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Investment Management:

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Welcome to 2013 – as promised, the Fiscal Cliff negotiations provided quite a side-show all the way up to the last minute in 2012. But we did, as we thought all along, get a deal that helps avoid the worst parts of the Fiscal Cliff. Even though the newest compromise from Congress leaves some questions unanswered, we probably have enough information now to avoid a recession in 2013. Below, our team has put together some bullet points to help highlight where we stand:

1. The Fiscal Cliff has turned into a Fiscal Slope… the deal is a very positive development for the economy vs. what “could” have happened. Given what we know now, we estimate a fiscal drag of about -1% on our economy in 2013. Worst case scenarios pointed to a -4%+ drag, which could have landed us right in a recession.

2. Payroll Tax Holiday EXPIRED = 2% hike on first $113,700 in income or about a max of $200 a month. So tax rates are going UP for nearly everyone, but 90% of the new tax revenue will be collected families who earn $1.0 million or more. (according to the Kogod Tax Center at American University) 

3. The AMT (Alternative Minimum Tax) Patch is made permanent with new provisions for future inflation. This is an extraordinary positive, as more than 30 million families in the US would have been blindsided by a tax they had never seen to the tune of $3700 per family!

4. Taxes on dividends and capital gains stay the SAME except for: (A) filers with modified AGI of ($200K single/$250K married) who will now be subject to an extra 3.8% Medicare tax on dividends/capital gains (effectively an 18.8% rate); and (B) filers with modified AGI of ($400K single/$450K married) who will now have dividends/capital gains taxed at 20% and be subject to an additional 3.8% Medicare tax on dividends/capital gains (effectively a 23.8% rate).

5. Americans KEEP their Mortgage Interest Deduction – very positive for the housing market. Plus there is still tax relief for Mortgage Debt Forgiveness – also very positive for housing. (There were 98,000 short sales in Q3 2012, as an example of how prevalent this is, debt forgiveness will continue to allow the housing market to clear and recover).

6. “Doc Fix” was extended – meaning that Medicare enrollees should not have any new worries about receiving care. Medicare reimbursements to doctors were extended through 2013.

7. Estate/Gift Tax Exemption remains at $5.12 million per person for 2013 and is indexed to inflation in the future. The maximum estate tax rate was raised to 40%.

8. The spending sequester was delayed until March 1, 2013. This is good and bad news; the stock market likes this in the short term, but the debate will be had again once the new Congress is sworn in.

In summary, this deal is a very positive outcome for the economy as the “up-hill battle” in 2013 has been significantly side stepped. This deal will be very good for consumer sentiment and confidence and is, in turn, good news for the stock market and investors. This deal is very close to what we were expecting in the months leading up to the new year and we have positioned your portfolio for this type of environment.

Bottom line: the crisis was averted, for now, but a can of worms will be re-opened in just a few short weeks as Congress approaches another debt-ceiling debate where spending cuts will be the focus.

 

CIA in the Press


Special CIA Fiscal Cliff Deal Audio

 

The long awaited Fiscal Cliff debate is over. And deals have been made. Clients have been calling us with a lot of questions and inquiries about what to do next, not to mention the calls we’ve been getting each week leading up to this on Money Matters. Read More


CIA’s CNN Interview: 4 Things To Do in 2013

Mitch Reiner spent Sunday morning in the studio at Early Start, a CNN morning news show, discussing his top four tips that people should do financially in 2013. Read More

 

Reiner Talks to WSJ About Troubles in Emerging Market ETFs

 

As more investors seek out opportunities to trade in emerging markets, the Vanguard MSCI Emerging Markets ETF has been a strong assets to those investing in China, South Korea, Brazil, Taiwan, and others. But just recently, investment giant Vanguard is now switching the benchmark for the ETF, causing a controversial backlash from investors. Read More

 

 

Question of the Month

 

Our question this month comes from a radio listener who

writes: We are in our mid 60’s and have $100,000 to invest for both growth and income with a very limited amount of risk. Any suggestions?

 

CIA: It is really tough to give specific advice with the limited information provided. If you are looking for an investment that pairs both stocks and bonds together I can give you a couple of ideas. If you want to manage the money yourself I suggested opening a Vanguard or Charles Schwab account. There are no fees to have an account and you will have plenty of no load mutual funds to chose from as well as stocks and ETF’s that trade for $8.95. Look into VWINX ( 65% bonds- 35% stocks) and VWELX (60% stocks and 40% bonds). Both of these are low cost Vanguard mutual funds.

Also, if you are interested in hiring a manager I attached a copy of the latest performance of the WELA 50-50 portfolio. This is a portfolio that manages 50% stocks and 50% bonds. If you have any other questions about either investment feel free to reach back out to me.

 

Capital Recap December 2012
  • Post-Thanksgiving and early December, the markets posted some consecutive weekly gains with the S&P inching by 0.50% and the Dow slightly gaining at 0.12%. 
  • In mid-December, treasuries saw a slight decline in price with yields averaging around 1.70% on the 10 year bond. 
  • Overall for 2012, we saw existing home sales rise 9.4% with new home applications rising 4.5% during the first week of December.

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Matt Reiner’s Tips to Dow Jones on Schwab ETFs 

In a recent interview with Dow Jones Newswires’ Murray Coleman, Matt Reiner shared that he’s likely to start using Schwab ETFs now for client portfolios.

Read More 

 

Emerging Market ETFs on the Rise 

Mitch Reiner was recently quoted in an interview with Investor’s Business Daily on the recent movement of basic materials and emerging market ETFs, particularly Materials commodities, moving from worst to first this year.

Read More


 

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