July 1, 2010 Edition
Industry's Best Websites?

Take a look at these three examples of Websites provided by The Virtual Assistant. We believe they provide the "deepest" and most valuable content available on any industry Website plus...the cost is no more than $21.95 per month with discounts available!

By the way, did we mention that we will "throw in" the most comprehensive sales support tool in the industry? Newsletters, lead generators, client presentations, PowerPoint seminar presentations, tax information...all at your fingertips.

See details on all at thevirtualassistant.com

DIRE FINANCIAL STATE OF THE STATES - We've been writing about this for awhile and Time recently published Inside the Dire Financial State of the States..."From Hartford to Honolulu, once sturdy state governments are approaching the brink of fiscal calamity, as the crash of 2008 and its persistent aftermath have led to the reckoning of 2010."  Problems include plummeting tax revenues, an end to federal stimulus funds, increased demand for welfare and Medicaid services and underfunded, overly generous public pension plans.  Speaking of which...

STATE PUBLIC PENSIONS - As the Time article puts it, "Many state and local governments have made the mistake of courting the votes of public employees by fattening salaries and benefits, all the time imagining that pension-fund investments could only go up."  Thousands of New York State retirees are paid at least $100,000 a year, some beginning at relatively young ages.  A California Bay Area fire chief was collecting $241,000 a year in retirement benefits...at age 51.  And those are just two states.  Continuing from the Time article, "The Pew Center on the States, a nonpartisan research group, estimates that states are at least $1 trillion short of what it will take to keep their retirement promises to public workers. Two Chicago-area professors recently calculated the shortfall at $3 trillion. According to Pew, half the states ran fully funded pension plans in 2000, but by 2008 that number had dwindled to four."

LET'S BLAME BP - The New York state pension fund plans to sue BP to recover its losses from the drop in BP stock prices.  The fund owned more than 19 million shares of BP at the time the Deepwater Horizon rig exploded in the Gulf of Mexico.

STOCKS STUMBLE - Stocks continue to fall with the Dow hitting a 9-month low after a big drop in consumer confidence and signs of a bigger slowdown in the global economy. Investors plowed into the safety of government debt, sending the 10-year note yield below 3% for the first time in 14 months.

NEW FINANCIAL REGULATIONS - Congressional negotiators have finalized legislation that would instruct federal agencies to address a wide range of issues, meaning that before the final regulations are issued, the financial industry and consumers will have time to influence specific rules. Weighing in at 2,000 plus pages, we doubt that anyone knows what these new rules are intended to do, much less the "unintended consequences" that may result. We will have more when the final regulations "hit the street."  The final legislation has passed the House and is awaiting a Senate vote after the July 4th recess.

END TARP, PAY FOR REGS - Congressional negotiators have agreed to offset the cost of the regulatory-revamp bill by terminating the Troubled Asset Relief Program early, rather than levying bank fees. Lawmakers also inserted language into the bill that would increase the minimum level of a fund that the FDIC uses to insure deposits.

BANKS WILL HAVE 12 YEARS TO COMPLY - Big banks could have until 2022 to comply with the "Volcker rule," which would require financial institutions to reduce their stakes in their hedge funds and private-equities. The time frame was a compromise in the regulatory-revamp legislation, which is said to have made the rule's namesake, former Fed chairman Paul Volcker, very unhappy.

FIDUCIARY STANDARD - The financial reform legislation contains a compromise provision regarding imposition of a fiduciary standard on insurance agents and broker-dealers.  The provision requires the SEC to report back to Congress within six months on "its findings of gaps in existing legislation."  After that, the SEC "would be allowed to launch rulemaking designed to impose a fiduciary standard on the sale of all investment products."  

FINANCIAL REGULATION AND IAs – Since the compromise version of the new financial reform legislation contains provisions to keep annuities under state regulation, it is probably a "done deal."

FINANCIAL REFORM AND ADVISERS - Click here for a good analysis by Investment News of the major provisions of the financial reform legislation, together with the expected impact on financial advisers.  
Bend over backwards for your clients!


E-Mail for detail!

FANNIE/FREDDIE TAB AT $1 TRILLION - Reform of the two mortgage giants is not part of the financial reform package.  The Congressional Budget Office believes the cost of extending aid to Fannie Mae and Freddie Mac could reach $400 billion, but some experts warned that the amount might go higher if housing prices drop further. Yale economics professor Robert Shiller, co-creator of the S&P/Case-Shiller Home Price Indices, believes that the mortgage giants' mission should be pared back "so that they're not helping middle-class homeowners, [but] they're helping poor people get into the housing market."

S&P PLACES MOODY'S ON WATCH - Standard & Poor's has placed rival ratings agency Moody's on its watch list for a credit downgrade, citing dangers from financial reform legislation that could imperil S&P itself. The primary danger cited is the threat the bill poses by making it easier for investors to sue ratings agencies for providing bad information.
 
MID YEAR REVIEW – This from Marketwatch, "The first six months of the new decade have been anything but boring as we've witnessed events that may forever change the face of free-market capitalism. We traversed the depths of despair and the height of hope and the world is on edge as we ready for the back nine."

DON'T QUIT SPENDING! - Should governments keep spending to fight the downturn or is now the time for austerity measures to prevent Greek-like crises? Maybe not say some, "I'm in the camp that just doesn't see the value add in a fundamental and strict tightening of the fiscal belt right now," says Dan Greenhaus. "I think doing so in an immediate fashion while the private sector continues to deleverage is a recipe for disaster." Who knows, but it sure seems we will need to rein in things at some point.

AUSTERITY NOW! – Others disagree, including the G20, which is pledging to slash deficits in half by 2013, and the Bank for International Settlements (BIS), which announced in its annual report that "the limits to fiscal stimulus have been reached in a number of countries" and "immediate, front-loaded fiscal consolidation is required in several industrial countries."

STIMULUS OR AUSTERITY? - We now are witnessing a struggle between the "stimulators" and the "austereians." Both predict a worldwide depression if governments now make the wrong choices...the stimulators say the danger lies in spending too little and the austereians from spending too much.  Lead proponents for each are Paul Krugman and Alan Greenspan, respectively.  The problem is that neither has any more facts about the economy than they did previously and failed to recognize the last crash.  More here: www.capitalismmagazine.com.

FED CONCERNED ABOUT ITS OWN PURCHASES - Kevin Warsh, a member of the Federal Reserve Board, is concerned about the central bank's willingness to bolster the economy by buying more government bonds or mortgage debt. The idea has been considered as fear continues that the economic recovery will falter. See more of Warsh's thoughts at wsj.com. Question: Why does this privately-owned bank have so much influence over our economy?

JOBS UP EVER SO SLIGHTLY - U.S. private employers added just 13,000 jobs in June. "There is really no way to characterize this number other than disappointing. The overall number tells you that the recovery in the jobs market is very, very sluggish at this point."

REAL PROBLEM ISN'T THE DEFICIT – Here is a pretty interesting but short article on the "real problem."  "Cutting off unemployment benefits will do absolutely no good and lots of harm. People who have been just holding on financially will fall off, and there is no economic benefit from that. Raising taxes will only serve to impede economic growth. But the real problem that faces the public sector (federal, state and local) is its lack of accountability, its lack of competitiveness and its bloated cost structure. That is where the knife needs to be used." See it at www.cnbc.com.

NOSE-BLEED DEBT - The federal debt will represent 62% of the nation's economy by the end of this year, the highest percentage since just after World War II, according to a long-term budget outlook released by the non-partisan Congressional Budget Office.

DIFFICULT CHOICES NEXT YEAR - President Barack Obama recently vowed to curtail soaring U.S. budget deficits, saying Americans will face some "difficult choices" next year. "I'm doing it because I said I was going to do it. People should learn that lesson about me, because next year, when I start presenting some very difficult choices to the country, I hope some of these folks who are hollering about deficits and debt step up, because I'm calling their bluff."  That raises the question of whose bluff is being called?

NAIFA ACTION NOW REQUEST - Reason Action Is Urgently Needed: Congressman Melancon has agreed to distribute a "Dear Colleague" letter regarding the new health web portal required by the Patient Protection and Affordable Care Act (PPACA). Members of Congress will be asked to sign a letter addressed to U.S. Department of Health and Human Services Secretary Kathleen Sebelius strongly encouraging the inclusion of agent language on the new web portal. Consumers should be made aware of the personalized assistance provided by state-licensed health insurance agents. NAIFA and industry partners have made similar requests of HHS. Contact your Representative to encourage support of the Melancon "Dear Colleague" effort. The Melancon letter is available to view here.

UNINSURED COVERAGE STARTS – Coverage for uninsured Americans with medical problems begins this week, but premiums will be a stretch for many and the $5 billion that Congress allocated to the program through 2013 could run out well before that. The Pre-Existing Condition Insurance Plan qualifications can be found at healthcare.gov. Premiums will vary from state to state. In California, for example, the cost for a 50-year-old is estimated at $575 a month, with a $1,500 annual deductible and 15% co-insurance. The insurance program is a stopgap fix for the most vulnerable until 2014, when core provisions of the new health care law take effect. At that time, insurance companies will be barred from turning away people in poor health and low- and middle-income households will get government assistance with premiums. While most states already operate their own high-risk insurance pools, the state plans tend to charge significantly higher premiums than the new federal plan, and many offer less coverage. Consumers will not be able to switch from state to federal coverage -- unless they're willing to risk going six months without health insurance.

PPACA CORE REGULATIONS - Interim final regulations to be used in implementing the rescission, preexisting condition exclusion, benefits maximum and patient protection provisions in the new health reform law have been released.  Click here for an analysis from the National Underwriter.  

STABLE IS GOOD! - Since October 2008, Moody's has rated the life insurance industry's outlook as "negative," but in May it was restored to "stable" due to "more favorable economic and capital market trends which signal the stabilization of life insurers' business and financial prospects."

HEALTH INSURANCE COSTS RISE - According to the Kaiser Family Foundation survey conducted in March and early April, people buying coverage on their own are experiencing sharp increases in the cost of their policies. Those surveyed said they were faced with premium increases averaging 20% at renewal and those who switched to less expensive plans reported an average increase of 13%.

CAN'T PAY - A Thompson Reuters "sentiment index" shows Americans' confidence in their ability to access and pay for health care for the next three months fell to a new low in May.

HOW MUCH DOES IT COST, DOC? – Members of the Society of Actuaries (SOA) believe consumers might do a better job of shopping for health care if providers did a better job of providing price and quality information.  Only about 37% of consumers said they think getting more health care price and quality data would help, but 86% of the actuaries believe providing data would help. However, about 90% of the actuaries and 83% of the consumers said they believe financial incentives can encourage consumers to live healthier lives and shop more effectively for health care.

PERSONAL INCOME UP – According to the Department of Commerce personal income rose for the seventh consecutive month in May by $53.7 billion, or 0.4%. Meanwhile, spending by individuals rose 0.2% to $24.4 billion.

HOW MUCH LIFE INSURANCE – According to Kiplinger, standard formulas such as buying coverage equal to eight to 10 times your annual income are inadequate shortcuts to determining how much life insurance one should have. We agree, but the article is a bit condescending to individuals as well as insurance professionals. Their suggestion rules out using pure income replacement, but rather suggests a cash needs approach using final expenses, mortgages and other debts, education expenses and...income replacement. That works for us and the best part of the article suggests a combination of permanent and term for an insured's needs. See it at kiplinger.com.

MOST NOT HAPPY WITH RETIREMENT SAVINGS - According to a new survey by Harris Interactive, most employees are not saving enough money for retirement. 51% said that not saving enough money is hindering their financial success, while contributing factors were credit card and other consumer debt, cited by 35%, and not starting retirement savings early in their career, mentioned by 33%. The survey also found that 22% of employees indicated that impulse purchases have impeded their financial success, while 20% blamed living beyond one's means.

GIVE US GUARANTEES - A new Nationwide Financial survey shows that 77% of U.S. adults "support the concept of modifying the 401k retirement plan system to specify that employer contributions be used to provide a guaranteed stream of income."  More information is available at www.nationwide.com.  

MORE RESEARCH - Allianz Life has released a comprehensive examination of baby boomers' preparation for and expectations of retirement...Reclaiming the Future: Challenging Retirement Income Perceptions.  While 61% of Boomers fear outliving their money in retirement more than they fear death, the study reveals how very little understanding by people of how much money they'll need.   Northwestern Mutual released Financial Realities: Changing Timeframes, which confirms that "Americans have embraced a distinctly more conservative approach to their financial planning, priorities and preferences."  

SENIOR SAVINGS – According to a Harris Intreractive survey, about 60% of retirees say they have reduced expenses since 2008. Here is what they are living without.
  • Meals Out
  • Balmy Temperatures
  • New Clothes
  • New Books and Movies
  • Impulse Purchases
  • Home Improvement Projects
  • Pricey Transportation
  • Bigger Homes
  • Traveling the World
But living "without" means less spending and that results in less money for younger folks who provide those products and services.

CASH IS KING - Slow and steady wins the race. According to Hulbert Financial Digest, the adviser at the top of the rankings over 30 years has been largely in cash for more than a decade. Charles Allmon (Growth Stock Outlook) for more than 20 years Allmon has allocated the bulk of his model portfolio to cash. They currently own just four stocks that collectively amount to 20% of total portfolio value...the other 80% is parked in a money-market fund.
© Copyright 2010 Financial Services Online, Inc.