Wednesday, December 5, 2012

Good News for 529 College Investing Plan Participants

Here is some valuable information for New Jersey Residents investing in a Franklin Templeton 529 College Investing Plan for a student who attends school in New Jersey.

Clients wishing to help a current New Jersey resident pay for college will enjoy additional benefits by investing with Franklin Templeton 529 College Investing Plan.
Double tax-free tax status. Franklin Templeton 529 College Savings Plan is a tax-free investment for New Jersey residents. Your client will not owe either federal or New Jersey state income taxes on earnings or assets withdrawn to pay for qualified educational expenses.2

Up to a $1,500 college scholarship. Franklin Templeton 529 College Savings Plan offers a scholarship rewarding students who pursue higher education in New Jersey. The plan offers increasingly larger scholarships based upon how long your client invests, up to a maximum of $1,500 scholarship for over 12 years of saving.5

Please access the Investor Handbook for more information. Use the Scholarship Request form to apply.

ContributionFull Years Account OpenScholarship Amount

Limited interference with financial aid. The first $25,000 of contributions to a Franklin Templeton 529 College Savings Plan will not be considered when determining a student beneficiary's eligibility for financial aid awarded by the state of New Jersey.

Investors should read the Investor Handbook carefully before investing and consider whether their or their account beneficiary's home state offers any state tax or other benefits that are only available for investment in its qualified tuition program.

Tuesday, December 4, 2012

How About a Scenic Overlook?

I knew there was going to be a great deal of chatter about the deal that needs to be reached between Congress and the President concerning the fiscal cliff, and I must say the media hasn't disappointed me.  While there have been some talks between the President and Boehner to attempt to find common ground, the right and left wings of the two Parties, through their mouthpieces in the national media, continue to paint a picture of polarization.  What seems like a fairly straightforward compromise dictated by the results of the election, is being presented as bogged down.

The only way to solve this issue is for enough of our elected representatives to step up and realize there need to be cuts in spending and increases in revenue.  There is simply no other way to make the adjustments necessary now to avoid worse options in the future.  Some Republicans have hinted they are willing to abandon the Norquist camp and will consider some tax revenue increases.  Limiting itemized deductions for some taxpayers is the route they would take to increase revenue without raising tax rates.  The President continues to insist the election results dictate increased tax rates on upper income individuals.  This is one area where the common ground is quite obvious, but it seems like they can't get passed the semantics regarding increased revenue as opposed to increased tax rates.

I do feel there will be no mad cap plunge over the fiscal cliff, but rather the citizenry will have an opportunity to observe, from a scenic overlook, a country on the verge of enjoying a period of better growth, increased Federal revenue, more balanced spending as a percentage of GDP, a manageable debt level, and a restructuring of the various entitlement programs, if the politicians can reach a compromise.  Our forefathers had the insight to create a government with checks, balances, filibusters and other procedures designed to protect minority interests while reflecting the majority's point of view on most issues.  Compromise on issues important to the majority of citizens must be foremost in the minds of our government employees.  If they were to irresponsibly choose to plunge the economy over the fiscal cliff, we will survive, but the President's legacy will definitely pay the price.

Look for this drama to drag on until Christmas or the end of the year, with the media making a huge deal about each and every proposal and counter proposal.  This Congress will make just enough of a compromise, such as postponing some tax increases, delaying some of the more draconian cuts, or some other stop gap measure designed to take us to the edge, but not go into a free fall, until the next Congress can pick up the issue and hopefully reach the bargain necessary.  My hope is the markets are prescient on this issue and won't recoil at the end of December, providing another flat year for the indices, or worse!

Wednesday, November 21, 2012

The Desolate Wilderness and This Fair Land

I usually write the bulk of the material that appears on my blog, but every now and then I feature other authors who have a flair for great writing. This is a piece that is an annual ritual in a national publication that corresponds with the Thanksgiving Holiday season. It does a nice job of reminding the reader of the reasons to be thankful and to whom we owe that gratitude. I hope you enjoy it

The Desolate Wilderness

Here beginneth the chronicle of those memorable circumstances of the year 1620,as recorded by Nathaniel Morton, keeper of the records of Plymouth Colony, based on the account of William Bradford, sometime governor thereof:

So they left that goodly and pleasant city of Leyden, which had been their resting place for above eleven years, but they knew that they were pilgrims and strangers here below, and looked not much on these things, but lifted up their eyes to Heaven, their dearest country, where God hath prepared for them a city (Heb. XI, 16, and therein quieted their spirits. When they came to Delfs-Haven they found the ship and all things ready, and such of their friends as could not come with them followed after them, and sundry came from Amsterdam to see them shipt, and to take their leaves of them. One night was spent with little sleep with' the most, but with friendly entertainment and Christian discourse, and other real expressions of true Christian love.

The next day they went on board, and their friends with them, where truly doleful was the sight of that sad and mournful parting, to hear what sighs and sobs and prayers did sound amongst them; what tears did gush from every eye, and pithy speeches pierced each other's heart, that sundry of the Dutch strangers that stood on the Key as spectators could not refrain from tears. But the tide (which stays for no man) calling them away, that were thus loath to depart, their Reverend Pastor, falling down on his knees, and they all with him, with watery cheeks commended them with the most fervent prayers unto the Lord and His blessing; and then with mutual embraces and many tearsthey took their I leaves one of another, which proved to be the last leave to many of them.

Being now passed the vast ocean, and a sea of troubles before them in expectations, they had now no friends to welcome, them, no inns to entertain or refresh them, no houses, or much less towns, to repair unto tb seek for succour; and for the season it was winter, and they that know the winters of the country know them to be sharp and violent, subject to cruel and fierce storms, dangerous to travel to known places, much more to search unknown coasts. Besides, what could they see but a hideous and desolate wilderness, full of wilde beasts and wilde men? and what multitudes of them there were, they then knew not: for which way soever they turned their eyes (save upward to Heaven) they could have but little solace or content in respect of any outward object; for summer being ended, all things stand in appearance with a weatherbeaten face, and the whole country, full of woods and thickets, represented a wild and savage hew. If they looked behind them, there was a mighty ocean which they had passed, and was now as a main bar or gulph to separate them from all the civil parts of the world.

This Fair Land

Anyone whose labors take him into the far reaches of the country, as ours lately have done, is bound to mark how the years have made the land grow fruitful. This is indeed a big country, a rich country, in a way no array of figures can measure and so in a way past belief of those who have not seen it. Even those who journey through its Northeastern complex, into the Southern lands, across the central plains and to its Western slopes can only glimpse a measure of the bounty of America.

And a traveler cannot but be struck on his journey by the thought that this country, one day, can be even greater. America, though many know it not, is one of the great underdeveloped countries of the world; what it reaches for exceeds by far what it has grasped.

So the visitor returns thankful for much of what he has seen, and, in spite of everything, an optimist about what his country might be. Yet the visitor, if he is to make an honest report, must also note the air of unease that
hangs everywhere.

For the traveler, as travelers have been always, is as much questioned as questioning. And for all the abundance he sees, he finds the questions put to him ask where men may repair for succor from the troubles that beset them.

His countrymen cannot forget the savage face of war. Too often they have been asked to fight in strange and distant places, for no clear purpose they could see and for no accomplishment they can measure. Their spirits are not quieted by the thought that the good and pleasant bounty' that surrounds them can be destroyed in an instant by a single bomb. Yet they find no escape, for their survival and comfort now depend on unpredictable strangers in far off corners of the globe.

How can they turn from melancholy when at home they see young arrayed against old, black against white, neighbor against neighbor, so that they stand in peril of social discord. Or not despair when they see that the cities and countryside are in need of repair, yet find themselves threatened by scarcities of the resources that sustain their way of life. Or when, in the face of these challenges, they turn for leadership to men in high places-only to find those men as frail as any others.

So sometimes the traveler is asked whence will come their succor. What is to preserve their abundance, or even their civility? How can they pass on to their children a nation as strong and free as the one they inherited from their forefathers? How is their country to endure these cruel storms that beset it from without and from within?

Of course the stranger cannot quiet their spirits. For it is true that everywhere men turn their eyes today much of the world has a truly wild and savage hue. No man, if he be truthful, can say that the specter of war is banished. Nor can he say that when men or communities are put upon their own resources they are sure of solace; nor be sure that men of diverse kinds and diverse views can live peaceably together in a time of troubles.

But we can all remind ourselves that the richness of this country was not born in the resources of the earth, though they be plentiful, but in the men that took its measure. For that reminder is everywhere in the cities, towns, farms, roads,
factories, homes, hospitals, schools that spread everywhere over that wilderness.

We can remind ourselves that for all our social discord we yet remain the longest enduring society of free men governing themselves without benefit of kings or dictators. Being so, we are the marvel and the mystery of the world, for that enduring liberty is no less a blessing than the abundance of the earth.

And we might remind ourselves also, that if those men setting out from Delftshaven had been daunted by the troubles they saw around them, then we could not this autumn be thankful for a fair land.

These editorials have appeared annually in the Wall Street Journal since 1961.


John H. Kaighn

Jersey Benefits Advisors

Friday, November 9, 2012

Taking Stock

The election is over and many people are talking about the roughly $6 billion dollars that was spent only to wind up with the exact same result.  Well, I will take the money being spent over the way some countries solve their change of power during cantankerous times, which could range from resorting to revolution and civil war to arresting and jailing opponents.  Yes, it certainly would be nice if we could have a campaign of a month or three months with no mudslinging, but the election is about being the president of the largest, most prosperous economy on the planet, so there should be a spirited debate about the various options for leadership.  In the end, one side won, one side lost, each made a speech and now its time to solve the issue of the fiscal cliff, which I discussed in the recent newsletter and follows this post.

Meanwhile, I am posting a video for anyone who would like to view it from Franklin Templeton Investments which talks about the case for investing in stocks now. It highlights the current disconnect between investors' perception of the stock market and reality.   View the video here and contact me if you have any questions or would like a recommendation for your investments.  View the brochure here if you would like to read more information about Franklin Templeton's research and the reasons they feel now is the time to be Taking Stock.

John H. Kaighn

Jersey Benefits Advisors 

Tuesday, October 16, 2012

Jersey Benefits Advisors Investor's Newsletter Fall 2012

Market Watch

With the revised release of second quarter GDP, which was a paltry 1.3%, the Federal Reserve sprang into action and announced plans to buy $40 billion dollars worth of agency mortgage backed securities a month, until the economy begins to grow at a faster pace.  The plan has been dubbed Quantitative Easing 3, or QE3.  Keeping in line with the Fed’s dual mandate of maintaining stable prices and stable employment, Chairman Bernanke announced the latest round of easing because an economy growing at 1.3% can’t produce enough jobs to lower unemployment, which stands at 7.8% as of September 2012.  This move was greeted almost simultaneously with cheers and boos, but the market generally seemed to approve.

At the end of the third quarter, the Dow Jones Industrial Average (DJIA*) stood at 13,437.13.  This represented a 4.32% gain for the quarter and a 9.98% gain for the year.  The S&P 500* added 5.76% for the quarter to reach the 1,440.67  point level.  The index has increased by 14.56% year to date.  The NASDAQ* closed at 3,116.23, which gave the technology heavy index a 6.96% gain for the quarter and brought its year to date return to 19.62%.  These were attractive gains for the quarter, and these returns would be considered respectable for an entire year.  Let’s hope the final quarter manages to maintain or add to these levels.

As we have discussed for quite some time, the market has been climbing a wall of worry, due to concerns about recession in Europe, apprehension about the Fed’s loose monetary policy leading to inflation, unease about the effect of a slowdown in China and other emerging markets on the global economy and the looming fiscal cliff.  Bernanke has stated on more than one occasion that the Fed would not have to continue monetary easing if the Congress and Administration would act in a more responsible way to address fiscal policy.  Between now and the election, there will more than likely be no meaningful outcomes for fiscal policy, and so we will have to listen to the drama concerning the fiscal cliff right up to the end of the current quarter.

With that said, look for an eleventh hour agreement before the end of the year whereby Congress addresses fiscal matters and attempts to come up with a plan for handling the threatening consequences of sequestration, or the blunt, automatic across-the-board budget cuts enacted by law by the Budget Control Act of 2011, a consequence of Congress’s failure to agree on a bipartisan deficit reduction plan.

As a result, the first installment of cuts goes into effect January 1st of 2013, cutting $2.4 trillion from federal debt over ten years.  Over the same ten year period, $1.2 trillion is slated to be cut from discretionary spending, which doesn’t even address entitlement spending.  The sequestration in conjunction with the expiring Bush Era tax cuts threatens to undermine the current, lackluster expansion and shave anywhere from 2% - 3.6% from GDP, depending on whose forecasts you cite. 

With GDP currently growing at 1.3%, it is a very real possibility that without an agreement to mute the effects of the of the budget cuts and tax increases, we could be looking at a possible recession in 2013.

As I have stated before, this expansion is one of the weakest expansions this country has ever experienced, coming out of a recession.  With that said, it suffices to say the last recession was the worst since the Great Depression.  If an agreement can be reached on budget cuts and tax increases, the expansion may continue.

More Parents Are Saving For College

According to a survey conducted by the College Savings Foundation, the number of parents who have saved at least $5000 for their children’s college years has increased from 40% to 45% since 2009.  The number of families saving has steadily increased since the 2009 survey, when less than a third of all families had saved that much.  “Coming out of 2008 and early 2009, many families sat on the sidelines and said they wouldn’t make a decision about saving for college until things turned around,” said Roger Michaud, chairman of the College Savings Foundation and a senior vice president at Franklin Templeton Investments.  Considering the cost of a four year college education can run as high as $250,000, families need to save more.  Call me for information on 529 Plans.

Family & friends gathered for a Labor Day luau to celebrate my 60th birthday.  Thanks, Margie for the surprise of a lifetime.  $%!  %&  You really got me this time!

Have You Reviewed Your Life Insurance Lately?

 When was the last time you  took a serious look at your life insurance coverage.  Life insurance was created to provide cash for your family in the event of your death.  The goal being to provide your beneficiaries a means to ease the financial burden that results from the death of a parent or spouse.  The beneficiaries may choose to use the benefits of a life insurance policy in any way they desire, such as paying for funeral expenses, covering mortgage payments or investing the proceeds and taking systematic payments to augment income.  Generally, the death benefit from a life insurance policy is paid free of any federal tax. 

One of the most important questions to ask  when evaluating life insurance needs is the amount of coverage needed.  Many financial planners recommend an amount of five to seven times gross annual salary as a guideline when purchasing life insurance, but as with all things in life, each family's goals are different.  It is always best to take an inventory of your family's current financial situation and then try to evaluate future needs.  Listing current and anticipated future expenses, as well as income sources is a good place to start.  If there are children, you might want to consider the cost of their education.  The younger the children, the more of a need for coverage, due to the length of time they will be dependent on one parent, in the event of a death of a parent.  Of course, this is exactly the time when a family may have the least amount of income available for insurance!

This is why there are different types of policies available.  The two broad categories of life insurance are :
    ·   Term Life Insurance
    ·   Permanent Life Insurance

Term Life Insurance provides protection for the pure cost of insurance for periods of 5, 10, 15, 20 or 30 years and is usually less expensive than permanent insurance.  The death benefit is only paid if you die during the specific term of the policy.  At the end of the term, the policyholder may be able to convert to a permanent policy or begin a new term, at a higher cost.

Permanent Life Insurance provides protection as long as you continue to pay your premiums, which can be fixed or tailored to your specific needs.  Permanent policies include Whole Life, Universal Life and Variable Universal Life.  These policies have a "cash value" feature, which means part of the premiums go into an account which builds up monetary value over time.  This is why the cost of a permanent policy is higher than term. Many times  a combination of the two types of policies can provide coverage and savings in stages for a lifetime.  Feel free to contact me if you would like to review your insurance needs and discuss the options available to you.

* The S&P 500, the DJIA and the NASDAQ are unmanaged indexes that are widely used as indicators of Market Trends.  Past performance does not guarantee future results.  The performance of these indexes does not reflect fees and charges associated with investing.  It is not possible to invest directly in an index.
Dollar Cost Averaging through a systematic savings plan is an excellent way to build an account without a sizeable initial investment.  Saving a portion of our pay each month is very important.  Company sponsored pension plans are one method to save and should be used for retirement.  Other systematic investment accounts, SUCH AS ROTH IRA’S, TRADITIONAL IRA’S, COVERDELL ACCOUNTS, 529 PLANS, BROKERAGE ACCOUNTS AND ANNUITIES  can also be opened, and debited directly from your checking or savings account. For more information, just call to set up an appointment. REFERRALS ARE ALWAYS WELCOME. 
John H. Kaighn 

Company Information:

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
570 Carillon Parkway
St. Petersburg, FL  33758-9053
Transamerica Financial Advisors, Inc. is
not affiliated with Jersey Benefits Advi-
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
All opinions expressed in this newsletter are
solely those of John Kaighn & Jersey Benefits

LD044932 - 10/12

Thursday, October 4, 2012

John H. Kaighn   Becomes a Member of the Financial Services Institute

FSI Advocates for Main Street Americans’ Access to Independent, Affordable Financial Advice


Woodbine, NJ – Local financial advisor John H. Kaighn, of Transamerica Financial Advisors, Inc., today announced he has become a member of the Financial Services Institute (FSI) in Washington, D.C. FSI advocates for Main Street Americans’ access to unbiased, affordable financial advice, delivered by a growing network of over 35,000 independent financial advisor members.

“I am proud to become a member of the FSI, an organization that works hard every day, to protect my clients’ access to quality financial advice,” said Kaighn. “FSI helps educate elected officials and regulators on what Americans need from financial advisors and how the industry works with clients to secure their financial futures. They also help ensure that I can continue to offer my clients and potential clients the advice they need.”

“We are very pleased to have John H. Kaighn as a new member,” said FSI President & CEO Dale E. Brown. “Our advocacy is only as effective as our engaged members. And conscientious advisors like John help bring real-life experience to our efforts. We plan to work closely with Mr. Kaighn as we advocate for independent financial advisors and the hard-working clients they serve.”

About the Financial Services Institute (FSI): FSI is an advocacy organization for independent financial services firms and independent financial advisors. Established in January 2004, we have well over 100 broker-dealer members and over 35,000 financial advisor members. Our member firms have upwards of 180,000 financial advisors affiliated with them. Our mission is to create a more responsible regulatory environment for independent broker- dealers and their affiliated independent financial advisors through effective advocacy, education and public awareness. And our strategy includes involvement in FINRA governance, constructive engagement in the regulatory process and effective influence on the legislative process. For more information, please visit


Wednesday, September 19, 2012

What's Not To Like?

The scripted political conventions are now history, the Federal Reserve has announced a plan to buy $40 billion a month of agency mortgage-backed securities (QE3), oil prices are on the rise, and the market has been rising steadily throughout the year.  One could ask, "what's not to like?"  The messages are quite mixed and are emblematic of the debate the country is having with itself. 

The advent of QE3 certainly looks political in nature, because it could be construed to help the current administration, except when you factor in the fact that Ben Bernanke is a Republican.  Of course, since Romney wants to replace Ben if he wins the election, perhaps it is just a case of Ben seeking job security.  One would hope the Fed's motivations are not quite that transparent.

The election is being framed as a contrast between Big Government vs Limited Government, yet I still can't quite understand how Romney is going to create jobs, since that is what private industry does, unless of course he plans to add government jobs.  Oh yeah, that's right, it is the conditions which have to be altered to stimulate the Great American Jobs Machine.  So, what he is really going to do is cut down on regulation and limit the agencies which are creating laws and regulations which are chocking us.  At least I hope I understand that to be the case.

The President likes to remind us daily how his administration has created 4 million new private sector jobs, which sounds good as a sound bite, until you realize the economy lost 8 million jobs during the recession.  Of course, we all know that is George Bush's fault, because he gave all those millionaires tax cuts and sank the economy.  Hey, but don't worry, Dodd and Frank have given us a brand new set of regulations designed to stop any of those Wall Street types from "rolling the dice" on home ownership in the US.  Oops, I think those were Barney's words, right????

So, I heard a guest on CNBC use a football analogy to describe the election, just after the left released a video recording which would have you believe Romney insulted 1/2 the US population as not being responsible for themselves.  He said that right now there are 2 minutes left in the 4th quarter, with Romney down 10 points and Sanchez as the quarterback for Team Romney.  I wonder what odds the fantasy football fans give Romney?  The media is calling it dead even, but I really think I should contact Rachel Maddow and get her take on things.  I am sure she will be as spot on with an analysis of the election, as she was with her analysis of Chris Christie's speech at the RNC.

The Republic will survive, whatever the outcome of this election, but it is hard to say whether there will be a clear mandate for either party to do anything.  Perhaps the mandate will be to compromise.  After all, once the election is over, the stock market won't have a wall of worry with which to contend, but rather investors will be concerned with sailing right over the fiscal cliff we've all heard so much about.  Oh well, that's another day!       

Monday, August 27, 2012

Which Simple Rule for Monetary Policy?

Monday, August 27, 2012

By John B Taylor
Economics One Blog

The discussion of "Simple Rules for Monetary Policy" at last week’s FOMC meeting is a promising sign of a desire by some to return to a more rules-based policy. As described in the FOMC minutes, the discussion was about many of the questions raised in recent public speeches by FOMC members Janet Yellen and Bill Dudley. A big question is which simple rule?

Yellen and Dudley discussed two rules. Using Yellen’s notation these are

R = 2 + π + 0.5(π - 2) + 0.5Y
R = 2 + π + 0.5(π - 2) + 1.0Y

where R is the federal funds rate, π is the inflation rate, and Y is the GDP gap. Yellen and Dudley refer to the first equation as the Taylor 1993 Rule and the second equation as the Taylor 1999 Rule, though the second equation was only examined along with other rules, not proposed or endorsed, in a paper I published in 1999.

The two rules are similar in many ways. Both have the interest rate as the instrument of policy, rather than the money supply. Both are simple, having two and only two variables affecting policy decisions. Both have a positive weight on output. Both have a weight on inflation greater than one. Both have a target rate of inflation of 2 percent. Both have an equilibrium real interest rate of 2 percent.

The two rules differ substantially, however, in their interest rate recommendations as this amazing chart constructed last April by Bob DiClementi of Citigroup illustrates. The chart shows two rules along with historical and projected values of the federal funds rate. The rule labeled “Taylor” by DiClementi is the rule I proposed. The other rule is labeled “Yellen” by DiClementi because it corresponds to the rule apparently favored by Yellen. The projected values are the views of FOMC members.

Observe that the first rule never gets much below zero, while the second rule drops way below zero during the recent recession and delayed recovery. The difference continues though it gets smaller into the future. Note that the projected interest rates by FOMC members span the two rules.

This big difference between the two rules in the graph can be traced to two factors: (1) The second rule has a much larger GDP gap, at least as used by Yellen. (2) The second rule has a much bigger coefficient on the GDP gap.

In my view, a smaller value of the GDP gap and a smaller coefficient are more appropriate. This view is based on a survey of estimated gaps by the San Francisco Fed and simulations of models over the years. But given the striking differences in DiClememti's chart, more research on the issue by people in and out of the Fed would certainly be very useful. 

Monday, July 9, 2012



In my last newsletter I talked about the possibility the second quarter might be a good time to deploy some capital into the markets, especially since the first quarter was not very volatile, and the major indices had produced gains many investors would be pleased to garner for a full year.  As the European crisis played out over the last three months paring the Euro 12% against the dollar, oil and gas prices declined by 12.5%, and emerging markets shed about 18% of their value.  Meanwhile, US markets revisited their December 31, 2011 level,  briefly, and then slowly climbed back to a point that is quite respectable for mid year.

As we closed the books on the first half of the year, the DJIA*, at 12,880.09, has gained 5.42% year to date, even though it fell 2.5% in the second quarter.  The S&P 500* ended  at 1,362.16 for a 8.31% gain year to date, while dropping 3.3% in the second quarter.  The NASDAQ* is still sporting a double digit gain for the year at 12.66%, even though it gave back over 5% during the second quarter.  Needless to say, the markets never just go up in a straight line.  My guess is there will probably be more chances to invest, if you have been sitting on the sidelines during the first half of the year, although, there is some talk of a possible summer rally this year, due to a couple of events that transpired the last few days of June. 

The European Union took an unexpected step toward solving the crisis which has embroiled the Euro since 2010, by agreeing to create a banking union. Rather than having the funds flow through profligate governments, they’ve agreed to have money flow right to the banks, more than likely through a German controlled entity.  Also, the Supreme Court issued a ruling on the Patient Protection and Affordable Care Act, basically upholding the mandate for all Americans to buy insurance, not on the premise of the Commerce Clause, but rather by stating the mandate is a tax, which is within the power of Congress.  While neither of these events bring closure to these issues, the European summer vacation season should keep the debt issues of Spain, Italy, Portugal & Greece at bay, while it will take a Republican Presidential victory and control of both Houses of Congress to allow Mitt Romney to make good on his pledge to repeal the act.  Hence, there is a good chance we could have a better market this summer, rather than revisiting the doldrums  experienced during the last two summers. 

Manufacturing had been a bright spot for the US economy, expanding for 34 consecutive months, until the most recent report, which showed a drop off for the month of June.  The index had a reading of 49.7 down from a 53.5 reading in May.  A number below 50 indicates contraction in the sector.  The interconnectedness of the various markets around the world means the pain being felt in Europe translates to less exports from China and other emerging market economies being purchased by Europeans.  It also means less income for the Chinese and the other emerging market economies who in turn purchase a large percentage of our exports.  Another rather large percentage of our manufactured products are usually exported to Europe. 

The 3rd revised GDP estimate for the first quarter remains at 1.9%.  The employment report for June indicated the economy added an anemic net 80,000 jobs and the unemployment rate remained 8.2%  The report will lead to calls for more stimulus.  This has certainly been a less than stellar expansion, thus far.  Perhaps this will be a longer than average expansion this time around.    

Privacy Policy And Variable Annuity Update


At Jersey Benefits Advisors and Jersey Benefits Group, Inc. protecting your privacy is very important to us.  We want you to understand what information we collect and how we use it.  We collect and use information from you on applications and other forms as well as information  about financial transactions with us and from non-affiliated third parties.  This “nonpublic personal information” is obtained in connection with providing a financial product or service to you.

We do not disclose any nonpublic personal information about you without your express consent, except as permitted by law.  We may disclose the nonpublic personal information we collect to persons or companies that perform services on our behalf. 

We restrict access to your nonpublic personal information and only allow disclosures to persons and companies as permitted by law to assist in providing products or services to you. 
We maintain physical, electronic and procedural safeguards to protect your nonpublic personal information at all times.

You usually know you’ve got something good when someone offers to buy out your interest.  This is essentially the position in which some holders of older variable annuities with Guaranteed Minimum Income Benefits (GMIB) find themselves .  While the offer might be a good deal for a client who purchased the annuity as a way to guarantee a stream of income during retirement, but has had something change, so now they need cash, most clients who purchased the annuity for retirement income will be better served remaining with their current contract. 

AXA Equitable Life Insurance and Transamerica Life Insurance Company are two companies who have unveiled programs to “buy out” some existing contract holders in a move that will help reduce the companies’ liabilities.  Most of the  products being offered the buy out from Transamerica have GMIB’s of 6% compounded annually, and their cost for the rider is about half the cost of the current rider.  “The fact that insurers are willing to offer the arrangement only emphasizes the true value of the living benefit”, said Andrew Murdoch, an advisor with Somerset Wealth Strategies, Inc. 

According to Dave Paulsen, CEO of Transamerica Capital, Inc., “This offer is completely optional for our customers, and we don’t require anybody to use it.  For those who will benefit by accepting the offer, there is some benefit for Transamerica, as well, as some older capital-intensive assets would be removed from our books.”  Recently, VA providers have been increasing the pricing of GMIB’s due to hedging costs. 

Do You Or A Family Member Have Multiple Employer Plans?

Many people have multiple retirement accounts with various employers, because they have changed jobs.  One of the problems with this is the duplication of objectives within each account. Having a lot of funds, in several accounts, does not always provide the diversification we aim to achieve.  It also makes it very difficult to keep track of your assets, when you have statements coming from multiple brokers and mutual fund companies.

Many employees find themselves or a family member in the situation of having multiple employer plans. Most people can consolidate these assets into one diversified IRA or ROTH IRA. Call me if you would like to consolidate your accounts.  I will analyze the assets, make recommendations and help you with the paperwork. 

* The S&P 500, the DJIA and the NASDAQ are unmanaged indexes that are widely used as indicators of Market Trends.  Past performance does not guarantee future results.  The performance of these indexes does not reflect fees and charges associated with investing.  It is not possible to invest directly in an index. Dollar Cost Averaging through a systematic savings plan is an excellent way to build an account without a sizeable initial investment.  Saving a portion of our pay each month is very important.  Company sponsored pension plans are one method to save and should be used for retirement.  Other systematic investment accounts, SUCH AS ROTH IRA’S, TRADITIONAL IRA’S, COVERDELL ACCOUNTS, 529 PLANS, BROKERAGE ACCOUNTS AND ANNUITIES  can also be opened, and debited directly from your checking or savings account. For more information, just call to set up an appointment. REFERRALS ARE ALWAYS WELCOME. 

Investment Advisory Services offered through:
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
570 Carillon Parkway
St. Petersburg, FL  33758-9053
Transamerica Financial Advisors, Inc. is
not affiliated with Jersey Benefits Advi-

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

All opinions expressed in this newsletter are
solely those of John Kaighn & Jersey Benefits

Tuesday, June 26, 2012

SEC Official Warns Insurers about VA Benefit Exchanges

Nash says switch must be in best interests of contract holders
June 26, 2012 4:26 pm ET
An official with the Securities and Exchange Commission called upon life insurers to protect their legacy variable annuity clients — and to make sure that swapped benefits are suitable.
“When a company discontinues the sale of a contract, one option is to orphan the contract, allowing investments to dwindle,” said Susan Nash, associate director for disclosure and insurance product regulation at the SEC. “I urge you to focus on the long-term interests of your existing contract owners, as well as the reputation of your company.”
She spoke Tuesday morning at the Insured Retirement Institute's Government, Legal and Regulatory Conference.
Ms. Nash also commented on a new practice among life insurers with large books of legacy variable annuity business: the offer to clients to drop accumulated living or death benefits in exchange for an incentive, such as an increase in account value.
“In some cases, incentives may be offered to contract holders when they relinquish contracts that have living benefits,” Ms. Nash said. “These exchanges may raise questions of suitability.”
She added that “there is often an easily identified class of investors for whom the switch would not be advantageous,” namely those who could expect to use their living-benefit features.
“I encourage you to closely scrutinize these exchange transactions from the investors' viewpoint what exactly is being given up,” Ms. Nash said.
Ms. Nash also called for clear disclosure to clients and advisers on variable annuity contracts. Such disclosure should “provide information to contract purchaser that helps them make informed purchase decisions,” as well as “provide information to existing contract owners to help them understand how their investment has performed and changed,” she said.
The SEC is also boosting its staff, searching for an expert on derivatives to advise the department on “novel and complex investment products, including novel variable product designs,” Ms. Nash said.
The agency recently bolstered its expertise on exchange-traded funds in January when it brought in Barry Pershkow as senior special counsel in its investment management division.

Monday, June 4, 2012

A.M. Best Affirms Ratings of AEGON N.V.’s U.S. Operations, Upgrades Ratings of Transamerica Life Canada

I came across this article on Business Wire concerning Aegon, the parent company of Transamerica.  I thought it would be of interest to clients who are invested with me, as well as anyone who might be looking for an Advisor to help them with their investments.  There is nothing like a 3rd party endorsement of the company through which you place your business.

OLDWICK, N.J.--()--A.M. Best Co. has affirmed the financial strength rating (FSR) of A+ (Superior) and issuer credit ratings (ICR) of “aa-” of the life/health subsidiaries of AEGON N.V.’s (AEGON) (Netherlands) [NYSE: AEG] U.S. operations. AEGON’s U.S. life/health companies are collectively referred to as AEGON USA Group (AEGON USA). In addition, A.M. Best has affirmed the debt ratings of “aa-” of the outstanding notes issued under the funding agreement-backed securities (FABS) programs sponsored byMonumental Life Insurance Company (Cedar Rapids, IA), a member of AEGON USA. The outlook for all the above ratings is stable.

A.M. Best also has upgraded the FSR to A- (Excellent) from B++ (Good) and ICR to “a-” from “bbb+” of Transamerica Life Canada (TLC) (Toronto, Ontario), an indirect, wholly owned subsidiary of AEGON. The outlook for both ratings has been revised to stable from positive.
Additionally, A.M. Best has affirmed the FSR of A (Excellent) and ICR of “a” of Canadian Premier Life Insurance Company (CPL), a subsidiary of AEGON N.V. The outlook for these ratings is stable. (See below for a detailed listing of the companies and ratings.)
The affirmation of AEGON USA’s ratings reflects its favorable earnings performance and risk-adjusted capitalization during 2011. International Financial Reporting Standards (IFRS) earnings for AEGON Americas (which includes its domestic, Canadian and Latin American operations) were $933 million for year-end 2011. Although AEGON USA recorded a 2011 U.S. statutory net loss of 2.5 billion as a result of unique statutory accounting requirements for reinsurance transactions, which dictate that recapture losses are recognized through income, surplus was not negatively impacted as reinsurance treaty gains are re-classed to surplus. The group’s risk-adjusted capitalization remained strong as its year-end 2011 regulatory capital ratio improved slightly over the previous year and is significantly higher than historical levels.
AEGON USA’s stand-alone credit profile considers its strong market position in a number of U.S. life and annuity market segments, a large multi-channel distribution platform, diversified sources of earnings and a strong positive cash flow. The organization also benefits from meaningful economies of scale, strong brand name recognition and effective asset/liability and liquidity management. AEGON USA’s ratings also recognize A.M. Best’s assessment of the financial strength and support of AEGON. As a result, the stand-alone ratings of AEGON USA receive rating enhancement in consideration of AEGON’s overall creditworthiness and the strategic and financial importance of the U.S. operations to AEGON.
A.M. Best notes that the group has taken various initiatives to de-risk its balance sheet and improve its risk profile. The quality of the investment portfolio was upgraded by reducing hedge fund holdings and increasing positions in treasuries and other short-term investments. The institutional spread-based business (primarily guaranteed interest contracts, funding agreements and funding agreement-backed securities) remains in run off to reduce exposure to credit risk, lower required capital and shift to a more balanced mix of business between spread and fee-based products. AEGON USA also reduced its exposure to equity market risk by increasing the size of the macro hedge covering its variable annuity business.
Despite this improved risk profile, A.M. Best notes the possibility of additional material credit losses within the organization’s general account investment portfolio. Although pre-tax IFRS asset impairments declined to $352 million in 2011 from $506 million in 2010, additional realized losses and impairments are likely to occur in 2012, given AEGON USA’s sizable structured asset portfolio and exposure to direct commercial real estate. In addition, the group’s substantial variable annuity portfolio exposes its earnings to volatility, as declines in the capital markets would translate to lower fee income and higher required reserves on secondary guarantees. While the additional equity hedging will serve to reduce volatility, AEGON USA’s earnings remain somewhat correlated to capital market performance.
In August 2011, AEGON closed the divestment of its life reinsurance business, Transamerica Reinsurance (TARe), to SCOR SE, a global reinsurance company. Although A.M. Best notes that the removal of the TARe earnings has resulted in a contraction of AEGON USA’s operating profile, A.M Best views positively the divestiture as it lowers the organization’s required capital, reduces the need to arrange redundant reserve (XXX/AXXX) financing and allows senior management to focus on its core businesses of life insurance and asset accumulation.
The ratings of TLC reflect the enhanced scope of its overall business profile through market positions maintained in its core business lines, its multi-channel distribution platform, reduced risk profile and adequate capitalization. In addition, A.M. Best views positively TLC’s enhanced risk management practices, including more comprehensive hedging strategies and its decision to exit portions of its segregated funds product offerings for new business. A.M. Best also notes that while TLC recorded a significant 2011 net loss on a Canadian IFRS basis, the company did produce a small net gain on a Universal IFRS basis, which is how TLC’s performance is measured by AEGON. The ratings also consider the significant historical financial support (including the 2011 CAD 200 million capital contribution) TLC received from AEGON. As a result, the stand-alone ratings of TLC receive rating enhancement in consideration of AEGON’s overall creditworthiness and the strategic and financial importance of the Canadian life operations to AEGON.
A.M. Best believes AEGON USA, TLC and CPL are well positioned at their current rating levels for the foreseeable future.
Factors that could result in negative rating actions for these entities include a significant and sustained decline in their consolidated risk-adjusted capitalizations as measured by Best’s Capital Adequacy Ratio (BCAR) model, net operating performances that do not meet A.M. Best’s expectations or a decline in the creditworthiness of AEGON, which could constrain its future financial support for these entities.
The FSR of A+ (Superior) and ICRs of “aa-” have been affirmed for the following members of AEGON USA Group:
  • Transamerica Life Insurance Company
  • Transamerica Financial Life Insurance Company
  • Western Reserve Life Assurance Co. of Ohio
  • Monumental Life Insurance Company
  • Stonebridge Life Insurance Company
  • Transamerica Advisors Life Insurance Company
  • Transamerica Advisors Life Insurance Company of New York
The following debt ratings have been affirmed:
Monumental Global Funding Limited— “aa-” program rating
-- “aa-” on all outstanding notes issued under the program
Monumental Global Funding II—”aa-” program rating
-- “aa-” on all outstanding notes issued under the program
Monumental Global Funding III—”aa-” program rating
-- “aa-” on all outstanding notes issued under the program
The methodology used in determining these ratings is Best’s Credit Rating Methodology, which provides a comprehensive explanation of A.M. Best’s rating process and contains the different rating criteria employed in the rating process. Key criteria utilized includes: “Rating Members of Insurance Groups.” Best’s Credit Rating Methodology can be found at
Founded in 1899, A.M. Best Company is the world’s oldest and most authoritative insurance rating and information source. For more information, visit
Copyright © 2012 by A.M. Best Company, Inc. ALL RIGHTS RESERVED.


A.M. Best Co.
Robert Adams
Senior Financial Analyst
908-439-2200, ext. 5225
William Pargeans
Assistant Vice President
908-439-2200, ext. 5359
Rachelle Morrow
Senior Manager, Public Relations
908-439-2200, ext. 5378
Jim Peavy
Assistant Vice President, Public Relations
908-439-2200, ext. 5644

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