US FlagMay 15, 2008 Edition


CRUNCH NOT OVER - Federal Reserve Chairman Ben S. Bernanke says the credit crisis is not over and it "is likely to take some time" before financial markets return to normal. His comments and those by other Fed officials indicate there is a fear that rising energy prices will stoke inflation.

HALF FULL - Treasury Secretary Henry Paulson said, "the worst is likely to be behind us." Paulson sees the Fedâ™s efforts to keep Bear Stearns from collapsing and providing liquidity to other financial institutions as "an inflection point" in the ongoing crisis. That means he thinks the government has âœsaved the day.â

CHEERFUL CHAP ⓠJPMorgan Chase CEO Jamie Dimon believes that the credit crunch might be easing, but a severe recession may still hit the U.S. economy. Further, the recession may last until 2010 and, if so, his company would likely suffer significant losses.

WELL, NOT EVERYBODY - According to White House economist and Council of Economic Advisers Chairman Edward Lazear, the U.S. economy is not in a recession. "The data are pretty clear that we are not in a recession." He also believes the tax rebate checks will stimulate growth in the current quarter.

STIMULUS PACKAGE? ⓠIn a rare agreement, many experts and about 80% of the public do not believe tax-rebate checks will be enough to stop the U.S. economy from slipping into a recession. In fact, most everybody seems to believe the economy is already in a recession. One economist put it like this, "I still maintain the business cycle is bigger than the government.â
UNDERSTANDING THE SUBPRIME CRISIS ⓠWant a better understanding of how we got into the current subprime mess?  Then check out Path to Investingâ™s âœUnderstanding the Subprime Crisis.❠ 

HEAVY LUNCH - Three days before the rescue of Bear Stearns, Fed Chair Ben Bernanke had lunch with the CEOs of JPMorgan Chase, Goldman Sachs, Lehman Bros., Merrill Lynch and other chief executives of major financial institutions. The Bear Stearns CEO did not attend...maybe they had him for lunch?

CREDIT CARD ABUSES ⓠExpect to see some changes in credit card industry practices that will give consumers more time to pay their monthly bill, prohibit companies from applying interest rate increases retroactively to pre-existing balances and ban âœdouble-cycle billing.â

HOUSING BAILOUT ⓠCongress continues to struggle with legislation to help troubled homeowners.  Hereâ™s a CNNMoney analysis of the situation.  

HEDGE FUNDS AND INSTITUTIONAL INVESTORS ⓠA Financial News survey suggests that institutional investors have accepted hedge funds as viable investment vehicles. In fact, nearly half are already in a fund with the rest expected to be so soon. The thinking is that hedge funds have been recognized as offering the best chance to deliver the returns that pension funds need.

SEC AND LIQUIDITY DISCLOSURE ⓠExpect the SEC to force Wall Street to divulge more details about their capital and liquidity positions. The obvious reason is to prevent a repeat of another sudden collapse like Bear Stearns. The new disclosure requirement would be "in terms that the market can readily understand and digest." Understanding...that is a novel approach.


VSA...The Most Comprehensive
Sales Tool Ever!
Don'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 free look.�

Check out the more than 60 VSA Sales Ideas. Take advantage of the VSA's 30-day free look,� use just one of the ideas and the VSA will pay for itself!
 

INTEREST ON RESERVES ⓠThe Federal Reserve will ask Congress for the power to pay interest on the reserves commercial banks hold. Paying interest on bank reserves could make more money available to banks without further easing the key interest rate.  Click here for Bloombergâ™s analysis of this proposal. 

FANNIE MAE STOCK SALE - Fannie Mae plans to raise $6 billion through the sale of new stock, but some say that may not be enough "to shore up its balance sheet while also backstopping the national housing market." Estimates of the real need range from an additional $5 billion to $15 billion. 

FANNIE AND FREDDIE POST RECORD GAINS ⓠThe Wall Street Journal reports that Fannie Mae and Freddie Mac have recorded stock gains of 44% and 49% since March. The bounce came as the cost of insuring against a debt default by the government-sponsored mortgage companies fell by 60% and after a government-brokered bailout of Bear Stearns, signaling to investors that the government is committed to making good on its backing.  

BANK LOANS TIGHTER - A Federal Reserve report found that U.S. banks tightened lending standards to near-record levels in the first quarter of 2008. Some see this as a sign that the credit crunch in the broader economy has intensified and the Feds are going to come to the aid of struggling homeowners by restructuring their mortgages.

UBS PROBLEMS - UBS lost $10.9 billion in the first quarter and now plans to cut its work force by about 5,500. Reasons: the subprime meltdown and the ensuing credit crunch. Further, the big Swiss bank plans to exit the municipal bond market and put its muni-market business up for sale. 

BOA AND COUNTRYWIDE DEBT - Bank of America will not guarantee that $38.1 billion of Countrywide debt âœwould be redeemed, assumed or guaranteed" after the takeover. Sure makes that look like a sweet deal for BOA.

MORGAN STANLEY WOES - Morgan Stanley will cut about 5% more of its staff this year, but its retail brokerage firm will be excluded. Including cuts since October that works out to about 5,000 out of about 47,000 employees.

NEW SOCIAL SECURITY CRISIS ⓠThe Government Accountability Office warns that 44% of Social Security Administration workers could retire by 2016. âœBecause retirements will occur among the agencyâ™s most experienced staff, this will have a serious impact on field offices♠institutional knowledge.❠The number of employees at the 1,300 SSA field offices fell 7.1% between 2005 and 2007 to 26,743.

DUCK SHAREHOLDERS VOTE ON COMP ⓠIn the ultimate âœsay on pay❠move, Aflac gave shareholders a chance to vote on the companyâ™s executive pay-for-performance program. Results: 93% voted in favor of the âœduckâ™s❠executive comp program. 

FEWER APPS SUBMITTED, AGAIN - U.S. life insurers received fewer requests for individual coverage in February 2008 than they did in February 2007, but requests for applicants ages 60 and over jumped 9.8%.

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.
AFFORDABLE WEBSITES INTRODUCED ⓠThe Virtual Assistant has introduced a new and affordable advisor Website. Bill Oâ™Quin, VSA, LP managing partner, calls the Websites the least expensive and the most effective in the industry. See samples here: example 1, example 2, example 3. Get your own at http://vsa.fsonline.com for about $20 per month with no start-up charge or contract.

HSA NEWS ⓠAmericaâ™s Health Plans released figures indicating that health savings account enrollment is up 35% from last year.  Meanwhile, the GAO released an HSA study noting that in 2006, tax filers with HSAs had an average taxable income of about $139,000, compared with an average taxable income of $57,000 for other filers.  This led to some members of Congress noting that HSAs are âœincreasingly a popular tax shelter for wealthy taxpayers.❠ There is also some sentiment in Congress to require better substantiation of how HSA withdrawals are used.  In other HSA news, the IRS has issued the 2009 indexed amounts for health savings accounts:
  • Maximum annual contribution: $3,000 for self-only coverage; $5,950 for family coverage
  • Maximum annual out-of-pocket amounts: $5,800 for self-only coverage; $11,600 for family coverage
  • Minimum deductible amounts for high deductible health plans: $1,150 for self-only coverage; $2,300 for family coverage
FLOOD INSURANCE RENEWAL ⓠThe Senate has voted to extend to 2013 the federal flood insurance program, forgiving $17 billion in debt the program had built up due to Hurricane Katrina, but rejecting adding wind coverage to the program.  Since the House voted to include wind coverage and not forgive the Katrina debt, negotiators must work out a compromise bill.

DARK POOLS AGAIN - Brokers are fighting for position in the market for dark pools. As the name implies, dark pools lack transparency and are used by institutional investors seeking to trade large blocks of stocks without creating the price wobbles that routinely accompany such moves. The trading is done away from the traditional exchanges, offering unprecedented anonymity. âœDark pools and crossing networks are trading venues that match hidden liquidity. Their use has increased in recent years despite fears of fragmentation and market elitism.❠We wonder how many people in this country have a clue as to what all this means.

ESTATE TAX UNCERTAINTY ⓠA consensus seems to be growing that Congress must, at a minimum, extend 2009 estate tax provisions through 2010 while they develop a permanent estate tax solution, eliminating the âœestate tax holiday❠currently scheduled to take place in 2010. 

BOOMING BANKS ⓠAccording to data from the Bank Insurance Market Research Group, âœbanks that sold insurance were more profitable than those that didnâ™t in 2007.❠ More information is available here. 

WORLDWIDE TAX EVASION ⓠExpect an international crackdown when European finance ministers start looking into the practices of private-banking centers that help their clients evade taxes. Recently, U.S. authorities detained one of UBSâ™s top bankers as a material witness in a tax-evasion investigation and German prosecutors began probing citizens with accounts in Liechtenstein.

FINANCIAL REGULATORY BLUEPRINT ⓠClick here for a copy of the regulatory blueprint issued by the Treasury Department that calls for a self-regulatory organization for investment advisers.  

HEALTH CARE COSTS ⓠMilliman Inc. says that the typical U.S. family of four covered by an employer-sponsored preferred provider plan will spend $15,609 on medical care in 2008, up 7.6% from 2007.

STUDENT LOANS ⓠPresident Bush has signed the Ensuring Continued Access to Student Loans Act of 2008, which seeks to address the student loan market credit crunch.  Click here for a summary of the billâ™s provisions. 

DEATH OF SPOUSE ⓠFINANCIALLY DISASTROUS! ⓠAccording to an ING survey, Americans in every demographic group say that their death or the death of their spouse would be a much greater threat to their familyâ™s future financial security than a recession, declining stocks or decreasing home values.  Life insurance anyone?

MISMANAGED 401(k) PLANS - According to Financial Engines, many employees are mismanaging their 401(k) plans by investing too heavily in company stock. Their study found that employees over 60 were more likely to have a larger percentage of their plans invested in company stock. Remember Enron? Have your clients diversify.

IN DEFENSE OF INDIVIDUAL HEALTH POLICY ⓠThis seems counterintuitive to us, but a recent study by researchers at the University of Pennsylvania concludes that workers in fair or poor health with an individual health insurance policy have more security than workers relying on employer-sponsored small-group health coverage. Sicker workers who began with small-group coverage were much more likely than workers with individual coverage to lose all coverage.

SBA COURSE ON FRANCHISING ⓠHave clients considering franchising? Have them check out a new online course from the U.S. Small Business Administration and FranNet. It is a free online seminar, which provides three key sections that examine more than 10 essential areas relating to franchising, including, "Is Franchising Right for You?" and "How to Choose the Right Franchise." The Franchising Basics course is located at here and you can just skip the registration if you wish.

NATIONAL THRIFT CAMPAIGN ⓠJust in time for the Stimulus Package, a diverse coalition of leaders have launched a national campaign entitled promoting thrift. There is a booklet called "Confronting the Debt Culture" and a new report, "For a New Thrift: Confronting the Debt Culture," which addresses today's debt crisis and promote a new thrift culture that would promote savings and sustainability.  Check them out at http://www.newthrift.org.

OVER-ESTIMATING PROTECTION ⓠA study by the Life and Health Insurance Foundation for Education (LIFE) reveals that U.S. workers seem to think that they have more public and private disability insurance than they actually have. No surprise here. How about sending all your clients The Virtual Assistantâ™s Disability Income Review found here.

CAPITAL GAINS TAX ADVOIDANCE ⓠGot any clients who are considering selling their businesses? If so, many are suggesting that now is the time. Reason: regardless of who is the next president, there is a very good chance that capital gains taxes will be increased.

FEMALE ECONOMIC ANXIETY -  A study by the Institute for Women's Policy Research reveals that while the economic downturn has caused widespread personal financial worries, women are more worried than men. "We found striking gender differences in economic anxiety and insecurity, with women much more likely than men to feel economically insecure. And, not surprisingly, perhaps this insecurity is even more pronounced among women of color." Simple explanation here...women are smarter than men and anyone who âœcan remain calm in this situation simply doesnâ™t understand the situation.â

TOP RETIREMENT TIPS - 1. Start early with retirement planning. 2. Make estimates on what your income and expenses will be for retirement. 3. Don't retire early unless you're sure your finances will support you as long as you need. Don't take Social Security too early. 4. Research everything carefully. 5. Set up a team of financial advisers to help you. 6. Make realistic estimates about the rate of return you'll be able to receive from your investments and what the inflation rate will be. 7. Learn about Medicare options and figure into your budget what it will cost for a Medigap policy to supplement Medicare. 8. Plan to pay off your credit cards and mortgage before you retire. 9. Consider your housing needs. 10. Determine if working part time or full time is something you'd like or need to do.

MEDICARE ABUSE CRACKDOWN ⓠThe Wall Street Journal reports that some health insurers have been criticized for their "overly aggressive marketing tactics, such as enrolling seniors without explaining what they are getting into.❠That will stop soon. A new proposal will: 1. Prohibit cold-calling, door-to-door marketing and unsolicited marketing in places such as hospital waiting rooms and senior centers 2. Ban cross-selling of non-health care products 3. Increase the government's ability to fine insurers that do not comply with the rules. 4. Limit to $15 gifts and promotional items for potential customers. 5. Bar insurers from paying agents higher bonuses or commissions for the first-year enrollment of a beneficiary compared to a renewal, which creates a "financial incentive for agents to encourage beneficiaries to change plans each year.â

RETIREMENT INSURANCE ⓠDisability income policies typically cover up to 60% of lost income. That may be enough to live on, but does not allow much to be put away for retirement. That is why an increasing number of people are looking into retirement insurance contribution protection. Only a handful of insurance companies are offering the policy, either as disability insurance or a separate policy. Payments go directly to the policyholderâ™s retirement account.

ONE MILLION NOT ENOUGH - Opinion Research says that a million dollars just isnâ™t enough to retire on comfortably and many baby boomer millionaires agree. The current economic situation is adding to these concerns. About 30% of 60-year-old baby boomers with investable assets of at least $1 million say they feel more financial stress now than six months ago.  We say it is pure math. $1,000,000 capital retention at 4% is less than $3,400 per month.

WHOLE LIFE WITH LTC ⓠJohn Hancock has introduced a whole life policy with a âœLifeCare Benefit❠rider. Policyholders who need long-term care can withdraw up to $5 million in policy value to pay for the care. The product will be treated as a life insurance policy with an accelerated death benefit and not as long-term care insurance. We have always thought this and/or LTC benefits tied to an annuity was a good idea.

U.S. GAS CHEAP - Out of 155 countries surveyed, U.S. gas prices were the 45th cheapest. U.S. gas prices are about $3.45 a gallon, compared to over $8 a gallon across much of Europe. Many believe that cheap gas prices have lulled Americans into buying bigger cars and bigger houses further away from their work - leaving them more exposed to rising prices.

METLIFE SITE - MetLife Mature Market Instituteâ™s newly designed Web site at http://www.maturemarketinstitute.com is a good resource for clients and advisors interested in aging, care giving, the changing workforce, retirement and demographics. Check it out.

FINANCIAL TIPS FOR NEWLYWEDS - 1) Come up with a Budget 2) Set up Bank Accounts 3) Create a Plan for the Future...maximizing your 401(k) contributions, setting up an emergency fund, paying off consumer debt and saving at least 10% of your take-home pay. 4) Purchase Life Insurance...purchasing life insurance will give you the peace of mind of knowing your loved ones will have money to help maintain their standard of living should anything happen to you. 5) Double check your beneficiaries. Here is a better tip, send your soon-to-be-married prospects a Marriage and Money Life Guide from The Virtual Assistant.