Below is a link to a good video from the Wall Street Journal Live that may be helpful to understanding more about the “employer mandate” of Obamacare. We’d encourage business owners to view this and let us know your thoughts. It’s becoming clearer that small businesses could face penalties under this new healthcare provision for 2014.
WSJ Live: Small Businesses Growing Fearful of Obamacare
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Good insight from Steve Holman of Vanguard that gives a view on maintaining a long-term perspective and the importance of delaying gratification. He also reminds us that “doing the right thing means having clear goals, choosing the right balance… and investing for the long term.”
Long-term perspective: Essential for athletics and investing
If you’re looking for insight on investments and personal finance, you could do a lot worse than asking a long-distance runner.
Vanguard is a second career for me. After college, I had the great fortune to compete as a professional distance runner. Yes, there are such things as professional distance runners; however, our rewards tend to be more spiritual than financial. After participating in the Barcelona Olympics for the United States in 1992, and competing across the globe as a world-ranked miler for almost ten years, I “retired” at the age of 31.
Whether you’re 31 or 65, retirement isn’t an easy adjustment. Many of us experience a profound sense of nostalgia and melancholy for our former lives. We worry about what lies ahead. Like many retirees, it took me a while to figure out my next step. Ultimately, I decided to go to business school.
While I had been a Vanguard client for a number of years, making a career here was never a serious consideration until I spent time here as a summer intern while I was in grad school. As it turns out, many of the defining characteristics of my athletic career directly linked to Vanguard’s investing philosophy.
Long-term perspective: Distance runners know that success is never a product of a single run; it’s the cumulative effect of remaining committed, consistent, and focused over a long period of time. At times, it’s hard to remain diligent for a benefit that seems so far off in the future, but the rewards when you achieve these goals are immense. Investors, too, are often rewarded for remaining disciplined and maintaining a long-term perspective.
Delayed gratification: Getting up at 6 a.m. to jog isn’t “fun.” Pushing through the last few miles of a tough workout is rarely enjoyable. Runners know that you have to make choices and sacrifices in the short term if you hope to improve fitness over time. Putting money away in savings means you’re not consuming something cool now, and that can be tough. But a less expensive car now could mean a happier retirement later.
No quick fixes: I’m proud to say that I never used performance-enhancing drugs during my athletic career. I could have doped and run faster, maybe even got away with it, but it wasn’t the right thing to do. Instead, I got up every morning and put in the miles, year after year. It’s easy to be seduced by portfolio-enhancing alpha strategies and esoteric alternate investments. Occasionally these things work in the short run, but usually they don’t, and sometimes people go to jail. Doing the right thing means having clear goals, choosing the right balance of low-cost funds, and investing for the long term.
And as I learned long ago, hard work gets results—even when you can’t see the finish line.
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Our industry requires a great degree of education, testing and licensing. Today we are happy to announce that Julie Sanders has passed her Series 6 exam! She has been working and studying hard over the last several months in preparation, so today is a “happy day” for her (and all of us).
In order to pass the Series 6 exam, candidates must test on topics covering mutual funds, variable annuities, securites and tax regulations, retirement plans and insurance products. The test is administred by FINRA (the Federal Industry Regulatory Authority) and passing candidates will register as an “Investment Company/Variable Contracts Products Limited Representative”. We are proud of Julie and know you will be also…
Although no one can tell you with accuracy exactly what will happen in 2013, we continue to see a sense of enthusiasm regarding the markets for this year. We are somewhat positive about equities, and bonds may not return as they did last year. In fact, did you realize that since the beginning of the year the S&P 500 Index is up +6.19% through Wednesday, February 6th?
In his latest commentary, economist Brian Wesbury explains why the pessimists are losing. We thought you may like to listen, so click here to watch the latest First Trust video: Wesbury 101 – “The Pessimists are Losing”.
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With tax season around the corner many contemplate funding their IRA or Roth IRA accounts. Sometimes you may wonder which is better for you. We thought this article may help you as you debate the differences and which might be best for your situation. Contribution limits for 2012 remained level at $5,000 with an additional $1,000 available for those age 50 or older. It may be helpful to know that in 2013 these limits increased slightly to $5,500 (age 49 or younger) and $6,500 (age 50 or older). Also remember that Traditional IRAs must be established by the tax-filing deadline (without extensions) for the tax year to which your qualifying contribution(s) may apply.
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At Mascagni Wealth Management, after 24 years of advising women, we have found our work to be so much more than financial advice. Although needs vary, there are similar challenges women face that may at times be difficult, even painful, but there is hope. So we have asked Sue Templeman, recently divorced after 23 years of marriage, to share her story each week. Sue would tell you that there’s nothing special about her; she is simply representative of the growing group of women with lives that have suddenly derailed. She’ll relay her experiences to start a dialogue that may be helpful to you or someone you may know. Will regrets, mistakes, and even fresh ideas emerge? You bet. So meet Sue… and “like us” on Facebook to follow her weekly posts to our page.
Sue Templeman
Sue Templeman is not a securities licensed individual and is not affiliated with Investacorp, Inc.
The Heritage Foundation recently summarized a list of the 13 tax increases that started January 1, 2013. Seven resulted from the deal that Congress and President Obama struck at the end of 2012 to help avoid the fiscal cliff, and the other six are tax increases from Obamacare that also began this year. Here is the list summarized by Charles Dubay:
13 Tax Increases That Started January 1, 2013:
Tax increases the fiscal cliff deal allowed:
1) Payroll tax: increase in the Social Security portion of the payroll tax from 4.2 percent to 6.2 percent for workers. This hits all Americans earning a paycheck—not just the “wealthy.” For example, The Wall Street Journal calculated that the “typical U.S. family earning $50,000 a year” will lose “an annual income boost of $1,000.”
2) Top marginal tax rate: increase from 35 percent to 39.6 percent for taxable incomes over $450,000 ($400,000 for single filers).
3) Phase out of personal exemptions for adjusted gross income (AGI) over $300,000 ($250,000 for single filers).
4) Phase down of itemized deductions for AGI over $300,000 ($250,000 for single filers).
5) Tax rates on investment: increase in the rate on dividends and capital gains from 15 percent to 20 percent for taxable incomes over $450,000 ($400,000 for single filers).
6) Death tax: increase in the rate (on estates larger than $5 million) from 35 percent to 40 percent.
7) Taxes on business investment: expiration of full expensing—the immediate deduction of capital purchases by businesses.
Obamacare tax increases that took effect:
8) Another investment tax increase: 3.8 percent surtax on investment income for taxpayers with taxable income exceeding $250,000 ($200,000 for singles).
9) Another payroll tax hike: 0.9 percent increase in the Hospital Insurance portion of the payroll tax for incomes over $250,000 ($200,000 for single filers).
10) Medical device tax: 2.3 percent excise tax paid by medical device manufacturers and importers on all their sales.
11) Reducing the income tax deduction for individuals’ medical expenses.
12) Elimination of the corporate income tax deduction for expenses related to the Medicare Part D subsidy.
13) Limitation of the corporate income tax deduction for compensation that health insurance companies pay to their executives.
In spite of negative news on the Fiscal Cliff issues, the economy is showing continued improvement. Here is the latest economic commentary from Brian Wesbury and Bob Stein of First Trust that shares more detail…
“The Pouting Pundits of Pessimism have been in a froth over the “fiscal cliff,” but US consumers seem to be ignoring them. Shoppers hit stores in droves over the past four days, both in person and, increasingly, on-line. It’s not an economic boom, but it sure isn’t a recession, either.
Sales for the full first weekend of holiday shopping – Thursday through Sunday – are up 13% versus a year ago according to the National Retail Federation. On average each customer spent 6.3% more than last year.
ComScore says online Black Friday sales were up 26% from a year ago and surpassed $1 billion for the first time ever. Online sales on Thanksgiving Day itself were up 32%. This strength was confirmed by Coremetrics, an online data-gatherer affiliated with IBM, which says Black Friday internet sales were up 20%.
The weakest report was from ShopperTrak, a Chicago-based firm that has monitoring devices at 40,000 retail outlets and malls around the country, measuring foot traffic, which reported a 1.8% decline for Black Friday. However, when they add back Thanksgiving Day, the total for both days was up 1%.
The calendar is interesting this year. Thanksgiving always falls on the fourth Thursday of November, and because November 1st was a Thursday in 2012, the shopping season will be the longest possible. In addition, the Internet is making shoppers savvier, while retailers have more data. As a result, we think the middle and latter stages of the shopping season will be stronger than the early stages.
While some wonder how sales can be up, it is clear that more jobs, higher earnings and smaller debt burdens are all positive forces.
In the past twelve months, the unemployment rate is down a full percentage point, payrolls are up 162,000 per month, and total private wages and salaries are up 4.6% from a year ago. Meanwhile, consumers have whittled down their debts, so that monthly financial obligations – mortgages, rent, car loans/leases, and other debt service – are now the lowest share of after-tax income since 1984.
In the near term, jobs and incomes may take a hit from Hurricane Sandy. But, any hit would be temporary. For example, the recent spike in unemployment claims suggests zero net change in payrolls for November. However, weekly unemployment claims have already started to recede, so a rebound in jobs will come in December or very early next year.
Autos sales were doing well until Sandy hit in late October. Next Monday we get November auto sales, which were probably held down by Sandy as well. However, all the storm did was postpone sales. That, plus the need to replace vehicles damaged in the storm, will cause a surge in car and truck sales in December and early 2013.
Meanwhile, housing keeps picking up steam, with housing starts up 42% from a year ago, new home sales up 27% and existing home sales up 11%. We expect these gains will continue in the year ahead as the pace of home building still has a long way to go to get back to normal (so inventories stop falling) and more workers qualify for mortgages. In turn, this means more growth for consumer spending.
The bottom line is that for the fourth year in a row, consumer spending is on an upward path. Unlike some economists, we don’t think this causes economic growth. Instead, we take it as a sign that the economy continues to leave the wreckage of 2008-09 further behind. It’s a Plow Horse economy, still, with consumers taking the reins.”
– First Trust Economic commentary by Chief Economist, Brian Wesbury, and Senior Economist, Ben Stein, 11/26/12.
The individual investor has been hammered in the last month about the “end-of-year“ Fiscal Cliff issues coming due all at one time. In turn, many people are asking what the markets and economy might do after the November presidential election if Congress and the White House fail to act on this. Here are three dreaded Fiscal Cliff issues all coming due on December 31st:
- Mandatory cuts on defense spending
- The need to increase the Federal debt ceiling
- The temporary Bush tax cuts expiring 12/31/12
Though all of us won’t know the outcome until it happens, we are optimistic that resolutions will be made to prevent the Dec. 31st Fiscal Cliff from happening. We will continue to monitor this issue for our clients. In the meantime, Brian Westbury’s recent “No Recession Yet” video helps explain some of the issues.
Below is an interesting Q&A by Al Lewis who is a columnist for Dow Jones Newswires in Denver, CO. This interview below addresses some of the common questions and concerns people are asking now about QE3…
“A Q&A on QE3 by Al Lewis, September 15th:
Q: Why did Federal Reserve Chairman Ben Bernanke launch a third round of bond buying known as quantitative easing, or QE3, last week? A: Because the stock market told him to. How else can he keep the Dow Jones Industrial Average above 13000? Companies are warning of slower earnings growth.
Q: How big is QE3? A: $40 billion a month—indefinitely. This is on top of the $45 billion a month the Fed is already spending on another program called “Operation Twist” through the rest of this year.
Q: Phew, is that all? A:Hardly. Since 2008, the Fed has dumped more than $2.3 trillion into the economy, artificially levitating the values of stocks and real estate against the ravages of an economic reckoning.
Q: What will the Fed buy with this QE3 money? A: Mortgage-backed securities. It is betting that the way to fix a deflated housing bubble is to blow another one.
Q: Does the Fed really just print all this money? A: No. That would take eons. The Fed simply adds zeros to its magic spreadsheet, and violà, money!
Q: Isn’t this a Ponzi scheme? A: Of course not. A Ponzi scheme is illegal. This is a Bernanke scheme.
Q: Is it working? A: Every new QE is an admission that the last one didn’t work. Since the first QE in late 2008, America’s economic growth has mostly been described as “anemic.”
Q: So why will QE3 last indefinitely? A: It spares Mr. Bernanke the humility of announcing QE4, QE5, QE6 ….
Q: Will this finally lower unemployment? A: You tell me. The Fed has launched QEs and held interest rates close to zero for nearly four years. The unemployment rate has remained above 8%.
Q: So why call it a “recovery”? A: It’s not as depressing as the term depression. A depression can be defined as a prolonged period of high unemployment.
Q: Why not just call it that? A: Another theory holds that a depression is impossible as long as Mr. Bernanke can keep creating money.
Q: Won’t this cause inflation? A: Only if you eat food, burn gasoline, require medical attention, purchase commodities or pay college tuition. Bottled water is $1.29, and air is still free.
Q: Why haven’t QEs worked? A: It’s a global economy and QEs simply leak out of the bucket. Companies, for instance, may use the cheap money to expand abroad. And consumers may use it to buy more Chinese goods.
Q: So why do it? A: The money flows into banks to strengthen their balance sheets. Corporations use it to lower borrowing costs and launch stock-repurchase programs. The ensuing boost in corporate performance helps executives collect “performance pay.”
Q: Won’t the Fed eventually have to sell the trillions in bonds it is buying? How will it be able to find enough buyers? A: Don’t ask. Nobody knows.
Q: How do QEs contribute to our national debt? A:The Fed’s purchases of U.S. Treasurys lower the interest rate our government pays to issue them. This can only encourage more borrowing. Since 2008, our national debt has risen more than 60% to more than $16 trillion.
Q: Isn’t that astronomical? A: Yes. But we can now measure the national debt in lightyears. A lightyear equals nearly six trillion miles. At $1 a mile, our national debt is only 2.6 lightyears.
Q: Why lightyears? A: Because our economic woes are indefinite, and that’s why QE3 is indefinite. Mr. Bernanke should change his name to Buzz Lightyear: “To infinity and beyond!”
—Al Lewis is a columnist for Dow Jones Newswires in Denver. He blogs at tellittoal.com; his email address is al.lewis@dowjones.com.”
