Summer

I’m 50 years old and I have never outgrown the effect summer has over me. Every year when the days get longer, the temperature climbs into the 80’s and the lightening bugs appear at night, I feel like a kid again. I want to get up early, stay out late, and enjoy every minute of the season before its gone.

I grew up on a small farm, so our summers were full of picking strawberries, hoeing rows of corn, shelling peas and climbing apple tress. From dawn to dark we were outside – and with a flashlight we extended the day with a game of flashlight tag. Our parents taught my brother, sister and I how to grow all the farm’s vegetables and fruits. We learned the names of all the birds we heard and could pick them out by their calls. As a biology teacher, our father taught us the name of every tree, bug, weed and flower we saw.

So what did I do with this “nature girl” background? I grew up, majored in accounting and finance, and have worked in an office environment since I was 18! Still, every summer I want to move my desk outside.

Today when I read about the obesity epidemic in children in the US, I can’t help but wonder if a summer spent outside would help slow the trend. We can’t push back the tide of soft drinks, McDonalds , video games and all the changes that they have brought to childhood, but getting out and involved in the outdoors would be a great defense.

My grandson is only four months old, but I am already looking forward to climbing trees and chasing lightening bugs with him in the summers to come!


Jeannette A. Jones, CPA, CFP®
jjones@taaginc.com
http://www.taaginc.com/

Defining "The Market"

All too often, we hear the term “the market” being used by the most concentrated of its definitions. It is commonplace to refer solely to the Dow Jones Industrial Average as “the market”. The truth is the Dow, while a decent indicator of what is occurring in U.S. large cap growth stocks, is far from the total stock market available to investors.

As of December 31, 2009, the world stock market represented approximately $28.6 Trillion in market capitalization. All U.S. stocks, including large, mid and small-cap comprise just 42% of that market. A truly diversified portfolio has broad exposure to as much of the overall world market as possible in markets that are reasonably stable, liquid, and available at a reasonable cost.

For example, within our moderate portfolio containing 60% equities and 40% fixed income, the thirty stocks that comprise the Dow made up 3.41% of the portfolio as of March 31, 2010. Concentrations in the Dow across the full range of our allocation models measure from a high of 5.55% all the way down to 0.91% as of that same date. That means in a $1 million portfolio, somewhere between $9,144 and $55,482 is invested in those 30 stocks via the funds we use at any given time when balanced.

It is very tempting to allow our emotions to be controlled by the daily fluctuations of the Dow. It is the most widely reported indicator in the US media market and what we hear about on drive-time radio, the evening news and most other daily reports on “the market”.

We preach diversification and know that our clients appreciate and understand the value in having a broad, total market approach to their investments. But sometimes a disconnect exists in what we allow to drive our emotions on a day to day basis. Confusion over why a portfolio actually increases on a day when “the market” is down or vice versa is fairly common.

The fact is that looking at the market’s performance on a daily basis is an unhealthy exercise to begin with, but that’s a different discussion for a different day. If you are a market watcher, make sure you take a moment to realize what “the market” truly represents in your portfolio. If you find your emotions rising and falling each day based on what occurs to just 30 companies, ask yourself what the significance is to your overall portfolio and you’ll hopefully find your pulse slowing.

Chip Workman, CFP®
cworkman@taaginc.com
http://www.taaginc.com

Changes Are Coming to Medicare Supplements

If you have a Medicare supplement (Medigap) policy or are turning 65 this year, you need to be aware of the changes that are occurring this month. These changes have nothing to do with health care reform and were suggested by the National Association of Insurance Commissioners in order to better protect consumers. Effective June 1, 2010, these changes were and designed to close coverage gaps in the existing plans. Here are the highlights from Medicare’s web site.

• Basic Benefits – Starting with policies effective on or after June 1, 2010, Hospice Part A coinsurance (outpatient prescription drug and inpatient respite care coinsurance) will be covered. Plan K will cover 50% of the costs and Plan L will cover 75% of these costs.

• Part B Coinsurance – Plans K, L, and N will require you to pay a portion of Part B coinsurance and copayments, which may result in lower premiums for these plans. All other Medigap policies pay them at 100%.

• New Plans Offered – Plans M and N are new choices.

• Plans D and G – Plans D and G effective on or after June 1, 2010 have different benefits than D or G Plans bought before June 1, 2010.

• Plans No Longer for Sale – Plans E, H, I, and J will no longer be sold after May 31, 2010. But, if you already have or you buy Plan E, H, I, or J before June 1, 2010, you can keep that plan.

Another plus is that companies will be able to reset their premiums because of the added hospice benefit. This means that there will be more competition in the marketplace, possibly leading to lower cost coverage.

Medicare has published a guide to help you when selecting the plan that will be most beneficial for your individual circumstance.
http://www.medicare.gov/publications/pubs/pdf/02110.pdf

If all of this seems overwhelming, don’t worry. There are insurance specialists who receive continuing education on plan availability. We will be hosting a Lunch and Learn in June to help you decide if your current plan remains your best coverage option or whether one of the new plans would better suit your situation.

Chris Carleton, CFP®

clcarleton@taaginc.com

http://www.taaginc.com/

Don't Just Do Something, Sit There!

No, this isn’t a blog about a clever phrase to use when market volatility rears its ugly head (although it would be a good one, and you may see it again!). This is a quick post from all of us at The Asset Advisory Group to say Happy Memorial Day!

Forget about planning the perfect weekend. Forget about the ad showing a couple waking up to a freshly cooked breakfast in their staunch white bathrobes while the sun shines brightly throughout the house. Those ads leave out the hours spent grocery shopping, cooking, doing laundry, scrubbing the kitchen and cleaning the windows to get that moment just right. Few, if any can truly meet the standards imposed on us by popular media.

Instead, make it a priority over the next few days to enjoy the unofficial start to summer, take some time to remember those that have served this nation honorably and take some time for yourself. Whether that means turning off the cell phone for a few hours, putting down the remote or avoiding surfing for blogs, news and other information you probably don’t need right at this moment, take 30 minutes, find a corner of the house to rest your eyes and do something to reduce stress or invest in some “me” or “we” time.

Whatever you do, have a very Happy Memorial Day weekend! We’ll be back with our regular posts on Monday, June 7th.

The Asset Advisory Group
info@taaginc.com
http://www.taaginc.com

Our Age of Uncertainty

Over our lifespan, we baby boomers have lived through the Cuban Missile Crisis, JFK’s assassination, the Vietnam War, Richard Nixon’s resignation, the Iranian hostage crisis, the AIDs epidemic, and many other important and terrible historical events that are too numerous to mention - but they were not reported to us in real time like the news of today.

This negative information overload, discussed in Chip Workman’s blog last week, creates a constant sense of crisis and increases our anxiety level about our financial security. We’re getting older, and we realize we have less time to accumulate the savings we need to retire, or we are fearful about running out of the funds we currently live on in retirement. The 2007-2010 stock market gyrations haven’t helped. We want someone to tell us what is going to happen next.

The media capitalizes on our anxiety, and makes a living feeding our need to hear from ‘experts’ who tell us which way the market is headed and why. But seeking out predictions and acting on them is not a solution.

I can offer hundreds of examples of economic and market predictions that turned out to be horribly wrong over the last three years alone. In a September 1, 2007 Forbes article entitled, “The Fall 2007 Rally, ” Ken Fisher, a well-published money manager wrote, “This is a phony credit crunch… a few months from now we will be wondering what all the fuss was about.”

There were others that were right in their predictions, but terrible in their timing. Dr. Nouriel Roubini correctly predicted the housing bubble would cause a recession, but he made the prediction in 2004. If you took his advice and moved out of the market, you missed the 2004, 2005 and 2006 stock market returns. After three years of waiting for the fall, you probably gave up and moved back into the stock market in time for Bear Stearns and Lehman Brothers to collapse and kick off the recession.

Others are right in their timing, but wrong about what to do about it. Peter Schiff, President of Euro Pacific Capital, became a media darling in 2008 for predicting the market fall. But to protect his clients from the coming drop he moved them into commodities, international stocks, and shorted the dollar. As a result, their portfolios fell 60- 70% when they could have remained in the S&P 500 and lost 38%.

Our world is too complex for anyone to accurately predict what is going to happen and successfully reposition their portfolios to prepare. Yet the question – “What do you think is going to happen?” - is asked over and over by some people.

I have been a Certified Financial Planner since 1988, and based on my experience, the people who ask me this most often are the same people who refuse to create a financial plan. As a result, they feel uncertain about their future, anxious, and more vulnerable to panic when yet another negative news report about the Dow crosses their TV screen.

Jeannette A. Jones, CPA, CFP®
jjones@taaginc.com
http://www.taaginc.com/

Data Smog

“When information changes from a stream to a river to Niagara Falls, how will we ever slow down to achieve knowledge?” – Gregg Easterbrook, Sonic Boom, Random House, 2009.

The term “Data Smog” was coined in a book of the same name by author David Shenk in 1997. The term was more recently discussed in a book titled Sonic Boom by Gregg Easterbrook.
Data smog suggests that the ever increasing, on-demand news and data accessible to us as a society actually decreases our ability to acquire knowledge or plan for the future as we are too weighed down by the overload of information.

Why the overload? Aside from the obvious advent of the internet, there are the changing goals of our news sources. The goal in the past, when stories came from the local paper and the evening news, was to provide basic facts surrounding the events of the day. Networks made their money, but the news was largely untouched by marketing and promotion. Today, there is so much competition for our eyes and ears and so many different delivery methods, that the goals are very different. The goals are to make readers and viewers as unsettled as possible in order to drive both the need for more information and the need for the goods and services sold by their advertisers.

Today, all news is “breaking”. Every tremor, house fire or police chase is covered by multiple helicopters and posted all over 24-hour news channels and websites across the globe. The line between news and opinion has been blurred by Nancy Grace, Bill O’Reilly, Keith Olbermann, Rachel Maddow and Glenn Beck. This doesn’t even begin to address Tiger Woods , the Octomom, TMZ and other celebrity pseudo-issues that pass as news. We attempt to grasp it all, feeling that more information makes us more intelligent and informed.

The truth is no one person can handle the constant stream of sensationalized information on a minute-by-minute basis. The end result, as Easterbrook puts it, is a “universal low-grade nervous tension from which there may be no realistic escape.” It is ultimately in the business interests of the media outlets to make sure the public continues to suffer from this affliction.
This tension impacts our feelings about our investments, our government and many of the other aspects of our lives. The bombardment of constant information, much of which conflicts, makes it extremely difficult for anyone to form any opinion that goes beyond cynicism.

Much of this isn’t news to anyone. The information age went warp-speed well over a decade ago. There is nothing anyone can do about it and it will only get worse. What can be done, however, is achieving a deeper understanding of how this data smog impacts us on an individual level and how to handle it in our own lives.

First, choose your trusted information sources carefully and understand the difference between opinion and actual facts and data. Be especially careful to trust information which goes to any extreme for the sake of being extreme. Take time to understand the motivation or incentives behind those delivering the message.

Chip Workman, CFP®
cworkman@taaginc.com
http://www.taaginc.com/

The New Money Rules for Recent Graduates

(from Ron Lieber's Your Money Column, New York Times, 5/8/2010 - read the article direct from the Times here)

Graduation season is a time of oddly mixed emotions for the people finishing college and graduate school. On the one hand, there is pride in a job well done (or relief at simply getting through) and the satisfaction of having finished a long, hard slog. On the other, there is primal fear. Will anyone pay me to do something I’m good at? And will I actually have enough money to live on?

We push our graduates out into the world with little or no financial education; that much has been true for years. Meanwhile, their student loan debt has grown over time, with the median debt for bachelor’s degree recipients who did take out loans hitting $20,000 in 2007-8, according to the College Board’s 2009 Trends in Student Aid study. This year, many graduates are being greeted by an uninterested shrug from employers as they try to pay that all back.

There is some good news this graduation season, though. In four crucial areas — health insurance, banking, credit cards and student loans — there have been enormous shifts in the legislative and regulatory landscape in the last 12 months. These changes should ease some of the pain as new graduates try to establish themselves financially.

So before you leave for your postgraduation road trip (or buy yourself something nice for the first time in four years to celebrate the end of tuition bills), give the points below a quick skim. So much has happened in the last year, you’ve probably missed at least some of it.

HEALTH INSURANCE First, do no harm. A bad accident or illness could be financially catastrophic for you or your family if you don’t have health insurance. Keeping or getting insurance is about to get easier, since the health care bill that President Obama signed in March requires insurance companies that already provide dependent coverage for children to allow unmarried offspring to stay insured on their parents’ plans until they turn 26.

This part of the bill doesn’t go into effect until Sept. 23, and there’s still a lot of uncertainty about exactly who will benefit before or after that date as companies and insurers wait for more clarity from regulators on how to put the new rules into place.

Many insurers, including independent Blue Cross Blue Shield providers and UnitedHealthcare, have announced efforts to allow graduating students who are currently on their parents’ plans to stay there to avoid any gap in coverage. Ask your human resources department or insurance company about this possibility if you are a parent and your graduating child is still on your health insurance plan.

That said, your company may not allow your child to remain on the plan after graduation this year even if the insurance company it works with can make it happen. And even if your employer does allow your child to stay on, it’s not yet clear how much it will cost, though paying a young adult’s premium is about as practical a graduation gift as you’ll find.

What if you’ve been on a student health insurance plan and want to switch to your parents’ plan now? Or what about people who are uninsured and 24 and want to return to their parents’ coverage as soon as possible? You may have to wait until the next open enrollment period for your parents’ plan, according to Brett Lieberman, a Blue Cross Blue Shield spokesman.

Insurance companies may offer short-term or other plans to bridge the gap during the months until then.

Stephen L. Beckley, a consultant who specializes in student health insurance, notes that most graduating college students enrolled in student plans will have coverage through the summer. Call and ask to be sure. Also, some states already have laws similar to (or tougher than) the new federal one.

BANKING AND DEBIT CARDS So you’ll need a checking account. Perhaps you already have one.

What you may have missed, however, is that starting July 1, banks will no longer allow you to spend more money at a store with your debit card (or withdraw more at the A.T.M. machine) than you have in your account unless you’ve given them permission first. The federal government made them do this, since banks were infuriating so many customers by charging them repeated overdraft fees when they overspent.

Let’s assume that you don’t want to opt in to taking your balance below zero and would rather ask the bank to cut you off if you don’t have enough money in your account. If enough people do that, banks will lose lots of fee income and may use that as an excuse to tack monthly fees onto your checking account. The lower the balance in your account (and recent graduates tend to live hand to mouth), the more likely it is that your bank may try to charge you money.

Even if this happens, I’m confident that some institutions will remain free of monthly fees. If there’s a credit union at your college that offers fee-free banking, it may let you keep your account after graduation (check to see how much you’ll pay to withdraw money from other institutions’ A.T.M.’s, though). Or you can search for a new one at findacreditunion.com. Take a look, too, at banks with no branches, like PerkStreet Financial and ING Direct.

CREDIT CARDS The credit card legislation that passed in 2009 contained so many new rules that it went into effect in phases, including a bunch of regulations that began earlier this year. There are too many to list here, though the Federal Reserve has published an excellent plain-English guide that I’ve linked to from this sentence in the online version of the column.

I’m a big fan of the rule requiring card companies to get your permission before they’ll let you spend more than your credit limit (and charge you fees for the privilege). This always struck me as particularly noxious, and in the wake of the new rules, some card companies like American Express have simply stopped charging the fee to people who go over the limit (or cuts them off if the company thinks the spending is getting out hand). This is particularly helpful to younger people who may have lower credit limits and thus breach them more often.

Beth Kobliner, the author of “Get a Financial Life: Personal Finance in Your Twenties and Thirties,” is partial to the new rule requiring better information on the card statement. Now, it must state how long it will take to pay off your balance if you make only the minimum payment that the card company requires. It also must let you know what your monthly payment would be if you want to pay the balance off in three years. “It’s eye-opening for everyone, but particularly for young people who never realized how expensive putting something on the card and paying only the minimum can be,” Ms. Kobliner said.

One word of caution here. There’s another new rule that will make it much more difficult for card companies to put new plastic in the hands of people under the age of 21. As a result, card issuers may chase newly minted graduates that much harder with offers that sound too good to be true. Read your junk mail with caution and skepticism.

STUDENT LOANS Last July, a new program went into effect that can lower monthly payments on federal student loans for people who don’t earn a lot of money. It’s called income-based repayment, and it’s a bit complicated. Essentially, if your income is low enough (depending on your family size), it’s possible that your lender will limit the size of your monthly payments. And after 25 years of payments, the lender may even forgive your remaining loans.

To see if you qualify, use the calculator at ibrinfo.org, a site that a nonprofit organization, the Project on Student Debt, created. The site also has a lot more information about how the program works — and additional information about a program that could forgive federal loan debts after 10 years of repayment for people working in public service jobs.

Still confused? Try checking in with a financial aid officer at your school, even if you’ve already left. “They’re the thankless heroes in this, who really want to help,” said Ramit Sethi, author of “I Will Teach You to Be Rich,” another excellent book for young people trying to learn more about money.

FORWARDING ADDRESS This one’s not new, but it trips enough people that it bears repeating. Your physical address may change in the next few months, perhaps more than once. Or you may start using a new e-mail address or begin getting bills from companies that you haven’t worked with before, both of which can lead to important messages getting caught in a spam folder.

You see where this is heading, right? You can’t pay bills that you don’t see. So let people know where to find you. Mark due dates in your calendar. And make sure you have the ability to pay your credit card and student loan bills online from any computer, wherever it is you may go on your victory tour in the next couple of months. That way, you won’t return to find the kind of damage to your credit history that can set you far back on the path to financial health.