On January 15, 2009, 90 seconds after lifting off from LaGuardia Airport, the now famous US Airways flight 1549 lost all engine power upon striking a flock of geese 3,200 feet above New York City. Three-and-a-half minutes later, the crippled Airbus A320 touched down in the Hudson River, and what could have been a major loss of life became a textbook lesson in crisis management.
Listening to the cockpit communications, it's quickly apparent that "The Miracle on the Hudson" was made possible by the skill, poise and careful coordination of Captain Chesley Sullenberger and First Officer Jeff Skiles. Yet the transcript also reveals the importance of a tool that for decades has helped pilots manage both the routine and unexpected during flight. That tool is the checklist.
Indeed, in the moments just before the bird-strike, Sullenberger is heard saying, "After takeoff checklist complete." Upon losing power, the first directive he gives Skiles is "Get the QRH." The QRH or Quick Reference Handbook, is a manual consisting largely of checklists to be utilized in troubleshooting various problems such as loss of cabin pressure or engine power. After the order is given, Skiles and Sullenberger can be heard working through a series of steps designed to save the flight.
As they attempted to address an emotionally fraught, seemingly impossible situation, the two pilots had a simple resource they could turn to for help. Beyond the aviation world, checklists are used to manage a host of complex processes: from constructing skyscrapers to administering critical care in hospitals.
Of course, the decisions investors make when markets become volatile don't have life or death consequences, but they can prove vital to ong-term financial wellbeing. And given what we know about
how market volatility can transform a calm, cool and collected investor into an emotional, panicked and scattered one,having a checklist to consult during the next period of instability might mean the difference between reaching your goals and falling short of them. The next time volatility strikes, consider these six steps:
1. Take your emotional temperature.
Even with the recent market tumult still visible in the rearview mirror, it may be difficult to recall just how unsettled investors felt in 2008 and early 2009. Yet it's all but assured that a future downturn will find us back in the same emotional boat. We shouldn't be surprised that when markets decline our moods tend to do the same, as losses can make us feel as if our financial objectives are imperiled. Yet even if we acknowledge that declines are a reality, we are still susceptible to letting the emotions that accompany those downturns drive decisions at odds with key investing goals. One way to help keep them at bay is to gain a deeper understanding of where they originate.
Consider, for example, the strong compulsion to sell when markets become erratic. At heart this urge is essentially a flight response, We seek to eliminate a source of anxiety - in this case, the possibility of monetary loss - by disengaging from it. On a practical level, that generally means converting assets into cash, which limits the possibility of loss.
Psychological studies and research in behavioral finance confirm that this aversion to loss is actually part of our neurological programming, hard-wired into us from a time when survival depended on hunting and foraging - and holding on to the fruit of those efforts meant the difference between life and death.
Viewed in that light, it's no surprise that the visceral urge to limit losses overtakes the rational part of our brain that may be telling us that selling assets into the teeth of a down market locks in losses and reduces considerably the potential to benefit from a market recovery.
Aversion to loss is but one of many tendencies that surface during volatile periods. Others include the impulse to move with the herd - a phenomenon exemplified by the late 1990s rush into tech stocks - as well as our penchant to heavily weigh the importance of recent events rather than considering them against the backdrop of market history.
According to behavioral economist Dan Ariely in his book, Predictably Irrational, it's important to understand the surprising power that emotions can exert over our choices. "Although there is nothing much we can do to get our Dr. Jekyll to fully appreciate the strength of our Mr. Hyde, perhaps just being aware that we are prone to making the wrong decisions when gripped by intense emotion may help us."
2. Turn down the volume.
When the market is rising like a rocket or sinking like a stone, the popular press seldom provides analysis that's useful to long-term investors. Instead the headlines tend to play up whatever information or trend has grabbed the momentary attention of traders and pundits. In an age of nonstop connectivity, tuning out financial news can be tough, but fixating on daily or even weekly market returns can spur us to actions that might ultimately impede our long- term success.
It's interesting to consider that the temptation to monitor stock and bond investments on a daily or even hourly basis stems mostly from the fact that there is always new data available, as trading creates regular re-pricing. To remain focused on long-term goals, it may be helpful to take the same approach with your investment portfolio that you do with assets that don't get re-priced with similar frequency. For example, short-term fluctuations in the value of your home or car don't prompt you to immediately put them up for sale.
Another strategy for curbing the emotional impact of market volatility is to review the value of your investments only at regularly scheduled times. Many investors elect to do so quarterly upon receiving account or brokerage statements. This diminishes the likelihood that they will feel it necessary to make constant changes in response to day-to-day market swings.
3. Find the broader context.
Ask the average investor how many 20% market declines they'd expect to experience over a 25-year period and chances are the answer will fall short of the number suggested by history. The figure, based on the unmanaged Dow Jones Industrial Average dating back to 1900, is about seven. That's right, roughly once every three-and-a-half years (assuming 50% recovery of lost value between declines), the Dow has lost at least one-fifth its value.
Yet each time such a downturn occurs, it understandably upsets investors. Moreover, the sharper drops often elicit claims that this time the selloff is different or worse than those that have come before. As previously noted, maintaining perspective while watching an account balance shrink is not easy. but remembering that downturns are a fairly normal occurrence can help place short-term market events in a broader historical context.
Having that historical perspective can strengthen your resolve to stay invested, which can be a key to long-term success. After all, pulling out of the market at a high point and buying back in at the boltom is almost impossible to do once, let alone more than a half dozen times during your life as an investor.
4. Recognize the potential harm of sudden movements.
A recent survey by financial research firm Dalbar determined that over the 20 yearsended December 31, 2009, the average stock investor's return trailed that of the broader market by nearly 5% per year. Put another way, if the market gained 10% annually, the average investor's portfolio realized only a 5% gain.
Much of this differential stems from investors who, for the reasons discussed previously, sold at the boltom of the market and, if they bought back in, did so once the market had already begun to recover. Market turnarounds often happen suddenly and unpredictably; being on the sidelines when a reversal occurs can rob investors of significant return.
In fact, a hypothetical investor in the unrnanaged Standard & Poor's 500 Composite Index who wasn't invested on the index's five best days during the lO-year period ended December 31, 2009, would have realized an annual return nearly 4% lower than someone who remained invested the entire time. Of course, past results are not predictive of results in future periods.
5. Think like a contrarian.
Warren Buffett once offered the following bit of investing advice: "When others are greedy, be fearful; when others are fearful, be greedy." A more delicate rephrasing might be: Amid adversity, there is often opportunity. Volatility of the kind that marked 2008 and early 2009 often punishes good and bad investments alike, as some investors succumb to the stress and opt out of the market entirely.
Though coetinuing to invest when markets are declining can be difficult, if you believe that stock and bond funds are a good way of meeting long-term financial objectives - which has been the case historically - then making purchases during a downturn is often like buying investments at prices below their longterm average. That's because as markets become less emotionally driven, stocks and bonds generally return to something closer to their long-term average, and investors who "bought on the dip" can benefit. While regular investing doesn't ensure you'll make money, staying the course through thick and thin can help increase your share balance, which can increase your portfolio's ability to provide income.
6. Check in with your financial adviser.
No one would set out on a Himalayan trek without enlisting a guide who knew how to navigate the most perilous stretches. So it goes with investing.
Your financial adviser can be a steadying presence when market conditions get tough. Whether reviewing your investment plan, providing perspective on what's happening in the market or placing current conditions in a larger context, your adviser is an important ally and sounding board. Maintaining open lines of communication can prevent you from taking steps that could undermine your long-term goals.
Indeed, you might think of an adviser as a kind of co-pilot. Much like Sullenberger and Skiles, you can manage the crisis more effectively together - by systematically working through your checklist with the goal of achieving a belter outcome.
The preceding article appeared in the Investor Magazine provided to shareholders of American Funds, a mutual fund company whose various funds are used by Jersey Benefits Advisors and John Kaighn to assist clients in meeting their investment objectives.
Monday, November 15, 2010
Wednesday, October 6, 2010
JERSEY BENEFITS ADVISORS NEWSLETTER FALL 2010
MARKET WATCH
I don’t usually begin my missives with a quote from someone else, but I have to give kudos to Caroline Baum for this quote in her Opening Remarks article in the September 6, 2010 edition of Bloomberg’s Businessweek . She writes, “It’s easy to be nostalgic for the 1990-91 recession that gave way to the Clinton boom. What will it take to ignite that kind of growth again? The US economy remains almost comatose…. The current slump already ranks as the longest period of sustained weakness since the Great Depression…. Once in a lifetime dislocations will take years to work out. Among them: the job drought, the debt hangover, the defense-industry contraction, the banking collapse, the real estate depression, the health-care cost explosion and the runaway federal deficit.”
The portion of the quote in italics was included in Caroline’s article, but it was quoted from Time Magazine in September. However, the year of the quote was 1992, and shortly thereafter, the economy was off to the races for one of the best economic cycles in American history. While I am not predicting a 90’s type recovery, I believe you have to have a long term historical perspective when attempting to understand the cycles of the US economy, and be very wary of the media with their hysterical style of reporting.
While the 1990-91 recession could be considered mild in comparison to the 2007-09 recession, which by the way ended in June 2009 according to the NBER, many of the same problems we are experiencing today were concerns in 1992. Of course, the once in a lifetime dislocations didn’t take years to work out then, and also turned out not to be once in a lifetime dislocations. My point here is to be careful not to get caught up in the sensational, overly pessimistic and simplistic descriptions of our current state of affairs, and the equally inadequate prescriptions for corrective action espoused by various experts.
An article in Barrons quotes Stephen Roach, non executive chairman of Morgan Stanley Asia, on the solutions offered by both parties. He states," Also, the idea that we can come up with a quick fix is ludicrous. Politicians aren’t being honest. They’re saying, ‘Well if you just listen to what my party says, we can turn America around tomorrow.’ That’s a crock. And the American public has lost respect for what politicians are saying on both sides of the isle because these are deep seated problems that have been building over time and there’s no quick fix.” The idea of no quick fix sums it up, but it doesn’t mean unsolvable.
Thomas Donlan also writes in Barrons, “Medicare, Medicaid, Social Security, government retirement programs and military spending already consumed all the government’s $2.1 trillion in tax receipts for fiscal 2010. The rest of the official cost of government-including the spending to create and save jobs and the interest on the national debt-was borrowed.”
Budget cuts, changes in entitlement programs, tax increases and continued erosion in the value of the dollar (inflation) are on the horizon as the American public continues to wrestle with the questions of what do we really want in the way of entitlements, and what are we willing to pay for them.
Meanwhile, some help from the markets, like September’s best in 71 years performance can’t hurt! The DJIA is now up 3.45% for the year, the S&P 500, has posted a 2.45% increase for the year and the NASDAQ is up 4.38%.
THE POLITICAL AND THE ECONOMIC OUTLOOK
The mid term elections are rapidly approaching, and it seems the markets have priced in the prospects of Republican gains in the House of Representatives and possible control of that body. Since the market is always looking toward the future, don’t look for the actual election results to move the markets all that much. In the short term, the market’s prospects will be more focused on the earnings reports this month and the jobs report on Friday, October 8.
The overpromising by the Obama Administration that stimulus would save jobs has cost them their credibility. While it did lessen the effects of the recession, the stimulus hasn’t done much to help unemployment. This is because stimulus is a means of injecting government spending into the economy when it is weak, not a jobs program, per se. Employment only increases when the imbalances which caused the recession have been resolved.
As mentioned earlier, the recession’s official end was cited as June 2009. While many people feel we are still in the grip of recession, the facts don’t bear this out. We are in the recovery phase of the economic cycle, which means we are working our way back to the Gross Domestic Product level of the previous cycle. Because this recovery has been very weak, it is taking longer to reach GDP levels achieved prior to the recession, and it makes everyone impatient. The employment picture should begin to get better once we enter the expansion phase of the economic cycle, which will begin when we get back to the previous GDP levels of the last cycle. No one knows exactly when that will be, but it will be evidenced by lower unemployment numbers.
As we enter the last quarter of 2010, there may finally be a chance for a more pragmatic approach in Washington. It almost seems like we had to go through this exercise in idealism summed up in the quote “change we can believe in”, to reach the understanding politicians will say anything to get elected. The perception by the populace of a government moving so rapidly and unapologetically to the left, against the will of the majority, has led to a rebuke of big government ideas. While government is not the entire problem, it is also not the entire solution. I think if the administration fails to move more to the center, Obama will be a one term president.
At its last meeting, the Federal Reserve stated it stands ready to use Quantitative Easing, being called QE2, to further help the economy. This means the purchase of Treasury Securities in the open market, which will keep interest rates low, but could further erode the value of the dollar. This is a balancing act, and it can be positive for the markets. Rising stock markets mean better economic conditions, which can happen, if the government exhibits the fiscal discipline needed.
IF YOU ARE READY TO GO PAPERLESS READ ON
For those of you who have brokerage and retirement accounts through Pershing, there is a service called My Edocument Suite, which might interest you. It enables you to view account documents online, and is provided on behalf of Transamerica Financial Advisors, Inc. by Pershing LLC (member FINRA, NYSE, SIPC), a subsidiary of The Bank of New York Mellon Corporation.
On this secure website, you can request a user ID and password that will allow you to access your brokerage account statements, trade confirmations and other documents online. It also enables you to stop your paper statements and have notifications sent to your email when a new statement, confirmation or tax statement (1099) is available. All you need is your account number and a few minutes to answer some security questions. The link is http://www.myedocumentsuite.com . Call me for assistance.
Gold broke through the $1,300 per oz. level in late September. It belongs in your portfolio, but don’t put all of your eggs there!
DOLLAR COST AVERAGING THROUGH A SYSTEMATIC SAVINGS PLAN IS AN EXCELLENT WAY TO BUILD UP AN ACCOUNT WITHOUT A SIZEABLE INITIAL INVESTMENT. THIS IS THE WAY MANY COMPANY RETIREMENT PLANS FUNCTION. 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 be opened, some for as little as $50 per month, and debited directly from your checking or savings account. For more information, just call to set up an appointment. REFERRALS ARE ALWAYS WELCOME.
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
Email: kaighn@jerseybenefits.com
http://www.jerseybenefits.com/
Securities offered through:
Transamerica Financial Advisors, Inc.
A registered Broker/Dealer
34 Doe Dr.
Woodbine, NJ 08270
800-245-8250
Member FINRA & SIPC
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
Email: kaighn@jerseybenefits.com
Http://www.jerseybenefits.com/
All opinions expressed in this newsletter are solely those of John Kaighn & Jersey Benefits Advisors, formerly known as Kaighn Financial Services.
I don’t usually begin my missives with a quote from someone else, but I have to give kudos to Caroline Baum for this quote in her Opening Remarks article in the September 6, 2010 edition of Bloomberg’s Businessweek . She writes, “It’s easy to be nostalgic for the 1990-91 recession that gave way to the Clinton boom. What will it take to ignite that kind of growth again? The US economy remains almost comatose…. The current slump already ranks as the longest period of sustained weakness since the Great Depression…. Once in a lifetime dislocations will take years to work out. Among them: the job drought, the debt hangover, the defense-industry contraction, the banking collapse, the real estate depression, the health-care cost explosion and the runaway federal deficit.”
The portion of the quote in italics was included in Caroline’s article, but it was quoted from Time Magazine in September. However, the year of the quote was 1992, and shortly thereafter, the economy was off to the races for one of the best economic cycles in American history. While I am not predicting a 90’s type recovery, I believe you have to have a long term historical perspective when attempting to understand the cycles of the US economy, and be very wary of the media with their hysterical style of reporting.
While the 1990-91 recession could be considered mild in comparison to the 2007-09 recession, which by the way ended in June 2009 according to the NBER, many of the same problems we are experiencing today were concerns in 1992. Of course, the once in a lifetime dislocations didn’t take years to work out then, and also turned out not to be once in a lifetime dislocations. My point here is to be careful not to get caught up in the sensational, overly pessimistic and simplistic descriptions of our current state of affairs, and the equally inadequate prescriptions for corrective action espoused by various experts.
An article in Barrons quotes Stephen Roach, non executive chairman of Morgan Stanley Asia, on the solutions offered by both parties. He states," Also, the idea that we can come up with a quick fix is ludicrous. Politicians aren’t being honest. They’re saying, ‘Well if you just listen to what my party says, we can turn America around tomorrow.’ That’s a crock. And the American public has lost respect for what politicians are saying on both sides of the isle because these are deep seated problems that have been building over time and there’s no quick fix.” The idea of no quick fix sums it up, but it doesn’t mean unsolvable.
Thomas Donlan also writes in Barrons, “Medicare, Medicaid, Social Security, government retirement programs and military spending already consumed all the government’s $2.1 trillion in tax receipts for fiscal 2010. The rest of the official cost of government-including the spending to create and save jobs and the interest on the national debt-was borrowed.”
Budget cuts, changes in entitlement programs, tax increases and continued erosion in the value of the dollar (inflation) are on the horizon as the American public continues to wrestle with the questions of what do we really want in the way of entitlements, and what are we willing to pay for them.
Meanwhile, some help from the markets, like September’s best in 71 years performance can’t hurt! The DJIA is now up 3.45% for the year, the S&P 500, has posted a 2.45% increase for the year and the NASDAQ is up 4.38%.
THE POLITICAL AND THE ECONOMIC OUTLOOK
The mid term elections are rapidly approaching, and it seems the markets have priced in the prospects of Republican gains in the House of Representatives and possible control of that body. Since the market is always looking toward the future, don’t look for the actual election results to move the markets all that much. In the short term, the market’s prospects will be more focused on the earnings reports this month and the jobs report on Friday, October 8.
The overpromising by the Obama Administration that stimulus would save jobs has cost them their credibility. While it did lessen the effects of the recession, the stimulus hasn’t done much to help unemployment. This is because stimulus is a means of injecting government spending into the economy when it is weak, not a jobs program, per se. Employment only increases when the imbalances which caused the recession have been resolved.
As mentioned earlier, the recession’s official end was cited as June 2009. While many people feel we are still in the grip of recession, the facts don’t bear this out. We are in the recovery phase of the economic cycle, which means we are working our way back to the Gross Domestic Product level of the previous cycle. Because this recovery has been very weak, it is taking longer to reach GDP levels achieved prior to the recession, and it makes everyone impatient. The employment picture should begin to get better once we enter the expansion phase of the economic cycle, which will begin when we get back to the previous GDP levels of the last cycle. No one knows exactly when that will be, but it will be evidenced by lower unemployment numbers.
As we enter the last quarter of 2010, there may finally be a chance for a more pragmatic approach in Washington. It almost seems like we had to go through this exercise in idealism summed up in the quote “change we can believe in”, to reach the understanding politicians will say anything to get elected. The perception by the populace of a government moving so rapidly and unapologetically to the left, against the will of the majority, has led to a rebuke of big government ideas. While government is not the entire problem, it is also not the entire solution. I think if the administration fails to move more to the center, Obama will be a one term president.
At its last meeting, the Federal Reserve stated it stands ready to use Quantitative Easing, being called QE2, to further help the economy. This means the purchase of Treasury Securities in the open market, which will keep interest rates low, but could further erode the value of the dollar. This is a balancing act, and it can be positive for the markets. Rising stock markets mean better economic conditions, which can happen, if the government exhibits the fiscal discipline needed.
IF YOU ARE READY TO GO PAPERLESS READ ON
For those of you who have brokerage and retirement accounts through Pershing, there is a service called My Edocument Suite, which might interest you. It enables you to view account documents online, and is provided on behalf of Transamerica Financial Advisors, Inc. by Pershing LLC (member FINRA, NYSE, SIPC), a subsidiary of The Bank of New York Mellon Corporation.
On this secure website, you can request a user ID and password that will allow you to access your brokerage account statements, trade confirmations and other documents online. It also enables you to stop your paper statements and have notifications sent to your email when a new statement, confirmation or tax statement (1099) is available. All you need is your account number and a few minutes to answer some security questions. The link is http://www.myedocumentsuite.com . Call me for assistance.
DOLLAR COST AVERAGING THROUGH A SYSTEMATIC SAVINGS PLAN IS AN EXCELLENT WAY TO BUILD UP AN ACCOUNT WITHOUT A SIZEABLE INITIAL INVESTMENT. THIS IS THE WAY MANY COMPANY RETIREMENT PLANS FUNCTION. 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 be opened, some for as little as $50 per month, and debited directly from your checking or savings account. For more information, just call to set up an appointment. REFERRALS ARE ALWAYS WELCOME.
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
Email: kaighn@jerseybenefits.com
http://www.jerseybenefits.com/
Securities offered through:
Transamerica Financial Advisors, Inc.
A registered Broker/Dealer
34 Doe Dr.
Woodbine, NJ 08270
800-245-8250
Member FINRA & SIPC
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
Email: kaighn@jerseybenefits.com
Http://www.jerseybenefits.com/
All opinions expressed in this newsletter are solely those of John Kaighn & Jersey Benefits Advisors, formerly known as Kaighn Financial Services.
Thursday, September 30, 2010
Recession Over?
According to an announcement by the NBER the current recession ended in June 2009. This recession lasted from December 2007 through June 2009, a period of 18 months, making it the longest recession since World War II. This distinction earned it the moniker of The Great Recession in the media.
Since so many people are focused on the unemployment numbers, which are a lagging indicator of economic growth, a large segment of the population, according to various polls, still thinks the recession is ongoing and that a double dip is imminent. GDP numbers released today for the second quarter show the economy growing by 1.7%, and anemic growth is forecast for the current quarter as well. For those with a contrarian view, investing prudently now could pay off handsomely, when folks begin to believe this recovery is for real
John Kaighn
Jersey Benefits Advisors
Since so many people are focused on the unemployment numbers, which are a lagging indicator of economic growth, a large segment of the population, according to various polls, still thinks the recession is ongoing and that a double dip is imminent. GDP numbers released today for the second quarter show the economy growing by 1.7%, and anemic growth is forecast for the current quarter as well. For those with a contrarian view, investing prudently now could pay off handsomely, when folks begin to believe this recovery is for real
John Kaighn
Jersey Benefits Advisors
Monday, July 12, 2010
Jersey Benefits Advisors Newsletter Summer 2010
MARKET WATCH
The 4th of July holiday has come and gone as the mercury keeps rising incessantly, baking the East Coast in near record temperatures. I hope you were able to take advantage of the beautiful holiday weather and enjoy an outdoor activity or two. I was lucky enough to spend some time with my family at beach, and enjoyed my granddaughter as she frolicked in the sand and negotiated with the waves. She did quite well, until I managed to allow a rather small wave to splash up and hit her in the face. She didn’t like that very much! It reminded me of how I felt about the stock market’s performance prior to the holiday.
After a decent first quarter in 2010, some of the concerns we spoke about in the last quarter overwhelmed investors as the reality set in that this will not be a normal recovery, much as the recession we recently experienced was not typical. The countries of the European Union experienced their own debt crisis, with Greece being the poster child for fiscal mismanagement. Fear of a debt contagion from Europe undermined investor confidence and led to a major correction in the second quarter. The DJIA closed the quarter at 9,774.02, which leaves it at - 6.27% for the year. The Dow is now 12.8% lower than the April high, while the S&P 500 ended the quarter at 1,030.71 for a - 7.28% performance for the January to June period. The NASDAQ finished the quarter at 2,109.24 for a - 7.05% first half showing.
There are many debates raging about the significance of the second quarter drubbing. With the DJIA off 12.8% and the S&P 500 down over 15% from April, talk of the economy sinking back into recession, the dreaded double dip, has resurfaced. There is also much discussion about the American Recovery and Reinvestment Act of 2009. The huge stimulus bill hasn’t begun to create the jobs promised, as unemployment remains stubbornly high at 9.5% of the workforce. The major expansion of the government into healthcare, as well as the administration’s promise to push through a cap on carbon emissions, in their response to the BP fiasco in the Gulf of Mexico, has left many Americans wary of the Big Government goals of this Congress. In fact it has led Barron’s, in July 5th issue, to call for major losses for the Democrats in November, and an end of the Big Government agenda.
While the effectiveness of government stimulus will be debated ad infinitum, the fact of the matter is something had to be done to stabilize the economy. The promise of it being a “job creation machine for shovel ready projects” created unrealistic expectations. As can be witnessed by this tepid expansion, stimulating an economy as multifaceted as ours is no small endeavor. It takes a great deal of time for the effects of government spending to be felt, and when it is targeted to technologies which are the pet projects of politicians, the effects can be minimal, and can have some unintended consequences.
So, if in fact Barron’s is correct and we wind up with a stalemate in Congress after November and the inability to push through Cap and Trade legislation, we may actually be better off. While the search for alternative and renewable fuels is certainly in our best interest as a country, to deny the role of fossil fuels in our immediate and long term future is tantamount to utter deception. As for the double dip recession, with all of the stimulus thrown at the economy, it seems unlikely. We will probably continue to expand slowly, but unemployment will likely remain uncomfortably high.
ARE YOU TAKING ADVANTAGE OF THIS BUYING OPPORTUNITY?
It seems like the markets have been on a wild, rollercoaster ride lately. Even portfolios with state of the art diversification have gyrated significantly over the last two years. I realize it gets difficult to stay the course, when there is so much opinion and information bombarding you on a daily basis. Yet, more than ever, I believe these volatile times present a wonderful opportunity to systematically add to your portfolio. It is really not enough to just hold onto your investments, because it is equally important to continually purchase shares to take advantage of lower prices when they become available. This trading range will not last forever, and there will be a point when the markets recognize the expansion is for real, and the buying opportunity will be gone.
PRIVACY POLICY & FINANCIAL REFORM
PRIVACY POLICY
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.
FINANCIAL REFORM
Legislation may be signed into law this summer, billed as reform of the financial system, to prevent a calamity similar to the 2008 financial crisis. Unfortunately, there is no provision in the legislation about what to do with Fannie Mae and Freddie Mac, the two entities many feel are at the root of the housing crash. While consumer protection is a worthwhile goal and regulations are certainly important in order to reign in those who are corrupt, this particular bill is too little, too late, and fails to recognize the government’s complicit role in the housing bubble. Enjoy your summer!
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
Email: kaighn@jerseybenefits.com
Http://www.jerseybenefits.com
Securities offered through:
Transamerica Financial Advisors, Inc.
A registered Broker/Dealer
34 Doe Dr.
Woodbine, NJ 0870
800-245-8250
Member FINRA & SIPC
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
Email: kaighn@jerseybenefits.com
Http://www.jerseybenefits.com/
All opinions expressed in this newsletter are solely those of John Kaighn & Jersey Benefits Advisors, formerly known as Kaighn Financial Services.
The 4th of July holiday has come and gone as the mercury keeps rising incessantly, baking the East Coast in near record temperatures. I hope you were able to take advantage of the beautiful holiday weather and enjoy an outdoor activity or two. I was lucky enough to spend some time with my family at beach, and enjoyed my granddaughter as she frolicked in the sand and negotiated with the waves. She did quite well, until I managed to allow a rather small wave to splash up and hit her in the face. She didn’t like that very much! It reminded me of how I felt about the stock market’s performance prior to the holiday.
After a decent first quarter in 2010, some of the concerns we spoke about in the last quarter overwhelmed investors as the reality set in that this will not be a normal recovery, much as the recession we recently experienced was not typical. The countries of the European Union experienced their own debt crisis, with Greece being the poster child for fiscal mismanagement. Fear of a debt contagion from Europe undermined investor confidence and led to a major correction in the second quarter. The DJIA closed the quarter at 9,774.02, which leaves it at - 6.27% for the year. The Dow is now 12.8% lower than the April high, while the S&P 500 ended the quarter at 1,030.71 for a - 7.28% performance for the January to June period. The NASDAQ finished the quarter at 2,109.24 for a - 7.05% first half showing.
There are many debates raging about the significance of the second quarter drubbing. With the DJIA off 12.8% and the S&P 500 down over 15% from April, talk of the economy sinking back into recession, the dreaded double dip, has resurfaced. There is also much discussion about the American Recovery and Reinvestment Act of 2009. The huge stimulus bill hasn’t begun to create the jobs promised, as unemployment remains stubbornly high at 9.5% of the workforce. The major expansion of the government into healthcare, as well as the administration’s promise to push through a cap on carbon emissions, in their response to the BP fiasco in the Gulf of Mexico, has left many Americans wary of the Big Government goals of this Congress. In fact it has led Barron’s, in July 5th issue, to call for major losses for the Democrats in November, and an end of the Big Government agenda.
While the effectiveness of government stimulus will be debated ad infinitum, the fact of the matter is something had to be done to stabilize the economy. The promise of it being a “job creation machine for shovel ready projects” created unrealistic expectations. As can be witnessed by this tepid expansion, stimulating an economy as multifaceted as ours is no small endeavor. It takes a great deal of time for the effects of government spending to be felt, and when it is targeted to technologies which are the pet projects of politicians, the effects can be minimal, and can have some unintended consequences.
So, if in fact Barron’s is correct and we wind up with a stalemate in Congress after November and the inability to push through Cap and Trade legislation, we may actually be better off. While the search for alternative and renewable fuels is certainly in our best interest as a country, to deny the role of fossil fuels in our immediate and long term future is tantamount to utter deception. As for the double dip recession, with all of the stimulus thrown at the economy, it seems unlikely. We will probably continue to expand slowly, but unemployment will likely remain uncomfortably high.
ARE YOU TAKING ADVANTAGE OF THIS BUYING OPPORTUNITY?
It seems like the markets have been on a wild, rollercoaster ride lately. Even portfolios with state of the art diversification have gyrated significantly over the last two years. I realize it gets difficult to stay the course, when there is so much opinion and information bombarding you on a daily basis. Yet, more than ever, I believe these volatile times present a wonderful opportunity to systematically add to your portfolio. It is really not enough to just hold onto your investments, because it is equally important to continually purchase shares to take advantage of lower prices when they become available. This trading range will not last forever, and there will be a point when the markets recognize the expansion is for real, and the buying opportunity will be gone.
PRIVACY POLICY & FINANCIAL REFORM
PRIVACY POLICY
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.
FINANCIAL REFORM
Legislation may be signed into law this summer, billed as reform of the financial system, to prevent a calamity similar to the 2008 financial crisis. Unfortunately, there is no provision in the legislation about what to do with Fannie Mae and Freddie Mac, the two entities many feel are at the root of the housing crash. While consumer protection is a worthwhile goal and regulations are certainly important in order to reign in those who are corrupt, this particular bill is too little, too late, and fails to recognize the government’s complicit role in the housing bubble. Enjoy your summer!
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
Email: kaighn@jerseybenefits.com
Http://www.jerseybenefits.com
Securities offered through:
Transamerica Financial Advisors, Inc.
A registered Broker/Dealer
34 Doe Dr.
Woodbine, NJ 0870
800-245-8250
Member FINRA & SIPC
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
Email: kaighn@jerseybenefits.com
Http://www.jerseybenefits.com/
All opinions expressed in this newsletter are solely those of John Kaighn & Jersey Benefits Advisors, formerly known as Kaighn Financial Services.
Tuesday, June 15, 2010
Investing Your Money Wisely
If you are involved in business then chances are you are so caught up with your day to day operations that you sometimes forget that there are ways for your money to make even more money for you. In many instances, you will actually earn more from your investments than from your actual business. This is because you have to deal with overhead expenses, salary, and other operations with your business. On the other hand, all these factors are not present with your investments. In other words, you are making your money work for you when you invest rather than the other way around.
So how exactly can you go about this endeavor? The fact is, investments require exposure to the financial markets, so you would need to determine where to invest your money. There are many investment options from which to choose. 401k Plans, IRA's, Simplified Employee Pensions and the SIMPLE Plan are a few ways you can funnel cash from your business into an investment account. Asset Management Accounts, Annuities and Life Insurance are other methods you can use to gain some tax advantages while putting your money to work.
While investing in the market can yield a higher rate of return for your money, there are also risks, so you should have a long term investment horizon. Some ways to invest include investing in the stock market, bonds, mutual funds, ETF's and money market funds. Diversification is one key to success while investing. This means having your money spread over many asset classes so your risks are balanced in different industries and sectors of the economy. Using diversification/asset allocation as part of your investment strategy neither assures nor guarantees better performance and cannot protect against losses in a declining market. Another key to investing wisely is to dollar cost average into your investments, so you don't drop a large amount of money into a particular asset all at once. Dollar cost averaging is simply investing smaller amounts of money on a monthly or quarterly basis into your selected funds, in order to make purchases at various prices, instead of one large purchase. Dollar cost averaging/systematic investment does not ensure a profit or guarantee against a loss. Investors should consider their financial ability to continue their purchases through periods of low price levels.
Investing is a good way to earn while enjoying the convenience of being in control of your time and your money. Investments also can provide you with a sense of security if you know that your money is managed by a competent financial advisor. Choosing an investment advisor is a highly personal endeavor, but with all of the options and choices available, having someone with which to discuss your investments and provide advice is extremely important. Advisors can work fee based or commission based and can even charge on an hourly basis, depending on the needs of the client. No matter whether you choose to go it alone or work with an advisor, investments certainly give you plenty of flexibility because you are free to choose the investment medium that best suits your needs.
John Kaighn
Jersey Benefits Advisors
So how exactly can you go about this endeavor? The fact is, investments require exposure to the financial markets, so you would need to determine where to invest your money. There are many investment options from which to choose. 401k Plans, IRA's, Simplified Employee Pensions and the SIMPLE Plan are a few ways you can funnel cash from your business into an investment account. Asset Management Accounts, Annuities and Life Insurance are other methods you can use to gain some tax advantages while putting your money to work.
While investing in the market can yield a higher rate of return for your money, there are also risks, so you should have a long term investment horizon. Some ways to invest include investing in the stock market, bonds, mutual funds, ETF's and money market funds. Diversification is one key to success while investing. This means having your money spread over many asset classes so your risks are balanced in different industries and sectors of the economy. Using diversification/asset allocation as part of your investment strategy neither assures nor guarantees better performance and cannot protect against losses in a declining market. Another key to investing wisely is to dollar cost average into your investments, so you don't drop a large amount of money into a particular asset all at once. Dollar cost averaging is simply investing smaller amounts of money on a monthly or quarterly basis into your selected funds, in order to make purchases at various prices, instead of one large purchase. Dollar cost averaging/systematic investment does not ensure a profit or guarantee against a loss. Investors should consider their financial ability to continue their purchases through periods of low price levels.
Investing is a good way to earn while enjoying the convenience of being in control of your time and your money. Investments also can provide you with a sense of security if you know that your money is managed by a competent financial advisor. Choosing an investment advisor is a highly personal endeavor, but with all of the options and choices available, having someone with which to discuss your investments and provide advice is extremely important. Advisors can work fee based or commission based and can even charge on an hourly basis, depending on the needs of the client. No matter whether you choose to go it alone or work with an advisor, investments certainly give you plenty of flexibility because you are free to choose the investment medium that best suits your needs.
John Kaighn
Jersey Benefits Advisors
Wednesday, May 19, 2010
Open Letter to Governor Christie
Governor Christie,
I have been following the steps you have been taking in regard to the Pension System and Health Benefits, as well as your other steps to bring some sensibility to our state's finances. Just so you know, I am a 57 y/o male from Cape May County who voted FOR YOU, even though I am registered as an independent. I am also an educator in Middle Twp. and a Registered Investment Advisor in the State of NJ as well as a Registered Representative of Transamerica Financial Advisors, Inc. I have worked in both the public and private sector for my entire career, so I hope you take the time to read what I say here, because I think I have an understanding of the issue.
Educators are not your nemesis, and some of the ideas in the recently enacted legislation are not only palatable, but should have had the support of NJEA in 2006 when they were originally drafted by a Democratic Legislature, the chosen party of NJEA. This legislation is an acceptable compromise, because it is directed at new employees and will be the basis for bringing the pension system in line with that of the private sector. However, when you talk about how much teachers or other public employees have contributed to the pension plan, and how much of a benefit they reap upon retirement, you should also remember that some teachers, who are still working, went into education when the starting salary was $7,000.00 or less. The money contributed to the pension plan is supposed to go into an investment fund which is supposed to be PRUDENTLY invested. With the time value of money invested over a 30 - 40 year career, the actual dollar amount each individual teacher contributed to the plan is NOT the only money they have in the plan, as it is SUPPOSED to grow. I KNOW you understand this, so it is a bit of demagoguery to ask if it is fair for people to collect more than they contributed. I do agree there are some municipalities where individuals have gamed the system. Perhaps you should publically NAME a few of them.
I think you will find most educators don't want to pay for health benefits, because they feel it was a promise made to them by the state, and is considered by many to be compensation for services rendered. It is also true that NJEA’s position is that the union doesn't want to give up anything it has previously negotiated. However, with the current fiscal situation in this state, it is a bit like the position the United Auto Workers took with GM, so I think It is time for the name calling, whining and public bickering to end and for you to start negotiations with the union at the state level, and not ask individual districts to take pay freezes or act unilaterally. This is an extremely divisive tactic and will be seen for what it is, which is an attempt to break the union. If you spell out how much a 1.5% contribution equals, since many people don't actually do the math, it may be an easier sell. After all, $900 a year on a $60,000 salary is a reasonable compromise.
If you begin to educate, and not scapegoat people, you may start to get teachers to understand that the current system is unsustainable and must change. If you provide detailed analysis and realistic comparison of salary, benefits and pension as a total compensation package between the public sector and the private sector, I think people would understand that compensation in the public sector has begun to eclipse the compensation levels in the private sector. While many will argue this is a matter of the choices made by individuals, rational people will realize compromise must be made. After all, the public sector is funded by those paying taxes from the private sector, so the two systems MUST be in balance.
It is difficult to compare jobs in the public sector to jobs in the private sector, especially when you consider many employees in the private sector rely on a 401k or similar plan to fund their retirement. This equates to 10% - 15% of compensation being put into a retirement fund. If an employee managed to save $500,000 for retirement, took a retirement salary of $50,000 per year, and could continue to gain 8% on that investment while retired, the account would be DEPLETED in less than 20 years. Hence the private sector angst at the public sector’s lifetime pensions.
In my particular school district, we receive $55 per day for our unused sick leave when we retire. I have not abused my sick leave and yet my compensation upon retirement for sick time would be less than $10,000. Most school districts have similar limits on payments upon retirement for sick time. I do understand there are some municipalities where some public employees have outrageous compensation for sick time. This has to stop and I agree.
In this time of angry politics, it might be a good idea for you to not try to find scapegoats as you attempt to get this state’s fiscal house in order. There are actually some people who voted for you who are members of NJEA and would like to see the union be less beholding to the Democratic Party. Toning down the rhetoric, sitting down and actually talking respectfully to the professionals you’d like to make compromises might actually work.
Finally, you should look at dismantling the entire educational assessment juggernaut that has been created in this state. I have watched this bureaucracy grow over the years from one test at the end of 8th grade to the behemoth it is today. There are commercially available tests that would yield results that can be tracked year after year, without the cost of actually recreating the wheel. Perhaps this might be one very good act of privatization that could save quite a few dollars immediately.
I do hope you can help bring some semblance of fiscal responsibility back to this state, but as you know, any time you have to make cuts there is going to be pain. I don't envy you in your position. Just remember every cut has an impact on jobs, so wholesale cutting can be dangerous. Attrition, hiring freezes and eliminating much of the political patronage in this state would help a GREAT deal. Making certain employees scapegoats or demons is counterproductive and demoralizing. Pitting the private sector against the public sector is irresponsible and reprehensible.
Sincerely,
John Kaighn
Middle Twp. School District
Jersey Benefits Advisors
I have been following the steps you have been taking in regard to the Pension System and Health Benefits, as well as your other steps to bring some sensibility to our state's finances. Just so you know, I am a 57 y/o male from Cape May County who voted FOR YOU, even though I am registered as an independent. I am also an educator in Middle Twp. and a Registered Investment Advisor in the State of NJ as well as a Registered Representative of Transamerica Financial Advisors, Inc. I have worked in both the public and private sector for my entire career, so I hope you take the time to read what I say here, because I think I have an understanding of the issue.
Educators are not your nemesis, and some of the ideas in the recently enacted legislation are not only palatable, but should have had the support of NJEA in 2006 when they were originally drafted by a Democratic Legislature, the chosen party of NJEA. This legislation is an acceptable compromise, because it is directed at new employees and will be the basis for bringing the pension system in line with that of the private sector. However, when you talk about how much teachers or other public employees have contributed to the pension plan, and how much of a benefit they reap upon retirement, you should also remember that some teachers, who are still working, went into education when the starting salary was $7,000.00 or less. The money contributed to the pension plan is supposed to go into an investment fund which is supposed to be PRUDENTLY invested. With the time value of money invested over a 30 - 40 year career, the actual dollar amount each individual teacher contributed to the plan is NOT the only money they have in the plan, as it is SUPPOSED to grow. I KNOW you understand this, so it is a bit of demagoguery to ask if it is fair for people to collect more than they contributed. I do agree there are some municipalities where individuals have gamed the system. Perhaps you should publically NAME a few of them.
I think you will find most educators don't want to pay for health benefits, because they feel it was a promise made to them by the state, and is considered by many to be compensation for services rendered. It is also true that NJEA’s position is that the union doesn't want to give up anything it has previously negotiated. However, with the current fiscal situation in this state, it is a bit like the position the United Auto Workers took with GM, so I think It is time for the name calling, whining and public bickering to end and for you to start negotiations with the union at the state level, and not ask individual districts to take pay freezes or act unilaterally. This is an extremely divisive tactic and will be seen for what it is, which is an attempt to break the union. If you spell out how much a 1.5% contribution equals, since many people don't actually do the math, it may be an easier sell. After all, $900 a year on a $60,000 salary is a reasonable compromise.
If you begin to educate, and not scapegoat people, you may start to get teachers to understand that the current system is unsustainable and must change. If you provide detailed analysis and realistic comparison of salary, benefits and pension as a total compensation package between the public sector and the private sector, I think people would understand that compensation in the public sector has begun to eclipse the compensation levels in the private sector. While many will argue this is a matter of the choices made by individuals, rational people will realize compromise must be made. After all, the public sector is funded by those paying taxes from the private sector, so the two systems MUST be in balance.
It is difficult to compare jobs in the public sector to jobs in the private sector, especially when you consider many employees in the private sector rely on a 401k or similar plan to fund their retirement. This equates to 10% - 15% of compensation being put into a retirement fund. If an employee managed to save $500,000 for retirement, took a retirement salary of $50,000 per year, and could continue to gain 8% on that investment while retired, the account would be DEPLETED in less than 20 years. Hence the private sector angst at the public sector’s lifetime pensions.
In my particular school district, we receive $55 per day for our unused sick leave when we retire. I have not abused my sick leave and yet my compensation upon retirement for sick time would be less than $10,000. Most school districts have similar limits on payments upon retirement for sick time. I do understand there are some municipalities where some public employees have outrageous compensation for sick time. This has to stop and I agree.
In this time of angry politics, it might be a good idea for you to not try to find scapegoats as you attempt to get this state’s fiscal house in order. There are actually some people who voted for you who are members of NJEA and would like to see the union be less beholding to the Democratic Party. Toning down the rhetoric, sitting down and actually talking respectfully to the professionals you’d like to make compromises might actually work.
Finally, you should look at dismantling the entire educational assessment juggernaut that has been created in this state. I have watched this bureaucracy grow over the years from one test at the end of 8th grade to the behemoth it is today. There are commercially available tests that would yield results that can be tracked year after year, without the cost of actually recreating the wheel. Perhaps this might be one very good act of privatization that could save quite a few dollars immediately.
I do hope you can help bring some semblance of fiscal responsibility back to this state, but as you know, any time you have to make cuts there is going to be pain. I don't envy you in your position. Just remember every cut has an impact on jobs, so wholesale cutting can be dangerous. Attrition, hiring freezes and eliminating much of the political patronage in this state would help a GREAT deal. Making certain employees scapegoats or demons is counterproductive and demoralizing. Pitting the private sector against the public sector is irresponsible and reprehensible.
Sincerely,
John Kaighn
Middle Twp. School District
Jersey Benefits Advisors
Wednesday, April 7, 2010
Jersey Benefits Advisors Newsletter Spring 2010
MARKET WATCH
The stock market indices have behaved in a much more modest fashion in the 1st quarter of 2010, prompting many to doubt the economic recovery which is blossoming all around us. At this juncture, many investors and much of the news media are focused on the unemployment numbers and the slowness of job growth. Yet retail sales figures, temporary hiring and manufacturing are ticking upward, while consumer spending rose in February for the fifth straight month, jumping by 3.4% from a year earlier.
Of course there are many concerns facing the US as a country, such as unemployment, paying for the healthcare legislation recently enacted this year, the moribund housing sector, Social Security, Iraq, Afghanistan, Iran, oil prices, terrorism and of course the dreaded double dip recession. All of these issues are definitely a drag on the national psyche as the extreme positions on the Right and Left scream for attention. As all of this plays out on the national stage, an interesting phenomenon is happening in the markets.
Thankfully, the major issues confronting usare being managed in a way the stock market indices, which are reflections of you and I, seem to appreciate. The fact of the matter is that the almost 75% gain in the S&P 500 over the last year has helped ease the concerns of financial collapse. While there are some analysts and pundits concerned the market has moved too fast, the proper context for the increase in the S&P 500 since last March, according to Michael Santoli of Barrons, is the index “has merely recouped 57% of the bear market losses, reattaining a level first reached in 1998 and still below where the market collapsed after Lehman Brothers failed.
As Mike O’Rourke of brokerage BTIG has noted, on Monday, September 29, 2008, as the first TARP vote failed in Congress, the S&P 500 fell to 1106 from a Friday close of 1213. So this leg of the rally to 1178 since hitting 1100 near Thanksgiving has merely recouped three-quarters of what was lost in a single, sickening day”. Do you remember how gut-wrenching that day was?
So, a subdued but very decent quarter has just ended with the Dow Jones IndustrialAverage gaining 4.10%, closing at 10,856.63 and recently climbing above 11,000. The S&P 500 ended the quarter at 1,169.43 which was a 4.87% increase. The NASDAQ finished the quarter at 2,397.96 scratching out a 5.68% gain. The performance was not spectacular, but three more quarters at half that rate would generate above average returns for the year.
It amazes me how the various state governments manage to forget to plan for the economic fallout of recessions. Since our economy is cyclical and the public sector relies on revenue from taxes to fund its operations, it would seem a prudent move would be to reign in expenditures when the private sector begins to contract. When the private sector sheds millions of jobs and the unemployment rate jumps from 4% to 10%, you would think governors, state legislatures and public employee unions would realize there might be a few less tax dollars rolling into the coffers of the local, state and federal governments. Unfortunately, the public sector just doesn’t seem to get it. With state budgets facing huge deficits, the public sector will be forced to shed jobs, which will definitely add to the ranks of the unemployed. This is an unfortunate fact of life and a lesson we seem to be destined to relearn each recession. No sector is immune to a recession’s wrath.
STRATEGIES FOR DIVERSIFYING ASSETS
There has been a great deal of press in recent years given to portfolio diversification, in particular to the use of hedging strategies with alternative investments. Many times hedge funds are referred to as the vehicles to use for this type of strategy, because they are not linked to traditional investments, such as stocks and bonds. However, on a closer inspection, it becomes evident that many hedge funds, even though they use sophisticated tools such as derivatives, controlling purchases in companies, merger arbitrage and venture capital, are still very much connected to traditional investments, and also remain illiquid, expensive and prone to risk.
Are these investments suitable for your portfolio? The answer depends on your appetite for risk, tolerance for illiquidity and overall investment goals. In the past, hedge funds were marketed to very high net worth individuals, but recently, this unregulated asset class has been marketed to a larger group of investors, in order to increase market performance during times of low returns.
Many hedge funds have had lackluster performance recently, and this can lead managers to increase the risk, in order to increase the return for the year. Accurate data has only been collected on hedge funds for about 12 years. This doesn't give much information on which to " base an analysis, so you need to exercise caution in interpreting such results", according to Vikas Agarwal, of the J. Mack Robinson College of Business at Georgia State University.
During the last decade, there was a rotation out of technology into real estate, energy, natural resources, commodities, bonds and emerging markets, which created asset bubbles and culminated in the financial collapse of 2008-09. In my opinion, the idea is not to switch asset classes and try to time these rotations, but rather to attempt to build a portfolio, which holds positions in all of these asset classes and more. This requires a great deal of discipline, because it means holding and purchasing positions, which may be out of favor, at the same time you are building positions in sectors, which are in favor. This is why I recommend adding to your portfolio through dollar cost averaging, and monitoring performance on a calendar year basis.
Much of the same diversification hedge funds claim they can provide can be attained through the careful construction of a portfolio using sector mutual funds and Exchange Traded Funds. It can also be done without the cost structure of a hedge fund, which generally charges a fee of 2% of assets, plus a 20% incentive fee on the profits for the year. If you’d like information on ways to hedge your portfolio, feel free to call for an appointment.
CONSOLIDATED STATEMENT & GMIB REMINDERS
I just wanted to remind you that consolidated statements for clients will be provided on a semiannual basis after the market results on June 30th and December 31st. All clients will still receive statements from the various mutual fund companies, insurance companies or Pershing. If you would like to discuss your consolidated portfolio value, or receive a consolidated statement after March 31st or September 30th, just give me a call. We can set up an appointment, or I can send you the statement by email or regular mail.
Clients with Transamerica or MetLife annuities should look for the Guaranteed Minimum Income Benefit, Managed Annuity Program, Family Income Protector or Retirement Income Choice Riders to compare market value to guaranteed value. Call me with your questions.
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
Email: kaighn@jerseybenefits.com
Http://www.jerseybenefits.com
Securities offered through:
Transamerica Financial Advisors, Inc.
A registered Broker/Dealer
570 Carillon Parkway
St. Petersburg, FL 33758-9053
800-245-8250
Member FINRA & SIPC
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
Email: kaighn@jerseybenefits.com
Http://www.jerseybenefits.com/
All opinions expressed in this newsletter are solely those of John Kaighn & Jersey Benefits Advisors, formerly known as Kaighn Financial Services.
The stock market indices have behaved in a much more modest fashion in the 1st quarter of 2010, prompting many to doubt the economic recovery which is blossoming all around us. At this juncture, many investors and much of the news media are focused on the unemployment numbers and the slowness of job growth. Yet retail sales figures, temporary hiring and manufacturing are ticking upward, while consumer spending rose in February for the fifth straight month, jumping by 3.4% from a year earlier.
Of course there are many concerns facing the US as a country, such as unemployment, paying for the healthcare legislation recently enacted this year, the moribund housing sector, Social Security, Iraq, Afghanistan, Iran, oil prices, terrorism and of course the dreaded double dip recession. All of these issues are definitely a drag on the national psyche as the extreme positions on the Right and Left scream for attention. As all of this plays out on the national stage, an interesting phenomenon is happening in the markets.
Thankfully, the major issues confronting usare being managed in a way the stock market indices, which are reflections of you and I, seem to appreciate. The fact of the matter is that the almost 75% gain in the S&P 500 over the last year has helped ease the concerns of financial collapse. While there are some analysts and pundits concerned the market has moved too fast, the proper context for the increase in the S&P 500 since last March, according to Michael Santoli of Barrons, is the index “has merely recouped 57% of the bear market losses, reattaining a level first reached in 1998 and still below where the market collapsed after Lehman Brothers failed.
As Mike O’Rourke of brokerage BTIG has noted, on Monday, September 29, 2008, as the first TARP vote failed in Congress, the S&P 500 fell to 1106 from a Friday close of 1213. So this leg of the rally to 1178 since hitting 1100 near Thanksgiving has merely recouped three-quarters of what was lost in a single, sickening day”. Do you remember how gut-wrenching that day was?
So, a subdued but very decent quarter has just ended with the Dow Jones IndustrialAverage gaining 4.10%, closing at 10,856.63 and recently climbing above 11,000. The S&P 500 ended the quarter at 1,169.43 which was a 4.87% increase. The NASDAQ finished the quarter at 2,397.96 scratching out a 5.68% gain. The performance was not spectacular, but three more quarters at half that rate would generate above average returns for the year.
It amazes me how the various state governments manage to forget to plan for the economic fallout of recessions. Since our economy is cyclical and the public sector relies on revenue from taxes to fund its operations, it would seem a prudent move would be to reign in expenditures when the private sector begins to contract. When the private sector sheds millions of jobs and the unemployment rate jumps from 4% to 10%, you would think governors, state legislatures and public employee unions would realize there might be a few less tax dollars rolling into the coffers of the local, state and federal governments. Unfortunately, the public sector just doesn’t seem to get it. With state budgets facing huge deficits, the public sector will be forced to shed jobs, which will definitely add to the ranks of the unemployed. This is an unfortunate fact of life and a lesson we seem to be destined to relearn each recession. No sector is immune to a recession’s wrath.
STRATEGIES FOR DIVERSIFYING ASSETS
There has been a great deal of press in recent years given to portfolio diversification, in particular to the use of hedging strategies with alternative investments. Many times hedge funds are referred to as the vehicles to use for this type of strategy, because they are not linked to traditional investments, such as stocks and bonds. However, on a closer inspection, it becomes evident that many hedge funds, even though they use sophisticated tools such as derivatives, controlling purchases in companies, merger arbitrage and venture capital, are still very much connected to traditional investments, and also remain illiquid, expensive and prone to risk.
Are these investments suitable for your portfolio? The answer depends on your appetite for risk, tolerance for illiquidity and overall investment goals. In the past, hedge funds were marketed to very high net worth individuals, but recently, this unregulated asset class has been marketed to a larger group of investors, in order to increase market performance during times of low returns.
Many hedge funds have had lackluster performance recently, and this can lead managers to increase the risk, in order to increase the return for the year. Accurate data has only been collected on hedge funds for about 12 years. This doesn't give much information on which to " base an analysis, so you need to exercise caution in interpreting such results", according to Vikas Agarwal, of the J. Mack Robinson College of Business at Georgia State University.
During the last decade, there was a rotation out of technology into real estate, energy, natural resources, commodities, bonds and emerging markets, which created asset bubbles and culminated in the financial collapse of 2008-09. In my opinion, the idea is not to switch asset classes and try to time these rotations, but rather to attempt to build a portfolio, which holds positions in all of these asset classes and more. This requires a great deal of discipline, because it means holding and purchasing positions, which may be out of favor, at the same time you are building positions in sectors, which are in favor. This is why I recommend adding to your portfolio through dollar cost averaging, and monitoring performance on a calendar year basis.
Much of the same diversification hedge funds claim they can provide can be attained through the careful construction of a portfolio using sector mutual funds and Exchange Traded Funds. It can also be done without the cost structure of a hedge fund, which generally charges a fee of 2% of assets, plus a 20% incentive fee on the profits for the year. If you’d like information on ways to hedge your portfolio, feel free to call for an appointment.
CONSOLIDATED STATEMENT & GMIB REMINDERS
I just wanted to remind you that consolidated statements for clients will be provided on a semiannual basis after the market results on June 30th and December 31st. All clients will still receive statements from the various mutual fund companies, insurance companies or Pershing. If you would like to discuss your consolidated portfolio value, or receive a consolidated statement after March 31st or September 30th, just give me a call. We can set up an appointment, or I can send you the statement by email or regular mail.
Clients with Transamerica or MetLife annuities should look for the Guaranteed Minimum Income Benefit, Managed Annuity Program, Family Income Protector or Retirement Income Choice Riders to compare market value to guaranteed value. Call me with your questions.
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
Email: kaighn@jerseybenefits.com
Http://www.jerseybenefits.com
Securities offered through:
Transamerica Financial Advisors, Inc.
A registered Broker/Dealer
570 Carillon Parkway
St. Petersburg, FL 33758-9053
800-245-8250
Member FINRA & SIPC
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
Email: kaighn@jerseybenefits.com
Http://www.jerseybenefits.com/
All opinions expressed in this newsletter are solely those of John Kaighn & Jersey Benefits Advisors, formerly known as Kaighn Financial Services.
Wednesday, March 24, 2010
What Is Investing?
The concept of investment is actually quite simple: investing means putting your money to work for you. Basically speaking, investing is another way to think about how to make money. Growing up, most of us were taught that you can earn an income only by getting a job and working, and that's exactly what most of us do. There is nothing wrong with this way of thinking, but in order to make more money, we'd have to work more hours. However, there is a limit to the number of hours that can be worked in a day, not to mention the fact that having a great deal of money is no fun if we don't have the leisure time to enjoy it.
You can't clone yourself to increase your working time, so instead, you need to have an extension of yourself - your money - working for you. That way, while you are putting in hours for your employer, working in the garden, sleeping, reading the paper or socializing with friends, your investments can be earning you money. Quite simply, making your money work for you maximizes your earning potential whether or not you receive a raise, decide to work overtime or look for a higher-paying job.
There are many different ways you can go about making an investment. This includes putting money into a money market, stocks, bonds, mutual funds, annuities, ETF's, real estate or starting your own business. Sometimes people refer to these options as "investment vehicles," which is just another way of saying "a way to invest". Each of these vehicles has various pros and cons, depending on who you talk to, but it doesn't matter so much which method you choose for investing your money, the idea is to have your money working for you so it creates wealth. Even though this is a simple idea, it's the most important concept about investing.
What Investing Is Not:
Investing is not gambling. Gambling is putting money at risk by betting on an uncertain outcome with the hope that you might win money. Part of the confusion between investing and gambling, however, may come from the way some people use investment vehicles. For example, it could be argued that buying a stock based on a "hot tip" you heard at the water cooler is essentially the same as placing a bet at a casino.
True investing doesn't happen without some action on your part. An investor does not simply throw his or her money at any random investment; he or she performs thorough analysis and commits capital only when there is a reasonable expectation of profit. Yes, there still are risks, and there are no guarantees, but investing is more than simply hoping Lady Luck is on your side.
Why Bother Investing?
Obviously, everybody wants more money. It's pretty easy to understand that people invest because they want to increase their personal freedom, sense of security and ability to afford the things they want in life. However, investing is becoming more of a necessity. The days when everyone worked the same job for 30 years and then retired to a nice fat pension are gone. For average people, investing is not just a helpful tool, but rather the only way to afford to retire and maintain their present lifestyle.
Whether you live in the U.S., Canada, or pretty much any other country in the industrialized Western World, governments are tightening their belts. Almost without exception, the responsibility of planning for retirement is shifting away from the state and towards the individual. There is much debate about how safe our old-age pension programs will be over the next 20, 30 and 50 years. But why leave it to chance? By planning ahead you can ensure financial stability during your retirement. (For more, see Jersey Benefits Group, Inc.)
John Kaighn
Jersey Benefits Advisors
John Kaighn's Guidance Website
You can't clone yourself to increase your working time, so instead, you need to have an extension of yourself - your money - working for you. That way, while you are putting in hours for your employer, working in the garden, sleeping, reading the paper or socializing with friends, your investments can be earning you money. Quite simply, making your money work for you maximizes your earning potential whether or not you receive a raise, decide to work overtime or look for a higher-paying job.
There are many different ways you can go about making an investment. This includes putting money into a money market, stocks, bonds, mutual funds, annuities, ETF's, real estate or starting your own business. Sometimes people refer to these options as "investment vehicles," which is just another way of saying "a way to invest". Each of these vehicles has various pros and cons, depending on who you talk to, but it doesn't matter so much which method you choose for investing your money, the idea is to have your money working for you so it creates wealth. Even though this is a simple idea, it's the most important concept about investing.
What Investing Is Not:
Investing is not gambling. Gambling is putting money at risk by betting on an uncertain outcome with the hope that you might win money. Part of the confusion between investing and gambling, however, may come from the way some people use investment vehicles. For example, it could be argued that buying a stock based on a "hot tip" you heard at the water cooler is essentially the same as placing a bet at a casino.
True investing doesn't happen without some action on your part. An investor does not simply throw his or her money at any random investment; he or she performs thorough analysis and commits capital only when there is a reasonable expectation of profit. Yes, there still are risks, and there are no guarantees, but investing is more than simply hoping Lady Luck is on your side.
Why Bother Investing?
Obviously, everybody wants more money. It's pretty easy to understand that people invest because they want to increase their personal freedom, sense of security and ability to afford the things they want in life. However, investing is becoming more of a necessity. The days when everyone worked the same job for 30 years and then retired to a nice fat pension are gone. For average people, investing is not just a helpful tool, but rather the only way to afford to retire and maintain their present lifestyle.
Whether you live in the U.S., Canada, or pretty much any other country in the industrialized Western World, governments are tightening their belts. Almost without exception, the responsibility of planning for retirement is shifting away from the state and towards the individual. There is much debate about how safe our old-age pension programs will be over the next 20, 30 and 50 years. But why leave it to chance? By planning ahead you can ensure financial stability during your retirement. (For more, see Jersey Benefits Group, Inc.)
John Kaighn
Jersey Benefits Advisors
John Kaighn's Guidance Website
Sunday, February 21, 2010
Using Systematic Payouts for Income
While there is no “one size fits all” model which can be used to determine the savings necessary for the retirement years, there are some benchmarks and rates of return, which are realistic measures for making projections. Most of us don’t want to see our standard of living and quality of life deteriorate during our retirement years, so retirement income needs to be close to working income, especially if travel or vacation homes are included in those retirement dreams. However, most defined benefit plans have a payout ranging from 40% - 80% of working income, with most being closer to the lower end of the range. Many companies have stopped using defined benefit plans all together, opting to utilize defined contribution plans, such as the 401k, SIMPLE or SEP.
So what is a realistic rate of return and retirement asset goal? Let’s look at the rate of return first. Prudent advisors and investors realize long term averages have to be considered in making projections, and 8% has been the rule of thumb used for calculating investment rate of return. This is based on long term bond performance. The historical return for the stock market has been closer to 10%. How much do you need for a comfortable retirement? That is a personal question for each retiree, but I’ll run through a couple of scenarios to show how systematic payouts from your investments can help stretch out your income. A systematic payout is basically reverse dollar cost averaging. It means taking withdrawals of retirement income on a monthly basis, the same way the money was saved prior to retirement. The type of investment vehicle could be a rollover IRA, which receives defined contribution balances after retirement, or when changing jobs.
If you have saved $750,000 by the tme you are ready to retire, and draw 10%, or $75,000 annually, and you earn a rate of return equal to 8% annually, the money will last 18 years. The same $750,000 in the Growth Fund of America, using the returns of the last ten years, which include the bear market’s losses, and gaining only 8% thereafter, would last 25 years. If a client placed the $750,000 in one of the newer annuities, with the Guaranteed Minimum Income Benefit, and draws 6% a year, which is $45,000, and the GMIB return is 6% a year, the balance will never fall below $750,000. Therefore, the client’s heirs would get the $750,000 as a death benefit and possiby more, if the market returned more than the 6% GMIB.
While there are concerns about the solvency of Social Security, my feeling is the government will keep the social pact it has made with the workers of this country, and maintain some form of retirement benefits for its citizens, even if the age of retirement is extended and benefits are not as generous as today.
John H. Kaighn
Jersey Benefits Advisors
Middle Twp. Middle School Guidance Department
So what is a realistic rate of return and retirement asset goal? Let’s look at the rate of return first. Prudent advisors and investors realize long term averages have to be considered in making projections, and 8% has been the rule of thumb used for calculating investment rate of return. This is based on long term bond performance. The historical return for the stock market has been closer to 10%. How much do you need for a comfortable retirement? That is a personal question for each retiree, but I’ll run through a couple of scenarios to show how systematic payouts from your investments can help stretch out your income. A systematic payout is basically reverse dollar cost averaging. It means taking withdrawals of retirement income on a monthly basis, the same way the money was saved prior to retirement. The type of investment vehicle could be a rollover IRA, which receives defined contribution balances after retirement, or when changing jobs.
If you have saved $750,000 by the tme you are ready to retire, and draw 10%, or $75,000 annually, and you earn a rate of return equal to 8% annually, the money will last 18 years. The same $750,000 in the Growth Fund of America, using the returns of the last ten years, which include the bear market’s losses, and gaining only 8% thereafter, would last 25 years. If a client placed the $750,000 in one of the newer annuities, with the Guaranteed Minimum Income Benefit, and draws 6% a year, which is $45,000, and the GMIB return is 6% a year, the balance will never fall below $750,000. Therefore, the client’s heirs would get the $750,000 as a death benefit and possiby more, if the market returned more than the 6% GMIB.
While there are concerns about the solvency of Social Security, my feeling is the government will keep the social pact it has made with the workers of this country, and maintain some form of retirement benefits for its citizens, even if the age of retirement is extended and benefits are not as generous as today.
John H. Kaighn
Jersey Benefits Advisors
Middle Twp. Middle School Guidance Department
Tuesday, January 5, 2010
Jersey Benefits Advisors Newsletter Winter 2010
MARKET WATCH
My wife and I had the opportunity to visit New York City with some friends for her birthday on December 29th. That evening we strolled through Times Square, right past the unmarked, unlicensed, white cargo van that had been parked there for several days and was removed from the street the next day. It was searched for explosives, but none were found, however, the NASDAQ and other buildings in the area were evacuated. For the second time in a week, my attention was once again focused on terrorism. In fact, had it not been for the incompetence of the nut case with the bomb in his underwear, Christmas Eve could have been a night of tragedy for this country.
While sitting in the lounge at the Marriott Marquis in the Times Square area, our conversation turned to the multitude of high rise office buildings and the numerous businesses located in this section of the city. The history of this vibrant economic engine confronts you at every corner. The activity in the area gives one an appreciation for the scope of the economy of NYC, and helps me fathom the enormity of the 14 trillion dollar economy of our country, which many times seems quite esoteric.
We have been through a difficult recession and unemployment is still at an uncomfortable level, but as bad as 10% unemployment sounds, the reality is that 9 out of 10 workers have jobs. As an investment advisor, I read numerous publications and constantly scan data. I condense it into this newsletter to help you make decisions about your investments in order to attain your goals. Information constantly flows from the media, and much of it is spun by extremists on the right and left to advance their agenda. While I am not always correct, I try to be objective and show both sides of the issues facing us.
An interesting year has just concluded for the markets, as the financial panic that began in 2008 reached its nadir in March of 2009. Since then, the markets have recovered dramatically signaling the end of the recession and posting some significant gains for the year. In fact, the DJIA gained 18.82% for the year and closed at 10,428.05 while the S&P 500 improved to 1,115.10 which is an increase of 23.45%. Meanwhile, the NASDAQ rose to 2,269.15 adding 43.89%. While these percentage gains are significant, it is important to keep things in perspective.
In order for the indices to reach their former all time highs, the DJIA must still add 35.83% to get to 14,164.53 and the S&P 500 must improve to 1,565.15 which is another 40.35% gain. The NASDAQ, which bubbled into the stratosphere in 2000, must still reach 5,048.62 which is an increase of 122%.
While these statistics seem a bit depressing at first glance, it is safe to say that none of us invested all of our assets in the markets in October 2007, when the DJIA and S&P 500 reached these levels. While the value of our assets are lower than their highest value during the previous bull market, most of us have made money on our investments over the years. If you were investing through the entire recession, then you are poised to reap some pleasant rewards during the next bull market, which is unfolding now.
Remember, somewhere out there is a hapless soul who sold his investments in March, at the height of the panic, and went to cash. Now he is trying to decide if this rally is for real. Luckily, it is none of us! There will be some ups and downs going forward, and problems still exist, but the growth machine that is the US economy is unstoppable if we don’t constrain it.
ECONOMIC OUTLOOK FOR 2010
Of course, this turn of the page of the calendar also has us entering a new decade, which many times seems like a new chapter in an interesting book. There are many soothsayers out there trying to convince you they “know” what is going to happen this decade, and frankly I have read forecasts that are all over the map. My purpose here is to focus on where we are now and what we can expect in the short term, drawing on opinions depicting best and worst case scenarios.
As I mentioned earlier, the recession has not “officially” been declared over by the National Bureau of Economic Research, but the 2.2% growth in the third quarter is an indicator that the economy is growing again, albeit by economic stimulus. Of course, there are predictions of everything from a double dip recession to fourth quarter GDP increasing by 4.5% and annual GDP growth of 3.5% in 2010. According to a survey of 58 economists by Bloomberg, done in December, the US economy is “expected to muddle along at the 2.6% average annual growth rate of the past 20 years, that consumer prices will rise by 2.1% and that joblessness will remain at 10% for the year”.
Within that particular survey, the economists were divided into two distinct and extreme groups as to their view of the direction of the economy. One group adhered to the belief that the recovery will follow historical norms, with pent up demand generating a burst of growth. The other group believes things will be different this time as people will shy away from shopping and banks will be tight fisted with credit. While the “this time it is different crowd” was debunked in in the previous decade on dotcom profits, different paradigms, demographics, housing and decoupling of economies, there have also been recessions in the past where the recovery was not prolific or “V shaped”. It seems like the consensus view of muddling through may indeed be what happens.
Another area where opinions diverge drastically are on government intervention and stimulus. Had the government done nothing, the ensuing panic may have been even worse than what we saw from October 2008 to March 2009. So, now the focus is on an exit strategy.
There is reluctance to withdraw the stimulus too soon for fear of choking off a recovery. However, the more stimulus in the system, the higher probability of inflation. Many economists see little risk of inflation with unemployment at 10%, but politicians are already sweating the 2010 midterm elections. Current legislative initiatives will be costly, and all of us will have to pay more in taxes. Higher taxation stifles growth. Without growth, unemployment increases. Let’s hope Bernanke has the will to remove the punch bowl in time.
ROTH IRA CONVERSION RULES FOR 2010
In 2010, the income limit of $100,000.00 for ROTH IRA conversions will be eliminated, making it possible for anyone with an IRA to convert to a ROTH IRA. There are many factors to consider when making a decision about whether or not to convert your IRA to a ROTH IRA, but the overriding factor is taxation. If you convert in 2010, you must pay 100% of the tax by the date of final tax filing, which is October 14, 2011. Or, you can defer the tax due and pay half in 2011 & half in 2012. You also have until the final tax filing date to recharacterize or undue the conversion if your account value drops, and the tax would be lower by reconverting in 2011. However, then the total tax due would be 100% in that year. Give me a call for more information to see if it makes sense for you.
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
Email: kaighn@jerseybenefits.com
Http://www.jerseybenefits.com
Securities offered through:
Transamerica Financial Advisors, Inc.
A registered Broker/Dealer
570 Carillon Parkway
St. Petersburg, FL 33758-9053
800-245-8250
Member FINRA & SIPC
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
Email: kaighn@jerseybenefits.com
Http://www.jerseybenefits.com/
All opinions expressed in this newsletter are solely those of John Kaighn & Jersey Benefits Advisors, formerly known as Kaighn Financial Services.
My wife and I had the opportunity to visit New York City with some friends for her birthday on December 29th. That evening we strolled through Times Square, right past the unmarked, unlicensed, white cargo van that had been parked there for several days and was removed from the street the next day. It was searched for explosives, but none were found, however, the NASDAQ and other buildings in the area were evacuated. For the second time in a week, my attention was once again focused on terrorism. In fact, had it not been for the incompetence of the nut case with the bomb in his underwear, Christmas Eve could have been a night of tragedy for this country.
While sitting in the lounge at the Marriott Marquis in the Times Square area, our conversation turned to the multitude of high rise office buildings and the numerous businesses located in this section of the city. The history of this vibrant economic engine confronts you at every corner. The activity in the area gives one an appreciation for the scope of the economy of NYC, and helps me fathom the enormity of the 14 trillion dollar economy of our country, which many times seems quite esoteric.
We have been through a difficult recession and unemployment is still at an uncomfortable level, but as bad as 10% unemployment sounds, the reality is that 9 out of 10 workers have jobs. As an investment advisor, I read numerous publications and constantly scan data. I condense it into this newsletter to help you make decisions about your investments in order to attain your goals. Information constantly flows from the media, and much of it is spun by extremists on the right and left to advance their agenda. While I am not always correct, I try to be objective and show both sides of the issues facing us.
An interesting year has just concluded for the markets, as the financial panic that began in 2008 reached its nadir in March of 2009. Since then, the markets have recovered dramatically signaling the end of the recession and posting some significant gains for the year. In fact, the DJIA gained 18.82% for the year and closed at 10,428.05 while the S&P 500 improved to 1,115.10 which is an increase of 23.45%. Meanwhile, the NASDAQ rose to 2,269.15 adding 43.89%. While these percentage gains are significant, it is important to keep things in perspective.
In order for the indices to reach their former all time highs, the DJIA must still add 35.83% to get to 14,164.53 and the S&P 500 must improve to 1,565.15 which is another 40.35% gain. The NASDAQ, which bubbled into the stratosphere in 2000, must still reach 5,048.62 which is an increase of 122%.
While these statistics seem a bit depressing at first glance, it is safe to say that none of us invested all of our assets in the markets in October 2007, when the DJIA and S&P 500 reached these levels. While the value of our assets are lower than their highest value during the previous bull market, most of us have made money on our investments over the years. If you were investing through the entire recession, then you are poised to reap some pleasant rewards during the next bull market, which is unfolding now.
Remember, somewhere out there is a hapless soul who sold his investments in March, at the height of the panic, and went to cash. Now he is trying to decide if this rally is for real. Luckily, it is none of us! There will be some ups and downs going forward, and problems still exist, but the growth machine that is the US economy is unstoppable if we don’t constrain it.
ECONOMIC OUTLOOK FOR 2010
Of course, this turn of the page of the calendar also has us entering a new decade, which many times seems like a new chapter in an interesting book. There are many soothsayers out there trying to convince you they “know” what is going to happen this decade, and frankly I have read forecasts that are all over the map. My purpose here is to focus on where we are now and what we can expect in the short term, drawing on opinions depicting best and worst case scenarios.
As I mentioned earlier, the recession has not “officially” been declared over by the National Bureau of Economic Research, but the 2.2% growth in the third quarter is an indicator that the economy is growing again, albeit by economic stimulus. Of course, there are predictions of everything from a double dip recession to fourth quarter GDP increasing by 4.5% and annual GDP growth of 3.5% in 2010. According to a survey of 58 economists by Bloomberg, done in December, the US economy is “expected to muddle along at the 2.6% average annual growth rate of the past 20 years, that consumer prices will rise by 2.1% and that joblessness will remain at 10% for the year”.
Within that particular survey, the economists were divided into two distinct and extreme groups as to their view of the direction of the economy. One group adhered to the belief that the recovery will follow historical norms, with pent up demand generating a burst of growth. The other group believes things will be different this time as people will shy away from shopping and banks will be tight fisted with credit. While the “this time it is different crowd” was debunked in in the previous decade on dotcom profits, different paradigms, demographics, housing and decoupling of economies, there have also been recessions in the past where the recovery was not prolific or “V shaped”. It seems like the consensus view of muddling through may indeed be what happens.
Another area where opinions diverge drastically are on government intervention and stimulus. Had the government done nothing, the ensuing panic may have been even worse than what we saw from October 2008 to March 2009. So, now the focus is on an exit strategy.
There is reluctance to withdraw the stimulus too soon for fear of choking off a recovery. However, the more stimulus in the system, the higher probability of inflation. Many economists see little risk of inflation with unemployment at 10%, but politicians are already sweating the 2010 midterm elections. Current legislative initiatives will be costly, and all of us will have to pay more in taxes. Higher taxation stifles growth. Without growth, unemployment increases. Let’s hope Bernanke has the will to remove the punch bowl in time.
ROTH IRA CONVERSION RULES FOR 2010
In 2010, the income limit of $100,000.00 for ROTH IRA conversions will be eliminated, making it possible for anyone with an IRA to convert to a ROTH IRA. There are many factors to consider when making a decision about whether or not to convert your IRA to a ROTH IRA, but the overriding factor is taxation. If you convert in 2010, you must pay 100% of the tax by the date of final tax filing, which is October 14, 2011. Or, you can defer the tax due and pay half in 2011 & half in 2012. You also have until the final tax filing date to recharacterize or undue the conversion if your account value drops, and the tax would be lower by reconverting in 2011. However, then the total tax due would be 100% in that year. Give me a call for more information to see if it makes sense for you.
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
Email: kaighn@jerseybenefits.com
Http://www.jerseybenefits.com
Securities offered through:
Transamerica Financial Advisors, Inc.
A registered Broker/Dealer
570 Carillon Parkway
St. Petersburg, FL 33758-9053
800-245-8250
Member FINRA & SIPC
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
Email: kaighn@jerseybenefits.com
Http://www.jerseybenefits.com/
All opinions expressed in this newsletter are solely those of John Kaighn & Jersey Benefits Advisors, formerly known as Kaighn Financial Services.
Sunday, November 22, 2009
Education Department to Demand School Pay Data
By Stephen Sawchuk
U.S. Department of Education officials plan to require districts receiving economic-stimulus aid to report school-level salaries—a sign, observers say, that the Obama administration might seek key changes to district accounting procedures for federal Title I funds.
The reporting—the first collection of its type undertaken by the federal government—could give a clearer picture about the extent to which district spending on salaries differs between schools that receive Title I dollars for disadvantaged students and those that do not.
The results of the data collection, which is to take place this winter, are likely to give more ammunition to school finance experts and lawmakers who maintain that the Elementary and Secondary Education Act should be changed to require districts to address such disparities before receiving the federal aid.
Because a majority of districts’ costs are tied up in salaries, the data have implications for the way teachers of different levels of pay and experience are distributed across districts.
“We’ve never had a moment before when public officials have asked questions about these inequities,” said Marguerite J. Roza, a research associate professor at the University of Washington, in Seattle, who has studied the issue extensively. “Many districts swear that they don’t have them. But they haven’t looked.”
Teacher Distribution
A little-noticed provision in the American Recovery and Reinvestment Act requires each district receiving Title I funds under the stimulus law to file with its state a school-by-school listing of per-pupil expenditures by December 2009.
Aside from a brief notice in the Federal Register, the Education Department has been silent about what information it would seek from districts to fulfill the requirement. But according to forms filed by the department with the White House Office of Management and Budget over the past two months, the Education Department indicated that it plans to require districts to report information on wages, including:
Total salaries in each school;
• Salaries of instructional staff (such as paraprofessionals) only;
• Salaries of teachers only; and
• Nonpersonnel expenditures, if available.
The department would also request more detailed information from five states yet to be chosen. Those states would be asked to break down the expenditure information by state, local, and federal funding sources, including Title I, the documents indicate.
The heavy emphasis on teachers’ salaries stands in direct contrast to the way that districts currently account for them under the Title I program, which provides additional money to districts with high concentrations of poor students.
To receive the federal funding, districts must meet three financial requirements meant to prevent them from using the extra federal dollars to fill in gaps in state and local funding. Under the “comparability” provisions, districts must show that they provide equitable state and local resources to low- and high-poverty schools before receiving their Title I allocations.
But the current version of the ESEA allows districts to exclude salary differentials from the calculation. Instead, they can allocate money to schools based on the district’s average teacher pay as set out in the districtwide salary schedule.
Researchers such as Ms. Roza have found significant funding disparities between low- and high-poverty schools in the same district, largely as a result of differences in teacher salaries. She contends that the omission of salaries from the comparability language papers over factors, such as transfer rules in contracts and high turnover in low-income schools, that tend to lead to a concentration of lower-paid novice teachers in those schools.
In their documentation to the OMB, department officials wrote that the findings from the data collection could be used to help policymakers craft changes to the comparability provisions in the ESEA.
“This is the only way to truly measure whether resources around teacher salaries, curriculum, and technology are being equitably distributed to schools and classrooms,” said Charles Barone, the director of federal policy for Democrats for Education Reform, a New York City-based political action committee. “Districtwide figures obscure resource differences, which is the key reason why most districts refuse to publish school-by-school dollar figures.”
Raegen Miller, a senior policy analyst at the Center for American Progress, a Washington think tank headed by a former Clinton White House official, praised the department’s efforts in the five states that would be chosen for the more detailed reporting, saying such scrutiny could intensify the focus on putting performance at the center of school policy.
“A lot of people think that some amount of budgetary discretion should reside in the hands of principals, that there should be some more flexibility about how teachers are compensated,” he said. “That depends on knowing how much money is flowing to the schools and whether outcomes are measured.”
But the documents show that state officials approached about the collection have expressed concerns about the burden and cost, as well as its feasibility.
“We also understand that districts may not have comprehensive data on school-level expenditures that they can report for a previous school year, but we believe that, at a minimum, they should be able to identify which staff were assigned to each school and to determine the salary expenditures for each school staff member,” Sandra Abrevaya, a spokeswoman for the Education Department, said in an e-mail.
Closing ‘Loopholes’
Although the Obama administration has not made any public statements about the comparability language, several experts on the issue now work in the administration.
A former Center for American Progress analyst, Robert Gordon, and Russlynn Ali, a former vice president of the Education Trust West, an advocacy group, work, respectively, at the OMB and in the Education Department’s office for civil rights. Both pressed for changes to the Title I comparability provisions in their prior roles.
Such changes could, for instance, require districts to account for actual, rather than average, teacher salaries in determining whether state and local funds are distributed comparably to Title I schools.
Any such alterations would require congressional approval, and that could well be difficult.
When the House Education and Labor Committee, in 2007, issued a discussion draft of a bill to reauthorize the ESEA—currently the No Child Left Behind Act—that proposed accounting for actual teacher salaries, comparability became a surprise hot-button issue. ("Draft Proposal Seeks to Equalize School Resources," Sept. 19, 2007.)
Teachers’ unions opposed the proposal, fearing it would cause districts to try to override contracts and transfer teachers forcibly to equalize salaries.
The National Conference of State Legislatures and the American Association of School Administrators argued that the change would interfere with state funding formulas and district budget flexibility.
But Ms. Roza contends that closing the comparability “loophole” would not necessarily require transferring teachers. Districts couldmake up for lower teacher salaries in high-poverty schools, she says, by spending more to hire instructional coaches for those schools, creating incentives for teachers to move to them, or reducing class sizes.
Neither the American Federation of Teachers nor the National Education Association returned requests seeking comment on the new data collection.
For their part, lawmakers are not likely to take up comparability before turning their attention again to the ESEA, which is overdue for reauthorization. But they still have their sights set on the provision.
“I think you have to [make changes],” said Rep. George Miller, D-Calif., the chairman of the Education and Labor Committee, when asked about comparability following a recent hearing on ensuring equitable access to teachers.
“We assume that there is equal funding across the district so that these [Title I] dollars go to schools impacted by heavy concentrations of poor and minority students,” he continued. “But if those resources are siphoned off, that purpose of federal law is not being met.”
Education Week
Vol. 29, Issue 12, Pages 15,17
U.S. Department of Education officials plan to require districts receiving economic-stimulus aid to report school-level salaries—a sign, observers say, that the Obama administration might seek key changes to district accounting procedures for federal Title I funds.
The reporting—the first collection of its type undertaken by the federal government—could give a clearer picture about the extent to which district spending on salaries differs between schools that receive Title I dollars for disadvantaged students and those that do not.
The results of the data collection, which is to take place this winter, are likely to give more ammunition to school finance experts and lawmakers who maintain that the Elementary and Secondary Education Act should be changed to require districts to address such disparities before receiving the federal aid.
Because a majority of districts’ costs are tied up in salaries, the data have implications for the way teachers of different levels of pay and experience are distributed across districts.
“We’ve never had a moment before when public officials have asked questions about these inequities,” said Marguerite J. Roza, a research associate professor at the University of Washington, in Seattle, who has studied the issue extensively. “Many districts swear that they don’t have them. But they haven’t looked.”
Teacher Distribution
A little-noticed provision in the American Recovery and Reinvestment Act requires each district receiving Title I funds under the stimulus law to file with its state a school-by-school listing of per-pupil expenditures by December 2009.
Aside from a brief notice in the Federal Register, the Education Department has been silent about what information it would seek from districts to fulfill the requirement. But according to forms filed by the department with the White House Office of Management and Budget over the past two months, the Education Department indicated that it plans to require districts to report information on wages, including:
Total salaries in each school;
• Salaries of instructional staff (such as paraprofessionals) only;
• Salaries of teachers only; and
• Nonpersonnel expenditures, if available.
The department would also request more detailed information from five states yet to be chosen. Those states would be asked to break down the expenditure information by state, local, and federal funding sources, including Title I, the documents indicate.
The heavy emphasis on teachers’ salaries stands in direct contrast to the way that districts currently account for them under the Title I program, which provides additional money to districts with high concentrations of poor students.
To receive the federal funding, districts must meet three financial requirements meant to prevent them from using the extra federal dollars to fill in gaps in state and local funding. Under the “comparability” provisions, districts must show that they provide equitable state and local resources to low- and high-poverty schools before receiving their Title I allocations.
But the current version of the ESEA allows districts to exclude salary differentials from the calculation. Instead, they can allocate money to schools based on the district’s average teacher pay as set out in the districtwide salary schedule.
Researchers such as Ms. Roza have found significant funding disparities between low- and high-poverty schools in the same district, largely as a result of differences in teacher salaries. She contends that the omission of salaries from the comparability language papers over factors, such as transfer rules in contracts and high turnover in low-income schools, that tend to lead to a concentration of lower-paid novice teachers in those schools.
In their documentation to the OMB, department officials wrote that the findings from the data collection could be used to help policymakers craft changes to the comparability provisions in the ESEA.
“This is the only way to truly measure whether resources around teacher salaries, curriculum, and technology are being equitably distributed to schools and classrooms,” said Charles Barone, the director of federal policy for Democrats for Education Reform, a New York City-based political action committee. “Districtwide figures obscure resource differences, which is the key reason why most districts refuse to publish school-by-school dollar figures.”
Raegen Miller, a senior policy analyst at the Center for American Progress, a Washington think tank headed by a former Clinton White House official, praised the department’s efforts in the five states that would be chosen for the more detailed reporting, saying such scrutiny could intensify the focus on putting performance at the center of school policy.
“A lot of people think that some amount of budgetary discretion should reside in the hands of principals, that there should be some more flexibility about how teachers are compensated,” he said. “That depends on knowing how much money is flowing to the schools and whether outcomes are measured.”
But the documents show that state officials approached about the collection have expressed concerns about the burden and cost, as well as its feasibility.
“We also understand that districts may not have comprehensive data on school-level expenditures that they can report for a previous school year, but we believe that, at a minimum, they should be able to identify which staff were assigned to each school and to determine the salary expenditures for each school staff member,” Sandra Abrevaya, a spokeswoman for the Education Department, said in an e-mail.
Closing ‘Loopholes’
Although the Obama administration has not made any public statements about the comparability language, several experts on the issue now work in the administration.
A former Center for American Progress analyst, Robert Gordon, and Russlynn Ali, a former vice president of the Education Trust West, an advocacy group, work, respectively, at the OMB and in the Education Department’s office for civil rights. Both pressed for changes to the Title I comparability provisions in their prior roles.
Such changes could, for instance, require districts to account for actual, rather than average, teacher salaries in determining whether state and local funds are distributed comparably to Title I schools.
Any such alterations would require congressional approval, and that could well be difficult.
When the House Education and Labor Committee, in 2007, issued a discussion draft of a bill to reauthorize the ESEA—currently the No Child Left Behind Act—that proposed accounting for actual teacher salaries, comparability became a surprise hot-button issue. ("Draft Proposal Seeks to Equalize School Resources," Sept. 19, 2007.)
Teachers’ unions opposed the proposal, fearing it would cause districts to try to override contracts and transfer teachers forcibly to equalize salaries.
The National Conference of State Legislatures and the American Association of School Administrators argued that the change would interfere with state funding formulas and district budget flexibility.
But Ms. Roza contends that closing the comparability “loophole” would not necessarily require transferring teachers. Districts couldmake up for lower teacher salaries in high-poverty schools, she says, by spending more to hire instructional coaches for those schools, creating incentives for teachers to move to them, or reducing class sizes.
Neither the American Federation of Teachers nor the National Education Association returned requests seeking comment on the new data collection.
For their part, lawmakers are not likely to take up comparability before turning their attention again to the ESEA, which is overdue for reauthorization. But they still have their sights set on the provision.
“I think you have to [make changes],” said Rep. George Miller, D-Calif., the chairman of the Education and Labor Committee, when asked about comparability following a recent hearing on ensuring equitable access to teachers.
“We assume that there is equal funding across the district so that these [Title I] dollars go to schools impacted by heavy concentrations of poor and minority students,” he continued. “But if those resources are siphoned off, that purpose of federal law is not being met.”
Education Week
Vol. 29, Issue 12, Pages 15,17
Wednesday, October 21, 2009
JERSEY BENEFITS ADVISORS FALL 2009 NEWSLETTER
MARKET WATCH
What a difference a year makes! Heading into October 2008 we were watching in horror as the banking system teetered on the abyss. Portfolios withered in ways no Monte Carlo projection could depict. Panic was gripping the markets, and our leaders allowed politics to drive them to devastating lows.
Fast forward to October 2009, and while there are the usual remarks about this being a bad month for the markets, the recovery to date has been stellar. The Dow Jones Industrial Average gained 15% to close the quarter at 9,712.28 and posted its best quarter since 1998, as well as its best third quarter since 1939. While the actual lows for this cycle in the Dow were attained on March 9, 2009, it has roared back since then, sensing economic rebound, and recovered 48%. Although the Dow is still 31% lower than the all time high it reached in October 2007, it has posted an 11% gain year to date.
The overall market turned in strong gains, as evidenced by the 15% jump in the Standard and Poor’s 500 index for the third quarter. The S&P 500 is up 17% year to date and has recovered 56% from the March lows. It still remains 32% lower than its October 2007 high.
Interestingly and not unexpectedly, the markets have retrenched a bit early in October, and will probably provide some unpleasant experiences going forward. Markets never provide straight line growth, especially after such a tumultuous period. Look for volatility to increase as the forces of recovery battle the forces of an economic backslide. Eventually the inevitable recovery will manifest itself, and the indices will be within striking distance of their all time highs once again. In order to take advantage of this fact, investors should be committing assets to their portfolios now.
There are many factors to be considered as we head into the final quarter of this year. Interest rates, taxes, health care, foreclosures, inflation, deflation, regulation, Social Security and energy are all issues commanding our attention. How they are handled in the next few years is paramount to our well being. The markets will react accordingly.
ECONOMIC OUTLOOK
On September 30, the Bureau of Economic Analysis released its third revision of the estimate of Gross Domestic Product for the second quarter. The estimate of - 0.7% indicates the economy remained in recession at least through June 30, 2009. As I noted in previous newsletters, the two longest recessions, since the Great Depression, were the recessions of 1973-75 & 1981-82. Each of those recessions lasted 16 months. The current recession is officially 19 months and the longest since the depression. The third quarter has shown signs of economic recovery, and it is possible we may see a return to growth when the BEA releases statistics on the current period.
Many economists and Fed Chairman Bernanke echo the belief that the economy has turned positive in the third quarter, and the stock markets certainly have ratified it. There are arguments supporting this belief, as well as one’s dismissing the projections of the beginning of a new economic cycle. As I have mentioned before, the introduction of a trillion dollars of stimulus into the economy will definitely return us to growth, and will more than likely have some very positive consequences, as well as some unintended negative consequences. Our economy is changing and when this happens old industries falter as new ones develop. Creative destruction can’t be stopped.
529 QUALIFIED TUITION PLANS
Saving money for college expenses is a goal I hear many young parents express, and one of the best ways to build tax-advantaged savings for college is the 529 plan. A 529 plan is a tax advantaged savings plan designed to encourage saving for future college costs. 529 plans, legally known as “qualified tuition plans,” are sponsored by states, state agencies, or educational institutions and are authorized by Section 529 of the Internal Revenue Code.
Changes in the tax code were made in 2006 making permanent the provision that earnings in a 529 plan are tax free upon withdrawal when used for education expenses. This has resulted in eliminating any change in status for earnings for the 529 plan and made it the premier savings vehicle for college savers.
There are two types of 529 plans: pre-paid tuition plans and college savings plans. All fifty states and the District of Columbia sponsor at least one type of 529 plan. In addition, a group of private colleges and universities sponsor a pre-paid tuition plan. There are differences between pre-paid tuition plans and college savings plans, and each individual family needs to determine which plan may be right for their needs.
Pre-paid tuition plans generally allow college savers to purchase units or credits at participating colleges and universities for future tuition and, in some cases, room and board. Most prepaid tuition plans are sponsored by state governments and have residency requirements. Many state governments guarantee investments in pre-paid tuition plans that they sponsor.
College savings plans generally permit a college saver (also called the “account holder”) to establish an account for a student (the “beneficiary”) for the purpose of paying the beneficiary’s eligible college expenses. An account holder may typically choose among several investment options for his or her contributions, which the college savings plan invests on behalf of the account holder. Investment options often include stock mutual funds, bond mutual funds, and money market funds, as well as, age-based portfolios that automatically shift toward more conservative investments as the beneficiary gets closer to college age. Withdrawals from college savings plans can generally be used at any college or university. Investments in college savings plans that invest in mutual funds are not guaranteed by state governments and are not federally insured.
If you are a parent or grand parent and wish to learn more about this option as a means to save for college, please don’t hesitate to contact me for more information. As with any type of investment, the longer time frame you have to invest, the better chance you have to achieve your goals. There is no time like the present to get started!
TFA & ISI MERGER COMPLETED & REFERRALS ARE ALWAYS WELCOMED
The successful merger of Transamerica Financial Advisors and Intersecurities resulted in only a few technical difficulties for me. Some clients received confirmations with Intersecurities as the B/D, and some accounts were charged a fee for systematic investments, which will be reimbursed. Overall, I have to offer kudos to our back office for the meticulous completion of the merger. I look forward to providing enhanced services to you and your family through our state of the art broker/dealer. If the advisor of any of your friends or relatives has left the business, or if any of your other investment representatives have been absent during the recent market turmoil, please feel free to make a referral. Your confidence in me is greatly appreciated, as I monitor and protect your assets.
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
Email: kaighn@jerseybenefits.com
http://jerseybenefits.com
Securities offered through:
Transamerica Financial Advisors, Inc.
A registered Broker/Dealer
570 Carillon Parkway
St. Petersburg, FL 33758-9053
800-245-8250
Member FINRA & SIPC
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
Email: kaighn@jerseybenefits.com
Http://www.jerseybenefits.com/
All opinions expressed in this newsletter are solely those of John Kaighn & Jersey Benefits Advisors, formerly known as Kaighn Financial Services.
What a difference a year makes! Heading into October 2008 we were watching in horror as the banking system teetered on the abyss. Portfolios withered in ways no Monte Carlo projection could depict. Panic was gripping the markets, and our leaders allowed politics to drive them to devastating lows.
Fast forward to October 2009, and while there are the usual remarks about this being a bad month for the markets, the recovery to date has been stellar. The Dow Jones Industrial Average gained 15% to close the quarter at 9,712.28 and posted its best quarter since 1998, as well as its best third quarter since 1939. While the actual lows for this cycle in the Dow were attained on March 9, 2009, it has roared back since then, sensing economic rebound, and recovered 48%. Although the Dow is still 31% lower than the all time high it reached in October 2007, it has posted an 11% gain year to date.
The overall market turned in strong gains, as evidenced by the 15% jump in the Standard and Poor’s 500 index for the third quarter. The S&P 500 is up 17% year to date and has recovered 56% from the March lows. It still remains 32% lower than its October 2007 high.
Interestingly and not unexpectedly, the markets have retrenched a bit early in October, and will probably provide some unpleasant experiences going forward. Markets never provide straight line growth, especially after such a tumultuous period. Look for volatility to increase as the forces of recovery battle the forces of an economic backslide. Eventually the inevitable recovery will manifest itself, and the indices will be within striking distance of their all time highs once again. In order to take advantage of this fact, investors should be committing assets to their portfolios now.
There are many factors to be considered as we head into the final quarter of this year. Interest rates, taxes, health care, foreclosures, inflation, deflation, regulation, Social Security and energy are all issues commanding our attention. How they are handled in the next few years is paramount to our well being. The markets will react accordingly.
ECONOMIC OUTLOOK
On September 30, the Bureau of Economic Analysis released its third revision of the estimate of Gross Domestic Product for the second quarter. The estimate of - 0.7% indicates the economy remained in recession at least through June 30, 2009. As I noted in previous newsletters, the two longest recessions, since the Great Depression, were the recessions of 1973-75 & 1981-82. Each of those recessions lasted 16 months. The current recession is officially 19 months and the longest since the depression. The third quarter has shown signs of economic recovery, and it is possible we may see a return to growth when the BEA releases statistics on the current period.
Many economists and Fed Chairman Bernanke echo the belief that the economy has turned positive in the third quarter, and the stock markets certainly have ratified it. There are arguments supporting this belief, as well as one’s dismissing the projections of the beginning of a new economic cycle. As I have mentioned before, the introduction of a trillion dollars of stimulus into the economy will definitely return us to growth, and will more than likely have some very positive consequences, as well as some unintended negative consequences. Our economy is changing and when this happens old industries falter as new ones develop. Creative destruction can’t be stopped.
529 QUALIFIED TUITION PLANS
Saving money for college expenses is a goal I hear many young parents express, and one of the best ways to build tax-advantaged savings for college is the 529 plan. A 529 plan is a tax advantaged savings plan designed to encourage saving for future college costs. 529 plans, legally known as “qualified tuition plans,” are sponsored by states, state agencies, or educational institutions and are authorized by Section 529 of the Internal Revenue Code.
Changes in the tax code were made in 2006 making permanent the provision that earnings in a 529 plan are tax free upon withdrawal when used for education expenses. This has resulted in eliminating any change in status for earnings for the 529 plan and made it the premier savings vehicle for college savers.
There are two types of 529 plans: pre-paid tuition plans and college savings plans. All fifty states and the District of Columbia sponsor at least one type of 529 plan. In addition, a group of private colleges and universities sponsor a pre-paid tuition plan. There are differences between pre-paid tuition plans and college savings plans, and each individual family needs to determine which plan may be right for their needs.
Pre-paid tuition plans generally allow college savers to purchase units or credits at participating colleges and universities for future tuition and, in some cases, room and board. Most prepaid tuition plans are sponsored by state governments and have residency requirements. Many state governments guarantee investments in pre-paid tuition plans that they sponsor.
College savings plans generally permit a college saver (also called the “account holder”) to establish an account for a student (the “beneficiary”) for the purpose of paying the beneficiary’s eligible college expenses. An account holder may typically choose among several investment options for his or her contributions, which the college savings plan invests on behalf of the account holder. Investment options often include stock mutual funds, bond mutual funds, and money market funds, as well as, age-based portfolios that automatically shift toward more conservative investments as the beneficiary gets closer to college age. Withdrawals from college savings plans can generally be used at any college or university. Investments in college savings plans that invest in mutual funds are not guaranteed by state governments and are not federally insured.
If you are a parent or grand parent and wish to learn more about this option as a means to save for college, please don’t hesitate to contact me for more information. As with any type of investment, the longer time frame you have to invest, the better chance you have to achieve your goals. There is no time like the present to get started!
TFA & ISI MERGER COMPLETED & REFERRALS ARE ALWAYS WELCOMED
The successful merger of Transamerica Financial Advisors and Intersecurities resulted in only a few technical difficulties for me. Some clients received confirmations with Intersecurities as the B/D, and some accounts were charged a fee for systematic investments, which will be reimbursed. Overall, I have to offer kudos to our back office for the meticulous completion of the merger. I look forward to providing enhanced services to you and your family through our state of the art broker/dealer. If the advisor of any of your friends or relatives has left the business, or if any of your other investment representatives have been absent during the recent market turmoil, please feel free to make a referral. Your confidence in me is greatly appreciated, as I monitor and protect your assets.
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
Email: kaighn@jerseybenefits.com
http://jerseybenefits.com
Securities offered through:
Transamerica Financial Advisors, Inc.
A registered Broker/Dealer
570 Carillon Parkway
St. Petersburg, FL 33758-9053
800-245-8250
Member FINRA & SIPC
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
Email: kaighn@jerseybenefits.com
Http://www.jerseybenefits.com/
All opinions expressed in this newsletter are solely those of John Kaighn & Jersey Benefits Advisors, formerly known as Kaighn Financial Services.
Wednesday, October 7, 2009
Education Department Unveils Investing In Innovation Fund Criteria.
Here is a reprint from the Associated Press giving some information on how stimulus dollars are being spent. Although most of the $5 billion of stimulus money is targeted for the states, at least $650 million will be going directly to schools to try to improve the quality of education in this country.
WASHINGTON (AP) -- School districts and nonprofit partners can benefit from a $650 million competitive grant fund for school reforms pushed by President Barack Obama.
The money is part of the economic stimulus law, which gave Obama $5 billion to help overhaul schools. Most of the money is for states, but $650 million will go directly to school districts or schools in partnership with colleges, philanthropies, nonprofit companies that turn around failing schools or other nonprofit groups.
The idea is to provide seed money for fresh ideas and for smaller programs that need help to expand.
''This is an unprecedented investment in cutting-edge ideas,'' Education Secretary Arne Duncan said.
Duncan issued rules for the competition Tuesday. The Education Department plans to publish a final application early next year, accept proposals in the spring and award the money by Sept. 30, 2010.
In August, Duncan said Teach for America and programs like it could benefit from the competition. Begun in 1990, the nonprofit recruits recent college graduates to teach in schools in poor communities for at least two years. The group sent an unprecedented 4,100 recruits into the classroom this fall.
Duncan also talked about charter schools, which are taxpayer-funded schools that operate independently of local school boards. Obama wants to expand the number of charter schools, which are an estimated 4,100 of the country's nearly 100,000 public schools.
Duncan said the biggest grants from the $650 million ''Investing in Innovation'' fund will go to programs that have been proven to work. Grants for those programs could reach $50 million.
Programs that need money to expand or build a research base could get grants of up to $30 million, and promising ideas worth trying could get grants of up to $5 million, he said.
Obama announced the rules for the $5 billion state grant competition in July, and that money should be awarded early next year.
John Kaighn
Jersey Benefits Advisors
The Kaighn Report
WASHINGTON (AP) -- School districts and nonprofit partners can benefit from a $650 million competitive grant fund for school reforms pushed by President Barack Obama.
The money is part of the economic stimulus law, which gave Obama $5 billion to help overhaul schools. Most of the money is for states, but $650 million will go directly to school districts or schools in partnership with colleges, philanthropies, nonprofit companies that turn around failing schools or other nonprofit groups.
The idea is to provide seed money for fresh ideas and for smaller programs that need help to expand.
''This is an unprecedented investment in cutting-edge ideas,'' Education Secretary Arne Duncan said.
Duncan issued rules for the competition Tuesday. The Education Department plans to publish a final application early next year, accept proposals in the spring and award the money by Sept. 30, 2010.
In August, Duncan said Teach for America and programs like it could benefit from the competition. Begun in 1990, the nonprofit recruits recent college graduates to teach in schools in poor communities for at least two years. The group sent an unprecedented 4,100 recruits into the classroom this fall.
Duncan also talked about charter schools, which are taxpayer-funded schools that operate independently of local school boards. Obama wants to expand the number of charter schools, which are an estimated 4,100 of the country's nearly 100,000 public schools.
Duncan said the biggest grants from the $650 million ''Investing in Innovation'' fund will go to programs that have been proven to work. Grants for those programs could reach $50 million.
Programs that need money to expand or build a research base could get grants of up to $30 million, and promising ideas worth trying could get grants of up to $5 million, he said.
Obama announced the rules for the $5 billion state grant competition in July, and that money should be awarded early next year.
John Kaighn
Jersey Benefits Advisors
The Kaighn Report
Thursday, September 24, 2009
Nation's Teachers Unions Feel Squeezed by Some Former Allies
Unions continue to be battered by the Democrats, and still they stand 100% in lock step behind their candidates... go figure!! Read on.
By Rob Hotakainen
rhotakainen@mcclatchydc.com
Published: Monday, Sep. 21, 2009 - 7:05 am | Page 16A
Last Modified: Monday, Sep. 21, 2009 - 7:53 am
WASHINGTON – When Gov. Arnold Schwarzenegger proposed merit pay for teachers and lifting the cap on charter schools, the head of the California NAACP stood by his side.
And when the Los Angeles school board voted to approve a plan that could turn over a third of its schools to private operators, Latino members and Mayor Antonio Villaraigosa led the charge.
The nation's public school teachers are feeling the squeeze from all sides these days, and some of the heat is coming from unlikely sources: minorities and longtime Democratic allies.
One of them is President Barack Obama, who is irking teachers by suggesting that student test scores be used to judge the success of educators.
The pressure is particularly intense in California, where U.S. Education Secretary Arne Duncan says the state has "lost its way" with public schools.
In an attempt to improve them, the Obama administration is threatening to withhold federal stimulus money if the Golden State does not rescind a state law that prevents the state from tying test scores to teacher performance.
None of this is exactly what teachers had in mind when they knocked on doors to help elect Obama.
"It takes more than the ability to fill in bubbles to be considered an educated person," Marty Hittelman, president of the California Federation of Teachers, said in a letter to Duncan. "We thought President Obama understood that."
As the battles intensify, longtime political alliances are shifting, said Jaime Regalado, executive director of the Edmund G. "Pat" Brown Institute, a nonprofit public policy center at California State University, Los Angeles.
"They're in flux. There's no question about that," he said, adding that "teacher unions feel somewhat chagrined" with what they're hearing from Washington.
David Sanchez, president of the 340,000-member California Teachers Association, said teachers had high hopes for Obama but that so far there has been little change.
Indeed, when it comes to education policies, he said it's hard to distinguish Obama from his predecessor, President George W. Bush, who placed a premium on high-stakes student testing.
"To be perfectly honest, it's disappointing again," Sanchez said. "Our perception is it's more of the same, and that's not good, because we thought we were going to be able to change something, make some true reform in public education."
Ironically, the teacher unions find themselves opposing some of their former members.
Alice Huffman, the NAACP's president since 1999, helped lead fights against school vouchers and merit pay when she worked as an organizer for the CTA for 13 years. Her thinking has definitely changed, which is why she was standing next to a Republican governor last month.
"The only place the NAACP can be is with this governor," Huffman said. "If the teacher unions put a better proposal on the table, we would stand with them."
For Huffman, the battle is personal. She said too many inner-city minority children are stuck in failing schools and that immediate and revolutionary changes are needed.
"I have watched this for 20 years," Huffman said. "And I have nieces and nephews that have come out of the public schools that can't read, can't write, will never be employable. This is happening right here. … Something profound has to happen. We can't wait another decade and another decade while people tweak with it."
In Los Angeles, Villaraigosa turned against the local teachers union to help push a school-choice plan that was approved last month. It will allow private operators to submit plans on how they'd run 250 schools, including many that failed to meet federal benchmarks on state tests. United Teachers Los Angeles, Villaraigosa's former employer, is opposed to the plan, saying it's the first step toward privatizing the school district.
In Sacramento, state legislators will soon meet in a special session to consider Schwarzenegger's "Race to the Top" plan. Among other things, it would allow merit pay and more charter schools while permitting the state to use test scores to evaluate teacher performance.
John Kaighn
Jersey Benefits Advisors
The Kaighn Report
By Rob Hotakainen
rhotakainen@mcclatchydc.com
Published: Monday, Sep. 21, 2009 - 7:05 am | Page 16A
Last Modified: Monday, Sep. 21, 2009 - 7:53 am
WASHINGTON – When Gov. Arnold Schwarzenegger proposed merit pay for teachers and lifting the cap on charter schools, the head of the California NAACP stood by his side.
And when the Los Angeles school board voted to approve a plan that could turn over a third of its schools to private operators, Latino members and Mayor Antonio Villaraigosa led the charge.
The nation's public school teachers are feeling the squeeze from all sides these days, and some of the heat is coming from unlikely sources: minorities and longtime Democratic allies.
One of them is President Barack Obama, who is irking teachers by suggesting that student test scores be used to judge the success of educators.
The pressure is particularly intense in California, where U.S. Education Secretary Arne Duncan says the state has "lost its way" with public schools.
In an attempt to improve them, the Obama administration is threatening to withhold federal stimulus money if the Golden State does not rescind a state law that prevents the state from tying test scores to teacher performance.
None of this is exactly what teachers had in mind when they knocked on doors to help elect Obama.
"It takes more than the ability to fill in bubbles to be considered an educated person," Marty Hittelman, president of the California Federation of Teachers, said in a letter to Duncan. "We thought President Obama understood that."
As the battles intensify, longtime political alliances are shifting, said Jaime Regalado, executive director of the Edmund G. "Pat" Brown Institute, a nonprofit public policy center at California State University, Los Angeles.
"They're in flux. There's no question about that," he said, adding that "teacher unions feel somewhat chagrined" with what they're hearing from Washington.
David Sanchez, president of the 340,000-member California Teachers Association, said teachers had high hopes for Obama but that so far there has been little change.
Indeed, when it comes to education policies, he said it's hard to distinguish Obama from his predecessor, President George W. Bush, who placed a premium on high-stakes student testing.
"To be perfectly honest, it's disappointing again," Sanchez said. "Our perception is it's more of the same, and that's not good, because we thought we were going to be able to change something, make some true reform in public education."
Ironically, the teacher unions find themselves opposing some of their former members.
Alice Huffman, the NAACP's president since 1999, helped lead fights against school vouchers and merit pay when she worked as an organizer for the CTA for 13 years. Her thinking has definitely changed, which is why she was standing next to a Republican governor last month.
"The only place the NAACP can be is with this governor," Huffman said. "If the teacher unions put a better proposal on the table, we would stand with them."
For Huffman, the battle is personal. She said too many inner-city minority children are stuck in failing schools and that immediate and revolutionary changes are needed.
"I have watched this for 20 years," Huffman said. "And I have nieces and nephews that have come out of the public schools that can't read, can't write, will never be employable. This is happening right here. … Something profound has to happen. We can't wait another decade and another decade while people tweak with it."
In Los Angeles, Villaraigosa turned against the local teachers union to help push a school-choice plan that was approved last month. It will allow private operators to submit plans on how they'd run 250 schools, including many that failed to meet federal benchmarks on state tests. United Teachers Los Angeles, Villaraigosa's former employer, is opposed to the plan, saying it's the first step toward privatizing the school district.
In Sacramento, state legislators will soon meet in a special session to consider Schwarzenegger's "Race to the Top" plan. Among other things, it would allow merit pay and more charter schools while permitting the state to use test scores to evaluate teacher performance.
John Kaighn
Jersey Benefits Advisors
The Kaighn Report
Wednesday, September 9, 2009
Obama Speech To Students Revisited
The controversy eminating from various corners of the country in regard to Obama's speech to schoolchildren abated dramatically when the text of the speech was released and former First Lady, Laura Bush, gave her support to the initiative. Of course the fear was that the speech would be some sort of indoctrination into left wing politics, when in fact it was just a use of the presidential bully pulpit to encourage students to do their best in school. Freedom of speech allows everyone in this country, including the extremists on the left and the right to speak their minds and be heard. Below are some quotes from various news agencies regarding the speech.
A plethora of news outlets covered President Obama's speech to schoolchildren, which took place at "Wakefield High School just outside Washington" on Tuesday. Most coverage was positive in nature, with some sources emphasizing students' reactions to the speech. The New York Times (9/9, Dillon) reports, "Millions of American schoolchildren, oblivious to the uproar that preceded a back-to-school speech by President Obama, heard him exhort them to greatness on Tuesday, watching, applauding and in some classrooms cheering a nationally broadcast address that urged them to set high goals, knuckle down in their studies and persevere through failure."
Education Week (9/9, Klein) reports, "In a speech that triggered advance controversy -- and logistical headaches for school officials -- President Barack Obama...urged America's K-12 students to study hard and stay in school, saying, 'What you make of your education will decide nothing less than the future of this country.'" The President's remarks "capped days of criticism, primarily from" his "conservative opponents...who asserted that Mr. Obama might use the address" and corresponding lesson plans from the U.S. Department of Education "to persuade children to support his political agenda."
The AP (9/9, Matheson, Rohr) reports that "for all the hubbub among adults over the back-to-school speech, many youngsters" nationwide "took the president's message to heart." After listening "closely to Obama's story of studying with his mother at 4:30 a.m.," William Geist, "a San Francisco fifth-grader who likes to sleep late," said, "Now since I heard this speech, I'm like, 'Man, I've got to get up early in the morning. I've got to get ready for school. I've got to do this.'"
The Miami Herald (9/9, Sampson, McGrory) reports that "kids interviewed by The Miami Herald called the speech inspiring and seemed incredulous that the 15-minute talk had sparked such outrage nationally." Pines Middle School seventh-grader Chanelle Missick, for instance, said, "I don't see what's wrong with him coming and talking to the kids, trying to give them responsibility and direct them in the right way." Meanwhile, 12-year-old Pines student Carlton Campbell "said he was encouraged when Obama talked about his own struggles. 'He really inspires me," said Carlton, 12. 'Because I was failing last year.'"
The Salt Lake Tribune (9/9, Stewart, Tribune) reports that "Utah students who watched the televised speech in class called it 'inspiring' and 'real.' Still, "some admitted to zoning out and others dismissed it as 'a political stunt.'" Nevertheless, the Salt Lake Tribune adds, after the speech was aired, "all the uproar over Obama using classrooms to push socialism or a hidden policy agenda seemed overblown." The Washington Post (9/9, 2:29 PM, Chandler, et al.) reports that in his speech, Obama "described his own upbringing, noting that he 'got in more trouble than I should have' as a youth. He told the students, 'There is no excuse for not trying. No one has written your destiny for you, because here in America you write your own destiny.'" Jack D. Dale, superintendent of Fairfax County Public Schools, called the speech "phenomenally good," noting that it focused on "the positive aspects of kids taking ownership of their education."
Tonight we get to hear all about the health care initiative. While it is true most Americans don't want the government involved too much in the free enterprise system, it is also unfair to characterize every undertaking of the government as folly. Perhaps some cooler heads will prevail and we will see some health insurance reform, no public option and mandatory health insurance for everyone, much as we have with auto insurance. Then the government could possibly look at some public/private initiatives which would revive the pure research models, such as Bell Labs and the Xerox program at Palo Alto, which we had when we first attempted to land on the moon. Of course, that would mean that the CEO's and other top management types would have to plow some of the cash from our leading corporations into research and development, instead of their pockets. I guess one could dream a little, huh?
John Kaighn
Jersey Benefits Advisors
The Kaighn Report
A plethora of news outlets covered President Obama's speech to schoolchildren, which took place at "Wakefield High School just outside Washington" on Tuesday. Most coverage was positive in nature, with some sources emphasizing students' reactions to the speech. The New York Times (9/9, Dillon) reports, "Millions of American schoolchildren, oblivious to the uproar that preceded a back-to-school speech by President Obama, heard him exhort them to greatness on Tuesday, watching, applauding and in some classrooms cheering a nationally broadcast address that urged them to set high goals, knuckle down in their studies and persevere through failure."
Education Week (9/9, Klein) reports, "In a speech that triggered advance controversy -- and logistical headaches for school officials -- President Barack Obama...urged America's K-12 students to study hard and stay in school, saying, 'What you make of your education will decide nothing less than the future of this country.'" The President's remarks "capped days of criticism, primarily from" his "conservative opponents...who asserted that Mr. Obama might use the address" and corresponding lesson plans from the U.S. Department of Education "to persuade children to support his political agenda."
The AP (9/9, Matheson, Rohr) reports that "for all the hubbub among adults over the back-to-school speech, many youngsters" nationwide "took the president's message to heart." After listening "closely to Obama's story of studying with his mother at 4:30 a.m.," William Geist, "a San Francisco fifth-grader who likes to sleep late," said, "Now since I heard this speech, I'm like, 'Man, I've got to get up early in the morning. I've got to get ready for school. I've got to do this.'"
The Miami Herald (9/9, Sampson, McGrory) reports that "kids interviewed by The Miami Herald called the speech inspiring and seemed incredulous that the 15-minute talk had sparked such outrage nationally." Pines Middle School seventh-grader Chanelle Missick, for instance, said, "I don't see what's wrong with him coming and talking to the kids, trying to give them responsibility and direct them in the right way." Meanwhile, 12-year-old Pines student Carlton Campbell "said he was encouraged when Obama talked about his own struggles. 'He really inspires me," said Carlton, 12. 'Because I was failing last year.'"
The Salt Lake Tribune (9/9, Stewart, Tribune) reports that "Utah students who watched the televised speech in class called it 'inspiring' and 'real.' Still, "some admitted to zoning out and others dismissed it as 'a political stunt.'" Nevertheless, the Salt Lake Tribune adds, after the speech was aired, "all the uproar over Obama using classrooms to push socialism or a hidden policy agenda seemed overblown." The Washington Post (9/9, 2:29 PM, Chandler, et al.) reports that in his speech, Obama "described his own upbringing, noting that he 'got in more trouble than I should have' as a youth. He told the students, 'There is no excuse for not trying. No one has written your destiny for you, because here in America you write your own destiny.'" Jack D. Dale, superintendent of Fairfax County Public Schools, called the speech "phenomenally good," noting that it focused on "the positive aspects of kids taking ownership of their education."
Tonight we get to hear all about the health care initiative. While it is true most Americans don't want the government involved too much in the free enterprise system, it is also unfair to characterize every undertaking of the government as folly. Perhaps some cooler heads will prevail and we will see some health insurance reform, no public option and mandatory health insurance for everyone, much as we have with auto insurance. Then the government could possibly look at some public/private initiatives which would revive the pure research models, such as Bell Labs and the Xerox program at Palo Alto, which we had when we first attempted to land on the moon. Of course, that would mean that the CEO's and other top management types would have to plow some of the cash from our leading corporations into research and development, instead of their pockets. I guess one could dream a little, huh?
John Kaighn
Jersey Benefits Advisors
The Kaighn Report
Friday, July 17, 2009
JERSEY BENEFITS ADVISORS INVESTOR NEWSLETTER SUMMER 2009
MARKET WATCH
As we close the books on the first half of 2009, there appears to be a cup half empty, cup half full scenario going on, depending on your point of view. The markets closed mixed with the S&P 500 winding up at 919.32, a 1.8% gain for the year and up 35.9% from the low of 676.53 in March. The DJIA finished at 8,447.00, which is still -3.8% below the beginning of the year, but still 29% above the low of 6,547.05 set in March. The Nasdaq posted the best year to date gain of the major indices when it closed at 1,835.04, which is a 16.4% increase for the first half of 2009.
While these gains from the lows in March indicate a fantastic recovery for the markets, they represent only a portion of the returns necessary to restore the indices to their former highs. For example, the DJIA would have to gain 67.7% to get to it’s former all time high of 14,164.53 and the S&P 500 would have to add 70.3% to reach it’s former high of 1,565.15. Of course the NASDAQ, which went to the moon in 2000, would have to increase a whopping 175.1% in order to reach the heights it attained before the dotcom bubble burst. While these numbers are troubling, they speak volumes about percentages and compounding. The sad fact is that it takes a 100% gain to recover a 50% loss, or put another way: if you start with 100 dollars, and lose 50%, you have 50 dollars. It will take a 100% gain to return the 50 dollars to the original 100 dollars. Isn’t math just so unfair!
The point here is not to make you feel despondent, but rather to help keep things in perspective. Yes, this was a great quarter and perhaps this recession could be over or at least in its final stages, but there are a great deal of challenges ahead of us. After having witnessed the near implosion of the world’s financial system, the creative destruction of the auto industry in the US, and a tanking of the stock market to levels not seen since the mid 1990’s, looking for positive signs makes sense. If you’ve been investing through all of this turmoil, it is like you had the opportunity to go back to 1997 and put in new money. These gains are real and will continue to positively impact your portfolio going forward.
REFERRALS AND THE MERGER OF TFA & ISI
Has the advisor of any of your friends or relatives left the business, or have any of your other investment representatives been absent during the recent market turmoil?
Do you feel as if your representative only wants to talk to you when all is well with the world? I am here to talk to you about the state of the market, the performance of your investment portfolio, and your retirement plans, regardless of what the market is doing.
With the merger of Transamerica and Intersecurities, I look forward to continuing to provide you with quality investment products and individualized service.
Please feel free to refer any of your friends or relatives who may looking for a new advisor to me. Thank you!
ECONOMIC OUTLOOK
As I mentioned on the preceding page, there is some evidence, as well as historical precedent to indicate the recession may be over or in the fourth quarter, to use a sports analogy. As I noted in previous newsletters, the two longest recessions, since the Great Depression, were the recessions of 1973-75 & 1981-82. Each of those recessions lasted 16 months. March of 2009 was the 16th month of the current recession. As I’ve mentioned before, there are always numerous opinions on these matters, but it is more than likely no coincidence the markets, which are leading indicators, began recovering in March.
While I’d like to believe this is not a head fake, but rather a real recovery, I’ve read enough opinions by numerous bears to remain reticent. This doesn’t mean not being invested, but rather it means cautious, disciplined investing. With the government running GM, TARP funds in the financial sector, Korea and Iran defiantly rebuking Obama’s olive branch, Congress salivating over health care and over a trillion dollars of stimulus in the system, a lot could go wrong. Inflation is one evil that comes to mind.
Obama says he doesn’t want to run GM or the health care system. The specter of public housing conjures up horrendous images of what public health care would look like.
PRIVACY POLICY, MERGER UPDATE & INSURANCE
PRIVACY POLICY
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.
MORE ON THE MERGER
Transamerica Financial Advisors, Inc. is excited to share some important news with you. Pending final regulatory approval, Transamerica Financial Advisors will merge its operations with St. Petersburg, Florida based InterSecurities, Inc., an affiliated firm that has been offering financial services for almost 25 years. We anticipate the merger will take effect in September 2009. As part of the merger, the resulting entity will retain the Transamerica Financial Advisors, Inc name and continue to be a full service, independent broker-dealer and registered investment advisor. Most importantly, the relationship you have with your registered representative or investment advisory representative WILL NOT change.
INSURANCE SERVICES
Have you reviewed your insurance policies lately. Whether it comes to insurance on your life, health or investments, the need for insurance is something that should not be overlooked. Changes in status, such as a marriage or the birth of a child are times when insurance levels may need to be adjusted. Also, during times of peak earnings and peak responsibilities, a look at the protection you are providing to your family, in the event of an untimely death, is an unpleasant, but necessary task. Just as the insurance on retirement income, provided by annuities as part of an investment strategy paid off during this downturn, planning with life insurance helps your family when an unanticipated death occurs.
John H. Kaighn
Jersey Benefits Group, Inc.
As we close the books on the first half of 2009, there appears to be a cup half empty, cup half full scenario going on, depending on your point of view. The markets closed mixed with the S&P 500 winding up at 919.32, a 1.8% gain for the year and up 35.9% from the low of 676.53 in March. The DJIA finished at 8,447.00, which is still -3.8% below the beginning of the year, but still 29% above the low of 6,547.05 set in March. The Nasdaq posted the best year to date gain of the major indices when it closed at 1,835.04, which is a 16.4% increase for the first half of 2009.
While these gains from the lows in March indicate a fantastic recovery for the markets, they represent only a portion of the returns necessary to restore the indices to their former highs. For example, the DJIA would have to gain 67.7% to get to it’s former all time high of 14,164.53 and the S&P 500 would have to add 70.3% to reach it’s former high of 1,565.15. Of course the NASDAQ, which went to the moon in 2000, would have to increase a whopping 175.1% in order to reach the heights it attained before the dotcom bubble burst. While these numbers are troubling, they speak volumes about percentages and compounding. The sad fact is that it takes a 100% gain to recover a 50% loss, or put another way: if you start with 100 dollars, and lose 50%, you have 50 dollars. It will take a 100% gain to return the 50 dollars to the original 100 dollars. Isn’t math just so unfair!
The point here is not to make you feel despondent, but rather to help keep things in perspective. Yes, this was a great quarter and perhaps this recession could be over or at least in its final stages, but there are a great deal of challenges ahead of us. After having witnessed the near implosion of the world’s financial system, the creative destruction of the auto industry in the US, and a tanking of the stock market to levels not seen since the mid 1990’s, looking for positive signs makes sense. If you’ve been investing through all of this turmoil, it is like you had the opportunity to go back to 1997 and put in new money. These gains are real and will continue to positively impact your portfolio going forward.
REFERRALS AND THE MERGER OF TFA & ISI
Has the advisor of any of your friends or relatives left the business, or have any of your other investment representatives been absent during the recent market turmoil?
Do you feel as if your representative only wants to talk to you when all is well with the world? I am here to talk to you about the state of the market, the performance of your investment portfolio, and your retirement plans, regardless of what the market is doing.
With the merger of Transamerica and Intersecurities, I look forward to continuing to provide you with quality investment products and individualized service.
Please feel free to refer any of your friends or relatives who may looking for a new advisor to me. Thank you!
ECONOMIC OUTLOOK
As I mentioned on the preceding page, there is some evidence, as well as historical precedent to indicate the recession may be over or in the fourth quarter, to use a sports analogy. As I noted in previous newsletters, the two longest recessions, since the Great Depression, were the recessions of 1973-75 & 1981-82. Each of those recessions lasted 16 months. March of 2009 was the 16th month of the current recession. As I’ve mentioned before, there are always numerous opinions on these matters, but it is more than likely no coincidence the markets, which are leading indicators, began recovering in March.
While I’d like to believe this is not a head fake, but rather a real recovery, I’ve read enough opinions by numerous bears to remain reticent. This doesn’t mean not being invested, but rather it means cautious, disciplined investing. With the government running GM, TARP funds in the financial sector, Korea and Iran defiantly rebuking Obama’s olive branch, Congress salivating over health care and over a trillion dollars of stimulus in the system, a lot could go wrong. Inflation is one evil that comes to mind.
Obama says he doesn’t want to run GM or the health care system. The specter of public housing conjures up horrendous images of what public health care would look like.
PRIVACY POLICY, MERGER UPDATE & INSURANCE
PRIVACY POLICY
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.
MORE ON THE MERGER
Transamerica Financial Advisors, Inc. is excited to share some important news with you. Pending final regulatory approval, Transamerica Financial Advisors will merge its operations with St. Petersburg, Florida based InterSecurities, Inc., an affiliated firm that has been offering financial services for almost 25 years. We anticipate the merger will take effect in September 2009. As part of the merger, the resulting entity will retain the Transamerica Financial Advisors, Inc name and continue to be a full service, independent broker-dealer and registered investment advisor. Most importantly, the relationship you have with your registered representative or investment advisory representative WILL NOT change.
INSURANCE SERVICES
Have you reviewed your insurance policies lately. Whether it comes to insurance on your life, health or investments, the need for insurance is something that should not be overlooked. Changes in status, such as a marriage or the birth of a child are times when insurance levels may need to be adjusted. Also, during times of peak earnings and peak responsibilities, a look at the protection you are providing to your family, in the event of an untimely death, is an unpleasant, but necessary task. Just as the insurance on retirement income, provided by annuities as part of an investment strategy paid off during this downturn, planning with life insurance helps your family when an unanticipated death occurs.
John H. Kaighn
Jersey Benefits Group, Inc.
Thursday, June 25, 2009
Coverdell Education Savings Accounts
For parents who are interested in saving money for their children's education, the Coverdell Education Savings Account (ESA) is an account which was created as an incentive for that purpose. The total contributions for each beneficiary of this account can't exceed $2,000 in any year, no matter how many accounts have been established. A beneficiary is someone who is under age 18 or is a special needs beneficiary and will receive the funds for educational purposes.
Any funds which are contributed to a Coverdell ESA are not tax deductible, however, money invested in the account will grow tax free until a distribution is taken. The beneficiary on the account will not owe any taxes on those distributions if they are less than a beneficiary’s qualified education expenses at an eligible institution. This benefit applies to post secondary, higher education expenses as well as to elementary and secondary education expenses.
Here are some things to remember about distributions from Coverdell Accounts:
Distributions are tax-free as long as they are used for qualified education expenses, such as tuition, books and fees
There is no tax on distributions if they are for an eligible educational institution. This includes any public, private or religious school that provides elementary or secondary education as determined under state law, and any college, university, vocational school, or other postsecondary educational institution eligible to participate in a student aid program administered by the Department of Education. It includes virtually all accredited public, nonprofit, and proprietary (privately owned profit-making) post secondary institutions.
The Hope and lifetime learning credits can be claimed in the same year the beneficiary takes a tax-free distribution from a Coverdell ESA, as long as the same expenses are not used for both benefits
If the distribution exceeds education expenses, a portion will be taxable to the beneficiary and will be subject to an additional 10% tax. Exceptions to the additional 10% tax include the death or disability of the beneficiary or if the beneficiary receives a qualified scholarship
There are contribution limits for taxpayers based on the taxpayer’s Modified Adjusted Gross Income. Contributions to a Coverdell ESA may be made until the due date of the contributor’s return, without extensions.
If there is a balance in the Coverdell ESA at the time the beneficiary reaches age 30, it must be distributed within 30 days. A portion representing earnings on the account will be taxable and subject to the additional 10% tax. The beneficiary may avoid these taxes by rolling over the full balance to another Coverdell ESA for another family member.
For more information, see IRS Publication 970, Tax Benefits for Higher Education, available at IRS.gov or by calling 800-TAX-FORM (800-829-3676)
John Kaighn
Jersey Benefits Advisors
The Kaighn Report
Any funds which are contributed to a Coverdell ESA are not tax deductible, however, money invested in the account will grow tax free until a distribution is taken. The beneficiary on the account will not owe any taxes on those distributions if they are less than a beneficiary’s qualified education expenses at an eligible institution. This benefit applies to post secondary, higher education expenses as well as to elementary and secondary education expenses.
Here are some things to remember about distributions from Coverdell Accounts:
Distributions are tax-free as long as they are used for qualified education expenses, such as tuition, books and fees
There is no tax on distributions if they are for an eligible educational institution. This includes any public, private or religious school that provides elementary or secondary education as determined under state law, and any college, university, vocational school, or other postsecondary educational institution eligible to participate in a student aid program administered by the Department of Education. It includes virtually all accredited public, nonprofit, and proprietary (privately owned profit-making) post secondary institutions.
The Hope and lifetime learning credits can be claimed in the same year the beneficiary takes a tax-free distribution from a Coverdell ESA, as long as the same expenses are not used for both benefits
If the distribution exceeds education expenses, a portion will be taxable to the beneficiary and will be subject to an additional 10% tax. Exceptions to the additional 10% tax include the death or disability of the beneficiary or if the beneficiary receives a qualified scholarship
There are contribution limits for taxpayers based on the taxpayer’s Modified Adjusted Gross Income. Contributions to a Coverdell ESA may be made until the due date of the contributor’s return, without extensions.
If there is a balance in the Coverdell ESA at the time the beneficiary reaches age 30, it must be distributed within 30 days. A portion representing earnings on the account will be taxable and subject to the additional 10% tax. The beneficiary may avoid these taxes by rolling over the full balance to another Coverdell ESA for another family member.
For more information, see IRS Publication 970, Tax Benefits for Higher Education, available at IRS.gov or by calling 800-TAX-FORM (800-829-3676)
John Kaighn
Jersey Benefits Advisors
The Kaighn Report
Tuesday, May 19, 2009
Taxing Health Care as Income
So you thought the new administration was really for middle-class tax cuts? There is no way a government can run the financial services industry, the automobile industry and the health care industry, without raising taxes on EVERYONE. Here is an example of what's in the works:
Unions target Wyden in anti-tax push
By Reid Wilson
Posted: 05/19/09 07:01 AM [ET]
Union groups are targeting one of their close allies in Congress over a controversial proposal to tax employee healthcare benefits.
In a coordinated campaign using radio advertising, mail and other pressure mechanisms, three top unions are urging Oregonians to voice their displeasure to Sen. Ron Wyden (D-Ore.), whose proposal may be stalled in the Senate.
The radio ads, purchased by the National Education Association, the American Federation of State, County and Municipal Employees (AFSCME) and the United Food and Commercial Workers, take Wyden to task for his Healthy Americans Act, a bill that would provide universal coverage while removing the tax exemption employers get when they provide health benefits to their employees.
"Taxing health benefits? That doesn’t make sense," the ad's narrator says. "Tell Sen. Wyden that Oregon families want quality, affordable healthcare — not taxes on their healthcare benefits."
The three major unions are running the radio ad in Wyden's backyard in the Portland and Eugene markets, to the tune of $60,000, according to those familiar with the expenditure. AFSCME is undertaking a larger pressure campaign utilizing phones, mail, canvassers and a website.
Top Oregon labor leaders took to a prominent liberal website last week to question Wyden's plan, which they compared to proposals by Sen. John McCain (R-Ariz.) during the 2008 presidential election.
Wyden's bill is far different from the proposal McCain offered last year. Wyden would add a standard deduction estimated at $17,000 for a family of four, according to estimates by the Oregon Democrat's office. More expensive plans would be subject to taxes.
The proposal would make employers' share of health premiums taxable. Unions largely stand to gain from maintaining the status quo.
Last week, Senate Finance Committee Chairman Max Baucus (D-Mont.) said he would not consider Wyden's proposal. But Baucus did release a list of priorities that unions are unlikely to be pleased by. A broadside aimed at Wyden could serve as a warning to Baucus.
Wyden "has been a champion of healthcare reform, and his work to reform the system and to encourage public options for health care coverage could change the face of our health care system, expand coverage, and make health more affordable for all Americans. But only if our Senior Senator stops lobbying for a health care benefits tax," wrote Oregon AFSCME executive director Ken Allen and Oregon AFL-CIO president Tom Chamberlain on the BlueOregon blog.
President Obama opposed the proposal during the campaign, but in March Obama's budget director, Peter Orszag, said the idea should not be taken off the table.
Finding himself on the opposite side of labor is not a normal position for Wyden. Ordinarily a strong backer of labor, Wyden voted labor's way on 94 percent of the scored votes in 2007, the last year for which the AFL-CIO has scored members of Congress. In his career in Congress, Wyden has voted with labor 88 percent of the time.
Unions target Wyden in anti-tax push
By Reid Wilson
Posted: 05/19/09 07:01 AM [ET]
Union groups are targeting one of their close allies in Congress over a controversial proposal to tax employee healthcare benefits.
In a coordinated campaign using radio advertising, mail and other pressure mechanisms, three top unions are urging Oregonians to voice their displeasure to Sen. Ron Wyden (D-Ore.), whose proposal may be stalled in the Senate.
The radio ads, purchased by the National Education Association, the American Federation of State, County and Municipal Employees (AFSCME) and the United Food and Commercial Workers, take Wyden to task for his Healthy Americans Act, a bill that would provide universal coverage while removing the tax exemption employers get when they provide health benefits to their employees.
"Taxing health benefits? That doesn’t make sense," the ad's narrator says. "Tell Sen. Wyden that Oregon families want quality, affordable healthcare — not taxes on their healthcare benefits."
The three major unions are running the radio ad in Wyden's backyard in the Portland and Eugene markets, to the tune of $60,000, according to those familiar with the expenditure. AFSCME is undertaking a larger pressure campaign utilizing phones, mail, canvassers and a website.
Top Oregon labor leaders took to a prominent liberal website last week to question Wyden's plan, which they compared to proposals by Sen. John McCain (R-Ariz.) during the 2008 presidential election.
Wyden's bill is far different from the proposal McCain offered last year. Wyden would add a standard deduction estimated at $17,000 for a family of four, according to estimates by the Oregon Democrat's office. More expensive plans would be subject to taxes.
The proposal would make employers' share of health premiums taxable. Unions largely stand to gain from maintaining the status quo.
Last week, Senate Finance Committee Chairman Max Baucus (D-Mont.) said he would not consider Wyden's proposal. But Baucus did release a list of priorities that unions are unlikely to be pleased by. A broadside aimed at Wyden could serve as a warning to Baucus.
Wyden "has been a champion of healthcare reform, and his work to reform the system and to encourage public options for health care coverage could change the face of our health care system, expand coverage, and make health more affordable for all Americans. But only if our Senior Senator stops lobbying for a health care benefits tax," wrote Oregon AFSCME executive director Ken Allen and Oregon AFL-CIO president Tom Chamberlain on the BlueOregon blog.
President Obama opposed the proposal during the campaign, but in March Obama's budget director, Peter Orszag, said the idea should not be taken off the table.
Finding himself on the opposite side of labor is not a normal position for Wyden. Ordinarily a strong backer of labor, Wyden voted labor's way on 94 percent of the scored votes in 2007, the last year for which the AFL-CIO has scored members of Congress. In his career in Congress, Wyden has voted with labor 88 percent of the time.
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