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Market Commentary - Month of November 2014

PlanningWorks Presents:







“Reflect on your present blessings, of which every man has many; not on your past misfortunes, of which all men have some.”

– Charles Dickens





Paying off credit card debt has more than an immediate benefit: it can save you money in the long term by improving your credit, and with less consumer debt, you can potentially save more for retirement.





An elephant manages to drink water from a puddle 26' away, but how does the elephant do this with an 18' chain around his left hind leg?



Last month’s riddle:
You have two twins, three triplets and four quadruplets in a room; how many total people do you have in the room?



Last month’s answer:

9. Two twins are 2 people, three triplets are 3 people, and four quadruplets are 4 people. 2 + 3 + 4 = 9.


November 2014

Wall Street had a dramatic October, as investors grew anxious about the big Es: Ebola, Europe and easing (specifically, the end of QE3). Ultimately, stocks climbed higher with help from another big E: earnings. The S&P 500 advanced 2.32% for the month, pushing into record territory again. Many Asia Pacific stock indices posted solid gains; many European indices racked up October losses. It was a rough month for gold, silver, oil and many crop futures. Domestic indicators were mostly positive and made the U.S. look like a bright spot in the global economy. Sales picked up slightly in the housing market, and the stock market seemed to take the wrap-up of the Federal Reserve’s historic stimulus program in stride.1


The initial Q3 GDP reading suggested that the economy was now on solid footing. The Bureau of Economic Analysis reported 3.5% expansion in Q3; that and the 4.6% growth of Q2 represented the best six months for the economy in more than a decade. Consumer spending was the question mark: it grew just 1.8% in Q3, and it actually retreated 0.2% in September, a month which also brought a 0.3% decline in retail sales. Some of the Q3 personal spending slowdown could be attributed to limited wage growth; personal incomes had grown by an unspectacular 2.0% in 12 months.2,3


Consumer confidence, on the other hand, kept improving. The Conference Board’s October index hit 94.5, and the University of Michigan’s consumer sentiment gauge had a final October reading of 86.9.2,3


Thanks to 248,000 new hires, the U.S. jobless rate fell to 5.9% in September. America hadn’t seen such low unemployment since July 2008. The U-6 rate (unemployed + underemployed) dipped to a 71-month low of 11.8%.4


September saw no real pickup in consumer prices – just another 0.1% gain in both the headline and core Consumer Price Index. The annualized advance for both was just 1.7%. (Food prices, however, had risen 3.0% in 12 months.) Producer prices dipped 0.1% in September after being unchanged for August.2,5


Speaking of production, September brought a 1.0% gain in factory output, although hard goods orders tailed off 1.3%. The 59.0 reading on the Institute for Supply Management’s October manufacturing PMI defied the forecast of analysts polled by MarketWatch, who had predicted a 0.1% decline from September to a mark of 56.5. (ISM’s non-manufacturing PMI fell a whole percentage point in September to 58.6.)2,6 


Lastly, the month ended with the American Automobile Association forecasting the average U.S. gas price to dip under $3 a gallon in early November, a prediction that came true. On November 3, AAA had a mean nationwide price of $2.98 for regular unleaded, which had become 36¢ cheaper over a year.7,8


Just as the Fed halted its monetary stimulus, the Bank of Japan increased its asset purchase program. On Halloween, the BofJ said that it would boost its quantitative easing to 80 trillion yen a year from the current 50 trillion yen. The announcement gave a boost to global stocks and poised Japan’s currency for depreciation.7


Not all the news out of the Asia Pacific region was so encouraging. China’s economy was coming off its poorest quarter since 2008: its official GDP reading for Q3 was 7.3%, down from 7.5% in Q2 and the poorest measurement taken since Q1 2009. The country’s industrial output rose to 8.0% in September from 6.9% in August, perhaps a sign of a better number for Q4. The Chinese government’s manufacturing PMI declined 0.3 points to 50.8 for October, while the HSBC/Markit PMI for the nation came in at a slightly improved 50.4.9,10


Was a recession imminent for the euro area? At month’s end, the European Central Bank had refrained from easing, even with the risk of deflation. Germany’s manufacturing sector grew slightly in October, but there was contraction in Italy and France and the overall Markit factory PMI for the eurozone was a tepid 50.6.10


European stock market investors lacked confidence in October: the month saw the Europe Dow lose 2.98%, the STOXX 600 1.83%, the FTSE MIB 5.30%, the CAC 40 4.15%, the DAX 1.56%, the RTS 2.87% and the FTSE 100 1.15%.1


In Asia, key indices turned in much better performances. While Korea’s KOSPI retreated 2.76%, the Shanghai Composite gained 2.38%, the Nikkei 225 1.49%, the ASX 200 4.42%, and the Asia Dow 1.98%; the Sensex and Hang Seng both advanced 4.64%. In the Americas, the Bovespa gained 0.95%, the IPC All-Share 0.09% and the DJ Americas 1.98%. Up north, the TSX Composite slipped 2.32% for October.1


Finally, the Global Dow lost 0.26% last month; the MSCI Emerging Markets Index rose 1.07% and the MSCI World Index advanced 0.57%.1,11



For the second straight month, big losses characterized this sector (select crops aside). Supply again outweighed demand for NYMEX crude: oil prices dropped 11.63% to $80.54 a barrel by Halloween. Other energy commodities were hit hard, too: heating oil slipped 5.11%, natural gas 6.35% and unleaded gasoline a whopping 16.94%. While copper moved 1.30% north on the month, silver retreated 5.44% and gold fell 2.94%; platinum futures lost 5.38%. Silver ended October at $16.11 an ounce, gold at $1,171.60 an ounce. The U.S. Dollar Index gained a little more in October. On September 30, it had settled at 85.94; on Halloween, it closed at 86.92 to go +1.14% for the month.12,13  


With winter coming to northern climes, certain ag commodities had a great month. Wheat futures rose 10.04%, soybean futures 14.31% and corn futures 16.33%. Sugar advanced 3.36%. The major losses came in warm-weather crops: cocoa fell 11.96%, coffee 3.01%.12


September saw a minor acceleration in purchases of both new and existing homes: the National Association of Realtors reported resales up 2.4% and the Census Bureau found a 0.2% monthly advance in sales of new residences. Year-over-year, new home sales had improved 17.0%. NAR’s pending home sale index rose 0.3% for September after falling 1.0% for August. As for home prices, the yearly gain in the S&P/Case-Shiller Home Price Index continued to moderate, lessening 1.1% to 5.6% in the August edition.2,14


Markedly declining mortgage rates may have promoted an increase in home buying for October. On October 30, Freddie Mac had the average interest rate on a conventional home loan at 3.98%. In Freddie’s September 25 Primary Mortgage Market Survey, it was up at 4.20%. While the mean rate that Freddie measured for the 1-year ARM was 2.43% in both surveys, the 15-year fixed became cheaper in October with average interest rates falling to 3.13% from 3.36%, and so did 5/1-year ARMs with mean rates falling from 3.08% to 2.94%.15


As the housing industry said goodbye to another summer, the yearly rate of housing starts topped the 1 million mark again thanks to a 6.3% September rise in groundbreaking. The Census Bureau also noted a 1.5% gain in building permits for that month.16


Last month, one of the biggest threats to stocks wasn’t an economic development but a disease. The first Ebola cases reported in the U.S. and the fear about the global reach of the virus contributed to the Dow’s triple-digit plunges as much (or more) than headlines from Europe and China. The fears eventually lessened, the market went back to focusing on fundamentals, and U.S. equities came out ahead. Across October, the DJIA rose 2.04% to 17,390.52, the S&P 500 2.32% to 2,018.05, the Nasdaq 3.06% to 4,630.74 and the Russell 2000 a tremendous 6.52% to 1,173.51, taking its YTD return to +0.85%. The CBOE VIX lost 2.28% in October, descending to 14.03 on Halloween.1

















S&P 500






10/31 RATE










Sources:,, - 10/31/141,17,18

Indices are unmanaged, do not incur fees or expenses, and cannot be invested into directly.

These returns do not include dividends.


So, is Wall Street poised for a great month? The market doesn’t seem to be complaining (yet) about the lack of easing from the Fed, as it remains sensitive and responsive to the needs and wishes of investors. November began with the S&P at another all-time peak, and the factors which may affect the market the most appear predictable: earnings, the mid-term elections, and the ECB’s decision on quantitative easing. On Halloween, Thomson Reuters said corporate earnings growth was averaging 9.3% with 76% of S&P 500 firms so far beating estimates, we just got the second impressive quarterly GDP reading in a row, and the Fed likely won’t make a move with interest rates until at least mid-2015 – all factors that might inspire some calm and some further gains for stocks, or at least the S&P hanging around the 2,000 level for a while.19


UPCOMING ECONOMIC RELEASES: Coming up, the important economic reports include: October’s ISM services PMI and the September ADP employment report (11/5), the October Challenger job-cut report (11/6), the October employment report from the Labor Department (11/7), September wholesale inventories (11/12), October retail sales, the initial November consumer sentiment index from the University of Michigan, and September business inventories (11/14), October industrial output (11/17), the October PPI (11/18), the October Fed policy meeting minutes and October housing starts and building permits (11/19), October existing home sales, the October CPI and the Conference Board’s latest leading indicator index (11/2o), September’s Case-Shiller home price index, the Conference Board’s November consumer confidence index and the second estimate of Q3 growth from Washington (11/25), and then a raft of data all at once on the eve of Thanksgiving – October new home sales, pending home sales, personal spending and hard goods orders plus the final November University of Michigan consumer sentiment index (11/26).


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Why People Want Independent Financial Advisors (Updated 2014)

Why People Want Independent Financial Advisors

In some cases, “independent” is better.


Provided by PlanningWorks


Times have changed – and so have financial advisors. Today, people don’t want financial advice from a salesman. Instead, they want a relationship with a financial professional who is candid, trustworthy and thoroughly educated, and who provides personalized financial consulting for each client.


That search often leads them to a fee-based or fee-only financial advisor or a Registered Investment Advisor.


A pleasant alternative to Wall Street. A paradigm shift has happened, and the traditional brokerage houses are witnessing its impact. Although old-school “stock brokers” have pretty much gone the way of the wooly mammoth, you still have a sales-first mentality in place at the big banks and Wall Street brokerages. If you’re employed by one of them, the mantra is simple: make a sale, earn a commission. As they try to serve their clients, these “wirehouse” brokers regularly contend with sales quotas and the inherent potential for conflicts of interest.


In a recent Charles Schwab survey of brokers at large financial firms, 78% of the respondents expressed their belief that their clients felt more loyalty to them than the Wall Street firm and that 70% of their clients would follow them if they left it. Many investment professionals start their careers with the wirehouses, and 65% of the brokers under the age of 40 surveyed said becoming an independent Registered Investment Advisor appealed to them. Not only that, 76% of respondents felt that the number of registered representatives leaving the wirehouses would increase in the coming years.1,2


Consumers are savvy, and it isn’t surprising that they are turning elsewhere for financial advice. In particular, there are three popular resources.


A fee-based financial advisor has structured his or her practice to promote earning income from fees instead of commissions. The emphasis is on advice. An independent, fee-based financial advisor also has freedom – freedom to choose the most appropriate products and services for your risk tolerance and investment goals. (More about that in a moment.)


Fee-only financial advisors earn no commissions at all. They derive 100% of their income from client fees, either annual management fees or hourly or per-project consulting fees. With this compensation arrangement, you know that the advisor is available to help you address myriad issues in your financial life, not simply those that could generate commissions linked to product sales.


A Registered Investment Advisor (RIA) usually works to manage the assets of high net worth investors. The management fees usually represent a percentage of the assets a client has invested. RIAs have to register with the Securities and Exchange Commission or the securities authorities in the states in which they operate. They also have a fiduciary duty to their clients – that is, their actions and investment recommendations must be in the client’s best interest.3


In 2014, Registered Investment Advisors are managing $1.5 trillion of invested assets. From 2008-12, assets under management by RIAs grew an average of 8.8% per year. In that same stretch, the population of RIAs grew 8% per year.4


People need unbiased advice. That’s probably the #1 reason why people seek an independent financial advisor. They know that the advice they receive is not shaped by sales incentives or directives. There is often a candor to the discussion that may not always be present at a bank or a brokerage.


People want more investment choices. An independent financial advisor is free to offer investments from dozens, maybe hundreds of companies, rather than the investments of a single company. In addition, that independent advisor can unhesitatingly tell you if an investment is or isn’t appropriate for your financial situation.


This is the age of independence. When it comes to the financial future, no one wants to be “sold” – just advised. That’s why we’ve seen the rise of a new kind of financial advisor who puts the client relationship first.


PlanningWorks may be reached at 512 498-7526 or


Taking Taxes Into Account When Saving & Investing

Taking Taxes Into Account When Saving & Investing

It isn’t always top of mind, but it should be.


Provided by PlanningWorks


How many of us save and invest with an eye on tax implications? Not that many of us, according to a recent survey from Russell Investments (the global asset manager overseeing the Russell 2000). In the opening quarter of 2014, Russell polled financial services professionals and asked them how many of their clients had inquired about tax-sensitive investment strategies. Just 35% of the polled financial professionals reported clients wanting information about them, and just 18% said their clients proactively wanted to discuss the matter.1


Good financial professionals aren’t shy about bringing this up, of course. In the Russell survey, 75% of respondents said that they made tax-managed investments available to their clients.1


When is the ideal time to address tax matters? The end of a year can prompt many investors to think about tax issues. Investors’ biggest concerns may include any sudden changes to tax law. Congress often saves such changes for the eleventh hour. Sometimes they present opportunities, other times unwelcome surprises.


The problem is that your time frame can be pretty short once December rolls around. You can’t always pull off that year-end charitable donation, gift of appreciated securities, or extra retirement plan contribution; sometimes your financial situation or sheer logistics get in the way. It is better to think about these things in July or January, or simply year-round.


While thinking about the tax implications of your investments year-round may seem like a chore, it may save you some money. Your financial services professional can help you stay aware of the tax ramifications of certain financial moves.


Think about taxes as you contribute to your retirement accounts. Do you contribute to a qualified retirement plan at work? In doing so, you can lower your taxable income (and your yearly tax liability). Why? Those contributions are made with pre-tax dollars. In 2014, you can contribute up to $17,500 to a 401(k) or 403(b) account or the federal government’s Thrift Savings Plan. If you are 50 or older this year, you can put in up to $23,000 into these accounts. The same is true for most 457 plans. This can reduce your taxable income and lower your tax bill.2,4


Think about where you want to live when you retire. Certain states have high personal income tax rates affecting wealthy households, and others don’t levy state income tax at all. If you are wealthy and want to retire in a state with higher rates, a Roth IRA may start to look pretty good versus a traditional IRA. Withdrawals from a Roth IRA aren’t taxed (assuming the Roth IRA owner follows IRS rules), because contributions to a Roth are made with after-tax dollars. Distributions you take from a traditional IRA in retirement will be taxed.2


What capital gains tax rate will you face on a particular investment? In 2013, the long-term capital gains tax rate became 20% for high earners, up from 15%. On top of that, the Affordable Care Act Surtax of 3.8% effectively took the long-term capital gains tax rate to 23.8% for investors earning more than $200,000.2,3


Greater capital gains taxes can actually be levied in some cases. Take the case of real estate depreciation. If you sell real property that you have depreciated, part of your gain will be taxed at 25%. The long-term capital gains tax rate for collectibles is 28%. Own any qualified small business stock? If you have owned it for over five years, you typically can exclude 50% of any gains from income, but the other 50% will be taxed at 28%. Lastly, if you sell an asset you’ve held for less than a year, the money you realize from that sale will be taxed at the short-term rate (i.e., regular income), which could be as high as 39.6%.2,3


Are you deducting all you can? The mortgage interest deduction is not always noticed by taxpayers. If a home loan exceeds $1.1 million, interest above that amount may not qualify for a deduction. Itemizing can be a pain, but may bring you more tax savings than you anticipate.2


A tax-sensitive investing approach is always specific to the individual. Therefore, any strategy needs to start with an in-depth discussion with your tax or financial professional.


PlanningWorks may be reached at 512 498-7526 or


The Right Beneficiary (Updated 2014)

The Right Beneficiary

Who should inherit your IRA or 401(k)? See that they do.


Provided by PlanningWorks


Here’s a simple financial question: who is the beneficiary of your IRA? How about your 401(k), life insurance policy, or savings account? You may be able to answer such a question quickly and easily. Or you may be saying, “You know… I’m not totally sure.” Whatever your answer, it is smart to periodically review your beneficiary designations.


Your choices may need to change with the times. When did you open your first IRA? When did you buy your life insurance policy? Was it back in the Eighties? Are you still living in the same home and working at the same job as you did back then? Have your priorities changed a bit since then – perhaps more than a bit?


While your beneficiary choices may seem obvious and rock-solid when you initially make them, time has a way of altering things. In a stretch of five or ten years, some major changes can occur in your life – and they may warrant changes in your beneficiary decisions.


In fact, you might want to review them annually. Here’s why: companies frequently change custodians when it comes to retirement plans and insurance policies. When a new custodian comes on board, a beneficiary designation can get lost in the paper shuffle. If you don’t have a designated beneficiary on your 401(k), the assets may go to the “default” beneficiary when you pass away, which might throw a wrench into your estate planning.


How your choices affect your loved ones. The beneficiary of your IRA, annuity, 401(k) or life insurance policy may be your spouse, your child, maybe another loved one or maybe even an institution. Naming a beneficiary helps to keep these assets out of probate when you pass away.


Beneficiary designations commonly take priority over bequests made in a will or living trust. For example, if you long ago named a son or daughter who is now estranged from you as the beneficiary of your life insurance policy, he or she is in line to receive the death benefit when you die, regardless of what your will states. Beneficiary designations allow life insurance proceeds to transfer automatically to heirs; these assets do not have go through probate.1,2


You may have even chosen the “smartest financial mind” in your family as your beneficiary, thinking that he or she has the knowledge to carry out your financial wishes in the event of your death. But what if this person passes away before you do? What if you change your mind about the way you want your assets distributed, and are unable to communicate your intentions in time? And what if he or she inherits tax problems as a result of receiving your assets? (See below.)


How your choices affect your estate. Virtually any inheritance carries a tax consequence. Of course, through careful estate planning, you can try to defer or even eliminate that consequence.


If you are simply naming your spouse as your beneficiary, the tax consequences are less thorny. Assets inherited from a spouse aren’t hit with estate tax, as long the surviving spouse who inherits them is a U.S. citizen.3


When the beneficiary isn’t your spouse, things get a little more complicated for your estate, and for your beneficiary’s estate. If you name, for example, your son or your sister as the beneficiary of your retirement plan assets, the amount of those assets will be included in the value of your taxable estate. (This might mean a higher estate tax bill for your heirs.) And the problem can persist: if your non-spouse beneficiary inherits assets from a 403(b) or a traditional IRA, for example, those assets will usually become part of his or her taxable estate, and his or her heirs might face higher estate taxes down the line. Your non-spouse heir might also have to take required income distributions from that retirement plan someday, and pay the required taxes on that income.4


If you designate a charity or other 501(c)(3) non-profit organization as a beneficiary, the assets involved can pass to the charity without being taxed, and your estate can qualify for a charitable deduction.5


Are your beneficiary designations up to date? Don’t assume. Don’t guess. Make sure your assets are set to transfer to the people or institutions you prefer. Let’s check up and make sure your beneficiary choices make sense for the future. Just give me a call or send me an e-mail – I’m happy to help you.

The Ins & Outs of Life Insurance (Updated 2014)


The Ins & Outs of Life Insurance

Breaking down the different choices.


Provided by PlanningWorks


When it comes to life insurance, there are many options. You may have heard terms like “whole life insurance,” “term insurance,” or “variable insurance,” but what do they really mean? And what are the differences between them?


Well, first let me point out what they have in common: all life insurance policies provide payment to a beneficiary in the event of your death. Aside from that basic tenet, the differences between policy types can be major.


Whole life insurance. This type of insurance covers your entire life (not just a portion or “term” of it) and is sometimes called “straight life insurance” or “permanent life insurance.” The premium payments on a whole life policy are fixed from day one and so is the dollar amount of the coverage.1


Whole life policies accumulate cash value. Just how does that happen? An insurer takes in much more money than it pays out on recently issued whole life policies, as the premium payments are higher relative to the actuarial risk the insurer assumes (those new policyholders are relatively young). The insurance firm directs a portion of these early premium payments into a reserve account, putting those funds into investments (typically conservative ones). The policyholder receives an interest credit linked to the investment performance – and that is how the cash value builds up over time.1,2


When you have held a whole life policy for more than a few years, you can borrow against its cash value, and you can even cancel it and receive its surrender value. The longer you wait, the greater the cash value becomes. Whole life generally isn’t a good choice for young families, who may find the premiums unduly high.1 


Universal life insurance. This is basically whole life insurance, but with a lower net cost over time and a death benefit that isn’t fixed from the outset. Like whole life policies, universal life policies build cash value with tax deferral, but the death benefit actually depends on three factors: your ability to keep making premium payments, the insurer’s policy charges and the credit rating of the policy.1,3


You have some flexibility with universal life policies: you can vary premium payments. That variance may affect the cash value and the payout, however. Month by month, the insurer is calculating the premiums you pay vis-à-vis the policy cost. Any “excess” premium received (plus interest) gets credited to the cash value and that ultimately determines the death benefit. Should you stop paying the premiums or borrow against the cash value such that the policy doesn’t have enough cash to meet expenses, the insurer can simply cancel the policy. (Some universal life policies do offer no-lapse guarantees.) 1,3


Term insurance. Essentially, this is life insurance that you “rent” for X number of years rather than own. Term insurance provides coverage for a set time period (usually 10-30 years). Should you die within that time period, your beneficiaries will receive a death benefit. Both the premium payments and the death benefit on a term policy are fixed from the start.3


If you can’t qualify for whole life or universal life, you may be able to qualify for a term policy. When the term is over, you may be offered the option to renew the coverage for another term, or to convert the policy to a form of permanent life insurance.2


Term life is cheap, but the tradeoff comes when the term is up. Just as you don’t build up home equity by renting, you don’t build up cash value by “renting” life insurance. When the term of coverage is over, you usually walk away with nothing for the premiums you have paid.2


Variable life insurance. A variable life policy is essentially a whole life policy with a riskier investment component. (Correspondingly, a variable universal life policy is a universal life policy with the same characteristic.) In VL and VUL policies, percentages of the cash reserve in your policy may be directed into investment sub-accounts managed by the insurer. Assets allocated to sub-accounts may optionally be put into equity investments rather than fixed-income investments. So in exchange for the possibility of greater reward (greater cash value), you (and the insurer) assume greater risk. The performance of the subaccounts cannot be guaranteed.2


So, which coverage is right for you? Many factors come into play when deciding what type of life insurance will best suit your needs. The best thing to do is speak with a trusted and qualified financial professional who can assist you in looking at all the factors and help you to choose the policy that will work best for you.


PlanningWorks may be reached at 512 498-7526 or

Market Commentary - Month of October 2014

PlanningWorks Presents:







“He that is of the opinion money will do everything may well be suspected of doing everything for money.”

– Ben Franklin





The end of the year is a good time to review (and adjust) the asset allocation of your portfolio. When you see a big difference between stock market performance and bond market performance in a given year, this is especially sensible.





You have two twins, three triplets and four quadruplets in a room; how many total people do you have in the room?



Last month’s riddle:
What may contain hundreds or thousands of wheels yet never moves or rises above the land?



Last month’s answer:

A parking lot.


October 2014

Bullish sentiment certainly waned in September – when the month was over, the Dow, Nasdaq, S&P 500 and Russell 2000 had all retreated to varying degree. Troubling headlines from Asia, the Middle East and Eastern Europe weighed on Wall Street’s collective mind, as did some unexpectedly weak U.S. economic signals. While the Federal Reserve maintained its outlook on interest rates, investors were acknowledging the looming end of QE3. The dollar got even stronger, and the broad commodities market took a severe hit. Housing news was mixed. The S&P notched a new record close of 2,011.36 during the month, then lost 1.8% between that peak and the start of October.1


The latest consumer indicators were mostly encouraging. Personal spending – which had declined 0.1% in July – rose 0.5% for August. Year-over-year, the increase was 4.1%. (The Commerce Department also noted 0.3% wage growth in August.)2,3


Household sentiment, as measured by the University of Michigan’s index, also improved: the index’s final September reading was 84.6 (up from 82.5 at the end of August, and the highest reading since late April). On the other hand, the Conference Board’s consumer confidence index sank a troubling 7.4 points, falling to 86.0.2,4


Shoppers were opening their wallets a bit more as inflation remained benign. Retail sales were up 0.6% in August following the 0.3% gain the Commerce Department recorded for July. August’s headline Consumer Price Index showed a 0.2% retreat, taking the annualized rise in consumer prices down to 1.7%. The core CPI was flat for August.4


Wall Street was disappointed in the August employment report. The Labor Department announced just 142,000 new hires, representing the smallest monthly net job gain since December. Unemployment ticked down to 6.1% and the U-6 rate (including the underemployed) dipped 0.2% to 12.0%.5


Factory activity had surged in July with aircraft orders being the big influence, but that all seemed to reverse in August. Factory orders dropped 10.1% in the eighth month of the year according to the Commerce Department, and August brought 0.1% and 0.4% respective declines in factory and manufacturing production. Durable goods orders fell 18.2% in August. Producer prices were flat in August and up 1.8% in a year.2,4


Given all that, the August drop in the Institute for Supply Management’s factory PMI wasn’t surprising. It came in at 56.6 as opposed to 59.0 for July – still strong, just less so. ISM’s service sector PMI had gained 0.9 points in August, reaching 59.6.2,6 


As the month and quarter wound down, the Commerce Department revised Q2 GDP north again, from 4.2% to 4.6%. Investors were pleased by that and by the Fed’s September policy statement, which again said that interest rates would likely not be adjusted for “a considerable time” after the end of quantitative easing.4,7


Investors watched fluid geopolitical situations on multiple continents. The U.S. led air strikes against ISIS positions in Syria, including oil refineries ISIS had captured. A truce in Ukraine seemed shaky at best: the month ended with Russian separatists killing seven Ukrainian soldiers. Pro-democracy protests in Hong Kong escalated into a blockade and raised fears of violence.3,8


Speaking of China, its latest official factory PMI came in flat for September at 51.1, indicating mild sector expansion; HSBC’s factory PMI for the country was also unchanged at 50.2. The PRC also announced economic initiatives to encourage home buying and assist real estate developers.9


Other key manufacturing gauges were largely unimpressive. The Markit factory PMI for Germany showed sector contraction for the first time in 15 months in September; Markit’s manufacturing PMI for France showed contraction for the fifth month in a row. The eurozone factory PMI came in at 50.3 in September, the poorest reading in 14 months. In a Reuters poll late last month, economists put the chance of the European Central Bank initiating a quantitative easing campaign at 40%; the ECB followed through with that move in early October.10


There were benchmarks that rose in September. Take China’s Shanghai Composite, with its 6.62% gain. Or the Nikkei 225, which advanced 4.86%, or Pakistan’s KSE Composite, up 4.06%. Not all Asia Pacific indices were so fortunate: the Kospi lost 2.34%, the Sensex 0.03%, the ASX 200 5.92% and the Hang Seng 7.31%. In Europe, the CAC 40 gained 0.80% and the DAX 0.04% while the FTSE 100 slipped 2.89%. Ireland’s ISEQ rose 1.91% and Italy’s FTSE MIB advanced 2.16%.11


In the Americas, the Bovespa sank 11.70%, the IPC All-Share 1.41% and the TSX Composite 4.26%. Overseas indices in the Dow Jones family suffered a rough month – the DJ Americas lost 2.89%, the Asia Dow 7.04%, the Europe Dow 4.10% and the Global Dow 3.29%. The STOXX 600 gained 0.32% last month; the MSCI World Index dipped 2.88% while the MSCI Emerging Markets Index slid 7.59%.11,12



September saw a 3.85% rise for the U.S. Dollar Index – the DXY closed out the month at 85.94. That factor alone meant rough going for many commodity futures. Important metals all pulled back: COMEX gold fell 5.98% for the month to close at $1,212.80 on September 30; platinum dropped 8.99%, copper 4.07% and silver 12.40%. Silver futures ended September down at $17.06.13,14  


Crop futures also had a trying September, with major losses for soybeans (16.35%), corn (10.80%), cotton (9.22%) and wheat (13.25%). Sugar retreated just 0.06%, coffee gained just 0.03%. Cocoa actually advanced 1.35%.14


Did air strikes on ISIS-controlled refineries put any real pressure on oil prices? No. NYMEX crude lost 4.72% last month and ended September at $92.00. Unleaded gasoline sank 7.23% and heating oil fell 7.24%. Natural gas futures, partly reflecting fears over security of Ukraine pipelines, rose 1.10%.14


Existing home sales had slipped 1.8% in August, in the first decline the National Association of Realtors had measured since March. Year-over-year, the sales pace had decreased by 5.3%. NAR also reported pending home sales down 1.0% for August, a switch from July’s 3.2% gain. The Census Bureau, on the other hand, reported new home sales up 18.0% in August. It noted an 8.0% annualized rise in new home prices and a 33.0% yearly improvement in new home buying.2,15


At the jobsite, the August numbers were negative. Construction spending was down 0.8% for the month, housing starts 14.4% and building permits 5.6%. A falloff in multi-family projects accounted for much of those retreats. Groundbreaking for single-family homes was up 4.2% year-over-year as of August.2,16


September saw mortgages grow more expensive. By the time Freddie Mac’s September 25 Primary Mortgage Market Survey rolled around, the average interest rate on a 30-year fixed loan was up to 4.20%. Rates on the refinancer’s favorite, the 15-year fixed, were averaging 3.36%. Average rates on the 5/1-year ARM and 1-year ARM respectively reached 3.08% and 2.43%. Back on August 28, mean interest rates on mortgage types were estimated as follows: 30-year FRM, 4.10%; 15-year FRM, 3.25%; 5/1-year ARM, 2.97%; 1-year ARM, 2.39%.17


Well, the CBOE VIX certainly had a fine month. It gained 36.14% to close at 16.31 on September 30. Small caps were battered last month – the Russell 2000 fell 6.19%. The big three retreated far less than that – the Dow lost 0.32%, the Nasdaq 1.90% and the S&P 1.55%. At September’s end, here was where the key U.S. indices finished: DJIA, 17,042.90; S&P, 1,972.79; Nasdaq, 4,493.39; RUT, 1,101.68.11

















S&P 500






9/30 RATE










Sources:,, - 9/30/1411,18,19

Indices are unmanaged, do not incur fees or expenses, and cannot be invested into directly.

These returns do not include dividends.


October has been a famously either/or month for stocks (plenty of big ascents, descents and swings over the years), and equities are being subjected to major volatility as the month opens thanks to recent world events. Unhappily, October 1 saw a correction in the Russell 2000. In the best-case scenario, better-than-expected earnings take center stage for the bulk of the month, complemented by upbeat economic indicators (manufacturing expansion, net job gains above the 200,000 level, a good initial reading on Q3 growth, solid fall consumer spending). The Fed’s longstanding asset purchase program is about to end; Wall Street is hopefully ready to accept that. October may throw more challenges at stocks than we have seen in several months. At junctures like these, hanging on and settling in for the ride often ends up being a wise move.20 


UPCOMING ECONOMIC RELEASES: Here is the rollout of important economic indicators and reports for the rest of this month: the Labor Department’s September jobs report and the September ISM services PMI (10/3), the release of the minutes from the Fed’s most recent policy meeting (10/8), August wholesale inventories (10/9), September retail sales, a new Beige Book from the Fed and September’s PPI (10/15), September industrial output (10/16), the initial University of Michigan consumer sentiment index  for October and the numbers on September housing starts and building permits (10/17), September existing home sales (10/21), September’s CPI (10/22), the Conference Board’s September leading indicators (10/23), September new home sales (10/24), September pending home sales (10/27), the Conference Board’s October consumer confidence index, the August Case-Shiller home price index and September hard goods orders (10/28), a Fed policy announcement (10/29), the first estimate of Q3 GDP from the federal government (10/30), and lastly the personal spending report for September and the final October University of Michigan consumer sentiment reading (10/31).



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Be watching for your Social Security Statement

The Social Security Administration recently announced they will resume the periodic mailing of Social Security Statements – once every five years for most workers. They are also encouraging everyone to create a secure my Social Security account online, to access your statements anytime.

You can create an account at:

To read more, visit:!/post/9-2014-1

If you have any questions or concerns, please reach out to a member of your PlanningWorks team

What Beneficiaries Need to Know (Updated 8/14)

What Beneficiaries Need To Know

What do you do when an account owner passes away?


Provided by PlanningWorks


If your loved ones have invested, saved or insured themselves to any degree, you may be named as a beneficiary to one or more of their accounts, policies or assets in the event of their deaths. While we all hope “that day” never comes, we do need to know what to do financially if and when it does.


Legally, just who is a beneficiary? IRAs, annuities, life insurance policies and qualified retirement plans such as 401(k)s and 403(b)s are set up so that the accounts, policies or assets are payable or transferrable on the death of the owner to a beneficiary, usually an individual named on a contractual document that is filled out when the account or policy is first created.


In addition to the primary beneficiary, the account or policy owner is asked to name a contingent (or secondary) beneficiary. The contingent beneficiary will receive the asset if the primary beneficiary is deceased.


Some retirement accounts and policies may have multiple beneficiaries. Charities are also occasionally named as beneficiaries. If you have individually listed one (or more) of your kids or grandkids as designated beneficiaries of your 401(k) or IRA, that designation will usually override any charitable bequest you have stated in a trust or will.1


A will is NOT a beneficiary form. When it comes to 401(k)s and IRAs, beneficiary designations are commonly considered first and wills second. Be mindful of who you select. If you willed your IRA assets to your son in 2008 but named the man who is now your ex-husband as the beneficiary of your IRA back in 1996, those IRA assets are set up to transfer to your ex-husband in the event of your death.1


If a retirement account owner passes away, what steps need to be taken? First, the beneficiary form must be found, either with the IRA or retirement plan custodian (the financial firm overseeing the account) or within the financial records of the person deceased. Beyond that, the financial institution holding the IRA or retirement plan assets should also ask you to supply:


* A certified copy of the account owner's death certificate

* A notarized affidavit of domicile (a document certifying his or her place of residence at the time of death)


If the named beneficiary is a minor, a birth certificate for that person will be requested. If the beneficiary is a trust, the custodian will want to see a W-9 form and a copy of the trust agreement.2


If you are named as the primary beneficiary, you may have three options for claiming the assets, regardless of what kind of retirement savings account you have inherited:


* Open an inherited IRA and transfer or roll over the funds into it.

* If you are the spouse, you can roll over or transfer the assets to your own, existing IRA. 

* Withdraw the assets as a lump sum (liquidate the account, get a check).


Before you make ANY choice, you should welcome the input of a tax advisor, and discuss any limitations or consequences that may apply to your situation.2


What if you are a spousal beneficiary? If that is the case, you may elect to:


* Roll over or transfer assets from a traditional IRA, Roth IRA, SEP-IRA or SIMPLE IRA into your own traditional or Roth IRA, or an inherited traditional or Roth IRA

* Withdraw the assets as a lump sum

* Roll over or transfer qualified retirement plan assets from a 401(k), 403(b), etc. into your own retirement account, or take them as a lump sum.2,3


What if you are a non-spousal beneficiary? If this is so, you may elect to:


* Roll over or transfer assets from a traditional IRA, Roth IRA, SEP-IRA, SIMPLE IRA or qualified retirement plan into an inherited IRA

* Withdraw the assets as a lump sum.2


What if a qualified (i.e., irrevocable) trust is named as the beneficiary? If that is the circumstance, the trustee has two choices:


* Transfer assets from a traditional IRA, Roth IRA, SEP-IRA, SIMPLE IRA or qualified retirement plan into an inherited IRA

* Withdraw the assets as a lump sum.2


The next calendar year will be very important. Inheritors of retirement accounts have until September 30 of the year following the original account owner’s death to review and remove beneficiaries, and until December 31 of that year to divide the IRA assets among multiple beneficiaries. Usually, December 31 of the year after the original retirement plan owner’s passing is the deadline for the first RMD (Required Minimum Distribution) from an inherited traditional or Roth IRA.4


Now, how about U.S. Savings Bonds? If you are named as the primary beneficiary of a U.S. Treasury Bond, you have three options:


* Redeem it at a financial institution (you will need your personal I.D. for this).

* Get the security reissued in your name or the names of multiple beneficiaries. You do this via Treasury Department Form 4000, which you must sign before a certifying officer at a bank (not a notary). Then you send that signed form and a certified copy of the death certificate to a Savings Bond Processing Site.

* Do nothing at all, as the primary beneficiary automatically becomes the bond owner when the original bond owner passes away.5


What about savings & checking accounts? Bank accounts are often payable-on-death (POD) assets or “Totten trusts.” All a beneficiary needs to claim the assets is his or her personal identification and a certified copy of the death certificate of the original account holder. There is no need for probate. (Some states limit charities and non-profits from being POD beneficiaries of bank accounts.)5


How about real estate? Lastly, it is worth noting that about a dozen states use transfer-on-death (TOD) deeds for real property. If you live in such a state, you have to go to the county recorder or registrar, usually with a certified copy of the death certificate and a notarized affidavit which informs the recorder or registrar that ownership of the property has changed. If the deed names multiple beneficiaries and some are dead, the surviving beneficiaries must present the recorder or registrar with certified copies of the death certificates of the deceased beneficiaries.5


PlanningWorks may be reached at 512 498-7526 or


Why I'm Done with Financial Goals

Why I’m Done with Financial Goals… click to read more!

Market Commentary - Week of 9/15/14

The Markets

If you’re familiar with fairy tales, you’ve probably encountered a story or two that involves the granting of wishes. Usually, these are cautionary tales. Well, there was some wishing going on around the globe last week and, if the wishes come true, the outcomes may be less beneficial than anticipated.

In the United States, some folks wish Chairwoman Janet Yellen and her peers at the Federal Reserve would set a timetable for rate hikes. Barron’s offered the opinion that abandoning a data-driven process in favor of a calendar-driven one would be a mistake. Recent improvements including a slight spike in consumer confidence, somewhat stronger consumer spending, and a generally improving job market remain mired in residue of the Great Recession. For instance:

“Housing remains in the doldrums as potential buyers cite insufficient savings, excess debt, poor credit scores, and, yes, their incomes as stumbling blocks on the road to home ownership. Higher rates won't fix any of those problems, and even setting a schedule for rate hikes could create head winds if it causes loans to become harder to get in anticipation of the change.”

Across the pond, the United Kingdom of Great Britain and Northern Ireland (U.K.) may cover a lot less territory if Scotland wins independence in next week’s referendum. Until recently, few thought the measure had enough support to pass, but the latest polls say that it may happen. While independence may seem like a reasonable objective, there are economic and other challenges attached that could profoundly affect the new country. These include:

• What currency will the Scots adopt? (U.K. leaders have said Scotland cannot keep the Pound.) 
• How will the U.K.’s national debt be divided? (By population? By gross domestic product?)
• How will markets respond to Scottish independence? (Will Scotland establish its own stock market? Will companies relocate to England?)
• How will the remainder of the United Kingdom be affected?

There is an adage that may prove appropriate here: Be careful what you wish for because you just might get it. 

Data as of 9/12/14
1-Week    Y-T-D    1-Year    3-Year    5-Year    10-Year
Standard & Poor's 500 (Domestic Stocks)    -1.1%    7.4%    18.0%    19.5%    13.6%    5.8%
10-year Treasury Note (Yield Only)    2.6    NA    2.9    1.9    3.4    4.2
Gold (per ounce)    -2.7    2.5    -7.3    -12.4    4.3    11.9
Bloomberg Commodity Index    -2.8    -3.5    -6.6    -8.8    -0.5    -1.7
DJ Equity All REIT Total Return Index    -5.0    15.3    16.1    14.9    16.6    8.8
S&P 500, Gold, Bloomberg Commodity Index returns exclude reinvested dividends (gold does not pay a dividend) and the three-, five-, and 10-year returns are annualized; the DJ Equity All REIT Total Return Index does include reinvested dividends and the three-, five-, and 10-year returns are annualized; and the 10-year Treasury Note is simply the yield at the close of the day on each of the historical time periods. Sources: Yahoo! Finance, Barron’s,, London Bullion Market Association. Past performance is no guarantee of future results. Indices are unmanaged and cannot be invested into directly. N/A means not applicable.

BEWARE UNPAID INTERNSHIPS! For decades, internships have offered opportunities to learn new skills and find gainful employment. However, a rise in lawsuits involving unpaid interns and the companies where they worked has focused new attention on the subject. In an article on the topic, The Economist offered some information worth pondering:

“Banks and accountancy firms now hire more than half of their recruits through their internship programs; careers in politics, medicine, the media, and many other fields nearly always begin with an internship. Two-thirds of American students have at least one internship under their belts before they leave college. But they are often badly compensated: nearly half the internships in America are completely unpaid. How do unpaid internships exist in countries that have minimum-wage laws?”

It’s an interesting question and one that’s answered in Fact Sheet #71 from the U.S. Department of Labor. The sheet sets forth six criteria that must be met for interns to work without pay. In broad terms, unpaid internships:

1. Must be similar to training provided in an educational environment
2. Must benefit the intern
3. Must not displace regular employees
4. Must not provide immediate advantage to the employer 
5. Do not necessarily end in employment
6. Are clearly understood to be unpaid by both employer and intern 

So, which internships, paid or unpaid, are most likely to help someone land a job? A recent study from LinkedIn examined the availability of internships by field as well as the likelihood of an internship leading to a full-time position. The best bets for prospective interns were accounting, computer networking, semiconductors, aviation and aerospace, investment banking, design, and consumer goods.

Weekly Focus – Think About It

“Individual commitment to a group effort – that is what makes a team work, a company work, a society work, a civilization work.”
--Vince Lombardi, Coach of the Green Bay Packers (1959-1967)

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