.  The representative on the phone didn’t seem to be able to answer whether mini-meds or short term medical plans would qualify.  Estimated rates for a 50 year old male in florida will be between $552-675/month, actual rates should be out tomorrow (I will run an update then).  Application review will take about 3 weeks and the applicant’s benefits will be effective the first of the following the date of the acceptance letter.  If you have all of these document you can go to the government’s website at http://www.pcip.gov/ and get more information.  You may also download an application form from here.

What does this mean for you?  If you’ve been without insurance for over 6 months, you must apply imediately to an insurance company to see if you qualify for their plan.  If you are declined or have a condition ridered from the policy, you will then have the ability to apply for coverage.  If you need help making an informed decision please feel free to call my office and I’ll be happy to assit you with your options.

Service sector grows; pace of expansion moderates

Last week, the Institute for Supply Management reported its June non-manufacturing index at 53.8. The index had come in at 55.4 in March, April and May. So we are still seeing growth in the service sector, just at a slightly slower rate. Economists polled by MarketWatch were expecting a 54.5 reading. The 53.8 is the lowest mark since February, but the index has been above 50 (indicating growth) all year.¹

Continuing unemployment claims reach a 9-month low

Thursday, the Labor Department announced that 4.41 million people were receiving jobless benefits after an initial week of aid during the week of June 26. That is the lowest such figure since November.²

Sales up 3.1% over last year at major retailers

That’s what a Thomson Reuters survey of 28 big mall chains just found – June retail purchases at these shops were 3.1% better than in June 2009. The most notable year-over-year gain among the 28 store brands? Nordstrom’s, where sales were up 14.1% in June from 12 months ago.³

Wholesale inventories build in May

They increased 0.5% in that month as wholesale sales fell 0.3%. In year-over-year figures, the Commerce Department said stockpiles were down 2.1% from May 2009, while wholesale sales had increased 15.1%.⁴

Bulls stampede as confidence returns

The first glimmer of a new earnings season and good news about jobless claims motivated buying on Wall Street. Last week, the DJIA gained 5.28%, settling at 10.197.72 Friday; the NASDAQ and S&P 500 respectively gained 5.00% and 5.41% in the best week in nearly a year for stocks.⁵

Note: last week’s article mentioned that the federal homebuyer tax credit had been extended through September 30. Please note, however, that only the credit has been extended – not the deadline for contracts. The deadline to buy (or enter into a binding contract to buy) a principal residence was April 30.⁶

Last week’s riddle: It can certainly be measured, yet it has no length, width or height. What is it?

Last week’s riddle answer: The temperature.

Please feel free to forward this article to your family, friends or colleagues. If you would like us to add them to our distribution list, please reply with their address. We will contact them first and request their permission to add them to our list.

«RepresentativeDisclosure»

This material was prepared by Peter Montoya Inc., and does not necessarily represent the views of the presenting Representative or the Representative’s Broker/Dealer. This information should not be construed as investment advice. The Dow Jones Industrial Average is a price-weighted index of 30 actively traded blue-chip stocks. The 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 Standard & Poor’s 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general. It is not possible to invest directly in an index. NYSE Group, Inc. (NYSE:NYX) operates two securities exchanges: the New York Stock Exchange (the “NYSE”) and NYSE Arca (formerly known as the Archipelago Exchange, or ArcaEx®, and the Pacific Exchange). NYSE Group is a leading provider of securities listing, trading and market data products and services. The New York Mercantile Exchange, Inc. (NYMEX) is the world’s largest physical commodity futures exchange and the preeminent trading forum for energy and precious metals, with trading conducted through two divisions – the NYMEX Division, home to the energy, platinum, and palladium markets, and the COMEX Division, on which all other metals trade. All information is believed to be from reliable sources; however we make no representation as to its completeness or accuracy. All economic and performance data is historical and not indicative of future results. Market indices discussed are unmanaged. Investors cannot invest in unmanaged indices. The publisher is not engaged in rendering legal, accounting or other professional services. If other expert assistance is needed, the reader is advised to engage the services of a competent professional. Please consult your Financial Advisor for further information. Additional risks are associated with international investing, such as currency fluctuations, political and economic instability and differences in accounting standards. www.montoyaregistry.com www.petermontoya.com

Citations.

1 – marketwatch.com/story/us-service-sector-weakens-a-bit-in-june-2010-07-06 [7/6/10]

2 – cnbc.com/id/38144446/ [7/8/10]

3 – articles.latimes.com/2010/jul/08/business/la-fi-retail-sales-20100707 [7/8/10]

4 – online.wsj.com/article/SB10001424052748704075604575356804274113436.html [7/9/10]

5 – cnbc.com/id/38171128 [7/9/10]

6 – irs.gov/newsroom/article/0,,id=204671,00.html [7/6/10]

7 – bigcharts.marketwatch.com/historical/default.asp?detect=1&symbol=DJIA&close_date=7%9F2%2F09&x=0&y=0 [7/9/10]

7 – bigcharts.marketwatch.com/historical/default.asp?detect=1&symbol=COMP&close_date=7%9F2%2F09&x=0&y=0 [7/9/10]

7 – bigcharts.marketwatch.com/historical/default.asp?detect=1&symbol=SPX&close_date=7%2F9%2F09&x=0&y=0 [7/9/10]

7 – bigcharts.marketwatch.com/historical/default.asp?detect=1&symbol=DJIA&close_date=7%2F8%2F05&x=0&y=0 [7/9/10]

7 – bigcharts.marketwatch.com/historical/default.asp?detect=1&symbol=COMP&close_date=7%2F8%2F05&x=0&y=0 [7/9/10]

7 – bigcharts.marketwatch.com/historical/default.asp?detect=1&symbol=SPX&close_date=7%2F8%2F05&x=0&y=0 [7/9/10]

7 – bigcharts.marketwatch.com/historical/default.asp?detect=1&symbol=DJIA&close_date=7%2F10%2F00&x=0&y=0 [7/9/10]

7 – bigcharts.marketwatch.com/historical/default.asp?detect=1&symbol=COMP&close_date=7%2F10%2F00&x=0&y=0 [7/9/10]

7 – bigcharts.marketwatch.com/historical/default.asp?detect=1&symbol=SPX&close_date=7%2F10%2F00&x=0&y=0 [7/9/10]

8 – ustreas.gov/offices/domestic-finance/debt-management/interest-rate/real_yield.shtml [7/9/10]

8 – ustreas.gov/offices/domestic-finance/debt-management/interest-rate/real_yield_historical.shtml [7/9/10]

9 – treasurydirect.gov/instit/annceresult/press/preanre/2000/ofm11200.pdf [7/12/00]

You want to retire, and you own a large home that is nearly or fully paid off. The kids are gone, but the upkeep costs haven’t fallen. Should you retire and keep your home? Or sell your home and retire? Maybe it’s time to downsize.

Lower expenses could put more cash in your pocket. If your home isn’t paid off yet, have you considered how much money is going toward the home loan? The typical mortgage payment in the U.S. represents about 30% of gross income and about 50% of after-tax income.¹ When you move to a smaller home, your mortgage expenses may diminish and your cash flow may greatly increase – and don’t forget about interest savings over the life of the loan.

You might even be able to buy a smaller home with cash (if finances permit) and cut your tax liability. Optionally, that smaller home could also be in a region with lower income taxes and a lower cost of living.

You could capitalize on some home equity. Why not convert some home equity into retirement income? If you were forced into early retirement by some corporate downsizing, you might have a sudden and pressing need for retirement capital – another reason to sell that home you bought decades ago and head for a smaller one.

The lifestyle reasons to downsize (or not). Maybe your home is too much to keep up, or maybe you don’t want to climb stairs anymore. Maybe a condo or an over-55 community appeals to you. Maybe you want to be where it seldom snows. On the other hand, you may want and need the familiarity of your current home and your immediate neighborhood (not to mention the friends attached).

If you decide to downsize, it may not pay to wait. Anyone who wants to retire in the current economy needs all the financial resources that can be mustered. Of course, the real estate market will eventually improve; it depends on how long you want to wait for improvement. Some people want to retire and then sell their home, but it may be wiser to sell a home and then retire since homes tend to sit on the market these days. If you sell sooner instead of later, you can always rent until you find a smaller house that could save you thousands (or tens of thousands) of dollars.

This material was prepared by Peter Montoya Inc., and does not necessarily represent the views of the presenting Representative or the Representative’s Broker/Dealer. This information should not be construed as investment advice. Neither the named Representative nor Broker/Dealer gives tax or legal advice. All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy. The publisher is not engaged in rendering legal, accounting or other professional services. If other expert assistance is needed, the reader is advised to engage the services of a competent professional. Please consult your Financial Advisor for further information.. www.petermontoya.com, www.montoyaregistry.com, www.marketinglibrary.net

Citations

1 – investopedia.com/articles/pf/07/downsize.asp [7/2/10]

Jobless rate drops to 9.5%

The Labor Department said 83,000 new jobs were created in the private sector in June, yet non-farm payrolls shrank by 125,000 positions (an effect of temporary U.S. Census workers being laid off). Still, the 0.2% drop in unemployment was considerably better than the 0.1% increase anticipated on Wall Street.¹

Gains in personal spending, personal income & personal savings

Consumer spending rose by 0.2% as incomes climbed 0.4% in May, the Commerce Department stated last week. The personal savings rate reached 4.0% in May, a high unseen since September 2009. So consumers are aiding the recovery, albeit cautiously.²

$8K homebuyer tax credit is back

The real estate market got some relief Friday morning as President Obama signed an extension of the federal homebuyer tax credit ($8,000 for first-time home purchasers and $6,500 for existing homeowners who move). The credit is now extended until September 30.³

Cheapest fixed-rate mortgages in decades

Right now, conventional home loans are almost as cheap as they were in the 1950s. The national average interest rate on 30-year FRMs fell to 4.58% last week, according to Freddie Mac’s final June estimate. This is the lowest rate Freddie Mac has recorded since the start of its Primary Mortgage Market Survey.⁴

Surprise drop in factory orders, but ISM index shows further growth

Factory orders fell 1.4% in May. Economists surveyed by Bloomberg had forecast a 0.5% slip. Minus transportation orders, the category was down 0.6% for the month. The Institute for Supply Management’s June manufacturing index slipped to 56.2 from 59.7 in May, but that still means growth.^5,6

Wall Street in sell mode

It seemed like every market day started with a descent last week. The S&P 500 ended the week at 1,022.58, the Dow at 9,686.48, and the NASDAQ at 2,091.79. It was rough going – on the week, the marquee U.S. indices lost between 4.5%-5.9%. On June 30, the yield on the 10-year Treasury note fell to 2.95%, which was the first time it went below 3% since April 2009.^4,7

Last week’s riddle: Can you determine four consecutive prime numbers that add up to 220?

Last week’s riddle answer: 47 + 53 + 59 + 61 = 220.

Please feel free to forward this article to your family, friends or colleagues. If you would like us to add them to our distribution list, please reply with their address. We will contact them first and request their permission to add them to our list.

This material was prepared by Peter Montoya Inc., and does not necessarily represent the views of the presenting Representative or the Representative’s Broker/Dealer. This information should not be construed as investment advice. The Dow Jones Industrial Average is a price-weighted index of 30 actively traded blue-chip stocks. The 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 Standard & Poor’s 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general. It is not possible to invest directly in an index. NYSE Group, Inc. (NYSE:NYX) operates two securities exchanges: the New York Stock Exchange (the “NYSE”) and NYSE Arca (formerly known as the Archipelago Exchange, or ArcaEx®, and the Pacific Exchange). NYSE Group is a leading provider of securities listing, trading and market data products and services. The New York Mercantile Exchange, Inc. (NYMEX) is the world’s largest physical commodity futures exchange and the preeminent trading forum for energy and precious metals, with trading conducted through two divisions – the NYMEX Division, home to the energy, platinum, and palladium markets, and the COMEX Division, on which all other metals trade. All information is believed to be from reliable sources; however we make no representation as to its completeness or accuracy. All economic and performance data is historical and not indicative of future results. Market indices discussed are unmanaged. Investors cannot invest in unmanaged indices. The publisher is not engaged in rendering legal, accounting or other professional services. If other expert assistance is needed, the reader is advised to engage the services of a competent professional. Please consult your Financial Advisor for further information. Additional risks are associated with international investing, such as currency fluctuations, political and economic instability and differences in accounting standards. www.montoyaregistry.com www.petermontoya.com

Citations.

1 – forbes.com/2010/07/02/labor-markets-bumpy-road-markets-economy-jobs-unemployment.html [7/2/10]

2 – voices.washingtonpost.com/economy-watch/2010/06/may_income_spending_and_person.html [6/28/10]

3 – marketwatch.com/story/home-buyers-win-more-time-to-claim-tax-credit-2010-07-02 [7/2/10]

4 – cnbc.com/id/38037896 [7/1/10]

5 – dailyfinance.com/story/May-factory-orders-fall-economic-slowdown/19539948/ [7/2/10]

6 – bloomberg.com/news/2010-07-01/u-s-manufacturing-grows-at-slower-pace-than-forecast-in-ism-s-june-index.html [7/1/10]

7 – cnbc.com/id/38064102 [7/2/10]

8 – bigcharts.marketwatch.com/historical/default.asp?detect=1&symbol=DJIA&close_date=7%2F2%2F09&x=0&y=0 [7/2/10]

8 – bigcharts.marketwatch.com/historical/default.asp?detect=1&symbol=COMP&close_date=7%2F2%2F09&x=0&y=0 [7/2/10]

8 – bigcharts.marketwatch.com/historical/default.asp?detect=1&symbol=SPX&close_date=7%2F2%2F09&x=0&y=0 [7/2/10]

8 – bigcharts.marketwatch.com/historical/default.asp?detect=1&symbol=DJIA&close_date=7%2F1%2F05&x=0&y=0 [7/2/10]

8 – bigcharts.marketwatch.com/historical/default.asp?detect=1&symbol=COMP&close_date=7%2F1%2F05&x=0&y=0 [7/2/10]

8 – bigcharts.marketwatch.com/historical/default.asp?detect=1&symbol=SPX&close_date=7%2F1%2F05&x=0&y=0 [7/2/10]

8 – bigcharts.marketwatch.com/historical/default.asp?detect=1&symbol=DJIA&close_date=7%2F3%2F00&x=0&y=0 [7/2/10]

8 – bigcharts.marketwatch.com/historical/default.asp?detect=1&symbol=COMP&close_date=7%2F3%2F00&x=0&y=0 [7/2/10]

8 – bigcharts.marketwatch.com/historical/default.asp?detect=1&symbol=SPX&close_date=7%2F3%2F00&x=0&y=0 [7/2/10]

9 – ustreas.gov/offices/domestic-finance/debt-management/interest-rate/real_yield.shtml [7/2/10]

9 – ustreas.gov/offices/domestic-finance/debt-management/interest-rate/real_yield_historical.shtml [7/2/10]

10 – treasurydirect.gov/instit/annceresult/press/preanre/2000/ofm11200.pdf [1/12/00]

Highest consumer confidence since January 2008

That is what the final University of Michigan/Reuters survey for June reveals. The index came in at 76.0, an improvement from the final 73.6 reading for May. (For the record, the survey has averaged 84.5 across the past ten years.) The poll’s index of consumer expectations (the “better or worse six months from now?” question) improved 1.0 points to 69.8.¹

Home sales swoon in May

New and existing home sales plunged dramatically last month as federal homebuying credits left the picture. Economists expected new home sales numbers would dip, but the 32.7% decline announced by the Commerce Department surprised Wall Street and the real estate industry. The National Association of Realtors stated that existing home sales were down 2.2% last month.²

Durable goods orders fall, but corporate profits revised north

The Commerce Department noted an overall 1.1% decline in durable goods orders for May; minus transportation orders, there was actually a 0.9% gain in the category. It put 1Q GDP slightly lower at +2.7% in its final 1Q snapshot, but it also revised 1Q corporate profits north to +8.0%. Corporate earnings were 34.0% better than a year before – the largest year-over-year climb in 26 years, and a signal that both hiring and business investment are due to accelerate. The consensus 2Q forecast of a Wall Street Journal survey estimates second-quarter GDP will come in at +3.6%.^1,3,4

BP, financial reform concerns weigh on Wall Street

The DJIA wrapped up Friday at 10,143.81, ending a rough week. The S&P 500 closed at 1,076.76 Friday, while the NASDAQ closed at 2,223.48. All three indices wound up in the red for 2010 as of Friday’s close, but the Russell 2000 remained positive (+3.15% YTD).⁵

Last week’s riddle: A man claims he was 88 years old two days ago, and yet he also tells you that he will turn 91 next year. How can this be?

Last week’s riddle answer: He talks to you on New Year’s Day and his birthday is on December 31. So two days ago (12/30), he was 88. On 12/31, he turned 89. His 90th birthday occurs on 12/31 of this year, and he will turn 91 next year.

Please feel free to forward this article to your family, friends or colleagues. If you would like us to add them to our distribution list, please reply with their address. We will contact them first and request their permission to add them to our list.

This material was prepared by Peter Montoya Inc., and does not necessarily represent the views of the presenting Representative or the Representative’s Broker/Dealer. This information should not be construed as investment advice. The Dow Jones Industrial Average is a price-weighted index of 30 actively traded blue-chip stocks. The 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 Standard & Poor’s 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general. It is not possible to invest directly in an index. NYSE Group, Inc. (NYSE:NYX) operates two securities exchanges: the New York Stock Exchange (the “NYSE”) and NYSE Arca (formerly known as the Archipelago Exchange, or ArcaEx®, and the Pacific Exchange). NYSE Group is a leading provider of securities listing, trading and market data products and services. The New York Mercantile Exchange, Inc. (NYMEX) is the world’s largest physical commodity futures exchange and the preeminent trading forum for energy and precious metals, with trading conducted through two divisions – the NYMEX Division, home to the energy, platinum, and palladium markets, and the COMEX Division, on which all other metals trade. All information is believed to be from reliable sources; however we make no representation as to its completeness or accuracy. All economic and performance data is historical and not indicative of future results. Market indices discussed are unmanaged. Investors cannot invest in unmanaged indices. The publisher is not engaged in rendering legal, accounting or other professional services. If other expert assistance is needed, the reader is advised to engage the services of a competent professional. Please consult your Financial Advisor for further information. Additional risks are associated with international investing, such as currency fluctuations, political and economic instability and differences in accounting standards. www.montoyaregistry.com www.petermontoya.com

Citations.

1 – bloomberg.com/news/2010-06-25/consumer-confidence-in-u-s-increases-to-76-from-73-6-in-michigan-index.html [6/25/10]

2 – dailyfinance.com/story/real-estate/may-new-home-sales-plunge-32-7/19527532/ [6/23/10]

3 – online.wsj.com/article/BT-CO-20100624-706095.html [6/24/10]

4 – online.wsj.com/article/SB10001424052748703615104575328493487718962.html [6/25/10]

5 – cnbc.com/id/37927853 [6/25/10]

6 – bigcharts.marketwatch.com/historical/default.asp?detect=1&symbol=DJIA&close_date=6%2F25%2F09&x=0&y=0 [6/25/10]

6 – bigcharts.marketwatch.com/historical/default.asp?detect=1&symbol=COMP&close_date=6%2F25%2F09&x=0&y=0 [6/25/10]

6 – bigcharts.marketwatch.com/historical/default.asp?detect=1&symbol=SPX&close_date=6%2F25%2F09&x=0&y=0 [6/25/10]

6 – bigcharts.marketwatch.com/historical/default.asp?detect=1&symbol=DJIA&close_date=6%2F24%2F05&x=0&y=0 [6/25/10]

6 – bigcharts.marketwatch.com/historical/default.asp?detect=1&symbol=COMP&close_date=6%2F24%2F05&x=0&y=0 [6/25/10]

6 – bigcharts.marketwatch.com/historical/default.asp?detect=1&symbol=SPX&close_date=6%2F24%2F05&x=0&y=0 [6/25/10]

6 – bigcharts.marketwatch.com/historical/default.asp?detect=1&symbol=DJIA&close_date=6%2F26%2F00&x=0&y=0 [6/25/10]

6 – bigcharts.marketwatch.com/historical/default.asp?detect=1&symbol=COMP&close_date=6%2F26%2F00&x=0&y=0 [6/25/10]

6 – bigcharts.marketwatch.com/historical/default.asp?detect=1&symbol=SPX&close_date=6%2F26%2F00&x=0&y=0 [6/25/10]

7 – ustreas.gov/offices/domestic-finance/debt-management/interest-rate/real_yield.shtml [6/25/10]

7 – ustreas.gov/offices/domestic-finance/debt-management/interest-rate/real_yield_historical.shtml [6/25/10]

8 – treasurydirect.gov/instit/annceresult/press/preanre/2000/ofm11200.pdf [1/12/00]

Congress agrees on a bill. How would it change the financial landscape?

Next month, President Obama will likely sign a bill into law ordering changes in the ways banks, credit card issuers and mortgage lenders interface with consumers. Here are the key features of the financial reform agreement that the Senate and House of Representatives came to on June 24, with a vote pending.

#1: The Bureau of Consumer Financial Protection. This new consumer agency answering to the Federal Reserve would supervise mortgages, credit cards, student loans and the banks, credit unions and private lenders that issue them. Institutions holding less than $10 million in assets wouldn’t be regulated by the BCFP – but they would have to follow its rules. The BCFP would aim to make these products easier to comprehend for consumers and crack down on any possible deceptive practices.^1,2

#2: See your credit score for free. If you are turned down for a mortgage or a loan, the new reforms would give you the power to see the credit score supplied to your lender. Right now, you can request three free credit reports each year but you can’t see your actual score.^1,2

#3: Tougher rules for mortgage lenders. These rules should have come into play years ago, of course, but better late than never. Mortgage lenders would need to verify the assets and income of borrowers, thwarting any surreptitious comeback for “liar loans”. Loan officers and mortgage brokers would not be able to receive bonuses for guiding you into this or that loan. Borrowers with ARMs and other types of complex home loans could not be hit with prepayment penalties should they want or need to pay off a mortgage before the end of its term.^1,2

#4: Retail minimums for the use of credit cards. Score one for retailers, who don’t want to see people make $2 credit card purchases when the swipe fee alone cancels out the revenue. Under the new legislation, stores could set minimums for credit card use. The minimum transaction level could be as high as $10 if a store chooses; the Federal Reserve could raise that $10 limit on the minimum with time.^1,2

Alternately, stores could offer consumers discounts if they pay for items with cash or debit cards. (They wouldn’t be able to vary the discounts for different debit cards.)²

Additionally, the proposed reforms could allow colleges and universities and the U.S. government to set maximums for credit card transactions.²

#5: Brokers could be held to a fiduciary standard. Under the new reforms, the Securities and Exchange Commission now has the chance to hold brokers to the same fiduciary standard common to financial advisers – that is, investment brokers would have to put a client’s best interest first and not simply recommend a “suitable” investment to a client. That new standard may or may not come into play, however; the SEC is undertaking a six-month study to see if such a rule would amount to regulatory overlap or not.³

#6: The “Volcker Rule” would be put into play. This is the rule that would prevent banks from trading with their own money. It would kick in with small concessions. While the reforms would halt most proprietary trading by banks, some limited investment would be permitted – they could provide up to 3% of a fund’s equity, and invest up to 3% of Tier 1 capital in hedge or private equity funds.⁴

The big banks got another key concession from Congress: they don’t have to get rid of their swaps-trading desks (some legislators had contended that this decision would drive such trading to foreign markets). They can still be involved in foreign-exchange and interest-rate swaps dealing.⁵

#7: An Office of Credit Ratings would appear. It would oversee the actions of Moody’s, Standard and Poor’s and other big names, and one of its objectives would be to flag potential conflicts of interest that could influence ratings judgements.¹

#8: The SEC would no longer regulate equity-indexed annuities. The promotion and sale of these annuity contracts has generated much flak in recent years. Interestingly, they would be overseen by state insurance regulators if the reform bill passes, and treated strictly as insurance products.²

Now, what about Fannie Mae and Freddie Mac? Good question. Nothing made it into the final reform bill to address that dilemma. Some analysts expect another bill will emerge in 2011 to propose their restructuring or elimination.⁵

This material was prepared by Peter Montoya Inc., and does not necessarily represent the views of the presenting Representative or the Representative’s Broker/Dealer. This information should not be construed as investment advice. Neither the named Representative nor Broker/Dealer gives tax or legal advice. All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy. The publisher is not engaged in rendering legal, accounting or other professional services. If other expert assistance is needed, the reader is advised to engage the services of a competent professional. Please consult your Financial Advisor for further information.. www.petermontoya.com, www.montoyaregistry.com, www.marketinglibrary.net

Citations

1 –abcnews.go.com/Business/financial-reform-bill-means-big-consumers/story?id=11012343 [6/25/10]

2 – cnbc.com/id/37921188 [6/25/10]

3 – nytimes.com/2010/06/26/your-money/26money.html?pagewanted=2 [6/26/10]

4 – businessweek.com/news/2010-06-25/banks-dodged-a-bullet-as-congress-dilutes-rules.html [6/25/10]

5 – cnbc.com/id/37927853 [6/25/10]

6 – reuters.com/article/idUSTRE65O1BK20100625 [6/25/10]

In 2013, wealthy Americans will pay extra Medicare taxes. Congress, President Obama and the IRS are putting a surcharge on the wealthy to help fund the health care reforms.

• Beginning in 2013, joint filers with adjusted gross incomes of $250,000 or greater and single filers with AGI of $200,000 or greater will have to pay 0.9% extra in FICA taxes (that is, Social Security and Medicare taxes). The employers of these taxpayers face no such increase.¹
• Also, joint filers with modified adjusted gross income (MAGI) of $250,000 or more and single filers with MAGI of $200,000 or more will be docked with a 3.8% tax on investment income. (Even estates and trusts will be subject to this new 3.8% levy.)¹

What might the dollar impact be? The Tax Foundation, a politically conservative watchdog organization, thinks that the richest 1% of American families will pay an average of $52,000 more in federal taxes by 2016.²

What are the chances of these tax hikes being repealed? Think slim and none. Basically, you’d have to repeal the health care reforms to make it happen.

How can you avoid the 3.8% tax on dividends, capital gains & interest? It won’t be easy. Real estate investors may luck out the most, because federal law characterizes rental income as “active” rather than “passive”. On the other hand, if you sell a home you’ve owned for decades and see a taxable gain above the home sale exclusion ($250,000 single, $500,000 married), you’ll face the 3.8% tax.¹

Some forms of unearned income won’t be slapped with the tax. IRA distributions and income distributions from 401(a), 403(b) and 457(b) plans will be exempt. The same goes for pension income and Social Security income. Annuities that are part of a pension plan will be exempt. Any income from a business that you participate in won’t be hit with the 3.8% tax. Veterans’ benefits, life insurance payouts and interest earned by municipal bonds will also be spared.^1,3

As a result of this tax, you might start to see subtle shifts in financial strategy. You might see more muni bond purchases, more interest in life insurance, and more installment sales. As qualified Roth IRA distributions don’t boost AGI, you might be looking at another factor promoting Roth IRA conversions.³ Everybody will think about taking some capital gains prior to 2013.

The richest Americans have paid less tax in recent decades. Wealth for the Common Good (a liberal non-profit looking at this matter) notes that in 1955, the 400 largest incomes in America paid 51.2% of those incomes back in federal taxes. That led to the “tax shelters” of the 1960s and 1970s. In comparison, the top 400 incomes in America in 2007 paid out only an average of 16.6% in federal taxes.²

So how can you reduce your taxes in 2013? It is not too early to think about it. You might want to devote a planning session to this topic, or start to read up on your options.

This material was prepared by Peter Montoya Inc., and does not necessarily represent the views of the presenting Representative or the Representative’s Broker/Dealer. This information should not be construed as investment advice. Neither the named Representative nor Broker/Dealer gives tax or legal advice. All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy. The publisher is not engaged in rendering legal, accounting or other professional services. If other expert assistance is needed, the reader is advised to engage the services of a competent professional. Please consult your Financial Advisor for further information.. www.petermontoya.com, www.montoyaregistry.com, www.marketinglibrary.net

Citations

1 – online.wsj.com/article/SB10001424052748703890904575297351898565426.html [6/12/10]

2 – csmonitor.com/Commentary/David-R.-Francis/2010/0503/Wealthy-Americans-shoulder-health-care-tax-burden [5/3/10]

3 – projo.com/opinion/contributors/content/CT_healthlaw27_05-27-10_86IIRQ8_v11.8fa6649.html [5/27/10]

4 – irs.gov/publications/p590/ch02.html#en_US_publink1000231071 [2009]

Minor deflation takes pressure off the Fed.
The Consumer Price Index retreated 0.2% for May, following a 0.1% decline in April. Energy prices fell 2.9% last month, leading the CPI downward. (Core CPI did advance 0.1% in May.) Across the last 12 months, the CPI has risen 2.0%, with core CPI up 0.9% – the smallest annual gains since 1966. While May’s wholesale prices were 5.3% above levels of a year ago, the Labor Department said that PPI fell 0.3% on the month, which was less than the 0.5% reduction forecast by economists polled by Reuters. Translation: the Federal Reserve has no compulsion to raise interest rates.^1,2

Will gold hit $1,300 this summer?
The precious metal got a little closer to that psychologically significant benchmark on Friday. Gold settled at a new record close – $1,258.30 an ounce. Since the end of 2009, gold prices have gained almost 15%.³

As tax credits expire, housing starts decelerate.
In real estate, the year-over-year numbers often tell the real story, rather than the “weather” indicated by the month-to-month statistics. So we should be encouraged by the fact that May’s housing starts were 7.8% above May 2009 levels. Still, they were down 10.0% from April to their lowest level in five months. The Commerce Department also reported 17.2% fewer permits for single-family home construction in May.⁴

Industrial output & leading indicators rise.
Factory production went north by 1.2% for May. The Conference Board’s leading indicators index gained 0.4% for May after a flat April. Across the last six months, the CB index has seen 3.9% growth.^2,5

Stocks move back into positive territory.
The S&P 500 closed the week at 1,117.51, the DJIA at 10,450.64 and the NASDAQ at 2,309.80. All three marquee U.S. indices went back to being positive YTD last week.⁶

Last week’s riddle: Four cars approach an intersection with four-way stop signs simultaneously, each car coming from a different direction. After stopping, the drivers all accelerate at the same time. However, there is no accident. How is this possible?

Last week’s riddle answer: All four cars make right turns.

Please feel free to forward this article to your family, friends or colleagues. If you would like us to add them to our distribution list, please reply with their address. We will contact them first and request their permission to add them to our list.

This material was prepared by Peter Montoya Inc., and does not necessarily represent the views of the presenting Representative or the Representative’s Broker/Dealer. This information should not be construed as investment advice. The Dow Jones Industrial Average is a price-weighted index of 30 actively traded blue-chip stocks. The 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 Standard & Poor’s 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general. It is not possible to invest directly in an index. NYSE Group, Inc. (NYSE:NYX) operates two securities exchanges: the New York Stock Exchange (the “NYSE”) and NYSE Arca (formerly known as the Archipelago Exchange, or ArcaEx®, and the Pacific Exchange). NYSE Group is a leading provider of securities listing, trading and market data products and services. The New York Mercantile Exchange, Inc. (NYMEX) is the world’s largest physical commodity futures exchange and the preeminent trading forum for energy and precious metals, with trading conducted through two divisions – the NYMEX Division, home to the energy, platinum, and palladium markets, and the COMEX Division, on which all other metals trade. All information is believed to be from reliable sources; however we make no representation as to its completeness or accuracy. All economic and performance data is historical and not indicative of future results. Market indices discussed are unmanaged. Investors cannot invest in unmanaged indices. The publisher is not engaged in rendering legal, accounting or other professional services. If other expert assistance is needed, the reader is advised to engage the services of a competent professional. Please consult your Financial Advisor for further information. Additional risks are associated with international investing, such as currency fluctuations, political and economic instability and differences in accounting standards. www.montoyaregistry.com www.petermontoya.com 

Citations.1 – marketwatch.com/story/us-may-cpi-falls-02-on-lower-gas-prices-2010-06-17-83600 [6/17/10]

2 – cnbc.com/id/37725637/ [6/16/10]

3 – cnbc.com/id/37768097 [6/18/10]

4 – voices.washingtonpost.com/economy-watch/2010/06/housing_starts_down_in_may.html [6/16/10]

5 – marketwatch.com/story/may-leading-indicators-rise-slower-growth-seen-2010-06-17-104400 [6/17/10]

6 – usatoday.com/money/default.htm [6/18/10]

7 – bigcharts.marketwatch.com/historical/default.asp?detect=1&symbol=DJIA&close_date=6%2F18%2F09&x=0&y=0 [6/18/10]

7 – bigcharts.marketwatch.com/historical/default.asp?detect=1&symbol=COMP&close_date=6%2F18%2F09&x=0&y=0 [6/18/10]

7 – bigcharts.marketwatch.com/historical/default.asp?detect=1&symbol=SPX&close_date=6%2F18%2F09&x=0&y=0 [6/18/10]

7 – bigcharts.marketwatch.com/historical/default.asp?detect=1&symbol=DJIA&close_date=6%2F17%2F05&x=0&y=0 [6/18/10]

7 – bigcharts.marketwatch.com/historical/default.asp?detect=1&symbol=COMP&close_date=6%2F17%2F05&x=0&y=0 [6/18/10]

7 – bigcharts.marketwatch.com/historical/default.asp?detect=1&symbol=SPX&close_date=6%2F17%2F05&x=0&y=0 [6/18/10]

7 – bigcharts.marketwatch.com/historical/default.asp?detect=1&symbol=DJIA&close_date=6%2F19%2F00&x=0&y=0 [6/18/10]

7 – bigcharts.marketwatch.com/historical/default.asp?detect=1&symbol=COMP&close_date=6%2F19%2F00&x=0&y=0 [6/18/10]

7 – bigcharts.marketwatch.com/historical/default.asp?detect=1&symbol=SPX&close_date=6%2F19%2F00&x=0&y=0 [6/18/10]

8 – ustreas.gov/offices/domestic-finance/debt-management/interest-rate/real_yield.shtml [6/18/10]

8 – ustreas.gov/offices/domestic-finance/debt-management/interest-rate/real_yield_historical.shtml [6/18/10]

9 – treasurydirect.gov/instit/annceresult/press/preanre/2000/ofm11200.pdf [1/12/00]

Times have changed – and so have financial advisors. Today, people don’t want financial advice from a salesman. Instead, they want a relationship with a financial professional who is candid, trustworthy and thoroughly educated, who provides personalized financial consulting for each client.

That search often leads them to a fee-based or fee-only financial advisor or a Registered Investment Advisor.

A pleasant alternative to Wall Street. A paradigm shift is happening, and the traditional brokerage houses are lagging. While old-school “stock brokers” have gone the way of the wooly mammoth, you still have a sales-first mentality in place at big banks and Wall Street brokerages. If you’re employed by one of them, the mantra is simple: make a sale, earn a commission.

As they try to serve their clients, these “wirehouse” brokers regularly contend with sales quotas and the inherent potential for conflicts of interest. It wears on them: a 2010 survey revealed that only 15% were “very satisfied” at their firms, and another 20% wanted to leave within two years.¹

Given the tarnished reputations of so many giant banks and brokerages, it isn’t surprising that consumers are turning elsewhere for financial advice. Here are three popular destinations.

A fee-based financial advisor has structured his or her practice to promote earning income from fees instead of commissions. The emphasis is on advice. An independent, fee-based financial advisor also has freedom – freedom to choose the most appropriate products and services for your risk tolerance and investment goals. (More about that in a moment.)

Fee-only financial advisors earn no commissions at all. They derive 100% of their income from client fees – annual management fees or hourly or per-project consulting fees. With this compensation arrangement, you know that a fee-only advisor is available to help you address myriad issues in your financial life, not simply those that could lead to a commission.

A Registered Investment Advisor (RIA) usually works to manage the assets of high net worth investors. An RIA receives management fees and does not receive commissions. The management fees usually represent a percentage of the assets a client has invested. RIAs have to register with the Securities and Exchange Commission and any states in which they operate.² Individuals, couples, families and institutions with sizable wealth management concerns often turn toward RIAs.

Even as the market has struggled since the end of 2007, independent Registered Investment Advisors have gained a greater share of assets under management in the U.S.³

People need unbiased advice. That’s probably the #1 reason why people seek an independent financial advisor. They know that the advice they receive is not influenced by sales incentives or directives. There is often a candor to the discussion that may not always be present at a bank or a brokerage.

People want more investment choices. An independent financial advisor is free to offer investments from dozens, maybe hundreds of companies, rather the investments of a single company. In addition, that independent advisor can unhesitatingly tell you if an investment is or isn’t appropriate for your financial situation.

This is the age of independence. When it comes to the financial future, no one wants to be “sold” – just advised. That’s why we’ve seen the rise of a new kind of financial advisor who puts the client relationship first.

This material was prepared by Peter Montoya Inc., and does not necessarily represent the views of the presenting Representative or the Representative’s Broker/Dealer. This information should not be construed as investment advice. Neither the named Representative nor Broker/Dealer gives tax or legal advice. All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy. The publisher is not engaged in rendering legal, accounting or other professional services. If other expert assistance is needed, the reader is advised to engage the services of a competent professional. Please consult your Financial Advisor for further information.. www.petermontoya.com, www.montoyaregistry.com, www.marketinglibrary.net

Citations

1 – bankinvestmentconsultant.com/news/pirker-aite-wirehouse-advisors-2667209-1.html [6/1/10]

2 – investopedia.com/articles/financialcareers/06/whatisaRIA.asp [6/11/10]

3 – fa-mag.com/fa-news/5548-independents-make-headway-despite-downturn.html [5/10/10]

Medicare spending cuts

Not surprisingly, the concerns of retirees and seniors generally center on potential cuts in Medicare benefits. At the outset, the new legislation does not affect Medicare’s guaranteed benefits. However, a goal of the new health-care legislation is to slow the increasing cost of Medicare premiums paid by beneficiaries, and to ensure that Medicare will not run out of funds. To help achieve these goals, cuts in Medicare spending will occur over a ten-year period, beginning in 2011, particularly targeting Medicare Advantage programs––Medicare programs provided through private insurers but subsidized by the federal government. These cuts could reduce or eliminate some of the extra benefits Medicare Advantage plans may offer, such as dental or vision care, and some insurers may choose to increase premiums. But Medicare Advantage plans cannot reduce primary Medicare benefits, nor can they impose deductibles and co-payments that are greater than what is allowed under the traditional Medicare program for comparable benefits. And, some of the federal funds previously earmarked for Medicare will be reallocated to doctors and surgeons as an incentive to treat Medicare patients.

Medicare Part D drug program changes

Some Medicare Part D beneficiaries are surprised to find that they have to pay for the entire cost of prescription drugs out-of-pocket after reaching a gap in their annual coverage, referred to as the “donut hole.” Currently, if you’re a Medicare Part D beneficiary, you may pay up to an additional $3,610, out-of-pocket, for medicines after reaching an initial threshold of $2,830 in total prescription drug costs (including Part D payments, beneficiary co-pays, and deductibles). But, beginning in 2010, beneficiaries who fall in the donut hole will receive a $250 rebate, and, in 2011, they will receive a 50% discount on brand-name drugs. By 2020, a combination of federal subsidies and a reduction in co-payments will completely eliminate the donut hole. However, individuals with annual incomes greater than $85,000, and couples with incomes exceeding $170,000, will see their Part D premiums increase as the federal subsidy offsetting some of the cost of Medicare Part D premiums is reduced.

Benefits added to Medicare

The leglislation also improves some traditional Medicare benefits. For example, Medicare beneficiaries will receive free wellness and preventive care beginning in 2011.

Increased access to home-based care

Often, people with disabilities or illnesses would rather receive care at home instead of at a hospital or nursing home. The new health-care reform law provides for programs and incentives for greater access to in-home care. The Community Living Assistance Services and Support program (CLASS) will be established sometime after 2011 (depending on when final regulations are published) as a voluntary insurance program, financed through payroll deductions and available to all working adults who choose to participate. This national program allows participants with functional limitations to maintain their personal and financial independence and live in the community by providing a cash benefit of at least $50 per day (after a five-year vesting period) for nonmedical services, such as home-care services, family caregiver support, and adult day-care or residential-care services. In order to qualify, a participant must need help with at least two activities of daily living, such as eating, toileting, transferring, bathing, dressing, or continence.

Also in 2011, the Community First Choice Option will be available to states to add to their Medicaid programs. This option will provide benefits to Medicaid-eligible individuals for community-based care instead of placement in a nursing home. In addition, the State Balancing Incentive Program, to be established in 2011, will provide increased federal funds to qualifying states that offer Medicaid benefits to disabled individuals seeking long-term care services at home, or in the community, instead of in a nursing home. The Independence at Home demonstration program, available in 2012, will be a test program that provides Medicare beneficiaries with chronic conditions the opportunity to receive primary care services at home. That is intended to reduce costs associated with emergency room visits and hospital readmissions, and generally improve the efficiency of care.

Prepared by Forefield Inc, Copyright 2010

The Heritage Foundation did a comprehensive timeline that is conservatively leaning, but goes into much more details about he proposed legislations.  The Heritage Foundation is a conservative think tank, promoted by many on the right.  The focus on the tax ramifications, individual and small business mandates, as well as new government programs and controls.  Heritage Foundation Health Reform Timeline

Lastly, I have attached a report from the Kaiser Institute.  They are a independant research group the does research on health care related topics.  They have no political agenda and are prohibited from any lobing activites.  I spoke with the President about a year ago and he’s a sharp guy who I think had some great ideas.  Unfortanetly, we didn’t listen to him.  Kaiser Health Reform Timeline

Me, Lori, Grandma, Angie, Dad, Mom (front to back, left to right)

For those of you that missed my abcense at the end of last month, may not have known I was back in Iowa for my Grandmothers 90th birthday.  It’s amazing to think of the things that she’s witnessed and people lives that she has touched.  She was alive and can remember the Great Depression, World War II and countless other events. 

Helen Stille was born in a little farm house 10 miles outside of both Plainfield and Nashua, IA.  Plainfields population is currently 427, while Nashua, which hosted the birthday bash is a spralling Metropolis of 1,517.  I would imagine that may of our local gated communities have more residents then these two cities combined.  In her 90 years on this earth Grandma Stille has never resided more then 1 mile from her current residences.  Her and my late grandfather farmed over 400 acres of rural Iowa for some 40 years, until my Uncle Don took over the farming duties a few years ago. 

The Iowa Track Suit

In attendance at the party was over 250 guest, some friends, some family and some aquantances she had made along the years.  She was know for making everyone feel at home in that Grandmotherly way that only few people can.  I was told by many that they referred to her as Grandma Stille, even though there was only a few of us lucky one that are genetic grandchildern.  She has been know to make special homemade egg noodles that are required for every church potluck. 

On a side, it was really cold!  The temperature when we arrived in Minneapolis was in the low twenties and quickly fell into the teens.  Lori insisted on making me excersice so we walked laps around the hotel, until even she couldn’t take the cold.  I attached a picture of her in her Iowa workout gear below.  All in all, it was alot of fun and a truely special occasion.  I hope we are all so lucky as Grandma Stille. 

Gold, and to a lesser extent silver, are unusual because they’re commodities but also have been used as a medium of exchange for centuries. Though paper currency is no longer pegged to the price of gold, much of the world’s gold supply is still held in reserves in the international monetary system. Precious metals are also valued for their many scientific and industrial applications, and their prices are driven not only by supply and demand but by political and economic factors, though each metal may react differently to those factors.

Why invest in precious metals?
They can help diversify a portfolio.

Because their price movements typically are not highly correlated with those of other types of investments, such as stocks or bonds, having a small portion of your portfolio devoted to precious metals may be able to help balance the performance of your other assets.
They may serve as an inflation-fighter

Precious metals, especially gold, are viewed by some investors as a way of hedging against rising prices or currency fluctuations. When inflation erodes the purchasing power of a currency–for example, if the dollar weakens relative to the euro–gold prices tend to rise. Because of this belief, gold often becomes more popular during periods of economic decline or political uncertainty.

Tradeoffs as an investment
They may experience high volatility

Precious metals is a small sector and, as a result, prices can and often do change dramatically. This volatility creates opportunities for sizeable returns but also for dramatic losses.
Geographical economic/political risks can affect their prices dramatically

Sources of precious metals are concentrated in certain areas of the world, subjecting them to special risks that include:

• Unpredictable economic and political developments
• Increased environmental costs
• Changes in tax and mining laws
• Trade restrictions between countries

Metals markets involve special knowledge

The fact that precious metals investments tend to move independently of other markets means that you cannot rely on your knowledge of stocks or bonds to be a successful investor in gold or precious metals. Depending on how you choose to invest in them, understanding how those markets work may require extra attention on your part as well as experienced advice.
Bullion requires special care

Unless you invest through a dealer that holds your bullion for you, storage and shipping will require special care to prevent theft or loss. Keep your precious metals in a bank’s safe deposit box or a safe in your home. Always ship precious metals by registered mail.

Caution:  If you’re considering investing in bullion, make sure you investigate the dealer thoroughly to be sure you are working with a reputable firm. This is especially true if you are considering buying online or by mail.

They are subject to the tax rate for collectibles

Net capital gains from selling precious metals (which are considered collectibles under tax law) are taxable at a maximum rate of 28 percent.

Securities vs. physical assets

Unlike most investments other than real estate, you can invest in gold indirectly by buying securities whose value is based on the price of gold, or by owning physical assets such as gold bullion or coins. (Gold jewelry is typically mixed with other metals and is valued in much the same way as a gem or collectible.) Most investors in other metals prefer to invest in securities rather than physical assets because of the challenges of storage. For the sake of simplicity, this discussion will focus on gold, as it is the metal of most widespread interest to individual investors, but many of the same principles will apply to other metals-oriented securities.
Securities

As the financial community has developed new ways to invest indirectly in gold and precious metals, they have become increasingly popular as a way to diversify portfolios. Some of the ways to incorporate gold as a part of your portfolio include stocks in mining companies. An investment in a mining company will depend in part on the fluctuating price of gold. If gold prices are up, mining companies can earn a better return on their substantial investments in land and equipment; if gold prices are down, mining companies will suffer. However, there also are many other factors to consider. As with any stock, company strategy, management and resources will affect the value of your investment, as will the market’s expectations about the direction of gold prices, the cost of mining it, and worldwide supply. In addition, the geopolitical climate may play a role.

Caution:  Because of the many factors that can affect share value, investments in gold mining stocks can be more volatile than the price of gold itself.

Gold mutual funds and exchange-traded funds (ETFs)

These can be a good way to get broad exposure to gold or precious metals as an asset class. However, they require careful investigation to determine just how a given fund invests in gold. Some invest in shares of mining companies, some may invest in commodity futures contracts, some may invest partly in gold stocks and partly in bullion, and some may track an index of gold stocks. Some exchange-traded funds may own bullion exclusively, and their returns are likely to reflect the price of gold more closely than those of other funds. If you’re considering investing in a gold fund, be sure to obtain and read the prospectus available from the fund before investing so you can carefully consider its investment objectives, risks, fees, and expenses.
Options, futures and derivatives

As with any options or futures contracts, these represent a contract to deliver a given quantity of gold at a specific price by a specific time. They can be traded on margin.

Caution:  If you’re considering options or futures as an addition to your portfolio, you should bear in mind that they generally require careful research and attention to market movements. Essentially, your investment depends on your being right not only about whether the value of the underlying instrument will rise or fall, but when that will happen and by how much. As a result, a gold-related option or futures contract is likely to involve greater consideration and care than investing in a stock or gold bullion. They are not suitable for all investors.

Warrants

A warrant gives the buyer the right to buy a precious metal at a given price by a given date. Unlike options or futures, however, they can usually be sold back to the issuer before their expiration date.
Bullion

You can invest in bullion in the form of bars, wafers, ingots, and coins. (Numismatic coins–old and rare coins traded by collectors–are more properly viewed as collectibles.)

Coins are the most portable, popular and liquid form of bullion. Bullion coins are legal tender coins issued by government mints and unlike numismatic coins, they have no value beyond their metal content. They generally come in one once, half-ounce, quarter ounce, and one-tenth ounce sizes. Several countries produce bullion coins. Examples of gold bullion coins include the American Eagle, the Canadian Maple Leaf, and the South African Krugerrand. Silver and platinum bullion coins are also produced.

You may take physical delivery of bullion or the seller may hold it on your behalf, issuing you a certificate to confirm ownership. Bullion can be purchased through large banks, brokerage firms, precious metal dealers, and coin dealers.

The value of bullion is determined by its weight and content or purity, as well as by the metal’s spot price (the cash price for metals that are to be delivered immediately), which fluctuates daily.

Tip:  Before you invest in bullion (other than bullion coins), have the metal assayed (i.e., certified for weight and purity).

Prepared by Forefield Inc, Copyright 2010

The term “structured products” is used to describe a broad assortment of financial instruments that generally combine derivatives with either securities or other derivatives to create what is essentially a prepackaged investment strategy in a single product. Generally, a structured product offers a way to gain exposure to a given type of asset without actually owning that asset.

Most structured products are debt instruments issued by investment banks or other large financial institutions. Like ordinary bonds, they have a fixed maturity date. Structured products as an asset class originally were used as a way to tailor a financial instrument’s risk/reward profile to an individual institutional investor’s specific need that couldn’t be met with existing investment vehicles. However, structured products also have been developed that are geared to individual investors. A structured product may be registered with the SEC, listed on a national securities exchange, and traded in the secondary markets as a stock or bond would be (in such a case, it may be known as an exchange-traded note or ETN).

Structured products are not the same as structured investment vehicles (SIVs), which typically function as a sort of credit arbitrage fund, borrowing money by issuing short-term commercial paper and buying bonds (often asset-backed securities) with the proceeds.

How do structured products work?

It depends on the type. Generally, a structured product typically includes an income component–for example, a zero-coupon bond–and a derivative component linked to a different type of asset, using options, futures, swaps or other derivatives to try to achieve its desired return or investment goal. Generally, the debt component of a structured product provides for periodic payments of interest, while the derivative component determines the amount paid at maturity; however, it can also be the other way around. Structured products are often designed to try to protect an investor’s principal while enhancing return or hedging risk with the derivatives component.

The derivative component in a structured product might be based on interest rates; a specific equity or bond; a basket of securities; a stock or bond index or indexes; an individual commodity or basket of commodities; a commodities index; an individual currency or basket of currencies; or the creditworthiness of a security or basket of securities. As a result, the returns of a structured product are highly sensitive to changes in the value of the underlying asset(s), index(es), interest rate(s), or cash flows.

Caution:  As with any debt, any guarantees a structured product offers depend on the financial solvency of the institution issuing that debt. For example, Lehman Brothers offered notes with “100 percent principal protection.” However, that protection represented unsecured debt based only on Lehman Brothers’ solvency. After the firm went bankrupt, those notes traded in many cases for far less than the amount invested, and their holders were on the same footing as other creditors to which Lehman owed money.

The general terms of a structured product are established before it is issued and do not change over the investment’s life. In some cases, a structured product may have a credit rating from one or more of the various ratings agencies that evaluate other debt instruments.

Tip:  Remember that credit ratings typically are based on the creditworthiness of the issuer and its ability to meet its obligations under the terms of the product. The credit rating does not reflect any potential market risk associated with the product itself.

Examples of structured products

The following are examples of structured products (some of which may overlap with one another):
Principal-protected notes

A principal-protected note is designed to return the principal invested when the note matures, plus (or minus) a return based on the value of whatever underlying assets the note is linked to. However, investors need to understand that the principal protection applies only at maturity, not if the note is sold before that date. Also, a note may pay its entire return at maturity rather than make periodic payments of interest.

Caution:  Some PPNs offer partial or contingent principal protection, which is limited or comes into play only under certain circumstances. Make sure you understand what type of principal protection a note offers and under what circumstances.

Example(s): XYZ Bank issues a principal-protected note that has a face value of $10,000. The note includes a zero-coupon bond and an option on an exchange-traded fund that mimics the Nasdaq Composite Index, which is at 1,400 when the note is issued. At maturity, the zero-coupon bond is redeemed to cover the repayment of principal. The call option will be exercised if the Nasdaq’s value is high enough to justify doing so, and the note will pay out that return. If not, the option will expire worthless, and you receive nothing beyond the repayment of principal. (This is a hypothetical example and is not intended to reflect the performance of any specific investment.)

Market-linked notes and CDs

These are notes and CDs whose return is linked to that of a specific company stock (an equity-linked note or CD), market index (an index-linked note or CD), or other derivative. For example, an inflation-linked note or CD’s return is based on the rate of inflation. A commodity-linked note or CD is linked to the performance of one or more commodities; a currency-linked note or CD is based on the performance of one or more currencies. A credit-linked note or CD’s return is linked to an embedded credit default swap covering a given credit risk.

Example(s): ABC Bank offers a $10,000 market-linked note that offers to pay the greater of a 5 percent total return after three years, or one-half of the S&P 500′s return over that time as calculated on a quarterly basis (with a cap of 7 percent). If the S&P is up by 10 percent for the quarter, the interest due at maturity would be increased by 5 percent. If it is up by 18 percent, the increase would be limited to 7 percent. If the S&P experiences a 7 percent loss for the quarter, the interest due might be reduced by 7 percent. (This is a hypothetical example and is not intended to reflect the performance of any specific investment.)

A market-linked note may or may not have the principal protection discussed above. A market-linked CD also may have FDIC insurance that guarantees investors will get their principal back when the CD matures. However, the FDIC guarantee does not apply to a CD sold before maturity; if the market to which a CD is linked declines sharply, you could still suffer a loss of principal if you tried to sell before maturity. Also, CDs with FDIC insurance often offer a lower rate of return than similar products without it. Market-linked CDs are subject to the same dollar limits on the amount of FDIC insurance as other CDs.
Reverse convertibles

A reverse convertible represents unsecured corporate debt that gives the issuer the right (but not the obligation) to repay investors’ principal at maturity in shares of a company’s stock (typically not that of the issuer). Repayment in stock typically occurs if the designated stock’s price is lower at maturity than it was when the reverse convertible was issued, or if it falls below a specified level during the term of the convertible.

For the issuer, a reverse convertible serves a purpose much like that of a put option. By allowing the issuer to repay the lender with stock if the price of that stock falls below a certain level, a reverse convertible gives the issuer the potential to reduce its cost for that debt. Because the investor’s return depends on the value of the stock to which it is linked, and because of the uncertainty involved, coupon rates on reverse convertibles are typically relatively high.

Caution:  If the company’s stock price drops below the level specified by the terms of the reverse convertible, at maturity investors may receive shares of stock that are worth much less than the value of the original investment.

Example(s): Bill purchases a $10,000 one-year reverse convertible linked to the stock price of ABC Corp., which is at $40 a share when the convertible is issued. The convertible’s coupon rate is 20 percent. If ABC’s price when the convertible matures is $40 or higher at maturity, Bill will receive $12,000 (his $10,000 principal plus 20 percent interest). However, if ABC’s price falls to $20 by the time the convertible matures, the convertible’s terms allow the issuer to pay Bill the $2,000 owed in interest plus $5,000 worth of stock (the $10,000 principal divided by the $40 original stock price = 250 shares currently worth $20 each = $5,000). Instead of the $12,000 Bill had anticipated at maturity, he receives $7,000. (This is a hypothetical example and is not intended to reflect the performance of any specific investment).

Return-enhanced notes

Some notes use options and/or leverage to try to enhance the note’s return. However, gains may be subject to a cap. Also, a return-enhanced note may provide no protection against a decline in the value of the underlying asset or index on which the derivative component is based, meaning you could lose principal if the market to which a note is linked declines.

Example(s): ABC Bank issues a return-enhanced three-year note that offers double the return of the S&P 500. However, the note does not offer principal protection, and sets a limit of 17 percent on the potential return from the index derivative. If the S&P’s return over the three years is 6 percent, the investor would receive both principal and a 12 percent return at maturity. If the S&P returned 10 percent, the investor would still receive the principal, but the excess return would be limited to 17 percent instead of 20 percent. And if the S&P suffers a loss of 2 percent, the investor would receive the principal minus the negative 2 percent return. (This is a hypothetical example and is not intended to reflect the performance of any specific investment.)

How can structured products be used?

• To provide income, as with other debt instruments.
• As an alternative to investing directly in a particular asset class.
• As a convenient way to adopt a complex investing strategy while investing in a single financial instrument. A structured product can streamline the process of investing in multiple asset classes, and may be more efficient than investing in its various components individually.
• To provide some exposure to the potential rewards from the asset class to which returns are linked, and in some cases, the potential for at least some downside protection.

Advantages

• For institutional investors, a structured product can provide a customized solution to an investing need. A product can be structured so that its maturity and underlying assets are tailored specifically to fit into an overall portfolio.
• Depending on the underlying assets, guarantees offered, and method of structuring payment, a structured product may offer an interest or coupon rate that is substantially higher than the prevailing market rate for other debt instruments. However, it’s important to have a complete understanding of the specific conditions that govern payment of both interest and principal for a specific structured product, as they can affect both overall return and the amount an investor receives at maturity.
• A structured product can be a convenient way to get at least partial exposure to the potential returns of one or more asset classes without actually owning them. (However, you also need to understand the potential risks involved with those asset classes, and the extent to which payment of your principal and interest could suffer from them.)

Tradeoffs

• Because of its highly specialized nature, a structured product may be thinly traded, and there is no guarantee a structured product will be marketable if you try to sell it before its maturity date. Also, even for a principal-protected product, that principal protection applies only at maturity; if you sell it before then, you could have a loss of principal or be unable to fully realize the projected return on the investment. As a result, structured products are generally most suitable for investors with a time horizon that matches the individual investment’s maturity date, rather than an investor who needs a high degree of liquidity.
• Any guarantee associated with a structured product–for example, the principal protection of a principal-protected note–is generally subject to the financial solvency of the issuer, as with any debt instrument. However, in some cases, such as some structured CDs, the product may come with FDIC insurance that guarantees the return of principal at maturity (though the FDIC coverage does not guarantee return of your principal if you try to sell a structured CD before maturity).
• Because structured products in general are not standardized, they can be challenging to understand and compare with other products–even other structured products. Some may be relatively simple; others can be quite complex. The risks involved depend not only on the financial solvency of the issuer, but on the specific financial instruments on which a given structured product is based. For example, the risks involved with a derivative based on an equity index will be different from the risks involved with a structured product’s income component; they may also be different from a similar derivative that is not part of a structured product.
• Because there is no standardized method for pricing structured products, their fees may be challenging to understand. For example, in some cases, fees may be embedded in the pricing of the options associated with a given product. Also, a highly customized structured product may have higher fees associated with that customization.
• Returns from a structured product may not match that of the underlying asset. Don’t assume that because you’ve invested in a particular asset previously that a structured product behaves in the same way. Also, there may be a limit on the upside potential return from the underlying asset, especially if a product also provides principal protection or the interest rate is substantially above the market rate.
• A specific structured product may require investors to commit a minimum investment for a specific term. Again, consider whether your time horizon is appropriate for a given product before investing.

Evaluating a structured product

There are many questions to consider when deciding whether to invest in a structured product. Some have to do with the investment itself, such as:

• What is the term of this product?
• What underlying assets does it involve? Does it include options, futures, or other derivatives?
• What types of risk are associated with those underlying assets?
• What interest rate does it pay? In general, the higher the interest rate offered by a structured product, the more likely it is to be associated with highly volatile underlying assets, and the greater the potential risk to principal.
• Does this product offer principal protection at maturity?
• What underlies any guarantee of return or safety of principal?
• Who issues the structured product, and what is their credit status?
• Is there a cap on the return that a structured product offers? If the product offers returns based on an index, will that return be limited if the index moves beyond a certain level?
• Can the results promised by this product be duplicated cost-effectively in a different way?

Other factors to consider involve your liquid net worth, tax status, risk profile, age, and investment experience, as well as how the structured product would fit into your existing portfolio.

Caution:  Information about a structured product’s characteristics and risks are included in its prospectus; you should obtain and read a copy before investing so you can carefully consider all significant factors.

Tax issues related to structured products

• Even though a structured product’s returns may be linked to equity returns, those payments do not necessarily qualify for preferential tax treatment. Depending on the structure, they may be taxed as interest, not at the (generally more favorable) rate for capital gains or qualified dividends.
• In some cases, you may have to report the interest on your structured product as original issue discount (OID) taxable interest in the current year’s tax return, even if the interest payment is not actually made until maturity. Be sure to understand how a structured product will be taxed before purchasing.

Prepared by Forefield Inc, Copyright 2010

What are the general rules for funding Roth IRAs?

There are three ways to fund a Roth IRA–you can contribute directly, you can convert all or part of a traditional IRA to a Roth IRA, or you can roll funds over from an eligible employer retirement plan (more on this third method later).

In general, you can contribute up to $5,000 to an IRA (traditional, Roth, or a combination of both) in 2010. If you’re age 50 or older, you can contribute up to $6,000 in 2010. (Note, though, that your contributions can’t exceed your earned income for the year.)

But your ability to contribute directly to a Roth IRA depends on your income level (“modified adjusted gross income,” or MAGI), as shown in the chart below:

What’s changed?

Prior to 2010, you couldn’t convert a traditional IRA to a Roth IRA (or roll over non-Roth funds from an employer plan to a Roth IRA) if your MAGI exceeded $100,000 or you were married and filed separate federal income tax returns.

In 2006, however, President Bush signed the Tax Increase Prevention and Reconciliation Act (TIPRA) into law. TIPRA repealed the $100,000 income limit and marital status restriction, beginning in 2010. What this means is that, regardless of your filing status or how much you earn, you can now convert a traditional IRA to a Roth IRA. (There’s one exception–you generally can’t convert an inherited IRA to a Roth. Special rules apply to spouse beneficiaries.)

And don’t forget your SEP IRAs and SIMPLE IRAs. They can also be converted to Roth IRAs (for SIMPLE IRAs, you’ll need to participate in the plan for two years before you convert). You’ll need to set up a new SEP/SIMPLE IRA to receive any additional plan contributions after you convert.

What hasn’t changed?

TIPRA did not repeal the income limits that may prevent you from making annual Roth contributions. But if your income exceeds these limits, and you want to make annual Roth contributions, there’s an easy workaround. You can make nondeductible contributions to a traditional IRA as long as you have earned income at least equal to the contribution, and you haven’t yet reached age 70½. You can simply make your annual contribution first to a traditional IRA, and then take advantage of the new liberal conversion rules and convert that traditional IRA to a Roth. There are no limits to the number of Roth conversions you can make. (You’ll need to aggregate all of your traditional IRAs when you calculate the taxable portion of the conversion–more on that below.)

Calculating the conversion tax

When you convert a traditional IRA to a Roth IRA, you’re taxed as if you received a distribution with one important difference–the 10% early distribution tax doesn’t apply, even if you’re under age 59½. (The IRS may recapture this penalty tax, however, if you make a nonqualified withdrawal from your Roth IRA within 5 years of your conversion.)

If you’ve made only nondeductible (after-tax) contributions to your traditional IRA, then only the earnings, and not your own contributions, will be subject to tax at the time you convert the IRA to a Roth. But if you’ve made both deductible and nondeductible IRA contributions to your traditional IRA, and you don’t plan on converting the entire amount, things can get complicated.

That’s because under IRS rules, you can’t just convert the nondeductible contributions to a Roth and avoid paying tax at conversion. Instead, the amount you convert is deemed to consist of a pro-rata portion of the taxable and nontaxable dollars in the IRA.

For example, assume that your traditional IRA contains $350,000 of taxable (deductible) contributions, $100,000 of taxable earnings, and $50,000 of nontaxable (nondeductible) contributions. You can’t convert only the $50,000 nondeductible (nontaxable) contributions to a Roth, and have a tax-free conversion. Instead, you’ll need to prorate the taxable and nontaxable portions of the account. So in the example above, 90% ($450,000/$500,000) of each distribution from the IRA in 2010 (including any conversion) will be taxable, and 10% will be nontaxable.

You can’t escape this result by using separate IRAs. Under IRS rules, you must aggregate all of your traditional IRAs (including SEPs and SIMPLEs) when you calculate the taxable income resulting from a distribution from (or conversion of) any of the IRAs.

Special deferral rule for 2010 conversions only

But even if you have to pay tax at conversion, TIPRA contains more good news–if you make a conversion in 2010, you can take advantage of a special deferral rule that applies only to 2010 conversions. You can report half the income from the conversion on your 2011 tax return and the other half on your 2012 return. Or you can instead elect to report all of the income from the conversion on your 2010 tax return.

For example, if your only traditional IRA contains $250,000 of taxable dollars (your deductible contributions and earnings) and you convert the entire amount to a Roth IRA in 2010, you can report half of the resulting income ($125,000) on your 2011 federal tax return, and the other half ($125,000) on your 2012 return. Or you can instead report the entire $250,000 on your 2010 tax return.

Should you use the special 2010 deferral rule? The answer depends in part on your tax rate in 2010 versus what you think your tax rates will be in 2011 and 2012. Keep in mind that tax rates are scheduled to increase in 2011, if the Bush tax cuts are allowed to expire. The top tax rate will increase to 39.6% in 2011, up from 35% in 2010.

And speaking of employer retirement plans…

You can also roll over non-Roth funds from an employer plan (like a 401(k)) to a Roth IRA. Prior to 2010, the income limits and marital status restrictions also applied to employer plan rollovers to Roth IRAs (commonly referred to as conversions). As with traditional IRA conversions, these restrictions have been removed beginning in 2010, and now anyone can roll over funds from an employer plan to a Roth, regardless of income level or marital status.

Like traditional IRA conversions, the amount you convert will be subject to income tax in the year of conversion (except for any after-tax contributions you’ve made). But the good news is that the special deferral rule discussed earlier also applies to amounts you roll over from an employer plan to a Roth IRA in 2010. You can report half of the conversion income on your 2011 tax return, and the other half on your 2012 return, or you can instead elect to report all of the income on your 2010 tax return. And even non-spouse beneficiaries can roll over inherited employer plan funds to a Roth IRA, as long as it’s done in a direct (not 60-day) rollover.

Is a Roth conversion right for you?

The answer to this question depends on many factors, including your current and projected future income tax rates, the length of time you can leave the funds in the Roth IRA without taking withdrawals, your state’s tax laws, and how you’ll pay the income taxes due at the time of the conversion.

And don’t forget–if you make a Roth conversion and it turns out not to be advantageous (for example, the value of your investments declines substantially), IRS rules allow you to “undo” the conversion. You generally have until your tax return due date (including extensions) to undo, or “recharacterize,” your conversion. For most taxpayers, this means you have until October 15, 2011, to undo a 2010 Roth conversion.

A financial professional can help you decide whether a Roth conversion is right for you, and whether you should take advantage of the special deferral rule for 2010 conversions.

Prepared by Forefield Inc, Copyright 2010

Federal estate tax repeal

In 2009, the top estate tax rate was 45%, and estates received an exclusion of $3.5 million, (meaning that up to $3.5 million of assets were exempt from estate tax). However, as part of the tax cuts initiated in 2001, the estate tax is repealed for 2010 but is scheduled to return in 2011, albeit with a reduced $1 million exclusion and an increased top tax rate of 55%.

It’s possible Congress may reinstate the estate tax retroactively, that is, back to January 1, 2010, in which case heirs who already received their inheritance may have to reimburse the estate to enable it to pay the reinstituted estate tax. On the other hand, heirs who haven’t received their inheritance may have to wait for their gifts until the likely challenges to the constitutionality of instituting the estate tax retroactively have been resolved in the courts. In any case, until these issues have been cleared up, it may be wise for executors and trustees of estates in 2010 to retain sufficient assets in the estate to pay a potential estate tax.

What should you be doing about the estate tax? Review and, if necessary, revise your estate planning documents, like wills and trusts. For example, many wills and trusts drafted with an estate tax in mind leave an amount of assets up to the applicable exclusion amount to children, with the balance going to the surviving spouse. However, in 2010, since there is no estate tax, there also is no exclusion. Depending on how documents are worded, this could create a situation where all of the assets pass to the children with nothing going to the surviving spouse, or vice versa. Thus, it’s important that your estate planning documents be reviewed to ensure that your intentions are actually carried out.

Generation-skipping transfer tax repeal

The generation-skipping transfer tax is a federal tax on transfers of property made, either during life or at death, to an individual who is more than one generation below you, such as your grandchild. The tax, also repealed for 2010, had a $3.5 million exemption in 2009 and a top tax rate of 45%. However, like the estate tax, the GST tax is also scheduled to be reintroduced in 2011, with a $1 million exemption and top tax rate of 55%.

What should you do about the GST tax in 2010? The repeal of the generation-skipping transfer tax in 2010 means the elimination (albeit temporarily) of one of the taxes on gifts made during life. The other applicable tax is the gift tax, which provides a $1 million lifetime exemption and a top tax rate of 35% in 2010. The gift tax rate is scheduled to increase in 2011 to 45%. Thus, assets can be gifted in 2010, either directly or through a trust, to grandchildren and younger generations while accounting only for the gift tax, unless, of course, the GST tax is reinstated, retroactively or otherwise.

Step-up in basis repeal

Along with the 2010 repeal of the estate tax and GST tax is the partial elimination of the step-up in basis rule. In 2009, the tax basis of property in a decedent’s estate was generally increased, or stepped up, to the asset’s fair market value as of the decedent’s date of death. However, in 2010, the cost basis of estate assets is equal to the lesser of the decedent’s adjusted cost basis or the fair market value of the assets on the date of the decedent’s death. This means that estate assets likely will retain the decedent’s cost basis. Absent Congressional action to the contrary, the modification of the step-up in basis rule is temporary, with the full step-up in basis rule scheduled to return in 2011.

The law does allow estates to exempt up to $1.3 million of gain (generally, the difference between the decedent’s cost basis in property and its date-of-death fair market value), which executors and trustees may allocate among estate assets. Also, an additional $3 million of gain may be exempted for assets passing to a surviving spouse. This means that estates in 2010 may be able to increase the cost basis of assets up to $4.3 million.

The modification of step-up in basis can lead to some issues for estate administrators. For example, executors or trustees of estates larger than $1.3 million will have to figure out which assets should receive the step-up in basis. This is especially important for heirs and beneficiaries other than a surviving spouse.

In addition, heirs who want to sell inherited assets not covered by the step-up in basis will have to try to figure out the decedent’s cost basis in order to calculate potential capital gain. For example, assume you inherit shares of XYZ Company stock in 2010. You sell them and now have to determine whether you owe a capital gains tax. First, you need to know if any of the $1.3 million step-up in basis applies to these shares. If your XYZ stock didn’t receive a basis step-up, you’ll have to figure out the cost basis of your inherited stock. Arriving at the cost basis of inherited property may prove difficult, if not impossible, especially if the decedent didn’t keep accurate purchase records, or if the stock split over the years, or if the decedent received some of the stock by gift or inheritance.

What’s next?

Most observers believe Congress will restore these taxes retroactively sometime in 2010. There are a number of proposals under consideration and exactly what plan will be adopted and when are important questions that remain unanswered.

Another potential issue surrounds the constitutionality of Congress reinstating the estate tax and/or GST tax retroactive to January 1, 2010. Congress has imposed taxes retroactively in the past and when challenged, taxpayers have lost the majority of the time. Whether Congressional reinstatement retroactive to January 1 will withstand a challenge is conjecture at this point since Congress has yet to act, but the possibility of reinstatement of either or both taxes further adds to the estate planning conundrum in 2010.

And don’t forget to consider possible state taxes. Currently, 16 states plus the District of Columbia impose their own estate and/or inheritance tax, separate from any federal estate tax.

Despite all of this uncertainty, do not put off making or reviewing your estate plan. Not having an estate plan, or having an outdated plan, could mean your intentions aren’t carried out and could cost your surviving spouse and heirs.

Prepared by Forefield Inc, Copyright 2010

You own a car or are about to purchase one. If you drive, auto insurance is a fact of life, especially if you live in one of the many states that requires insurance for each automobile. Insurance companies provide auto insurance through a personal auto policy (PAP).

Each state has its own version of the PAP, so discussing every state variation is impossible in this short space. Within this, and all discussions on auto insurance, generalizations will be made based on the “standard” insurance policy form. Your insurance representative can give you more information on your state’s specific auto insurance practices. Auto insurance isn’t a “should I or shouldn’t I” proposition in most states. Most states have what are called “financial responsibility” laws to ensure that you’re able to pay a liability claim against you. These laws typically require you to purchase a minimum amount of liability insurance. Assuming that you want to be a law-abiding citizen, the only real choices for auto insurance are what type of insurance you should buy and how much. There are many options. An in-depth discussion of policy coverage options is located in Premiums and Coverage. A brief discussion of these options follows. In addition to coverage options, there are also general policy options. These include setting the policy period (including canceling the policy) and deciding how you want to make the premium payments.

The personal auto policy
In general

The PAP is broken into several sections. The first four sections cover the four main coverages you can purchase with a PAP. The other sections cover various provisions and duties under the policy.
Part A–liability coverage

Liability coverage is the single largest auto insurance concern. Compared to collision coverage, which is limited to the value of your vehicle, liability claims for pain and suffering can be virtually limitless. The Part A– Liability Coverage section of the PAP separates liability coverage into two sections: bodily injury coverage and property damage coverage.

Liability coverage insures you against injuries you cause to other people and property in an automobile accident. This is one area in which you do not want to be underinsured.
Part B–medical payments coverage

Medical payments coverage (“med pay”) pays medical expenses up to a specified limit resulting from an automobile accident. The purpose of “med pay” is to provide payment for immediate medical treatment of people who are injured in an auto accident without waiting to see who is at fault and ultimately liable.

Med pay is required coverage in a few states and optional in most states. The Part B– Medical Payments Coverage section of the PAP governs this coverage.
Part C–uninsured/underinsured motorist coverage

Uninsured motorist coverage insures you against losses caused by someone who is completely uninsured or who has less than adequate insurance to cover the loss (underinsured). Like med pay, uninsured motorist protection is required coverage in some states.
Part D–coverage for damage to your auto

Part D of the standard PAP provides coverage for damage to your auto. This coverage actually consists of two separate coverages–collision and comprehensive. You can purchase either or both of these coverages for each vehicle you own.

In general, collision coverage insures the value of your car if you have an accident. Comprehensive coverage insures you against all other physical damage to your car caused by such things as fire, theft, flood, wild animals, and vandalism. These coverages can be written with or without a deductible (i.e., the amount of money that you are required to pay before your insurance takes over). Deductibles can be in any dollar amount but are generally $100, $250, $500 or $1,000. The higher the deductible, the less expensive the premium.
Part E–duties after an accident or loss

Part E of the PAP deals with the specific procedures that you must follow to have your claim covered by the insurer. It contains a list of general and specific duties that you must comply with. It’s essential to follow these duties carefully, since payment of your claim will depend on it.
Part F–personal auto policy provision

Part F of the PAP contains various provisions that limit and qualify the coverage provided in other sections of your PAP. If the conditions set forth in these provisions are not met, the insurer can deny coverage.
Other coverages included in your policy

In addition to the above types of coverage, your insurer offers other miscellaneous coverages to handle almost every situation. Miscellaneous coverages include towing and labor coverage, loss of income protection, and rental reimbursement insurance. See Premiums and Coverage for more information.

No-fault insurance

In the world of auto insurance, no-fault is a perpetual hot topic. At one time, all states were fault-based states. In a fault-based system (also called a tort system), the driver who is at fault in an accident is liable for the damages that he or she causes. There are currently 12 states plus Puerto Rico that have forgone the fault-based system and adopted some form of no-fault auto insurance.

When you have an accident under a no-fault insurance system, your insurer automatically pays your medical bills, regardless of fault, up to a specified limit. In exchange for this guaranteed payment, you must forgo some or all of your rights to sue the other driver involved in the accident. By the same token, you are also protected from being sued in the event that you are at fault in an accident. There are elements of no-fault in all auto insurance policies. Medical payments coverage and property damage coverage are typically paid regardless of fault.

Choosing your coverage and policy
Choosing insurance coverage

State law or your lender may require that you purchase a certain amount of auto insurance. These required coverages are only a minimum, and you may need more coverage.

There are many other types of coverages for you to consider. Because there’s no optimum amount for every individual, how much auto insurance you need depends partly on your tolerance for risk. Can you afford to pay the cost of a claim out-of-pocket, or would even a small claim threaten your finances? Your insurance agent or financial planner can recommend coverage limits that you should carry to adequately protect yourself and your property. See Premiums and Coverage for more information.
Purchasing a policy

Before purchasing auto insurance, you should evaluate and compare the various products offered. In addition, because your personal and financial obligations change, you will occasionally need to review your current PAP to ensure that it adequately meets your needs. If it doesn’t, you may have to increase or replace your policy.

See Evaluating, Comparing, Replacing, and Conserving Auto Insurance Policies for more information.

Prepared by Forefield Inc, Copyright 2010