September 1, 2009 Edition

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Advanced Settlements appreciates the opportunity to be your broker of choice and we look forward to earning your life settlement business.  As one of the largest life settlement companies in the nation, Advanced Settlements is committed to educating you about life settlements. Please feel free to call us anytime at 1-800-561-4148 or email us at

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For Registered Rep and Agent use only.  Please visit our website for more information and for complete list of disclosures.  Securities may be offered through NFP Securities, Inc., a Broker/Dealer and Member FINRA/SIPC Advanced Settlements, Inc. is an affiliate of NFP Securities, Inc. and a subsidiary of National Financial Partners Corp., the parent company of NFP Securities, Inc.

MORE PROBLEM BANKS - The FDIC has boosted the number of "problem banks" to a 15-year high, as its list of troubled lenders grew 36% to 416. Financial stocks led the S&P 500 to a 12-year low in March on concern falling real estate values would cause widespread insolvency.
 
FDIC FUND DOWN 20% - Stocks have rallied nearly 60% since the end of March, but the Federal Deposit Insurance Corporation still has bad news. The agency reported that the banking industry lost $3.7 billion in the second quarter amid a surge in bad loans made to home builders, commercial real estate developers, and small and midsize businesses. Further, its deposit insurance fund dropped 20%, to $10.4 billion, its lowest level in nearly 16 years.

STOCKS HIT NEW HIGH - The Dow Jones Industrial Average hit 9539.29 for a new high for the year. Drivers of late are apparently strong readings on home prices and an increase in consumer confidence.

BERNANKE, FOUR MORE YEARS - It's not surprising that Ben Bernanke is getting a second round as chairman of the Federal Reserve. Had President Obama bounced Bernanke after one four-year term, it would have sent an unsettling message just as the economy appears to be turning the corner.  Here's a Bloomberg article on Mr. Bernanke's likely agenda over the next four years.  As a side note, identity theft can happen to anyone, including Mr. Bernanke and his wife who had their checking account raided by identity thieves.

BAD COMBINATION - Tax receipts collected by the U.S. government are down 17% on a year-over-year basis. Outlays paid by the government are up +21% on a year-over-year basis due to increased spending on unemployment insurance and other safety-net programs, as well as large outlays on financial rescues.

RESULT OF UNSUSTAINABLE DEBT - The U.S. government has been spending a great deal more than it has been taking in, and it is on track to do so well beyond the next 10 years. Shy of finding a fairy willing to leave trillions under Uncle Sam's pillow, lawmakers will have to raise taxes and cut spending. If our foreign creditors become concerned that the country is running too high a balance, they will demand higher interest rates or they'll put their money elsewhere. At that point, things would get ugly. "Taxes would rise to levels that would make a Scandinavian revolt. And the government would not be able to provide anything but the most basic public services. We would no longer be a great power (or even a mediocre one), and the social safety net would evaporate," tax policy expert and Syracuse University professor Len Burman wrote in a recent op-ed cheerfully titled "Catastrophic Budget Failure."  Here's another perspective from Princeton University professor and Nobel prize winner Paul Krugman..."Till Debt Does Its Part." 

HEALTH REFORM AND GOVERNMENT DISTRUST - While studies show that most Americans want health reform, few want their current plans to change. This will be difficult to accomplish without a better understanding by Americans of the financially unsustainable nature of our current health care financing. Additionally, many believe that government distrust is at the very root of the objections to health care reform. And that isn't difficult to understand. We have seen nothing but unbridled government spending for years.  Here's a statement from the NAIC that "cuts to the chase" and addresses several core issues that must be addressed in order to successfully reform our health care system.  

DEBT, SPENDING AND HEALTH CARE – Here is a simple, bulleted appeal to stop destroying the free enterprise system in this country. Love to hear a critique from any reader.  For those interested in a more detailed analysis of the challenges we face in reforming our health care financing, here's "The Cost Conundrum."  

HINTS OF RECESSION END - The Commerce Department estimated that the GDP shrank at an annual rate of 1% in the second quarter. The 1.0% drop is much smaller than the first quarter's 6.4% annualized pace of decline and some think this could be a sign that the recession is ending. However, unemployment remains high and may benefit little from a recovery if jobs remain scarce and spending stays too low to fuel a strong rebound. Unemployment is not expected to peak until next spring, probably somewhere above 10 percent. The jobless rate is now 9.4%.

MOST EMPLOYERS HIRING IN 2010 - Findings from a survey by Robert Half International and CareerBuilder.com reveals that 53% of employers expect to hire full-time employees throughout next year.

RECOVERY AND/OR JOBS - The U.S. economy may be getting better, but don't expect to see much improvement on the jobs front anytime soon. The economy is following a script for a jobless recovery, and unemployment is likely to stay high, if not get slightly worse. The CBO sees unemployment peaking at 10.4% next year from an average of 9.3% this year, before it falls to 9.1% in 2011.

DOUBLE-DIP RECESSION? - A double-dip recession (a "W" recession) is a downturn that technically ends, but is followed by a fleeting period of growth and another period of economic decline before sustained growth is achieved. Some say it is possible, especially if unemployment continues to rise, if the dollar continues to drop, if "Cap and Trade" becomes the energy "law of the land," if oil prices rise and a whole host of other "ifs." However, others say "no way." The Economic Cycle Research Institute's Weekly Leading Index (WLI) for the week to August 21 fell to 124.4 from 124.9 the prior week. However, the index's annualized growth rate rose to a 38-year high of 19.6%  "With WLI growth continuing to surge through late summer, a double dip back into recession in the fourth quarter is simply out of the question."

NEW TARGET, HEALTH INSURERS – The House has asked 52 insurance providers for detailed data on pay and perks for executives, premium revenue by market segment, claims payments, sales and other expenses and profits for all health insurance products. A Senator has asked the top 15 health insurers for information on what portion of premiums goes to profits versus patient care.  The "populace card" of overpaid executives and out of control partying and perks might prove effective as a populous appeal, but the actual causal relationship will be more difficult to prove.  On the whole, blaming insurance firms for runaway healthcare costs is a weak argument, because the insurance industry isn't all that profitable to start with. Overall, the profit margin for health insurance companies was a modest 3.4% over the past year, according to data provided by Morningstar. That ranks 87th out of 215 industries. Complete article at www.usnews.com.

DEFICIT PROJECTIONS RAISED – Just how far in debt will the U.S. be in 10 years? The Administration's Office of Management and Budget projects $9.1 trillion...up about 30% from their projection just a few months ago.  The Congressional Budget Office estimated it would be $7.1 trillion. The reason for the apparent discrepancy: The White House projection of a $9.1 trillion deficit over the next 10 years is a projection based on the assumption the White House policies are enacted. The CBO did not adjust for the additional spending in their current release; its comparable number was $9.2 trillion released in March. One thing for sure is the exact number will be neither of the above...maybe more or, if we are lucky, less.

FORECLOSURES AT RECORD HIGH - The Mortgage Bankers Association reports more than 13% of American homeowners with a mortgage have fallen behind on their payments or are in foreclosure. The record-high numbers are being driven by borrowers with traditional fixed-rate mortgages, rather than the shady subprime loans with adjustable rates that kicked off the mortgage crisis. On the other hand, as banks unload foreclosed properties at deep discounts, they are attracting homebuyers back into the market.

BUFFET ON FEDERAL DEBT - According to billionaire Warren Buffett, the U.S. must do something about its enormous debt after bolstering the financial system with billions of dollars, or face potential threats to its economy and currency. "Enormous dosages of monetary medicine continue to be administered and, before long, we will need to deal with their side effects. For now, most of those effects are invisible and could indeed remain latent for a long time. Still, their threat may be as ominous as that posted by the financial crisis itself."

EXECUTIVES PONDER CZAR'S MOVE - Wall Street (or to be exact a few highly-paid financial executives) is warily watching Kenneth Feinberg, Obama administration's pay czar, and wondering if he will flex his muscle to "claw back" past bonuses paid to some of the biggest players in high finance. Such a move could roil the industry, which lately seems to have successfully toned down Congressional efforts to curb outsized pay packages. FYI, Fienberg is not unaccustomed to the "big bucks" himself, having reportedly made about $5,500,000 last year in his law practice. Is that still "big bucks?"

NO SECRET ANYMORE - The IRS has entered an agreement with the Swiss government under which UBS is releasing information on 4,450 client accounts, which may have been used by affluent Americans to avoid paying taxes. These accounts at one point held as much as $18 billion in assets, although there is not an estimate of the number of assets currently held in these accounts.  The IRS indicates that it may pursue other financial institutions in an effort to crack down on offshore tax evaders.

USPS TO CUT 30,000 JOBS - The U.S. Postal Service, the nation's second-largest employer, is offering buyouts to quickly slash up to 30,000 jobs as it grapples with declining mail volume and embraces more automation. Hopes are the cuts will save $6 billion this fiscal year after the Service reported a $2.4 billion loss in the quarter ended June 30.

LIFE EXPECTANCY INCREASES - The Division of Vital Statistics has published figures in a report on preliminary 2007 death data that show life expectancy at birth increased 0.2 years in 2007, to 77.9 years. Males increased to 75.3 years, from 75.1 years and females to 80.4 years from 80.2 years. The overall death rate is the same as it has always been – 100%.

LTC CHOICES - The odds of your house burning down are about .08%, being hospitalized is about 16%, but nearly 60% of us will someday need assistance in our daily living. Choices? 
  • The choice of most Americans is to do nothing and spend down until becoming eligible for state assistance or a VA benefit (if either are still available.)
  • Long-term care insurance
  • The "reserve parachute" of a reverse mortgage.
  • Asset-based long-term-care insurance, involving the conversion of an asset, such as a CD, into long-term care coverage worth a much larger amount
Number 4 seems like the best approach to us.

CREDIT CARD RELIEF – The Credit CARD Act went into effect last week. Issuers are now required to give customers 45 days advance notice before making any significant changes to a contract and will be required to mail bills 21 days before the due date. Consumers will also have the right to reject changes to their contracts, including interest rate increases, and they will have the option of paying off their balances at their existing rates within five years.  Click here for more information. 

LATE FEES - American consumers are expected to incur $39 billion in checking account overdraft charges and late fees on credit cards during calendar year 2009, an average of $105,000,000 per day in fees and late charges. Just 10% of consumers incur 90% of the overdraft fees and late charges.

ASSESSMENTS DOUBLING - FINRA has announced that its charges on individual registered representatives will be doubled next year, to between $130 and $150 a year from the current $65 to $75.  Assessments charged to some member firms may also increase.

FIXED TERM ANNUITIES – There is a demand and a need for an alternative to lifetime annuities, so expect to see more fixed-term or temporary annuities coming to the marketplace. The advantage to these products is the flexibility to buy a different type of product in the future, such as an enhanced annuity if health deteriorates.

TOP TWO PERCENT - To rank in the top 2% of all U.S. taxpayers required an adjusted gross income (AGI) level of at least $261,000 based upon calendar year 2007 tax data. This group earned 28% of all AGI nationwide and paid 49% of all federal income tax in the country.

FEDERAL ESTATE TAX - Unless modified by Congress in the next four months, the federal estate tax will be repealed as of 01/01/10, i.e., there will be no federal estate tax levied on the estates of all 2010 decedents. Current law increases the maximum amount a decedent may pass to his/her heirs estate tax free from $3,500,000 for a 2009 death to an unlimited amount for 2010 deaths, then reduces the exemption to $1,000,000 for 2011 deaths. Advise all your clients to wait until 2010 to die...unless, as expected, Congress extends the 2009 estate tax rules through 2010.

RETIREMENT AND COLLEGE CONCERNS - A recent survey from Bankrate.com indicates that 70% of Americans don't feel they'll be able to save enough for retirement and 50% are concerned with college savings.  Scarily, 50% fear that they might not be able to afford home payments in the future.  Additionally, 36% of respondents say they are saving less than before as a result of the current economic environment, while 17% have increased savings despite the state of the financial markets.

FINAL EXPENSES PLUS - 28% of all Medicare expenses are paid on behalf of participants in the final year of life. Check out the total annual expenditures of our largest social programs here. 

LIFE INSURANCE NEST EGG - Seniors bought life insurance policies with a face value of $11.8 billion last year, almost double the value of policies sold just two years earlier. By using life settlements, policyholders can sell their insurance for lump sums that are usually greater than they would receive if they surrendered the policies to the insurance companies.  However, policyholders and their advisors should first make certain that taking out a loan against the policy or receiving a partial payout through an accelerated death benefit would not be more appropriate.

LOW INFLATION DOWNSIDES - Unless Congress changes the law or inflation picks up in August and September, it's likely that qualified plan contribution limits will be reduced for 2010.  For example, 401(k) contributions, which currently max out at $16,500, will likely go down to $16,000 in 2010.  In addition, for the first time in a generation, Social Security is projecting that there will not be a cost of living increase for the next two years.  While Social Security benefits cannot go down, seniors who have Medicare prescription drug premiums deducted from their Social Security payments, may receive reduced monthly Social Security payments.

HEALTH INSURANCE COSTS UP - Aon Corp. is predicting that group health care plan costs, including high-deductible health plans, will increase an average of 10.5% over the next 12 months.

VARIABLE ANNUITY, UPS AND DOWNS – LIMRA reports variable annuity sales in the U.S. fell for a fifth straight quarter as insurers, weakened by the stock market slump last year, scaled back benefits of the equity-linked retirement products. Sales slipped 24% in the last quarter. The Insured Retirement Institute (formerly NAVA) reports a big jump in second-quarter assets, but the holdings of VA contracts reflect a big percentage drop for equities and corresponding increases in more conservative holdings.

NEW HOMEOWNER TAX CREDIT - Time is running out to claim the $8,000 first-time homebuyers tax credit passed earlier this year as part of the economic stimulus package. The credit, which does not need to be repaid, is good for up to $8,000, or 10% of the purchase price, and applies to people who have not owned a home in the previous three years. The program ends on Dec. 1, but it usually takes around 90 days to close on a house after a contract is signed, so buyers have very little time left to act.

NEW HOME SALES UP - The U.S. Department of Commerce reports sales of newly constructed homes increased 9.6% in July. The report followed other positive housing news as home prices in major cities rose for a second straight month in June.

DURABLE GOOD ORDERS UP - Orders for big-ticket items, including cars and appliances, increased 4.9% in July, indicating improvement in the manufacturing sector. While the overall numbers were encouraging, analysts cautioned that much of last month's increase came from the transportation sector, led by a surge in demand for aircraft and communications equipment, and increased auto sales resulting from the Cash for Clunkers incentive program.

CONSUMER CONFIDENCE UP - The Conference Board Consumer Confidence Index rose to 54.1 in August from 47.4 in July, an indication that consumers may be feeling more optimistic about recovery prospects.

CONSUMER CONFIDENCE DOWN - The Reuters/University of Michigan Surveys of Consumers said its final index of confidence for August fell to 65.7 from 66.0 in July...its lowest in four months.

HIGH-YIELD BONDS SOAR - High-yield bond funds have returned an average 33% year-to-date and attracted $14.6 billion in assets. For the 10 years through the end of July, high-yield bonds gained 2.9% annually, compared with the 2.2% loss in the S&P 500 Index.

FOLKS HAPPY WITH AUTO INSURER - According to J.D. Powers and Associates' 2009 National Auto Insurance Study, auto insurers have attained a five-year high in customer satisfaction in 2009, largely due to low premiums. The study also found that more than 50% of the companies involved made significant improvement, with price being the driving factor in customers' overall satisfaction.  Also 42% of customers reported premium decreases without having switched insurers...that is nice.

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