On Saturday, Eurozone bureaucrats in Brussels – let’s call them Eurocrats – enacted a $13 billion bailout of Cypriot banks.   Cyprus is a small country, total population just over a million; more people live in Dallas. And the Cypriot economy is small – smaller than that of Shreveport, Louisiana. But as part of the Eurozone, Cyprus uses the Euro as its currency.  The damaged banking system, with billions in defaulted loans to Greek companies, was on the brink of collapse. Hence the Eurocrats decreed a bailout to save Cypriot banks.

Still with me? Stop yawning, I’ll make it quick. This Euro-bailout differs from past bailouts in that bank depositors are getting a haircut –  10% on deposits over $130,000 and 6.75% on more modest deposits. Another word for haircut is confiscation. Cypriots with $5,000 in a savings account will wake up with $4,662. Ouch. This new get-tough Euro-bail policy has bank depositors running for the exits. Previous bailouts have left savers untouched. (Makes me think some of those folks would have been better off owning stock in Exxon, but I digress.)

My point: scared European investors will bolster the US dollar and the US economy. If you don’t want the risk of seeing your checking account confiscated, what are you going to do – invest in Chinese Renminbi? Urugayan Pesos? Fact is, scared money flows to one place: the US. More money flowing into our financial markets means higher bond prices and lower interest rates. If you thought 3% mortgage rates were the bottom, think again.

GTC

(This article contains the current opinions of the author but not necessarily those of Brighton Securities Corp.  The author’s opinions are subject to change without notice. This blog post is for informational purposes only. Forecasts, estimates, and certain information contained herein should not be considered as investment advice or a recommendation of any particular security, strategy or investment product. References to specific securities and their issuers are for illustrative purposes only and are not intended and should not be interpreted as recommendations to purchase or sell such securities).

Here are few musings from Mr. Bernanke, which as it turns out, were a bit less than accurate or not  all that prescient:

#1 (October 20, 2005) “House prices have risen by nearly 25 percent over the past two years. Although speculative activity has increased in some areas, at a national level these price increases largely reflect strong economic fundamentals.”

#2 (On 60 Minutes in response to a question about what would have happened if the Federal Reserve had not “bailed out” the U.S. economy) “Unemployment would be much, much higher. It might be something like it was in the Depression. Twenty-five percent.”

#3 (February 15, 2006) “Housing markets are cooling a bit. Our expectation is that the decline in activity or the slowing in activity will be moderate, that house prices will probably continue to rise.”

#4 (January 10, 2008) “The Federal Reserve is not currently forecasting a recession.”

#5 (When asked directly during a congressional hearing if the Federal Reserve would monetize U.S. government debt) “The Federal Reserve will not monetize the debt.”

#6 “One myth that’s out there is that what we’re doing is printing money. We’re not printing money.”

#7 “The money supply is not changing in any significant way. What we’re doing is lowering interest rates by buying Treasury securities.”

#8 (November 21, 2002) “The U.S. government has a technology, called a printing press (or today, its electronic equivalent), that allows it to produce as many U.S. dollars as it wishes at no cost.”

#9 (March 28, 2007) “At this juncture, however, the impact on the broader economy and financial markets of the problems in the subprime market seems likely to be contained. In particular, mortgages to prime borrowers and fixed-rate mortgages to all classes of borrowers continue to perform well, with low rates of delinquency.”

#10 (July, 2005) “We’ve never had a decline in house prices on a nationwide basis. So, what I think what is more likely is that house prices will slow, maybe stabilize, might slow consumption spending a bit. I don’t think it’s gonna drive the economy too far from its full employment path, though.”

#11 “Although low inflation is generally good, inflation that is too low can pose risks to the economy – especially when the economy is struggling.”

#12 (February 15, 2007) “Despite the ongoing adjustments in the housing sector, overall economic prospects for households remain good. Household finances appear generally solid, and delinquency rates on most types of consumer loans and residential mortgages remain low.”

#13 (October 31, 2007) “It is not the responsibility of the Federal Reserve – nor would it be appropriate – to protect lenders and investors from the consequences of their financial decisions.”

#14 (On the possibility that the Fed might launch QE3) “Oh, it’s certainly possible. And again, it depends on the efficacy of the program. It depends on inflation. And finally it depends on how the economy looks.”

#15 (November 15, 2005) “With respect to their safety, derivatives, for the most part, are traded among very sophisticated financial institutions and individuals who have considerable incentive to understand them and to use them properly.”

#16 (January 18, 2008) “[The U.S. economy] has a strong labor force, excellent productivity and technology, and a deep and liquid financial market that is in the process of repairing itself.”

#17 “I wish I’d been omniscient and seen the crisis coming.”

#18 (May 17, 2007) “All that said, given the fundamental factors in place that should support the demand for housing, we believe the effect of the troubles in the subprime sector on the broader housing market will likely be limited, and we do not expect significant spillovers from the subprime market to the rest of the economy or to the financial system.  The vast majority of mortgages, including even subprime mortgages, continue to perform well.  Past gains in house prices have left most homeowners with significant amounts of home equity, and growth in jobs and incomes should help keep the financial obligations of most households manageable.”

#19 “The GSEs are adequately capitalized. They are in no danger of failing.”

#20 (Two months before Fannie Mae and Freddie Mac collapsed and were nationalized) “They will make it through the storm.”

#21 (September 23rd, 2008) “My interest is solely for the strength and recovery of the U.S. economy.”

#22 “Economics has many substantive areas of knowledge where there is agreement but also contains areas of controversy. That’s inescapable.”

#23 “I don’t think that Chinese ownership of U.S. assets is so large as to put our country at risk economically.”

#24 “We’ve been very, very clear that we will not allow inflation to rise above 2 percent.”

#25 “…inflation is running at rates that are too low relative to the levels that the Committee judges to be most consistent with the Federal Reserve’s dual mandate in the longer run.”

#26 (June 10, 2008) “The risk that the economy has entered a substantial downturn appears to have diminished over the past month or so.”

#27 “Not all information is beneficial.”

#28 “The financial crisis appears to be mostly behind us, and the economy seems to have stabilized and is expanding again.”

#29 “Similarly, the mandate-consistent inflation rate–the inflation rate that best promotes our dual objectives in the long run–is not necessarily zero; indeed, Committee participants have generally judged that a modestly positive inflation rate over the longer run is most consistent with the dual mandate.”

#30 (October 4, 2006) “If current trends continue, the typical U.S. worker will be considerably more productive several decades from now. Thus, one might argue that letting future generations bear the burden of population aging is appropriate, as they will likely be richer than we are even taking that burden into account.”

Doug Hendee, CFP^®

(This article contains the current opinions of the author but not necessarily those of Brighton Securities Corp.  The author’s opinions are subject to change without notice. This blog post is for informational purposes only. Forecasts, estimates, and certain information contained herein should not be considered as investment advice or a recommendation of any particular security, strategy or investment product. References to specific securities and their issuers are for illustrative purposes only and are not intended and should not be interpreted as recommendations to purchase or sell such securities).

Yes:  start.

Let’s consider two scenarios:

Client 1 is 25 years old, just beginning his career.  Over the next ten years, he invests $5,000 each year.  If we assume an annual return of 7.5% (not unreasonable in a growth-based mutual fund), by age 35, Client 1 has $70,735 in his account.  At this point, he stops saving, but leaves his account alone to let it grow to age 65.

Client 2 is 45 years old and decides that if he wants to retire anytime soon, it’s time to start saving.  Over the next 20 years, he saves $10,000 each year.  Assuming the same 7.5% annual return, at age 65 his account value grows to $433,046.  Not bad!

Now, let us compare.

Client 2 saved four times as much as Client 1, and for twice as long.  You’d think Client 2 would be the winner in this scenario, but the numbers don’t lie.

When is the time to start?

Chuck Wade

(This article contains the current opinions of the author but not necessarily those of Brighton Securities Corp.  The author’s opinions are subject to change without notice. This blog post is for informational purposes only. Forecasts, estimates, and certain information contained herein should not be considered as investment advice or a recommendation of any particular security, strategy or investment product. References to specific securities and their issuers are for illustrative purposes only and are not intended and should not be interpreted as recommendations to purchase or sell such securities).

His response of “eating well and exercising” nearly put me to sleep.

I was expecting to hear of a month-long fast, or the newest, cutting edge diet.  Not so.  Good old fashioned diet and exercise.  Boring?  Yes.  Time-consuming?  Absolutely.  You don’t lose an entire person in body weight in just two weeks.  It takes commitment, hard work, and a plan – all of which must be focused towards achieving your goal.

Wait a second.  We are talking about weight loss here, right?  The same applies to your financial future.  The quick fix that sounds too good to be true is always out there.  And maybe if you invest in the hot, cutting-edge company that everyone is talking about, you’ll make a quick profit. Chances are, in the long run, you’ll lose more than you win.  But if you define your goals and put a well-informed plan in place, with commitment and work, you’ll find yourself not only reaching, but exceeding your goals.

Funny how life works like that.  Why not start now?

Chuck Wade

(This article contains the current opinions of the author but not necessarily those of Brighton Securities Corp.  The author’s opinions are subject to change without notice. This blog post is for informational purposes only. Forecasts, estimates, and certain information contained herein should not be considered as investment advice or a recommendation of any particular security, strategy or investment product. References to specific securities and their issuers are for illustrative purposes only and are not intended and should not be interpreted as recommendations to purchase or sell such securities).

Why $16 Trillion Only Hints at the True U.S. Debt

The actual liabilities of the federal government—including Social Security, Medicare, and federal employees’ future retirement benefits—already exceed $86.8 trillion, or 550% of GDP. For the year ending Dec. 31, 2011, the annual accrued expense of Medicare and Social Security was $7 trillion.

That is roughly double the entire annual Federal budget.

They go on to note that “to collect enough tax revenue to avoid going deeper into debt would require over $8 trillion in tax collections annually.”  Expropriating the entire income of the top 25% of households that pay almost 90% of the tax and all corporate taxes would only bring in $6.7 trillion.

I don’t know it’s kind of like saying “well if I ignore a few credit card bills I really don’t have the debt.”  I feel like the creditors don’t feel the same way.

Here again a little perspective goes a long way to give us some insight on this whole “Fiscal Cliff” situation.

Doug Hendee, CFP^®

(This article contains the current opinions of the author but not necessarily those of Brighton Securities Corp.  The author’s opinions are subject to change without notice. This blog post is for informational purposes only. Forecasts, estimates, and certain information contained herein should not be considered as investment advice or a recommendation of any particular security, strategy or investment product. References to specific securities and their issuers are for illustrative purposes only and are not intended and should not be interpreted as recommendations to purchase or sell such securities).

The dinner discussions on money and economics are more than academic. At the table are the chiefs of the world’s biggest central banks, representing countries that annually produce more than $51 trillion of gross domestic product, three-quarters of the world’s economic output.

Of late, these secret talks have focused on global economic troubles and the aggressive measures by central banks to manage their national economies. Since 2007, central banks have flooded the world financial system with more than $11 trillion. Faced with weak recoveries and Europe‘s churning economic problems, the effort has accelerated. The biggest central banks plan to pump billions more into government bonds, mortgages and business loans.

Their monetary strategy isn’t found in standard textbooks. The central bankers are, in effect, conducting a high-stakes experiment, drawing in part on academic work by some of the men who studied and taught at the Massachusetts Institute of Technology in the 1970s and 1980s.

“Will history decide they did too little or too much? We don’t know because it is still a work in progress,” said Kenneth Rogoff, an economics professor at Harvard and co-author of a book, “This Time Is Different,” examining financial crises over eight centuries. “They are taking risks because it is an experimental strategy. 

From yesterday morning’s Wall Street Journal by Jon Hilsenrath and Brian Blackstone

Well there you go that certainly is encouraging now isn’t it.  If you are one of my clients this is not news to you however, if you are not this may come as a bit of a shock.  I will maintain what I have been saying all along this is exactly that “an experiment” which by its very nature means that no one,  these people included, has any idea how this is going to work out.

For all our sakes I” hope” that it ends well but I believe I learned a long time ago “hope” is not an investment theme.

Doug Hendee, CFP^®

(This article contains the current opinions of the author but not necessarily those of Brighton Securities Corp.  The author’s opinions are subject to change without notice. This blog post is for informational purposes only. Forecasts, estimates, and certain information contained herein should not be considered as investment advice or a recommendation of any particular security, strategy or investment product. References to specific securities and their issuers are for illustrative purposes only and are not intended and should not be interpreted as recommendations to purchase or sell such securities).

For example; you bought 100 shares of XYZ for $10,000 five years ago and it is now worth $20,000, donating the 100 shares would give you a $20,000 write-off and you avoid paying tax on the $10,000 gain.  This really is a double-dip deduction.

There are two caveats that I want to mention.  First, make sure you have owned the stock over one year.  The rules are very different if you donate a stock with a short-term gain. In the above example, if you had only owned the stock for 11 months and donated $20,000 worth of stock your deduction would be limited to your cost basis or $10,000.  You would lose half of your deduction.

The second caveat is that you should not do this with depreciated stock.  If your stock has lost value since you purchased it, you should first sell it to capture the tax loss and then donate the proceeds to your charity.  If you donate the stock in this case, you will lose the capital loss write-off.

As always, consult your advisor before making this type of financial decision.

Joe Arena

(This article contains the current opinions of the author but not necessarily those of Brighton Securities Corp.  The author’s opinions are subject to change without notice. This blog post is for informational purposes only. Forecasts, estimates, and certain information contained herein should not be considered as investment advice or a recommendation of any particular security, strategy or investment product. References to specific securities and their issuers are for illustrative purposes only and are not intended and should not be interpreted as recommendations to purchase or sell such securities).

IRS CIRCULAR 230 NOTICE:

As required by U.S. Treasury Regulations, please be advised that any written tax advice contained in this communication was not written or intended to be used (and cannot be used) by any taxpayer for the purpose of avoiding penalties that may be imposed under the U.S. Internal Revenue Code.

• Deduction for business use of Auto will be 56.5 cents per mile, medical miles increase to 24 cents and charitable miles remain at 14 cents.
• The annual exclusion for gifts increases to $14,000 per person.
• Foreign earned income exclusion increases to $97,600.
• Social Security benefits will increase by 1.7%.
• The wage base for computing Social Security tax will increase to $113,700.
• Threshold for unearned income regarding “kiddie tax” rises to $1,000.
• The maximum IRA contribution will increase to $5,500.
• The maximum contribution to 401K and 403B plans will increase to $17,500, for those over 50 years old the catch up amount remains $5,500.
• The maximum contribution to a SIMPLE IRA plan will increase to $12,000.
• For those covered by a pension plan at work, the income phase out for deductible IRA contributions increases as follows;  $59,000 to $69,000 for singles and $95,000 to $115,000 for married filing joint.

Now we wait for the fun part…How much will they raise our taxes??

Joe Arena

(This article contains the current opinions of the author but not necessarily those of Brighton Securities Corp.  The author’s opinions are subject to change without notice. This blog post is for informational purposes only. Forecasts, estimates, and certain information contained herein should not be considered as investment advice or a recommendation of any particular security, strategy or investment product. References to specific securities and their issuers are for illustrative purposes only and are not intended and should not be interpreted as recommendations to purchase or sell such securities).

IRS CIRCULAR 230 NOTICE:

As required by U.S. Treasury Regulations, please be advised that any written tax advice contained in this communication was not written or intended to be used (and cannot be used) by any taxpayer for the purpose of avoiding penalties that may be imposed under the U.S. Internal Revenue Code.

Enough fun, here’s my point:  Instead of taking a shot at something that is less than likely to happen, why not replace that hope with tax-free income when you’re ready to retire?  Here’s how:

Funding a Roth IRA allows you that benefit, and you don’t need to win Powerball to start one.  Many mutual funds will allow you to start a Roth for as little as $50 each month.  That’s $600 over the course of a year.  Not a huge amount by any means, but consider:  if you started today with $50 each month, and continued for each month over the next 30 years, you will have invested $18,000 over that period.  If you earn 5% over that time, 30 years from now your investment will have grown to $41,856 – a return on your original investment of 132%.  And if you should need access to your cash in the meantime, your contributions come back to you tax-free, as do your earnings, if you wait until you’re 59½.

Something to think about if you find yourself with a little extra time while waiting to pick up a Powerball ticket.

Chuck Wade

(This article contains the current opinions of the author but not necessarily those of Brighton Securities Corp.  The author’s opinions are subject to change without notice. This blog post is for informational purposes only. Forecasts, estimates, and certain information contained herein should not be considered as investment advice or a recommendation of any particular security, strategy or investment product. References to specific securities and their issuers are for illustrative purposes only and are not intended and should not be interpreted as recommendations to purchase or sell such securities).

WHEN: Tuesday, December 4, 2012 at 5:00pm

WHERE: Greece Town Hall, Community Rooms A & B

1 Vince Tofany Boulevard, Rochester, NY 14626

Space is limited.  Reserve your seat today by calling 585-340-2246.

Laura Pennington

(This article contains the current opinions of the author but not necessarily those of Brighton Securities Corp. The author’s opinions are subject to change without notice. This blog post is for informational purposes only. Forecasts, estimates, and certain information contained herein should not be considered as investment advice or a recommendation of any particular security, strategy or investment product. References to specific securities and their issuers are for illustrative purposes only and are not intended and should not be interpreted as recommendations to purchase or sell such securities).