Friday, April 18, 2008

Perhaps It's A Housing and Financial Company Recession!

Today Citi announced another loss, $5.1 billion on top of last quarter's $9.8 billion, nearly all of it a result of credit and real estate. In response, Vikram Pandit is expected to cut 9,000 jobs at Citi in the next few months on top of the 4,200 already announced. Some analysts are predicting total job cuts at Citi rising as high as 25,000 in the next few quarters. On Thursday, Merrill Lynch reported a $2 billion loss and said it would cut 4,000 jobs, many from its S&T and IBD divisions. At JPMorgan the cost is estimated at over 10,000 jobs, mostly from its purchase of Bear Stearns. What's the total job toll of the credit crunch? This week's news brings it to over 40,000.

However, Wall Street topped off a strong week with a big rally Friday, after results from companies like Citigroup Inc. and Google Inc. helped ease investor anxiety about the health of corporate profits. The major stock indexes at times rose more than 2 percent. Investors have been worried that recent data indicate a slowing economy, which would cut into profit growth at some of the nation's biggest companies. But, results so far have shown that earnings, for the most part, are meeting or beating expectations, and the major indexes all posted gains of more than 4 percent for the week.

This has been the first full week of earnings reports, and all of the major companies, especially IBM, came in with results which were in line with or slightly ahead of expectations. While many analysts have been saying the economy has been in recession since the beginning of the year, there is still no definitive consensus that this is the case. The beginning and end points of recessions are determined in retrospect, so all we can do at this juncture is plan for the worst and perhaps if there is a recession it will be shallow. Meanwhile, enjoy the good week, but be ready for more volatility going forward as the various forces which drive the market struggle for the upper hand.

John Kaighn

Jersey Benefits Advisors

Web Business Review

Guidance Website

Thursday, April 17, 2008

Obama and Clinton Debate Media Reactions

Reprinted from The Moderate Voice

April 16th, 2008 by JOE GANDELMAN, Editor-In-Chief

So who won the Pennsylvania Democratic presidential primary between rival Senators Hillary Clinton and Barack Obama?

While the “official” media consensus has yet to come in at this writing, monitoring live streaming, live blogging and early stories on the debate suggest it wasn’t Obama’s best night (possibly his worst debate performance), Clinton continued effectively and relentlessly on the attack — and ABC and the debate moderators will come under fire from Obama supporters and perhaps others due to the first 45-minutes being questions that basically put Obama on the defensive. One question asked was reportedly raised by conservative talk show Sean Hannity.

But even so even some of his supporters now wonder why Obama didn’t seem better prepared.

For a reaction to the debate itself, READ THIS earlier post by TMVer Jazz Shaw. In a move unusual for a news event such as this, ABC embargoed the debate for delayed viewing on the West Coast. This post is a roundup of website and blog reaction to the debate.

One of the best, least emotional live blogging accounts of the debate can be found on USA Today’s blog. Here are some extensive quotes from weblogs, news sites and stories on the debate:

–Andrew Sullivan:

It was a lifeless, exhausted, drained and dreary Obama we saw tonight. I’ve seen it before when he is tired, but this was his worst performance yet on national television. He seemed crushed and unable to react. This is big-time politics and he’s up against the Clinton wood-chipper. But there is no disguising the fact that he wilted, painfully.

Clinton has exposed herself in this campaign as one of the worst shells of a cynical pol in American politics. She doesn’t just return us to the Morris-Rove era, she represents a new height for it. If she somehow wins, it will be a triumph of the old politics in an age when that is exactly what this country cannot afford. But Obama has also shown a failure to be resilient in this grueling process. In some ways, I’m glad. No normal reasonable person subjected to the series of attacks on his integrity, faith, patriotism, decency and honesty would not wilt. And we need a normal reasonable person in the White House again. But this is still the arena we have. It is what it is. ABC News is what it is. The MSM knows no other way. Obama has to survive and even thrive under this assault if he is to win. He failed tonight in a big way.

And so this was indeed a huge night for the Republicans, and the first real indicator to me that Clinton is gaining in her fundamental goal at this point: the election of John McCain against Barack Obama. How else will she rescue the Democrats from hope?

–The Politico’s Ben Smith:

So, who won, who lost, how did Obama hold up under what was basically a public enactment of Clinton’s case against him.

AND: Didn’t those quotes from the Constitution really set the tone?

ALSO: How much money will Obama raise off his supporters’ perception that this debate was unfair?


Wow. What the hell was that? Seriously, I’m a bit stunned. The level of discourse has reached a new low — a very new low. To be clear, I don’t think the debate was a disaster for Obama. He did fine. I think it was a disaster for our political system.

It was the worst debate ever. [ABC moderators Charles] Gibson and [former Clinton administration spokesman George] Stephanopoulos were horrible. The questions were literally right out of right wing talk radio.

–The Swamp:

Well, what we saw tonight was Hillary Clinton making a strong, last-ditch effort to pull her flagging campaign back from brink, get it back on track to victory on April 22 and make the superdelegates realize that she really is their last best chance to retake the White House.

She drummed on Obama not just for his remarks about small towns, guns and religion, but for his vast dearth of experience compared to hers–and that includes her experience of being ravaged by Republicans and living to see another day.

Obama, for his part, strove to defuse the negative ripples his aforementioned-ad-nauseum remarks might have engendered, not to mention the controversial comments of his former pastor–all of which appear not to have tarnished him much in polls.

Most importantly, he tried to get voters to imagine him as commander-in-chief, assigning “a mission” to his commanders–he’s the decider–although consulting with them re: tactics.

….And, for Hillary Clinton to get so giddy about the Wright question was really just sad. She was the official purveyor of fringe talking points. Shockingly so. And, she seemed to enjoy it. There’s a reason people think Clinton is dishonest as we saw today in the findings of the Washington Post-ABC News poll. She’s not only in this to win, she’s in it to win dirty — and to destroy Obama. She invoked Louis Farrakhan tonight for no reason — just to say it. Give me a break. Throughout this campaign, Clinton has pursued GOP attacks against Obama. He has not gone there against her.

–Daily Kos (one of several progressive sites calling on readers to flood ABC News with protests):

I used to think Republican operative and Karl Rove mentor Lee Atwater had died in 1991, after a nasty career of Republican race baiting, culture wars, dirty tricks, and a illness-induced conversion to Catholicism and public repentance for his dirty and divisive politics. I was wrong.

Lee Atwater apparently works for ABC News in devising…questions to ask Democratic Presidential candidates.

The questioning in tonight’s debate–—mostly straight out of 1988—was an abomination. Gun control. 60’s radicalism. Inflammatory black pastors. Respecting or disrespecting the flag. Taxes. Being out of touch with the military. Affirmative Action.

I’ll bet if they had more time, ABC anchors Charles Gibson and George Stephanopolus would probably have gotten around to asking Obama and Clinton about Willie Horton….The questions asked were not the kinds of questions Democratic primary voters care about. But they are the “gotcha” kinds of questions Republicans try to spring on Democrats in general elections.

I’m not afraid of those questions. I think Obama did fine tonight. Generally Clinton has performed best in debates, but as we first saw in the Texas debate, Obama appears to perform better one-on-one. I especially liked how he refused to get lured in to Charles Gibson’s conservative frames, and I like how he dismissed many of Clinton’s attacks on him as avoiding the substantive issues and hypocritical, as when he pointed out that Bill Clinton pardoned members of the Weather Underground.

–Hot Air’s Ed Morrissey feels the debate was “Obama’s Waterloo”:

The last Democratic debate has finally concluded, and perhaps the last chances of ending the primaries early. Thanks to a surprisingly tenacious set of questions for Barack Obama and Hillary Clinton from ABC moderaters Charles Gibson and George Stephanopolous, Barack Obama got exposed over and over again as an empty suit, while Hillary cleaned his clock. However, the big winner didn’t even take the stage tonight.

…The winner of this debate? John McCain. Both Democrats came out of this diminished, but Obama got destroyed in this exchange. If superdelegates had begun to reconsider their support of Obama after Crackerquiddick, they’re speed-dialing Hillary after watching Gibson dismember Obama on national TV tonight. And kudos to ABC News for taking on both candidates fearlessly. John McCain has to feel grateful not to be included.

–Josh Marshall:

9:46 PM … No Charlie. It hasn’t been a “fascinating debate.” It’s been genuinely awful.

9:50 PM … What happened to the League of Women Voters? Can we give the debates back to them? This sort of episode really sickens me. KB’s point above is sadly accurate. It’s stuff like this that really makes me think that whole big chunks of the established press needs to be swept away.

9:56 PM … As I noted above, I missed roughly the first half hour of this debate. But from what I heard about those thirty minutes and what I saw of the subsequent ninety minutes was basically debate by gotcha line with basically no discussion of any of the big questions the election is turning on.

–National Review’s Jonah Goldberg:

I’m no leftwing blogger, but I can only imagine how furious they must be with the debate so far. Nothing on any issues. Just a lot of box-checking on how the candidates will respond to various Republican talking points come the fall. Now I think a lot of those Republican talking points are valid and legitimate. But if I were a “fighting Dem” who thinks all of these topics are despicable distractions from the “real issues,” I would find this debate to be nothing but Republican water-carrying.

–Marc Ambinder:

Keeping the score card, there’s no way Obama could fared worse. Nearly 45 minutes of relentless political scrutiny from the ABC anchors and from Hillary Clinton, followed by an issues-and-answers session in which his anger carried over and sort of neutered him. But Hillary Clinton has a Reverse-Teflon problem: her negatives are up, and when she’s perceived as the attacker, the attacks never seem to settle on Obama and always seem to boomerang back on her. So it would be unwise to declare that Hillary “won” the debate in the dynamic sense just yet. (How much money will Obama raise off this debate? $3m million? $4 million?)

…..This sets up a blowback scenario wherein his supporters will rally to his defense and lash out at the media very loudly. But Obama’s going to be the next president of the United States, maybe. The most powerful person in the world. And questions about his personal associations, his character, his personal beliefs, his statements at private fundraisers — the answers to these questions tell us a lot. Sometimes the questions are unfair (( — nothing about Colombia and Mark Penn — )), but this ain’t Pop Warner; the artificial distinction between politics, personality and policy doesn’t exist in this league, and if you’re uncomfortable with it, then change the rules or don’t run for office.

–My DD’s Todd Beaton:

Although it was somewhat redeemed in the final half hour, I feel like taking a shower after that debate. It was tabloid hour on ABC, and certainly Obama did get the bulk of the more disgusting questions. Check out this post over at over 4,000 comments, the bulk of which seem to just rip ABC.

As for the candidates’ performances, neither was particularly inspiring and neither had his or her best night, although Obama did get plenty of opportunities to plead for an end to the issues of distraction and division and to call for a new style of politics and seemed to be the conscience of the audience as he called out the moderators. I think Clinton was stronger during the last half hour but not enough to tip the balance in her direction; certainly not enough for this to be a game changer.

It would almost be a shame for this to be the last debate, to go out on such a poor note.

–Chris Bowers:

Halfway through the debate, not a single question on any policy issue had been asked, it was obvious that this debate was prime-time hit job on Obama. The questions so far have been why he doesn’t wear a flag pin, whether or not his pastor loves America, why he can’t win, and how many people were offended by his bittergate comments. Except for Clinton being asked about why she wasn’t trustworthy, and both of them being asked about their vice-presidential choices, that has been the entire debate.

…..It appears that live focus group polling of undecideds favored Obama during the first round of questions that basically was a series of hit-jobs against him, while Clinton polled better in the focus group when it shifted to issues in the second half. Hmmm… perhaps her campaign should learn something from that.

–NBC’s Chuck Todd:

This debate is going to lead a lot of Obama supporters to ratchet up the calls on Clinton to either withdraw or tone down the attacks. Clinton supporters will point to this debate as proof that he’s not yet ready for the general, that’s why she should stay in, and that’s why superdelegates should overturn the winner of pledged delegates.

Overall, with the spotlight on him very bright, Obama didn’t step up. He got rattled early on and never picked his game back up. Clinton wasn’t very warm (outside of he first few minutes), but she didn’t have the spotlight on her very bright. And as we’ve noted in “First Thoughts” quite a few times, whenever the spotlight is on one candidate, the other seems to benefit. Tonight, the spotlight was on Obama, and for a short period of time, I expect Clinton to benefit. But the question is whether she can sustain any benefit since as the negativity goes on, she pays a bigger price than Obama. Let’s see what the PA Dem voting public decides in six days. A big Clinton victory and this debate will be seen as an important turning point, a narrow victory (less than five points) and she could find herself facing more calls to get out.

Could tonight’s true winner be John McCain? We’re betting that’s the unanimous pundit scoring tonight.

–Monica Crowley:

The final two Democratic candidates appeared to sleepwalk through tonight’s debate. I mean, quite literally, they looked so weary that they appeared to be napping while the other was talking. They swayed. They leaned on the podium. Their eyelids were heavy. Their speech was slow and deliberate, each response called up on auto-pilot.They moved as if through molasses.

They both survived. There were no earth-shattering gaffes or obvious slurring or devastating mangling of an issue. But to have both candidates looking ready to keel over is an indication of the toll this drawn-out campaign has had on them. A lot of Democrats are making an issue of John McCain’s age (71), but while he’s got 10 years on Hillary and 25 on Obama, McCain looks the most spry.

–Somervell County Salon:

Just got done watching the ABC Debate that was moderated by Charlie Gibson. Where were the questions about Bush’s torture, about executive signing statements, what about that permanent base in Iraq, what about the huge cost of the war, about bailing out investment bankers, about using PPPs (whether from this country or foreign) to lease out our infrastructure, what about the airline industry FAA problem? Nope. Had to listen to right-wing Republican talking points in a DEMOCRATIC DEBATE coming from Gibson and Steph. Now, on the one hand, maybe it’s a good thing because that’s what will happen when Gramps McCain goes head to head with Obama but you know, if I wanted to watch Fox News, I’d unblock it…

P.S. Hillary Clinton has a look on her face in much of the debate that reminded me of the pissy pursed look that Bush had in the second debate against Kerry.

–The Morning Call’s Pennsylvania Ave:

After the debate, both candidates surrogates rushed to the “Spin room” to field questions from a mass of media outlets about the debate.

The take from Clinton spokesman Howard Wolfson was that enough serious questions were raised about Barack Obama in the first half of the debate to give voters second thoughts about his electibility.

“A number of questions were asked really for the first time of Barack Obama,” Wolfson said, putting Obama “back on his heels.”

Wolfson also said he didn’t think Obama’s statements about small town voters who he described as “bitter” and clinging to guns and religion, was a gaffe, but rather “What he believes.”

The Obama campaign countered that most voters were probably frustrated with the first half of the debate, which had very little talk about the issues, instead focusing on political games.

U.S. Rep. Patrick Murphy, D-Bucks, said he thinks voters were more interested in hearing the candidates talk about issues like Iraq and the economy.

–Blue Ollie:

This night’s debate had potential to be very meaningful. Instead, it was a colossal waste of time.

No, I am not saying that because the moderators (including former Clinton official George Stephanopoulos) piled on Obama; I expect that.

It was because the piling on was over the warmed over trivial stuff: stuff Rev. Wright said, a party that Obama may have attended, why he stopped wearing a flag pin, etc. Yes, Clinton caught the Bosnia “sniper fire” question.

….ABC did more to make BHO’s point that today’s politics is petty and insubstantial….But as far as ABC debate: ABC News not a news organization but rather a tabloid organization.

--Ginger Snaps:

FLAG PINS? Is that what George Snuffalufagus thinks is one of the most important topics that needs to be discussed in a Presidential Debate?!?

Seriously, folks…the first 45 minutes of this debate really should have been relegated to Saturday Night Live. We were treated to questions about flag pins, the Rev. Wright issue that Obama has sufficiently addressed ad nauseum, implying that Obama should answer for the acts his friends committed 40 years ago, and, of course, the “b” word…

…and oh by the way, we have an economic crisis, a war, gas prices are through the roof, unemployment, veterans in crisis, a broken healthcare system…

You know…the things that affect us every single day?!?

…How are we going to get the right candidate in office if the media chooses to ask trivial questions that play on the FEAR of the country, when what we really need to know is their detailed plan for how they are going to fix the situation right now?

–Editor & Publisher Editor Greg Mitchell writing on the Huffington Post:

In perhaps the most embarrassing performance by the media in a major presidential debate in years, ABC News hosts Charles Gibson and George Stephanopolous focused mainly on trivial issues as Hillary Clinton and Barack Obama faced off in Philadelphia. They, and their network, should hang their collective heads in shame.

Wars in Iraq and Afghanistan, the health care and mortgage crises, the overall state of the economy and dozens of other pressing issues had to wait for their few moments in the sun as Obama was pressed to explain his recent “bitter” gaffe and relationship with Rev. Wright (seemingly a dead issue) and not wearing a flag pin — while Clinton had to answer again for her Bosnia trip exaggerations.

Then it was back to Obama to defend his slim association with a former ’60s radical — a question that came out of rightwing talk radio and Sean Hannity on TV, but was delivered by former Bill Clinton aide Stephanopolous. This approach led to a claim that Clinton’s husband pardoned two other ’60s radicals. And so on. The travesty continued.

–National Review’s Mark Hemingway declares McCain the winner and writes:

My prediction? The debate will be received so badly there will be increased pressure to kick Hillary out of the race. But since Obama was clearly the worse of the two in the debate, Hillary will win PA as expected and the goat rodeo will continue for the forseeable future with even more acrimony between the two candidates. Which only helps McCain.

–Newsday’s Spin Cycle:

The highlight of the debate tonight will be Hillary’s repeated efforts to use an electability argument as the basis for sharp attacks on Obama over Bittergate, Wright and 1960s radicals.

It was a tactic geared as much to superdelegates as to Pennsylvania voters, and Obama was not as sharp as he could have been in response. He seemed surprised sometimes, irritated others, and misspoke at least once (about disowning Wright, which he quickly corrected). So, if you’re scoring the debate like a prizefight, she wins a couple more rounds. But no game-changing moments.

–The New Republic’s The Stump blog:

For what it’s worth, I thought it was smart for Obama to go gracious on the Hillary-Bosnia scandal and suggest that they’re both entitled to make a mistake every now and then. Obviously, the choice of questions isn’t doing Obama any favors–bittergate, Wright, William Ayers!–but he’s doing a decent (if low-energy) job not getting dragged into the fray,* and Hillary is coming very close to over-reaching by rubbing his nose in it.

–Matthew Yglesias:

I had thought the Clinton campaign couldn’t sink any lower, but thus far she’s really just been giving us the full GOP. Listening to her talk about Barack Obama is like reading a Weekly Standard blog post. The lame excuse that she’s making this and that outrageous smear because the Republicans will do it later is pathetic. Maybe they will. But she’s the one doing it now.

–The New York Times:

Senator Hillary Rodham Clinton went on the attack against Senator Barack Obama on a variety of issues during a contentious debate Wednesday, warning that he would be deeply vulnerable in a general-election fight if he won the nomination.

–The Boston Globe framed it this way:

Senators Barack Obama and Hillary Clinton took their hard-fought battle for the Democratic nomination down to a deeply personal level in a nationally televised debate tonight, trading barbs on honesty, their appeal to working-class voters, and who would be a stronger candidate in November.

Clinton, struggling to gain momentum in the dwindling weeks of the primary campaign, accused Obama of associating with unsavory people, including his own former preacher, and questioned whether Obama — whom she called “a good man” — could beat the GOP nominee in the fall.

“They’re going to be out there in full force,” Clinton said of the Republicans. “I’ve been in this arena for a long time. I have a lot of baggage and everybody has rummaged through it for years.”

Obama, meanwhile, criticized the New York lawmaker for running a negative campaign, and said Clinton herself could not pass the electability test she was imposing on him.

“By Senator Clinton’s own vetting standards, I don’t think she would make it,” he said.

–The Globe’s blog political intelligence was far more blunt:

Barack Obama tonight staked his presidential campaign on the idea that the American people will look beyond the inevitable gaffes and errors and character attacks of a 24-hour campaign cycle to meet the challenges of a “defining moment” in American history.

Hillary Clinton staked her campaign on the idea that Americans won’t — and that her tougher, more strategic approach to countering Republican attacks is a better way for Democrats to reclaim the White House.

The first half of tonight’s debate in the august National Constitution Center in Philadelphia was a tawdry affair, as ABC news questioners called on Obama and Clinton to address a year’s worth of dirty laundry, and each combatant eagerly grabbed at the chance to befoul their rival a little more.

But while some in the audience groaned, the litany of nasty questions — about such matters as Obama’s comments on the working class and Clinton’s exaggerations about dangers she faced in Bosnia — helped to flesh out a long-simmering subtext to the Clinton-Obama battle: The Clinton campaign’s insinuation that Obama is more vulnerable to GOP-style attacks on his patriotism.

….Clinton wasn’t so high-minded. At times, she seemed to revel in her tough-gal statements, sounding like a character in a 1940s film noir.

….The tit-for-tat comment showed how off-message Obama was for most of the evening, able to conjure up little of the hopeful energy that has marked his campaign for much of the year.

…What did come through, however, was how crucial Obama’s self-described “bet on the American people” will be to the future of his campaign.

Obama has said on countless occasions that he believes the American people want “an honest conversation,” and not a campaign of charges and countercharges.

–The Washington Post’s news report on the debate includes this:

With the race for the Democratic presidential nomination mired in a form of trench warfare that has left party leaders searching for a way to bring it to a conclusion before the party’s late-summer convention, Clinton (N.Y.) and Obama (Ill.) began their first head-to-head encounter in nearly two months focused on political disputes rather than their relatively narrow policy differences. Obama, who leads in the delegates needed to claim the nomination, fielded tough questions about his relationship with his former pastor, his patriotism and his description of small-town voters as “bitter,” the latter a controversy that has engulfed his campaign for much of the past week.

Obama argued repeatedly that voters are smart enough to differentiate petty issues from important economic matters.

“So the problem that we have in our politics, which is fairly typical, is that you take one person’s statement, if it’s not properly phrased, and you just beat it to death,” Obama said. “And that’s what Senator Clinton’s been doing over the last four days. And I understand that. That’s politics. And I expect to have to go through this process. But I do think it’s important to recognize that it’s not helping that person who’s sitting at the kitchen table who is trying to figure out how to pay the bills at the end of the month.”

–The Washington Post’s The Fix blog:

The choice between the candidates crystallized tonight. It is not, fundamentally, a choice about issues or even ideology — it is a choice about approach. Obama is an idealist, using nearly every question to appeal to the better angels in people; Obama sees the world as he wants it to be and believes he can make it. Clinton, on the other hand, is an unapologetic pragmatist; she has been through the wringer that is national politics before and knows how to play the game.

*The longer the Democratic campaign goes on, the more clips Republican Sen. John McCain’s campaign can harvest for use against the eventual Democratic nominee. It’s one thing for McCain to take note of ties between Obama and a former member of the Weather Underground; it’s quite another for McCain’s campaign to roll tape of Clinton making those accusations. You can bet Steve Schmidt of McCain’s campaign was Tivoing every minute of tonight’s proceedings for use when summer turns to fall.

John Kaighn

Jersey Benefits Advisors

Web Business Review

Guidance Website

Sunday, April 6, 2008

Jersey Benefits Advisors Newsletter Spring 2008

Market Watch

After months of downbeat news and the housing, credit and stock markets being pummeled almost daily, the first quarter of 2008 ended with a positive whimper and the second quarter began with a surge. Whether or not the positive signs continue will depend on the statistical information forthcoming in regard to the economic cycle. In the mean time, we’ve closed the books on the first quarter, and while the news seemed quite dire for much of the time, the DJIA and S&P 500 haven’t reached bear market levels.

The Dow Jones Industrial Average ended the first quarter at 12,262.89 down 7.6%, while the S&P 500 finished at 1,322.70 shedding 9.9%. The NASDAQ actually hit bear market territory (20% decline) during the quarter, but closed at 2279.10 which was 14% lower than where it started the year. Considering all of the headwinds the markets faced during the winter, the damage has been minimal thus far.

Of course, it is far from apparent if the carnage in the various markets is over, since we don’t even have a definitive answer on whether or not the economy is in recession. The latest GDP numbers indicated extremely slow growth, just .6% for the fourth quarter of 2007. The first estimate of GDP growth for the first quarter will be provided at the end of April.

While many economists felt the economy would avoid recession this year, when polled at the beginning of the year, the debate has shifted to how long and how deep the downturn will be. Officially, a recession is the contraction of GDP for two consecutive quarters. The length of the recession represents the trough or bottom of the economic cycle from which a new economic cycle begins.

The wild card right now is the stimulus the Federal Reserve has injected into the credit markets, which have been paralyzed due to the fiasco created by the housing debacle and subprime mortgage mess. The results of some of the Fed’s actions are already being felt, as banks and investment firms have utilized the Federal Reserve as the bank of last resort. While this is a function of the Federal Reserve for banks, opening the discount window to investment firms is something that hasn’t been done since the 1930’s.

Chairman Bernanke has taken some drastic steps with monetary policy to shore up the financial system, and his study of the blunders made during the Great Depression have been quite evident. Fiscal stimulus, like the rebates headed our way this quarter, will also be felt later this year. Whether the stimulus will be enough to keep the economy out of recession remains to be seen.

Of course the politicians are having a field day recommending bailouts of mortgage holders, job programs, protectionism, taxes on “big oil” and more regulation. Most of the programs being championed will not have the slightest chance of implementation, but they make great sound bites to constituencies during an election year. A huge “shot over the bough” was fired by Treasury Secretary Henry Paulson with his proposal to streamline US financial regulation. It should encourage debate for months!

Finally, it is sufficient to say that if you are like me and believe the sun will shine again tomorrow, this particular phase of the economic cycle represents a buying opportunity. All markets are the same, and when there is a 10% - 15% sale, it is time to buy.

What Happened to Bear Stearns’ Client Accounts?

With the demise of such a large investment firm as Bear Stearns so prominently discussed in the news, many investors have asked what happens to the client accounts held at the firm. Client accounts are insured by the Securities Investor Protection Corporation (SIPC) for $500,000 per account but only $100,000 can be cash, the remainder must be in securities.

In the case of Bear Stearns, the company will more than likely become part of a division of JP Morgan Chase and Bear Stearns’ client accounts remain unaffected. SIPC involvement was not necessary. Bankruptcies of securities firms usually result in client accounts being transferred to another firm. Client accounts of brokers, such as Transamerica, are held by a third party (Pershing) which segregates client assets.

Ways To Protect Assets During Market Turmoil

A bright spot during this particularly gloomy period in the markets has been the performance of the variable annuities developed after the dotcom bubble. Insurance companies responded to the market turmoil from 2000 - 2002 by developing living benefits, which could be used to protect assets from significant downside risk. While many acronyms have been used to describe the various riders companies have developed, the main theme is to allow participation in market gains through separate accounts, and also guarantee a minimum amount of asset appreciation each year, which is usually 5% or 6%.

Each year the principal (amount invested) basically has two calculated values. The market value is the amount invested plus whatever gains are made in the separate accounts during the year. The withdrawal value or guaranteed value is the amount invested plus the rider’s guaranteed appreciation, which is the 5% or 6% discussed above. If the market declines, the client knows the amount which can be withdrawn for retirement will still increase by the 5% or 6%. If the market increases 10% or 15%, then the client can withdraw even more during retirement. Newer versions of these variable annuity riders allow a step up of the market value on an annual and even monthly basis, reducing downside risk even more effectively.

While there are fees charged by the insurance companies for annuities and their living benefits riders, they are quite reasonable when compared to the downside risk protection they provide. If market risk to principal is a concern, as it is to many investors approaching retirement, the peace of mind provided by a variable annuity may be worth the additional expense. Mutual funds are a less expensive way to participate in the various markets, but they provide no downside protection.

Variable annuity fees don’t even begin to compare to the whopping fees charged by hedge funds, which are supposed to be inversely correlated to the stock market. Unfortunately, this inverse correlation has not held up during this market cycle as hedge funds have been imploding under the weight of subprime mortgage debt. In fact, the demise of Bear Stearns was due to the default of two of their hedge funds, which went belly-up during the summer.

An analysis of my clients’ accounts who have invested in a variable annuity since 2002 showed the market value higher than the guaranteed value for the most part. The few clients whose market value was less than the guaranteed value, made recent large investments in 2007. Everyone has a higher account value than the amount invested and are breathing a bit easier these days.

If you feel a variable annuity is worth discussing for your investments, be sure to contact me.


Investment Advisory Services offered through:
Jersey Benefits Advisors
P.O. Box 1406
Ocean City, N.J. 08226
Phone: 609 827 0194
Fax: 609 861 9257

Securities offered through:
Transamerica Financial Advisors, Inc.
A registered Broker/Dealer
1150 S. Olive St. Suite T-25
Los Angeles, CA 90015

Third Party Administration and Insurance Services offered through:
Jersey Benefits Group, Inc
P.O. Box 1406
Ocean City, N.J. 08226
Phone: 609 827 0194
Fax: 609 861 9257

John Kaighn

Jersey Benefits Advisors

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