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BRACE YOURSELF - The last two weeks have produced nothing but bad news for the financial industry. Sorry, but that is the way it is. Believe us when we say that it is probably more depressing for us to write this than it is for you to read it! On the other hand, maybe this is a good thing; there are a lot of wonderful things always happening outside the financial aspects of our lives...family, friends and good health to mention a few. Got good news? Send it to us at goodnews@fsonline.com!

GOOD NEWS! - Hurricane season is officially over in two weeks (November 30) and there are no low pressure areas anywhere! 

MORE GOOD NEWS (KINDA, SORTA) - Paul Krugman, winner of the 2008 Nobel Memorial Prize in Economic Science, said in a press conference that the economic picture remains "spectacularly murky," but indicators are looking "better than they did one month ago."  Regarding the bailout legislation, he says that it "pulled us back from the brink.  We've had a 107 degree fever and it's down to 103."

WHAT HAPPENED? - Here is a long but interesting read on the causes of the Wall Street collapse. In a nutshell, the author says it was greed, ignorance, collateralized debt obligations and credit-default swaps on a "train being run solely for the benefit of the engineers."  

TIMELINE FOR DISASTER - Just in case you want to see a summation of the worldwide financial collapse, here is a timeline.  

THINGS YOU NEED TO KNOW - Kiplinger.com provides us with the '15 Things You Absolutely Need to Know About the Panic of 2008.'  

OBAMA TO-DO LIST - It's difficult to fathom the challenges awaiting President-elect Obama.  Here are opinions from a variety of sources concerning what should be on his to-do list:
 LIMIT EXECUTIVE COMPENSATION - Business Week has an article suggesting that excessive executive compensation is at the core of the current financial crisis and it is now time to take action. The actions of greedy "upper executives" may or may not be at the core of the crisis, but it sure has "pored salt in the wounds" of injured investors. Consider: "For most of the past century, CEOs earned roughly 20 times as much as the average employee... Today, however, average public company CEO compensation is 400 times that of the average employee. By contrast, the ratio of CEO pay to that of the average employee has remained around 22 in Britain, 20 in Canada, and 11 in Japan." This article says it is time for a congressional mandate and it is pretty hard to argue against that proposal. See the complete article here.

JUST SAYING NO - Apparently Goldman Sachs and UBS have gotten the message...seven top Goldeman Sachs executives have asked to receive no bonuses this year and instead will scratch by on their $600,000 base salaries, down from compensation in the $60 million range last year.  Over at UBS, top executives and senior managers will receive no bonuses this year.  Starting next year, bonuses will be based on performance over a three-year period and they will receive variable pay based on the company's results...maybe there really is a light at the end of the executive compensation tunnel.

EXPECT RATINGS DROP - Insurance companies, troubled by real estate investments and guaranteed retirement contracts, will see cuts in their credit ratings before year end. Many will have to seek addition capital in a very difficult market. Companies had until Nov. 14 to apply for federal help under the Troubled Asset Relief Program (TARP), but most of the life insurance industry will not be allowed to apply. The Treasury has said that to be eligible for TARP assistance, life insurers must be affiliated with banks or thrifts that are regulated at the federal level.

INSURANCE COMPANIES QUALIFYING FOR TARP - It appears that up to 35 insurers may qualify for TARP. They include Principal, Pru, Allstate, Allianz, Hancock, MetLife and AIG. AIG has already received $150 billion from the Treasury. We just got word that Hartford has applied to become a savings and loan holding company, making it eligible to receive TARP assistance.  Hard to believe these industry stalwarts are "against the ropes."

WAR CHEST? - Most life insurers are playing close to the vest regarding TARP applications so as not to send a signal that they might need financial assistance. Speculation is that MetLife might seek funds, not because it is teetering, but to build a war chest for acquisitions. That doesn't seem like a good use of our tax money.

LIFE INSURERS' FUTURE - Well, Goldman Sachs doesn't think it is very bright and is suggesting investors sell virtually all except for MetLife. "Longer term, we believe the landscape will be dramatically different as the industry's problems may ultimately force some of the smaller institutions to exit the business." He also indicated some of the stronger companies in property and casualty insurance could take advantage of this opportunity. In just one week, Hartford stock fell 61%, MetLife off 22% and Pru down 32%.

MORE TO AIG - Their stock is in the tank, but the Feds have restructured its bailout by raising the package to a record $150 billion with easier terms.  A smaller rescue plan failed to stabilize the ailing insurance giant. Sure hope this isn't good money after bad.

BLESS THE OLD MUTUALS - Mass Mutual and NY Life are "just saying no" to the Troubled Asset Relief Program. It could have a lot to do with the long-term perspective of mutual insurance companies versus the quarterly earnings focus of their stock counterparts. Further the executives in the mutuals don't have the chance to make millions from short-term gains in stock value. See Business Week article above.

BAILOUT MANIA - Everybody wants their piece of the pie. Here is a list that is guaranteed to grow: GM, Ford, Chrysler and now the cities of Detroit, Phoenix, Atlanta and Philadelphia which want help, among other items, in funding their health and retirement plans. As mentioned in earlier editions, virtually every state and municipality in this country is upside down due to retirement and health benefit under funding

FIVE TRILLION DOLLARS - Yep, that is with a "T." That is the total some say is already in play for the "Great Bailout of '08."

PENSION PROTECTION FUNDS - Well, this will be interesting. The National Underwriter reports that "About 300 insurers, business groups, employers and union chapters are pleading with House Ways and Means Committee leaders for help easing Pension Protection Act funding requirements. Sticking to the current requirements will make the effects of the current turmoil on employers with defined benefit pension plans even worse," the signers of the letter contend.
 
FORECLOSURES UP - RealtyTrak reports that homeowner foreclosures in October jumped by an alarming 25% over October 2007. That means more than 279,000 U.S. homes received at least one foreclosure-related notice in October...an increase of 5% over the prior month.

UNEMPLOYMENT - The number of people continuing to collect benefits reached a 25-year high and the number of Americans filing new claims for unemployment benefits has surpassed levels not seen since 9/11.  Sure to add to unemployment woes, Citigroup just announced a massive plan to cut more than 50,000 jobs.  Then we have Circuit City filing for bankruptcy protection and delivery service DHL shutting down its U.S.-only deliveries, resulting in 9,500 jobs lost. 

USPS WOES - The U.S. Postal Service reported a $2.8 billion net loss for its fiscal year, blaming the national economic slowdown (mail volume was down 4.5%) and costly "government mandates." Look for job cutbacks in the neighborhood of 40,000. This is likely to bring a whole new dimension to "going postal" and might require National Guard presence at some offices.

DIVERGENT LEGACIES - Here's an interesting article from MarketWatch on the wildly different legacies left by Alan Greenspan and his predecessor as Fed chairman, Paul Volcker.  If nothing else, this is a cautionary tale against granting anyone the "near-deity status" conferred on Alan Greenspan. 
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INDEX ANNUITIES TO BE SECURITIES - Investment News is reporting that the proposal to regulate equity index annuities as securities is likely to be approved by the SEC. The controversial proposal would move most EIAs from the status of insurance products to that of securities and it will not be good news for organizations creating and marketing the product.

HARTFORD B-D CUTS TRIPS - In perhaps a sign of things to come, Woodbury Financial, the B-D arm of Hartford, says it will beef up Web education programs and other education programs, but suspend use of vacations as a motivator. According to Woodbury Financial President Walter White, "(Advisors) recognize that it is the appropriate thing to do to temporarily stand down from luxury incentive trips and to focus instead on the things that drew us all into this profession, things like helping people achieve their retirement dreams, despite the uncertainties of the economy."

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RECHARGE YOUR BATTERIES - There are lots of great motivational and inspirational sites on the Net. Check them out. Here is a start provided by FSO...Mental Vitamins.  Provide this and much more to your clients from your personal and professional Virtual Assistant website. Details here.

PROTECTING SENIORS - The NAIC has adopted a new model regulation designed to protect seniors from abusive sales practices and fraud by prohibiting agents from using senior-specific certifications or professional designations in the sale or service of life insurance or annuities to senior.  More information is available here. 

DEMOCRATS AND TAXES - Here's what The Kiplinger Tax Letter predicts on the tax front:
  • Tax relief next year for middle-income taxpayers, including expansion of the earned income credit, making child and dependent care credits fully refundable and implementing a modest payroll tax credit.
  • Delay tax hikes on upper-income taxpayers beyond 2009 to give the economy time to recover.  Beginning in 2010, upper-income taxpayers should look for a restoration of the old 36% and 39.6% tax brackets, increased payroll taxes and in increase in the maximum rate on capital gains and dividends to 20%.
  • Freeze the estate tax at 2009 levels, preventing repeal in 2010 and allowing more time for a permanent solution.
DEMOCRATS AND RETIREMENT PLANNING - According to Spencer's Benefits Reports, this is some of what we might see in future retirement plan legislation:
  • Automatic plan enrollments to include direct-deposit IRA accounts, with the government matching a portion of the contributions made by workers under specified income levels.
  • Provide better bankruptcy protection for retirement benefits.
  • Enhance disclosure to plan participants.
  • Eliminate income taxes for seniors making less than $50,000 per year.
  • Raise the earnings threshold for the retirement saver's credit.
  • Impose Social Security tax on incomes in excess of $250,000.
  • Modify mandatory withdrawal requirements, as well as premature distribution penalties.
ROTH IRA CONVERSION - If you or any of your clients have a traditional IRA that's been hit by the market slump, conversion to a Roth IRA may make sense since tax will be due on the reduced value of the IRA and future growth will be tax free.  Adjusted gross income must be $100,000 or less to be eligible for a traditional IRA to Roth IRA conversion.  The income cap disappears in 2010.

INVEST IN IRELAND - Ireland is now one of the healthiest economies in the world, with the lowest unemployment rate in Europe. How did the "Irish Financial Miracle" happen? In the '70's Ireland had an oppressive 48% income tax; they lowered it to 12% and the result was the "miracle." Of course, some say it was simply the "luck of the Irish." However, here is the real reason to invest in Ireland...the "capital is always Dublin!"

HEDGE FUND DROPS - No surprise here...hedge fund assets fell by $100 billion in October with approximately $60 billion due to investor redemptions. The Hedge Fund Index fell 3.3% and the North American Hedge Fund Index dropped 4%.

SPAM SALES SKYROCKET! - The economy may be a mess but Hormel is having trouble keeping up with the increased demand for Spam. The NYT reports that "Through war and recession, Americans have turned to the glistening canned product from Hormel as a way to save money while still putting something that resembles meat on the table. Now, in a sign of the times, it is happening again, and Hormel is cranking out as much Spam as its workers can produce." More good news!

WILD WALL STREET - "Up and down it goes and where it is headed nobody knows!" We do know the Dow had its all-time high in October, 2007 of 14,164 and it is currently around 8,500...that is right at a 40% drop, if you are keeping score. Further, the 52-week range has been 7,773.71 - 13,850.90. What is it right now? See for yourself.  

HEALTH CARE COSTS - According to PricewaterhouseCoopers, implementing President-elect Obama's health finance program will cost about $2,500 per newly insured individual. The government would spend about $75 billion in 2009 with $48 billion going to cover people who are not insured and about $27 billion to replace the coverage of people who already have some type of coverage. The PricewaterhouseCoopers analysis is available here. 

GAS PRICES DOWN - Gas prices at the pump have dropped dramatically, with some parts of the country dropping below $2.00 per gallon.  The cost of "light, sweet crude" has dropped 60% since mid-July to less than $60 a barrel. Both are a direct result of consumers buying less at the pump. (When we say parts of the country, we mean it. Prices in metropolitan areas can be 10% higher than rural areas due to pollution regulations requiring cleaner - and more expensive - gasoline blends.)  Check out www.gasbuddy.com.  

LIFE APPS DOWN - MIB reports U.S. life insurers received 2.3% fewer individually underwritten life insurance applications in October than they received in the comparable month a year earlier. Further, life applications have fallen in most months since March 2006.

DIAGNOSTIC IMAGING UP - The Journal Health Affairs reports that the use of diagnostic imaging tests has increased significantly in the U.S. Computed tomography or CT scans doubled, while magnetic resonance imaging or MRI scans per patient tripled.