US FlagFebruary 15, 2008 Edition


STIMULUS PACKAGE SIGNED - President Bush has signed the bill for a $170 billion economic-stimulus bill. The package will pay single taxpayers $600, while married taxpayers who file jointly will receive $1,200.  To be eligible for the rebate, a taxpayer must have at least $3,000 in âœqualifying income❠(wages, Social Security benefits, certain veterans♠benefit payments and railroad retirement benefits).  The payments begin to phase out at $75,000 for individuals and $150,000 for couples. There is also a $300 per child tax credit.  A few notes:  Eligibility for the rebates is based on 2007 income, meaning that a 2007 tax return must be filed before a rebate will be issued.  For the millions of low-income seniors who typically donâ™t file an income tax return, they will need to do so in order to receive the rebate.  Finally, a taxpayer who owes back taxes, or has past-due child support or federal student loans, may see all or part of his/her rebate applied to those liabilities.

STIMULUS PACKAGE ATTACKED - Opinions on the need for economic stimulus range from the package shouldnâ™t be done at all to more money is needed. Who knows, but a curious fact is that most of those calling for the stimulus package (and more) are the same people that are against the extension of tax reductions. Hard to see the difference between giving money back and just not taking it in the first place.  Still others have made a case for stimulating the economy through rebuilding our infrastructure (bridges, roads, etc.).  This might make a lot of sense, but the economic stimulus provided would be longer-term in nature and unlikely to keep the economy out of a recession in the shorter term (of course, the current stimulus package might not either!).

FORECLOSURE PLANS ⓠPresident Bushâ™s new foreclosure-prevention plan has met with early criticism. Critics say earlier plans have done little to prevent foreclosures and no one action will solve the problems in the housing market.  There is some sentiment that the economy wonâ™t begin to rebound until the housing market hits bottom...maybe we should stop trying to delay the inevitable, take our medicine and put this fiasco behind us.

SUBPRIME LOSSES TO HIT $400 BILLION - The Group of Seven (G7) predicted that subprime-related losses will reach $400 billion. That is significantly higher than the $120 billion currently admitted by banks and other financial institutions.

RECESSION OR NO RECESSION ⓠOpinions still vary, but an AP poll reports that 61% of the respondents say we are already in a recession. Main causes: high energy bills, high food bills, tight credit and a stumbling housing market.  It might help to identify it if there was a standard definition of âœrecession.â

NEW YORK AND CREDIT RATING FIRMS - New York Attorney General Andrew Cuomo called new rating criteria voluntarily implemented by the companies "too little, too late" and "window dressing.❠He is pressing for more stringent criteria in their methods for rating mortgage-backed securities.

NEW DOW INDUSTRIAL FIRMS - The Dow Jones Industrial Average of 30 component stocks will now include Bank of America and Chevron. Dropping out to make way for the newcomers are Altria Group and Honeywell. "We saw that the financial industry was underrepresented...notwithstanding the current turbulence...and that the oil and gas industry's growing importance to the world economy called for another representative to join Exxon Mobil.â

DOW AT 18,500? - Morningstar says the Dow Jones Industrial Average will rise more than 6,000 points to roughly 18,500 over the next three years. They even have a logical formula to support that claim.

BANKS AND BROKERAGES HURT S&P ⓠCompanies in the Standard & Poor's 500 saw their earnings for the fourth quarter go down 22% compared with a year ago. However, earnings would be up nearly 12% if banks and brokerages were removed.

Attention Insurance and Financial Advisors!

It is not often that you get a sales idea that can change your life! What if there was a way to:
  1. Eliminate most of your travel time (and the nerve-racking driving!),
  2. Dramatically reduce transportation costs,
  3. Reduce evening activity, and
  4. Shorten the sales cycle.
Click here to learn how!!

Attention Wholesalers, BGA's, GA's and Trainers!
  • If you are not conducting Webinars for your producers, you are losing money!
  • If you are conducting Webinars for your producers and not using Gatherplace, you are losing money too!
Please check out www.gatherplace.net/?r=fsonline for a free trial to see how inexpensively and simply you can use the Internet to inform, train and even recruit producers. If you have needs beyond the standard packages quoted, please contact Fiona Streckler at fiona@gatherworks.com.

SOVEREIGN-WEALTH INVESTMENTS, CON ⓠA sovereign-wealth fund is basically a foreign government-owned fund investing in U.S. companies. Indiana Senator Evan Bayh is asking for controls and says, "As Americans, we realize the folly of allowing our government to own our private companies, yet paradoxically, some appear far less alarmed by the prospect of another country's government doing the same."

SOVEREIGN-WEALTH INVESTMENTS, PRO ⓠA Forbes magazine article says most of the thinking on sovereign-wealth investment in the U.S. is illogical. They point out that sovereign-wealth funds are suddenly viewed as a threat as they start to invest in struggling U.S. companies, even though foreign nations have long invested in U.S. debt.

CREDIT UNIONS THRIVE - Most big banks have tightened lending standards due to losses in the subprime-mortgage market. However, credit unions weren't hit as hard and are stepping up to fill a void.  

MORTGAGE INSURERS♠LOSSES - U.S. mortgage insurer MGIC Investments, one of the nationâ™s largest mortgage insurers, reported a fourth quarter loss of $1.47 billion and has hired an adviser to help raise capital. Banks are working to prevent a downgrade of Ambac, the second-largest bond insurer. If they fail, it could result in $40 billion to $70 billion in losses.

MUNI BOND WOES MAY AFFECT TAXPAYERS ⓠThe credit crunch and reduced confidence in credit ratings that has put asset-backed commercial paper and structured investment vehicles into a nosedive may now be affecting the municipal bond market. If so, it wonâ™t be the banks suffering...it will be the taxpayers who could be on the hook as the cost of borrowing rises for U.S. municipalities.

BUFFETTâ™S BILLIONS - Warren Buffett has offered to reinsure $800 billion of municipal debt insured by the major muni bond insurers like MBIA, Ambac and FGIC. The offer appears to be DOA since many feel it isnâ™t the answer to the current crisis. Further, muni bonds rarely enter default and are one of the safest corners of the bond market. 

ANOTHER CUT ⓠSince last month's cuts failed to lower borrowing costs, the Fed may be forced to cut interest rates again. Businesses are actually paying more to borrow now than before the last two cuts totaling 1.25%. 

DEFRAUDING CONSUMERS? ⓠNew York Attorney General Andrew Cuomo is conducting an industry-wide probe of health insurers who allegedly defraud consumers by manipulating reimbursement rates.  The investigation centers on Ingenix, owned by UnitedHealth Group and the nationâ™s largest provider of health care billing information.  Cuomo contents that Ingenix operates a âœdefective and manipulative❠database that most major health insurers use to set reimbursement rates for out-of-network medical expenses, resulting in consumers being âœstuck with excessive bills.â

FORECLOSURE RATES ⓠWant to know how your local housing market is holding up? See this chart on 2007 foreclosure rates for metro areas.


VSA...The Most Comprehensive
Sales Tool Ever!
Donâ™t take our word for it, click here to see what some of our
10,000 subscribers are saying and go to the Table of Contents for proof.
 
Now get a free personal Website just for subscribing to the VSA!
 
Virtual Sales Assistant (VSA) has been described as an interactive library, but it is much more than that. It is truly a very knowledgeable assistant that can put virtually everything you need to operate a financial practice at your fingertips. Your Assistant is available to you on any computer, anywhere in the world and is on call 24/7/365. Some specific products and services include:
 
     Personal Websites
     E-newsletters
     Lead generators
     Dozens of prospecting ideas
     Hundreds of "One-pagers"*		      Scores of presentations*
     Retirement calculators*
     Education calculators*
     Estate calculators*
*Personalized for you and your client

All this and the price is no more than $21.95 per month (discounts may apply), no annual contract and there is a 30-day âœfree look.â

Check out the more than 60 VSA Sales Ideas. Take advantage of the VSAâ™s 30-day âœfree look,❠use just one of the ideas and the VSA will pay for itself!
 
REVISED FORM ADV ⓠThe SEC is proposing a revised disclosure form for financial advisers.  The revision would require that Form ADV provide a narrative of business practices, the types of advisory services provided, the qualifications of employees providing advice to clients, fees, conflicts of interest and disciplinary history.  In addition, the forms would be filed electronically with the SEC and made publicly available on the SECâ™s web site.

THE AMERICAN DREAM ⓠMetLife has released the results of their second âœStudy of the American Dream.❠ While Americans♠economic mood has darkened, we remain a personally optimistic society, with 85% of individuals expecting their own financial situation to be the same or even better this year, compared to last year.  Go to www.metlife.com to review the survey results in more detail. 

HOUSE BILL ON EDUCATION COST - The House approved a new bill in hopes of reining in the rising cost of colleges. The bill, among a few other things, establishes a list of the most expensive colleges and authorizes billions of dollars in aid. It might work, but the government has poured increasing amounts of money into higher education and the costs have continued to rise well above inflation. Maybe these next few billion will have a different result...but we doubt it.

MEDICARE ADVANTAGE PLANS ⓠThe head of the Centers for Medicare and Medicaid Services has promised lawmakers that CMS will take âœswift action to root out abusive Medicare Advantage plan sales practices.❠ There was also discussion of possibly letting state regulators oversee Medicare Advantage plan sales.

DOWNGRADES AFFECT TAXES - Moody's potential downgrades on states' ratings could lower state tax revenue.  Further, the slumping economy and weakened housing market could cut states' tax revenue and lead to more credit-rating cuts.

ONLINE BROCHURE FOR ADVISORS ⓠThe SEC is considering requiring investment advisers to provide easy-to-read online brochures describing their services, fees and investment performance.

SALES TAX FOR ADVISORS ⓠTwo more states are looking to raise revenue by taxing advisors. Florida and Georgia are the latest states to consider taxing financial services in order to deal with state deficits. Hard to say where these movements will go, but there are a lot of states looking for revenue.

INVESTOR BROCHURE ON PROTECTING INFORMATION - SIFMA and FINRA have created a brochure designed to help investors protect their financial information. The brochure describes the critical steps investors can take to prevent identity theft and safeguard their financial accounts. Review the brochure by clicking here.  On a positive note, while identity theft remains a major problem, losses due to identity theft dropped from about $51 billion in 2006 to about $45 billion in 2007.

HEALTH CARE GAP ⓠCIGNA has published a white paper dealing with the healthcare gap faced by early retirees.  Itâ™s a âœscholarly❠paper, but worth reading if youâ™re interested in the types of integrated vehicles that might be created to address this issue.  Click here for a copy.  

BUY YOUR ANNUITY FROM SOCIAL SECURITY? ⓠThis is weird, but a SS recipient can "undo" his decision to take Social Security retirement benefits early by paying back (without any interest or inflation adjustment) the benefits he's received. He can then re-apply for Social Security and claim the bigger monthly checks paid to those who wait until an older age to claim benefits. Results: A couple, now both 70, claimed Social Security retirement benefits at 62. They now collect $11,556 each a year. The couple pays back $79,305 each in benefits. They then reapply--and begin collecting $20,000 a year each. In effect, they've each bought an extra $8,444 a year in an inflation-adjusted annuity. The cheapest commercial annuity would cost them 40% more.  There are, of course, other considerations...such as the risk of dying shortly after paying the lump sum back to Social Security.

OLDER AND LESS WISE? ⓠThe old adage âœolder and wiser❠doesnâ™t appear to be the case when it comes to managing money in retirement, at least according to a Thrivent Financial survey.  Not only are most people naïve about how much money they will need in retirement, but many are also off base when it comes to actual spending in retirement.  Go to www.thrivent.com for more information on the survey.  Over at MassMutual, we have some additional research of interest...apparently knowledge and action lead to insecurity.  According to the MassMutual survey, individuals who save more and are more active in managing their retirement savings are less confident in their retirement security as compared to individuals who save less and are less active in managing their savings.  More information is available at www.massmutual.com.  

THE ETHICAL WILL - In medieval times, Jewish men wrote letters to their sons, passing on guidelines for living a worthy life. These legacy documents were called âœEthical Wills,❠and provided for meaningful, enduring communication between generations. Modern people of all ages and faiths are now rediscovering this beautiful and sensible tool. Here are some tips on writing one:  (1) Start today. (2) Donâ™t try to win the Pulitzer Prize. (3) Ask yourself what your loved ones need to know. (4) Donâ™t try to write it all at once. (5) Be yourself. (6) Donâ™t contradict your legal documents. (7) Keep a positive tone. (8) Share it and let everyone enjoy it while you are alive.

CAPITAL GAIN TAXATION ⓠThis is so complex that few taxpayers have any chance of understanding it, but if you want to try there is a good article at http://biz.yahoo.com.

NEUTRON BOMB LOANS ⓠThese are also known as adjustable-rate mortgages (ARMs). About 1 million homeowners hold about $500 billion in ARMS and some could soon see their monthly payments double.

SEVEN-YEAR CAR LOANS ⓠIn order to drive sales, some automakers are offering 84 month (7 year) loans.  The loans cut buyers' payments and thus boost sales. This is nuts...it is bad for the consumer and puts future new auto sales at risk.

REVERSE MORTGAGE FUTURE MESS? - Be aware. Some are predicting a subprime-like mess for the future of reverse mortgages. Major problem is misleading marketing tactics and pressure to buy inappropriate investment or insurance products with the proceeds of the loan. Investigators are looking into direct-mail pieces that look like official government notices, but are actually just loan pitches, and others that promise huge commissions for salespeople who bundle annuities with reverse loans.

DID YOU KNOW? ⓠAccording to the Office of Management Budget, an arm of the White House, the deduction for employer-sponsored health coverage is expected to increase in fiscal year 2009 to $169 billion dollars, an 11% increase over 2008.  The health insurance deduction dwarfs other tax breaks, such as the deduction for mortgage interest ($101 billion), 401(k) plans ($51 billion) and charitable contribution deductions ($47 billion).

OLDER INSURANCE BUYERS ⓠTillinghast reports that between 2000 and 2005, more than 30% of all universal life insurance sales premium came from policyholders older than age 70 for some insurers.  Sales to people over age 60 have increased 4.3% between 2006 and 2007, while sales to younger people have dropped.

FINRA & SEC TO PROTECT SENIORS ⓠThe SEC and FINRA are continuing to examine the sales practices used with seniors. Expect a publication explaining best practices for account opening and related procedures.

MOST ARE SAVING FOR RETIREMENT ⓠAccording to an AXA Equitable study, 80% of working Americans say they have begun to prepare for retirement. Advisors note: Major life events such as milestone birthdays, marriage and having children can often trigger retirement savings efforts.

MYTHBUSTERS ⓠHere are some old âœrules of thumb❠that may no longer be true.

1. Subtract your age from 100. The answer is the percentage of your investments that should be in stocks or stock mutual funds. This rule was popular in the 1970s as an attempt to provide asset allocation direction. However, people are living longer today and the risk of inflation is high.
2. Keep three to six months of salary in an emergency fund. That can be a lot of extra saving. Maybe a better approach would be to look at living expenses.
3. Set aside 10% of gross income for savings. This may be a starting point, but it might need to go up dramatically with age.
4. The stock market will give you a 10% annual return. Roger Ibbotson, the guy whose research set this benchmark, now says that he expects the next 25 years to be different from the last 75, with returns closer to 8%. Further, the 10% includes several assumptions, such as a long time horizon, no active trading, no taxes and no transaction costs.
5. Life insurance benefits should equal five times your current income. A better approach may again be looking at expenses and individual needs.
6. Refinance your home when interest rates drop by 2 percentage points. With many available mortgages having small or no closing costs, consumers can get long-term savings by shaving off as little as a half percentage point.