|
 August 1, 2006
Edition |
|
|
|
|
NYSE
PROFITS SOAR – The NYSE's quarterly profits quadrupled to
$61.2 million as a result of strong trading revenues and the
introduction of its Archipelago platform, which it bought this year,
giving it electronic-trading revenue for the first time. The new CEO,
John Thain, appears to be doing such a good job that it may have been
worth $180 million plus just to get Dick Grasso to leave. For an
interesting perspective on public reaction to Dick Grasso's
compensation, here's "The
Coup de Grasso" from The New
Yorker.
EXECUTIVE
COMPENSATION UNVEILED – The SEC voted unanimously to
require companies to publish the total yearly compensation for their
five highest-paid officials. Most importantly, they must do so in plain
English and include all benefits, including stock options, retirement
benefits and future benefits if an executive is fired or the company is
acquired.
MORE ON EXECUTIVE PAY
- Shareholders are taking the money-management and mutual-fund firm
Legg Mason to task over the $35 million in bonuses it gave its CEO.
Shareholder advisory firm Proxy Governance (www.proxygovernance.com) is
urging shareholders to withhold support for directors who backed the
pay plan.
GDP SLOWS, STOCKS
GAIN – The increase in the gross domestic product, the
output of goods and services produced in the U.S., slowed to 2.5% in
the second quarter, causing inflation fears to wane and stocks to rise.
HCA BUYOUT
– The Blackstone Group is challenging Bain Capital, Kohlberg
Kravis Roberts, Merrill Lynch and HCA co-founder Thomas Frist Jr. for
the right to buy the U.S. hospital chain, HCA, Inc. The later group had
already offered about $23 billion in what is to be one of the biggest
leveraged buyouts in history. A bid from Blackstone set off the largest
takeover fight in the buyout industry since RJR Nabisco in 1989.
STOP SHORT TERM FOCUS
- The CFA Institute and the Business Roundtable Institute are calling
for companies to reform their financial reporting practices and end
their focus on "short-term" results. "The obsession with short-term
results by investors, asset management firms, and corporate managers
collectively leads to the unintended consequences of destroying
long-term value, which decreases market efficiency, reduces investment
returns, and impedes efforts to strengthen corporate governance."
Amen. More here.
"WAL-MART" LAW
OVERTURNED - A federal judge in Baltimore has ruled Maryland's
health coverage mandate law unconstitutional. According to the
judge, the federal ERISA law pre-empts the state law, which would
require non-governmental employers with 10,000+ employees to spend 8%
of payroll on employee health coverage. Wal-Mart would have been
the only Maryland employer affected by Maryland's "Fair Share Act."
INVESTORS HAPPY,
LAWYERS SUFFER – A Stanford University study suggests that
a rising market with fewer disgruntled investors and companies working
to improve corporate governance has helped quell class-action lawsuits.
The study predicts that such suits will be down 31% over last year.
GLOBAL CROSSING
SETTLEMENT - Goldman Sachs, Merrill Lynch, Canadian Imperial
Bank and several other investment banks will pay $99 million to settle
a class action lawsuit for their part in the collapse of
telecommunications company Global Crossing. This brings the total tab
in the accounting fraud case to a total of $444 million.
|
|
|
|
WORLD'S LARGEST BANK - Starting out
25 years ago as North Carolina National Bank, Bank of America is now
poised to replace Citigroup as the largest bank in the world based on
market value.
40 BEING EYED - Forty investment
firms in Florida, California, Arizona, Texas, North Carolina and
Alabama are under federal SEC examination over so-called "free lunch"
investment seminars that target elderly victims. Somewhat
surprisingly, an NASD
study indicates that elderly victims of investment fraud seem to be
more financially literate than non-victims, leading to suggestions that
financial education needs to cover more than market mechanics and
include teaching about scam tactics.
NASD BACKS OFF ON "BAD BOY" RULE -
State securities regulators are upset that NASD has softened a proposed
"bad boy" broker disclosure rule. The rule would allow for the public
disclosure of the entire disciplinary file of registered
representatives who have three or more disciplinary actions in the
prior 10 years. Under current procedure, NASD does not reveal unproven
or pending customer complaints that are over two years old or customer
settlements under $10,000.
MORGAN STANLEY CEO
ON HOT SEAT - Morgan Stanley CEO John Mack has agreed to be
interviewed by the SEC regarding his connection with an insider trading
case involving Pequot Capital.
BROKERAGE FIRMS DOING WELL - Merrill
Lynch, the nation's largest brokerage firm, reported a 44% increase in
its quarterly earnings. Discount brokerage firms Charles Schwab and TD
AMERITRADE reported 35% and 67% quarterly surges respectively.
RETIREMENT ASSETS - The Investment
Company Institute reports that the nation's retirement assets reached a
record $14.5 trillion in 2005...a 7% increase over the prior year and a
40% jump since 2002. Retirement assets now account for more than
one-third of household financial assets.
BROKER EARNINGS AND RETENTION
– Despite increased competition, SIA's 2005 Production and
Earnings Survey reveals median total earnings for brokerage registered
reps were up slightly to $124,871 from $121,577. The survey also
revealed a 5% decrease in production among first-year reps to $64,850
from $68,373 in 2004, but a 4% jump in earnings, to $65,184 from
$62,205. Finally, 35% of new reps leave the business within one
year.
WADDELL & REED
SETTLE - Waddell & Reed Financial will make a $77 million
settlement to resolve claims that it allowed certain clients to make
improper trades. A little more than a year ago the company paid $18
million to the NASD to settle accusations that it harmed investors by
changing variable annuity contracts.
MORE FINES
– The NYSE has fined Daiwa, Goldman Sachs, Citigroup and Credit
Suisse a combined $1.25 million for violations of new short-selling
rules designed to prevent "naked" short selling, which is the trading
of stocks that an investor doesn't own.
PRINCIPAL ACQUISITION - Principal
plans to acquire Washington Mutual's mutual fund management business
(WM Advisors) with more than $26 billion in assets under management for
$740 million. Don't be surprised to see more deals like this, as
insurance companies look to control a bigger share of baby boomers'
retirement assets.
|
 |
|
Need a
Free Speaker?
Use
Technology and Bill O'Quin, CLU,
ChFC,
RFC!
Bill is the
co-creator of the Virtual Sales Assistant and offers a
variety of free seminars for company, agency and association groups.
All speaking engagements are free and conducted via the Internet, so
no travel
costs are necessary. You provide an Internet connection, a speaker
phone and projection system. Bill will do the rest.
Currently
Bill's most popular
presentation
is:
The
Priority Planning Review.... A
Simpler Way to Approach Prospects.
A simple,
non-threating approach is
the key to effective and
unobtrusive prospecting. Bill will not only tell you how to do this,
but
will also give you the tools necessary to actually conduct a
stress-free approach.
For availability, contact
Bill at boquin@ix.netcom.com.
(Last minute requests for a stand-in speaker can usually be
accommodated.)
|
|
 |
PENSION OVERHAUL - Last Friday, the
House passed a bill designed to overhaul the private pension system and
prevent more defaults. To gain passage, extension of about $35
billion in popular tax breaks was removed from the pension bill and
instead combined with a permanent rollback in estate taxes and an
increase in the minimum wage. The House passed this second bill
on Saturday. This strategy has angered Senators of both parties,
so the future of both pieces of legislation remains uncertain in the
Senate.
DISCLOSURE,
CONFUSION AND CLARITY - Earlier this year, the SEC implemented a
rule designed to clearly answer the question, "Whose interests must
brokers, financial planners and other investment advisers put first:
their clients' or their own and their firms?" It turns out rather
than presenting a clear answer to this question, the SEC rule is
leaving consumers more confused than ever. An in-depth article on
this topic is available here.
FPA UPSET OVER NEW
CFP CODE - The Financial Planning Association is not too happy
with the Certified Financial Planner Board of Standard's "extreme
rewrite" of the code of ethics for CFP designees. The FPA feels some of
the changes are positive, but other provisions are "troubling and raise
long-term questions about the future direction of the financial
planning profession." The FPA has posted a detailed breakdown of the
CFP Board's proposed changes at www.FPAnet.org.
MAKE THAT $295,000
FOR HEALTH CARE – Several issues ago we reported that you
would need $225,000 for health care during retirement. According to the
Employee
Benefit Research Institute that figure is really $295,000 for a
typical husband and wife with an average life expectancy of 82 and 85.
If they both live to 95, they will need about $550,000 to cover
premiums and out-of-pocket expenses.
FINAL HSA RULES
- The Treasury Department and the IRS have released rules for employer
contributions to Health Savings Accounts. Employers can now make
different "comparable" contributions based on different variations of
family coverage and, if the HSA is part of a cafeteria plan, employer
contributions will be excluded from the comparability rules. More
information, including the regulations, is available by clicking here.
HEDGE FUND RULES
- In the wake of the U.S. Court of Appeals overturning the SEC's 2004
hedge fund adviser registration rule, SEC chairman Christopher Cox is
calling for "emergency limits" on the marketing and availability of
hedge funds to "unsophisticated" retail investors.
MOST/LEAST -
According to CNNMoney, 38 housing markets in the U.S. are overpriced,
with 56 markets considered fairly priced. Not surprisingly, the
east coast and California tend to be overpriced, with the broad
mid-section of the country providing the best housing values.
Read the article by clicking here.
LOVE, MARRIAGE AND
MONEY - According to Forbes,
"marriage just doesn't pay." While there are initially financial
benefits during the honeymoon phase, new expenses tend to follow in the
wake of marriage. Once children enter the picture, married
couples begin to face real financial challenges. The complete
article is available by clicking here.
BOOMERS BEWARE
– Apparently boomers are being targeted by con artists with a
variety of scams. People over 60 represent 30% of financial fraud
victims and the wealth controlled by that age group is expected to
grow. In fact, baby boomers already have some $8.5 trillion in
investable assets. Here are some specific fraud scenarios to look out
for: criminals posing as charitable organizations offering monthly
annuity payments to investors who surrender their savings, investments
that tie up older peoples' cash for many years and some "free-lunch"
events.
A FIRST - For
the first time in the annual Phoenix
Wealth Survey's history, high-net-worth individuals rank the risk
of unforeseen health care costs wiping out their accumulated assets as
their top financial concern, overtaking the worry of being able to live
comfortably on their available assets. The survey revealed a
variety of contradictions between expectations and planning..."They
have set considerable goals for a financially secure retirement but
haven't made specific plans, purchased the right products, or
established a relationship with a financial planner who will help them
achieve their goals."
GIVING UPDATE
- The Chronicle of Philanthropy reports that some $12 billion flows
annually into charities from donor-advised funds, eclipsing the
charitable efforts of Warren Buffett and Bill Gates. "People who
aren't millionaires are stepping up to the plate too, albeit with less
fanfare."
2010 AND THE ESTATE
TAX - Assuming estate tax law doesn't change in regard to the
year 2010, the estate tax disappears for that one year. According
to some tax experts, however, "some heirs will find they owe more in
taxes than they would if the tax had remained in place."
Why? Because the step-up in basis for income tax purposes also
disappears in 2010. Instead, heirs must carry over the deceased's
basis in the property they inherit. While $1.3 million of
inherited property receives a step-up in basis, with surviving spouses
getting an additional $3 million, in larger estates the step-up change
will create capital gains issues that didn't exist prior to 2010.
SAFETY IDEA –
If you or any of your clients don't have a home security system, here
is an idea for you. Keep your car keys next to your bed on the night
stand. If you hear a noise outside your house, just press the panic
alarm on your car. It will go off from most everywhere inside your
house and keep honking until your battery runs down or until you reset
it with the button on the key chain. Works well when traveling too.
NATIONWIDE SPONORS
FPA - Nationwide has signed an agreement to be the "national
sponsor" of the FPA. The agreement will give Nationwide exposure at FPA
national conferences and marketing opportunities in FPA publications.
LIFE APPS DOWN
– MIB reports that life applications were down 5.7% in June from
June 2005. Unfortunately, the MIB activity index has fallen during most
months during the past three years.
BANKS OFFERING LIVE
CHAT - Online chat is the newest venture among banks to keep up
with the competition. According to Bankrate.com, "An online chat
is an innovative, but still efficient, way to achieve interaction with
the customers. It's certainly an enhancement over the customers'
fending for themselves on a bank's Web site." It is also a move away
from the banking trend of late that tried to direct customers away from
tellers to automated services.
|
|
|
