January 28, 2011

Weekly Market Wrap:  Stocks ended the week slightly lower as a rally was halted by middle east instability, surging commodity prices and riots in Egypt.  The S&P 500 index ended the week down 0.5% to close at 1,276.  Commodity prices ended the week flat after a huge rally on Friday.  Oil closed at $89.34 per barrel down 0.2% and gold ended at $1,336 down 0.4%.  The dollar closed flat on the week against other major world currencies at $78.15.

In 2011 the major indexes finished at: The S&P index +12.8%, The Dow Jones Index +11%, The NASDAQ + 16.9%, The Russell 2000 Small cap Index + 25.3%, EAFE International +4.9%.  In the Bond market the 10 year treasury wrapped up the year yielding 3.29% and the 30 year yielding 4.33%

On Monday the market moved 7 points higher as Intel announced a new stock repurchase plan.  On Tuesday the market move up a fraction as rising consumer confidence was offset by a decline in manufacturing indexes and home prices.  Wednesday’s market moved higher once again as the index added 5 more points on announcements from the federal reserve meeting and an increase in new home sales.  Thursday’s market moved 3 points higher to 2+ year highs on mixed news including lower than expected durable goods orders, better than expected jobless numbers and mixed earnings reports.   Friday’s market was decidedly lower dropping 23 points as news of Egyptian protests sent oil and gold prices significantly higher and disappointing earnings from Ford and Amazon offset an increase in consumer sentiment and a higher 4Q GDP revision.

A good week ended on a disappointing and slightly fearful not as rioting and unrest in Egypt led to a sell-off in the US markets.  This biggest fear at this point is if the protests are successful and they remove their 30 year leader, what type of government will take over?  The current leader has been a friend to the US but has led the county and the majority of its people into an extremely distressed position.  Based on that I would say it is time for him to go but who will then take over?  If it is a militant group things could become much more difficult for the US and its allies in the middle east.

US economic news continues to be mixed with a slight bias towards the positive pushing the market higher for most of the week.  Job’s are typically one of the last things to recover after a recession and it seems as though the job outlook is starting to slowly improve.

This will be an extremely interesting week to see how things develop in the Middle East and how the US markets are impacted by this uncertainty.

Mortgage rates held steady this week.  The Schwab Bank 15-year rate is now at 4.23% and the 30-year rate is at 4.875%. These rates are as of 01/28/2011 and assume no points, no origination fee and a $250,000 mortgage. 

The Week at AAM (to highlight what I do for clients and how I am different than most advisors):

Some of the highlights of my last two weeks include:

• I helped a client set up IRAs for a couple of his managers to reward them for their continued good work.
• As part of a local Financial Planning Association Lunch and Learn I learned more about what the Grand Rapids Community Foundation does to improve greater Grand Rapids as well as their local Heartside district.  Visit www.grfoundation.org
• Met with a Troy Ginzer of TAG Accounting to prepare for the upcoming tax season.
• Attended a meeting to get started with the Grandville/Jenison Chamber Ambassador program to get the word out about the great job my chamber is doing in this community.
• Learned more about charitable giving strategies and did some networking at a meeting of the West Michigan Planned Giving Group.
• Met with a group of local NAPFA advisors to learn more about their business and do some networking with my peers.
• Checked out a Regus office in Troy and met with a client and a prospective new Investment Advisory Representative.
• Met with a number of clients to review  and plan for their futures.  Also, signed up a new planning client to help them towards their financial goals.
• Facilitated a compliance meeting to update my Advisory Representatives on what I have been doing to help my clients and what they need to do to help me stay compliant.
• Attended the Grandville/Jenison Chamber annual meeting.

I hope you had a great few weeks as well.  Please let me know if there is ever anything I can do for you or if something has changed in your financial situation to warrant a meeting or a change of investment policy.

Ronald J. VanSurksum, CFP®

Advanced Asset Management, LLC

• Personal Income and Spending: Both personal income and spending remained strong in November, rising 0.3 percent and 0.4 percent, respectively. But worries persist about whether this can be sustained because of continued high unemployment despite pent-up demand for consumer goods. New data come out Monday at 8:30 a.m.
• Core Prices: Despite persistent concerns about inflation, core prices increased only 0.1 percent in November, bringing the year-over-year growth down to 0.8 percent. That’s unchanged from October and remains at its lowest level in the 50-year history since the data has been collected. Watch for December data on Monday at 8:30 a.m.
• ISM Manufacturing Index: The ISM Manufacturing Index increased to 57.0 in December from 56.6 in November. With the exception of the Dallas Fed’s Texas Manufacturing Outlook Survey, all of the regional Fed surveys point to a further acceleration in manufacturing activity in December. Watch for December numbers on Tuesday at 10 a.m.
• Factory Orders: Factory orders strengthened in November — up 0.7 percent after falling 0.7 percent in October — in response to stronger consumer demand for items such as household appliances, computers, and furniture. Looking ahead, unfilled orders growth over the past several months should keep production stable. December’s numbers come out on Thursday at 10 a.m.
• Non-farm Payrolls: With unemployment holding above 9.4 percent and job growth lagging, payrolls don’t show any sign of markedly increasing any time soon. In December, non-farm payroll employment decreased in 35 states and the District of Columbia and increased in 15 states. January numbers are due out Friday at 8:30 a.m.

from www.moneynews.com

Essential Financial Planning for Returning or Deploying Military Personnel and their Families

As the United States goes into its ninth year of military action in Afghanistan and Iraq, financial planning for military personnel and their families has taken on unprecedented importance. Multiple deployments during the longest wartime period of U.S. history has added considerable strain to military family budgets already shaken by the worst economic downturn in 70 years.

One of the smartest moves military personnel can make is a visit to a qualified financial, tax or estate planner before or after a deployment -- no matter how small their assets or how deep their current financial problems are. To find a qualified financial planner familiar with military personal finance, individuals can type in where they live and check the box marked “Government and Military” at the FPA’s PlannerSearch website.

Here are some personal finance starting points for military personnel and their families:

Important laws and programs to know: After the 9/11 attacks, the federal government acted to boost benefits and protections for military families. One of the first was the Servicemembers Civil Relief Act of 2003, an update of longstanding financial protections for active military and their families. The act provides stays on civil litigation including bankruptcy and divorce and prevents wage attachments while military personnel are away. Coverage requires active duty confirmation from a commanding officer but expires 90 days after that status has been terminated. The law also makes it tougher – but not impossible – for landlords to evict military families for nonpayment of rent. A second major source of assistance for military families came in 2008 with changes to the Servicemen’s Group Life Insurance plan, raising the total death benefit limit from $250,000 to $400,000. And the Caregivers and Veterans Omnibus Health Services Act of 2010 provides families of severely wounded veterans of Iraq and Afghanistan with coordinated financial and caregiving support.

Special safeguards needed against identity theft: Single military personnel need to keep a special lookout for identity theft that can happen while they’re deployed. It’s important to register an “active duty alert” with the three major credit reporting companies (Transunion, Experian and Equifax) every year. The alerts automatically stop all credit offers from being mailed to their homes. A call to any one of the credit bureaus will automatically put an alert on an individual’s file with all three agencies. It’s also a good idea to authorize a spouse or other trusted friend or family member to access credit reporting data to check for fraud during the service person’s deployment or in case of injury or death.

Note credit protections: The 2003 act also freezes credit card, mortgage and some student loan interest at 6 percent if military personnel were approved for the loans before they were called to active duty. On student loans, reservists and active duty members of the military assigned away from their permanent-duty stations may receive a deferment for up to three years on student-loan payments as well as a break on accruing interest on missed payments. Finally, deployed military away for at least six months can terminate a car, truck or other vehicle lease without penalty.

Understand tax issues: Activated and deployed military personnel receive special tax breaks at the federal and sometimes state level. Military income earned by soldiers in combat zones is tax-free and they don’t have to file taxes until 180 days after their return. Activated military personnel also are entitled to an extension on the period of time allowed for a tax break on the profits from the sale of a home. They’re also entitled to tax breaks on childcare assistance and certain travel. Nontaxable combat pay can also be considered for the Earned Income Credit.

Plan ahead for lump-sum earnings: For returning military receiving accumulated military pay or compensation from civilian employment, it’s good to sit down with financial and tax planners before the money is frittered away.

Don’t forget retirement: Military service counts toward vesting for all civilian retirement plans -- even though employers may not always be required to give you your job back when you return.  Also, the Heroes Earned Retirement Opportunities (HERO) Act allows tax-free combat pay to be considered as earned income for determining the contribution amount for traditional and Roth IRAs.

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January 2011 — This column is produced by the Financial Planning Association, the membership organization for the financial planning community, and is provided by Ronald J. VanSurksum, CFP® , a local member of FPA.