A Generation Needs Help To Keep Its Dreams Alive.
Presented by Rose Greene Financial

What do you think your retirement will be like? If you are like many baby boomers, you may be pessimistic about it. Look at the results of a recent poll conducted by the Associated Press and NBC’s LifeGoesStrong.com:

• Only 11% of boomers think they will retire to a comfortable lifestyle.
• 24% of boomers say they have no retirement savings.
• 64% feel that Social Security will be their main source of retirement income.
• 25% of boomers in the work force say they will never retire.
• 66% of working boomers intend to work part-time or full-time after they end their careers. Yet the most recent Social Security Administration figures (2008) show that less than 50% of Americans age 65-74 earned income from a job.1

Hopefully, you have reason for optimism. The poll found that about 1 in 10 respondents had more than $500,000 in dedicated retirement savings. Additionally, about half of those surveyed had retirement savings of more than $100,000.1

If you don’t, what can you do to save your dream? Retiring later may help – it will give you added years of earned income and group health coverage. You can also apply for Social Security later, which can result in substantially greater benefits.

Don’t want to retire later? Then you may want to pour as much as you can into your 401(k) or IRA. If you are 50 and have a Roth IRA balance of about $80,000, you could potentially wind up with more than $450,000 in that IRA at age 65 if you contribute $5,000 per year and realize a 9% annual return. A 50-year-old with a $250,000 401(k) balance could potentially end up with more than $1 million in that 401(k) by age 65 if he or she contributes $16,500 a year and gets an 8% annual return. (That’s not even factoring in employer matches and “catch-up” contributions after age 50.) However, note that this does not include trading commissions, account fees and inflation, which if taken into account, would lower these numbers.

Yes, tapping your home equity may prove useful – but tax reduction strategies and new income sources resulting from investments or insurance contracts might give you a little more breathing room so you don’t have to make that decision.

Start now, because procrastination is your greatest enemy. Meet with a financial professional – one with significant experience in retirement planning. You may have more options than you realize. Fight for your retirement dream!

Rose Greene  may be reached at (310)399-1200 or rose@rosegreene.com. www.rosegreene.com

This material was prepared by MarketingLibrary.Net Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. All information is believed to be from reliable sources; however we make no representation as to its completeness or accuracy. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. Citations.

1 – msnbc.msn.com/id/42436897/ns/business-personal_finance/t/poll-reveals-baby-boomers-retirement-fears/ [4/5/11]
2 – investopedia.com/articles/retirement/08/catch-up.asp [5/19/11]

LPL Financial Model Wealth Portfolios Awarded Advisory Solutions Product of the Year by Money Management Institute Advisory Platform Honored for Innovation That Drives Industry Growth

Wednesday, 18 May 2011 | 9:00 AM ET

BOSTON, May 18, 2011 /PRNewswire via COMTEX/ — LPL Financial, the nation’s largest independent broker-dealer* and wholly owned subsidiary of LPL Investment Holdings Inc. (NASDAQ: LPLA), today announced that its Model Wealth Portfolios (MWP) platform has been awarded the Advisory Solutions Product of the Year by Money Management Institute (MMI), the leading national organization for the advisory solutions industry.

This prestigious industry award is granted to the firm that launched the most innovative advisory platform that contributed to the growth of the industry.

This year, LPL Financial was selected out of nearly 30 nominees, all of which in turn participated in a competitive selection process.

First launched in 2008, the MWP platform is one of the three centrally managed fee-based platforms offered to advisors by LPL Financial. Model Wealth Portfolios offers client-centric theme-based investment portfolios for a broad range of investor preferences including, among many others, risk aware, income generation and tax conscious investing.

Each portfolio combines professionally designed asset allocation strategies and disciplined mutual fund and ETF selections that are aligned with the unique investment goals of each advisor’s client. Additionally, the MWP platform features strategies from LPL Financial Research and three industry-leading ETF strategists including BlackRock, Cougar Global Investments and Quantitative Advantage. Each of the strategists brings unique investment philosophies, knowledge and expertise to MWP, enabling advisors to execute a turnkey approach to asset allocation, investment selection and implementation.

Importantly, the MWP platform also offers financial advisors discretionary control over all aspects of portfolio model construction and the management process, as well as significantly greater efficiency in how they operate their practices through an asset oversight versus day-to-day asset management approach.

John Moninger, LPL Financial Executive Vice President of Advisory and Brokerage Consulting Services, said, “We are grateful to Money Management Institute for their recognition of our MWP platform. The role this platform has played in the industry is due to the collaborative approach of our asset management partners, and our advisors, who have helped drive the ideas around its development. Our receipt of this award reflects the combination of scale-driven platform innovation and advisor focus that we emphasize as an organization.” Christopher Davis, President of Money Management Institute, said, “We congratulate LPL Financial on their receipt of the Advisory Solutions Product of the Year. Advisory platform innovation that directly supports greater efficiency in asset management is central to the continued growth of our industry. We are proud to support and recognize the leading companies who are building the top platforms in this space.” In just three years, Model Wealth Portfolios has become one of the fastest growing fee-based platforms at LPL Financial. Reflecting this growth, advisory assets as of the end of the first quarter of 2011 were $99.7 billion, an increase of 23.1% from $81 billion of advisory assets from the year-ago reporting period in 2010, shortly before the introduction of ETF strategies to the MWP platform. Total advisory and brokerage assets as of the end of the first quarter of 2011 were $330.1 billion.

About LPL Financial LPL Financial, a wholly owned subsidiary of LPL Investment Holdings Inc., is an independent broker-dealer. LPL Financial and its affiliates offer proprietary technology, comprehensive clearing and compliance services, practice management programs and training, and independent research to over 12,500 financial advisors and over 750 financial institutions. Additionally, LPL Financial supports approximately 4,000 financial advisors who are affiliated and licensed with insurance companies with customized clearing, advisory platforms and technology solutions. LPL Financial and its affiliates have over 2,600 employees with employees and offices in Boston, Charlotte, and San Diego. For more information, please visit http://www.lpl.com/.

Securities and advisory services offered through LPL Financial, a Registered Investment Adviser, Member FINRA/SIPC *Based on total revenues, Financial Planning magazine, June 1996-2010 LPLA-C LPL Financial Media Contacts Joseph Kuo Michael Herley LPL Financial Kekst and Company (704) 733-3931 (212) 521-4897 media.inquiries@lpl.com KEYWORD: FIN

Things you can do before and for the New Year.
Presented by Rose Greene Financial

The end of the year is a good time to review your personal finances. What are your financial, business or life priorities for 2011? Try to specify the goals you want to accomplish. Think about the consistent investing, saving or budgeting methods you could use to realize them. Also, consider these year-end moves.

Think about adjusting or timing your income and tax deductions. If you earn a lot of money and have the option of postponing a portion of the taxable income you will make in 2010 until 2011, this decision may bring you some tax savings. You might also consider accelerating payment of deductible expenses if you are close to the line on itemized deductions – another way to potentially save some bucks.

Think about putting more in your 401(k) or 403(b). You can contribute up to $16,500 to these accounts in 2010, with a $5,500 catch-up contribution also allowed if you are age 50 or older. Has your 2010 contribution approached the annual limit? There is still time to put more into your employer-sponsored retirement plan.₁

Can you max out your IRA contribution at the start of 2011? If you can do it, do it early – the sooner you make your contribution, the more interest those assets will earn. And if you haven’t made your 2010 IRA contribution yet, you can still do so through April 15, 2011.₁

The 2011 contribution limits on traditional and Roth IRAs are unchanged from 2010. You can contribute $5,000 to your IRA next year if you are age 49 and below, $6,000 if you are age 50 and above.₂

Consider a Roth IRA conversion before 2010 ends. Now anyone may convert a traditional IRA to a Roth IRA; there are no longer any income limits in the way. If you pull off a Roth conversion before 2010 ends, you can choose to divide the taxes on the conversion between your 2011 and 2012 federal returns. This nice opportunity won’t be available if you make a Roth conversion in 2011.₁

There are still MAGI phase-out limits for contributing to Roth IRAs. For 2010, those limits kick in at $167,000 for joint filers and $105,000 for single filers. If your MAGI will exceed those limits, you still have a chance to contribute to a traditional IRA in 2010 and immediately roll it over to a Roth.₃

Consult a tax or financial professional before you make any IRA moves. You will want see how it may affect your overall financial picture. The tax consequences of a Roth conversion can get sticky if you own multiple traditional IRAs.

If you are retired and older than 70½, don’t forget the 2010 RMD. As your IRA custodian has undoubtedly reminded you, the one-year suspension of Required Minimum Distributions has been lifted. Retirees over age 70½ must take RMDs from traditional IRAs – and 401(k)s – by December 31. Remember that the IRS penalty for failing to take an RMD equals 50% of the RMD amount._1,4

If you have turned or will turn 70½ at some point in 2010, you can choose to postpone your first IRA RMD until April 1, 2011. The downside of that is that you have to take two IRA RMDs next year – you have to make your 2010 tax year withdrawal by April 1, and your 2011 tax year withdrawal by December 31.₁

Keep an eye on what happens with income, capital gains & estate taxes. We’re all watching and waiting here to see what Congress will do.

If Congress doesn’t extend the current law, the tax rates on long-term capital gains will go from 0% to 10% next year for those in the 10% and 15% tax brackets. Taxpayers in higher brackets will see their capital gains tax rates rise 5% in 2011 to 20%. In addition, dividends are scheduled to be taxed at marginal income rates of 39.6%. As it stands now, time is running out to take advantage of the current capital gains tax break.₅

Income taxes are poised to return to pre-EGTRRA levels in 2011, with the lowest bracket set at 15% and the highest bracket set at 39.6%. (The so-called “marriage penalty” would also come back.) No one in Congress wants this on their legacy, so some kind of extension of the Bush-era tax cuts will almost certainly be worked out. We will have to wait and see if Congress extends the cuts for all or simply for the middle class.₆

Estate taxes will undoubtedly return in 2011. Hopefully, Congress will prevent them from returning at the 2001 levels (a puny $1 million exemption and a 55% top tax rate).₆

You may wish to make a charitable gift before New Year’s Day. If you make a charitable contribution this year, you can claim the deduction on your 2010 return.

You could make December the “13^th month”. Can you make a January mortgage payment in December, or make a lump sum payment on your mortgage balance? If you have a fixed-rate mortgage, a lump sum payment can reduce the home loan amount and the total interest paid on the loan by that much more. In a sense, paying down a debt is almost like getting a risk-free return.

Are you marrying next year, or do you know someone who is? The top of 2011 is a good time to review (and possibly change) beneficiaries to your 401(k) or 403(b) account, your IRA, your insurance policy and other assets. You may want to change beneficiaries in your will. It is also wise to take a look at your insurance coverage. If your last name is changing, you will need a new Social Security card. Lastly, assess your debts and the merits of your existing financial plans.

Are you returning from active duty? If so, go ahead and check the status of your credit, and the state of any tax and legal proceedings that might have been preempted by your orders. Review the status of your employee health insurance, and revoke any power of attorney you may have granted to another person.

Don’t delay – get it done. Talk with a qualified financial or tax professional today, so you can focus on being healthy and wealthy in the New Year.

Rose Greene may be reached at (310)399-1200 or rose@rosegreene.com. www.rosegreene.com

This material was prepared by Peter Montoya Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. This information should not be construed as investment, tax or legal advice. The publisher is not engaged in rendering legal, accounting or other professional services. All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy. If assistance or further information is needed, the reader is advised to engage the services of a competent professional.

Citations.
1 money.usnews.com/money/retirement/articles/2010/10/18/5-retirement-tax-deadlines-to-plan-for.html [10/18/10]
2 irs.gov/retirement/article/0,,id=202510,00.html [11/1/10]
3 kiplinger.com/columns/ask/archive/2009/q1019.htm [10/19/09]
4 irs.gov/retirement/article/0,,id=96989,00.html#8 [11/10/10]
5 bankrate.com/finance/money-guides/no-taxes-due-for-some-investors-1.aspx [1/16/09]
6 ncpa.org/pub/2011-year-of-tax-man [7/19/10]

What effect could the results have on stocks and taxes?

Provided by Rose Greene

GOP picks up 60 seats in the House, 6 in the Senate. The 2010 midterm elections are over and frustration has prompted change on Capitol Hill. Republicans will control the House with at least 239 seats; Democrats will retain a narrow majority in the Senate with at least 51 seats.₁

Here comes gridlock. “We’re determined to stop the agenda Americans have rejected and to turn the ship around,” Senate Minority Leader Mitch McConnell (R-KY) told the press after the election.₂ So will President Obama’s health care reforms be rolled back? Will federal spending be severely reduced?

Through 2012, you may not see much change at all. With Republicans controlling the House, Democrats controlling the Senate and President Obama’s veto pen at the ready, you can expect plenty of legislative stalemates.

Could gridlock benefit the markets? It could be bullish for stocks. With a conservative majority in the House, Wall Street could breathe a collective sigh of relief over the next two years, feeling less regulatory pressure and seeing fewer threats and a more business-friendly environment.

On the other hand, history suggests otherwise. Standard & Poor’s database reveals that since 1900, the S&P 500 has gained an average of just 2.0% in years featuring a split Congress. Since World War II, the average gain in such circumstances has been 3.5%.₃ Here’s hoping past performance is no indicator of future results.

What can the lame-duck Congress accomplish? Republicans don’t become the majority party in the House until January … so what will happen with the Bush-era tax cuts and the estate tax?

A compromise could be in the works on the estate tax. Neither party wants to see estate taxes reset to 2001 levels. With death taxes poised to top out at 55% next year, both parties may emerge from the limbo of 2010 and reach a consensus. A CNN report suggests the maximum estate tax rate will be set somewhere between 35-45% for 2011, with the federal exemption ranging anywhere from $3.5-$5 million.₄ 

Both parties want to preserve the Bush-era income tax cuts. Analysts now think Congress may act to extend the EGTRRA/JGTRRA tax cuts through at least 2011.₄ Will they be extended for all Americans, as Republicans want? Or just to households with incomes of less than $250,000, as Democrats want?

Two (lame duck) Democrats have proposed extending these tax cuts for all but the really rich. Senate Banking Chairman Chris Dodd (D-CT) would like them extended for households making less than $500,000; Sen. Blanche Lincoln (D-NE) has proposed setting the break at $1 million. In September, 31 House Democrats wrote a letter to their party’s leaders urging the extension of the cuts for all Americans.₅ 

Other matters to tackle. Currently, the unemployed can qualify for up to 99 weeks of federal unemployment benefits. The Tier V unemployment extension is set to expire at the start of December, and if it does, about 2 million Americans will lose that cushion. Additionally, the Medicare reimbursement rate for doctors will be reduced by 21% if Congress doesn’t apply its usual annual “doc fix” by the end of November, and the Alternative Minimum Tax needs its annual patch.₄

It is possible that one broad year-end tax bill could address all of the above issues.  

What if the economy needs another stimulus? Given the mid-term election results, it is pretty clear that Federal Reserve will have to “ride to the rescue” instead of Congress. The GOP wants to block any new spending that adds to the federal deficit, so any initiative President Obama might propose to pump up the housing market or job market will likely be small-scale. It is hard to imagine another federal stimulus package making it through Congress between now and 2012, though a tax-cutting move might stand a chance.

Obama appeals to the business world. One last item of interest: in the wake of the “shellacking” his party took this week, President Obama spoke of mending fences with America’s business community. He now says he wants to undo Section 9006 of the health care reform law – the section that would require all businesses to issue 1099 tax forms notifying the IRS of purchases exceeding $600 starting in 2012.₆

Rose Greene may be reached at http://www.rosegreene.com, (310)399-1200 or rose@rosegreene.com.

This material was prepared by Peter Montoya Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. This information should not be construed as investment, tax or legal advice. The publisher is not engaged in rendering legal, accounting or other professional services. All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy. If assistance or further information is needed, the reader is advised to engage the services of a competent professional. petermontoya.com, montoyaregistry.com, marketinglibrary.com.

Citations
1 – latimes.com/news/politics/election/la-election-results-map,0,4890426.htmlstory [11/3/10]
2 – marketwatch.com/story/republicans-to-challenge-obama-after-victory-2010-11-03 [11/3/10]
3 – marketwatch.com/story/gridlock-is-no-good-for-stocks-2010-11-02 [11/2/10]
4 – money.cnn.com/2010/11/01/news/economy/lameduck_agenda/ [11/1/10]
5 – money.cnn.com/2010/10/13/news/economy/bush_tax_cuts_possible_compromise/index.htm [10/13/10]
6 – money.cnn.com/2010/11/03/news/economy/Obama_business/index.htm [11/3/10]

Economic Soft Spot May Soon Firm Up

Jeffrey Kleintop, CFA
Chief Market Strategist
LPL Financial

Highlights

• If history is any guide, the disappointingly soft economic data over the past few months may soon begin to firm.

• Looking back over the past 60 years, about one year after the start of every recovery a soft spot emerges.

• Some closely watched indicators of growth are likely to be near the bottom of their typical soft spot-driven decline and poised for a rebound.

• As the data begins to firm in the coming months, the stock market may mount a fourth quarter rally achieving the modest single-digit returns we have forecast for 2010.

If history is any guide, the disappointingly soft economic data over the past few months may soon begin to firm.

Looking back over the past 60 years, about one year after the start of every recovery a soft spot emerges. These soft spots were not signs that the recovery was going to fail. In fact, in every case the recovery was successful and a multi-year period of economic growth followed. Some of the most current indicators of economic activity include the Institute for Supply Management Purchasing Managers Index (ISM), initial claims for unemployment benefits, consumer confidence, and the stock market. Around the time of these prior soft spots:

• The ISM consistently fell back to about the break-even level of 50. In August, the ISM was reported at 55.5, on its way down from the recent peak of 60.4. This index remains above 50 and is unlikely to have completed the full decline associated with the soft spot.
• The weekly number of first-time filings for unemployment benefits rose by 49,000. As of last week, jobless claims are up 73,000 from the low earlier this year, exceeding the typical rise by a potentially worrisome margin. However, on July 22 President Obama signed into law a measure restoring unemployment benefits to 2.5 million people. Since the passage of the law in mid-July initial claims for unemployment benefits have been on the rise. The extension of benefits at the end of July may be prompting Americans, whose assistance ran out, to file new claims causing the number of initial claims to rise rather than being driven by a new rising trend in layoffs. Supporting this notion is the fact that planned job cuts at U.S. corporations tracked by Challenger, Gray & Christmas Inc. have been falling.
• Consumer confidence declined by 13 points. The Conference Board reported that in July consumer confidence had declined 12.3 points from the recent high in May. The shaken confidence of consumers may begin to stabilize now that the typical soft spot decline has taken place. Daily and weekly measures of consumer confidence are showing an improving trend in August.
• The S&P 500 fell about 7% below its 200-day moving average. As of July 2, the S&P 500 had fallen 7.7% below the 200-day moving average. This is in line with the typical soft spot decline and suggests stocks may have already experienced the low point for the year. As of Friday, the index had recovered to 4% below the 200-day moving average.

The economic soft spot is likely to continue to unfold over the remainder of the quarter; however, some closely watched indicators of growth are likely to be near the bottom of their typical soft spot-driven decline and poised for a rebound. Notably, the weakness in the stock market, the labor market, and consumer confidence may have bottomed suggesting fears of a doubledip recession are overblown catching pessimistic investors by surprise.

Supporting our outlook is the LPL Financial Current Conditions Index (CCI), a weekly measure of the conditions that we believe are most relevant to growth in the markets and economy. Although the CCI shows us that growth momentum has stalled over the past three months, the vast majority of the ten CCI components point to an environment of growth.

As the data begins to firm, the stock market may mount a fourth quarter rally achieving the modest single-digit returns we have forecasted for 2010.

Click Below to download a pdf of the article

IMPORTANT DISCLOSURES

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which investment(s) may be appropriate for you, consult your financial advisor prior to investing. All performance reference is historical and is no guarantee of future results. All indices are unmanaged and cannot be invested into directly.

The ISM index is based on surveys of more than 300 manufacturing firms by the Institute of Supply Management. The ISM Manufacturing Index monitors employment, production inventories, new orders, and supplier deliveries. A composite diffusion index is created that monitors conditions in national manufacturing based on the data from these surveys.

The Standard & Poor’s 500 Index is a capitalization-weighted index of 500 stocks designed to measure performance of the broad domestic economy through changes in the aggregate market value of 500 stocks representing all major industries.

Challenger, Gray & Christmas is the oldest executive outplacement firm in the United States. The firm conducts regular surveys and issues reports on the state of the economy, employment, job seeking, layoffs, and executive compensation.

For more information on the Current Conditions Index (CCI) Components, please see the weekly publication published each Wednesday.

Missed Opportunity

Jeffrey Kleintop, CFA
Chief Market Strategist
LPL Financial

Highlights

• In the first quarter, the markets were focused on a slowdown in China, in the second quarter the concern moved to a slowdown in Europe, and in the third quarter the growth scare has shifted to the United States. In each of the prior quarters, markets made their low at the midpoint of the quarter as a policy announcement turned the tide on investor sentiment.

• It appears that the Fed missed the opportunity to turn sentiment around with their mid-quarter policy announcement last week. Without a potent policy driver, the fear surrounding the U.S. outlook may not dissipate as quickly this quarter as it did during the first two quarters of the year and linger into the fourth quarter.

• The mid-quarter policy driver during the fourth quarter may be the mid-term elections held in November. This event may be potent enough to turn sentiment around and produce gains for the year in line with our forecast for modest single-digit gains.

This year has been defined by three growth scares. In the first quarter, the markets were focused on a slowdown in China, in the second quarter the concern moved to a slowdown in Europe, and in the third quarter the growth scare has shifted to the United States. In each of the prior quarters, the concern peaked at the midpoint of the quarter:

• During the first quarter, the Chinese stock market, measured by the Hang Seng Index, bottomed around the middle of the quarter on February 8.
• During the second quarter, the European stock market, measured by the S&P 350 Europe Index, bottomed around the middle of the quarter on May 25.

We have reached the midpoint of the third quarter and so it may come as no surprise that there is a lot of pessimism about the U.S. economic outlook. Although, the U.S. stock market, measured by the S&P 500, remains up about 6% from the third quarter low on July 2, the S&P 500 fell by a sharp 4% since Monday (August 9) of last week.

In each of the prior quarters, the midpoint of the quarter coincided with a policy announcement that turned the tide on investor sentiment:

• In the first quarter, the change in sentiment was driven by the monthly economic reports in China released on February 9 and 10 that reflected solid growth and were not accompanied by any new policy announcements intended to slow the economy. In prior months, the midmonth data releases had coincided with announcements of policy changes intended to slow growth in the Chinese economy.
• In the second quarter, the change in sentiment was driven by the passage of the trillion dollar European rescue package. The debt problems were addressed by this program that ensured adequate capital to meet the financing needs over the next few years for Europe’s most troubled economies.

It appears unlikely that the mid-quarter policy driver for the third quarter was the Fed’s announcement last week that they will reinvest proceeds from interest and principal from maturing mortgage-backed bonds into the bond market. While this news initially led to a stock market rally after it was announced at 2:15 pm on Tuesday and stocks returned to, the three-month high in the S&P 500 set the day before, the stock market later decided this action was not what it had hoped for and opened down sharply the following morning. We noted in last week’s commentary, entitled Uncertain Fed Means Certain Outcome, that the Fed typically provides added economic stimulus at this point in the economic cycle. The disappointment in the lackof a more substantial action from the Fed was obvious and both stocks and bond yields dropped. It appears that the Fed missed the opportunity to turn sentiment around in a way similar to the policy-driven shifts in the first and second quarters.

Without a potent policy driver, the current growth scare may not dissipate this quarter as it did during the first two quarters of the year. Much of the economic data of late has come in worse than the consensus economist expectations and worse than the prior month. Our view remains that economic growth will decelerate but remain positive, in the second half of 2010. This is likely to keep the stock market volatile and range-bound during the remainder of the third quarter.

The fourth quarter may hold the key to the year for stock market performance. The restoration of a balance between the parties in Washington may be welcomed by markets. The market’s reaction to midterm elections has nearly always been positive, even when the balance of power has shifted in one or both houses of Congress — as we expect this year with the Republicans having a good chance of taking the House on November 2. The average gain for the S&P 500 in the fourth quarter of a mid-term election year is a solid 8% (see the Weekly Market Commentary from August 2 entitled “Mid-Term Market Moves” for more information). This mid-quarter policy driver may be potent enough to turn sentiment around and produce gains for the year in line with our forecast for modest single-digit gains.

To download this commentary click below

IMPORTANT DISCLOSURES
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which investment(s) may be appropriate for you, consult your financial advisor prior to investing. All performance reference is historical and is no guarantee of future results. All indices are unmanaged and cannot be invested into directly.

The Standard & Poor’s 500 Index is a capitalization-weighted index of 500 stocks designed to measure performance of the broad domestic economy through changes in the aggregate market value of 500 stocks representing all major industries.

The S&P Europe 350 Index is a stock index of European stocks. It is a part of the S&P Global 1200. The intent of the index is to track at least 70% of European equity market capitalization. The constituent shares are selected for relevance to the broad market, including industry sector balance, longevity (to minimize index turnover) and liquidity of the shares.

The Hang Seng Index is a market capitalization index of the top 33 companies listed on the Hong Kong stock exchange, administered by the Hang Seng Bank.

This research material has been prepared by LPL Financial.

The LPL Financial family of affiliated companies includes LPL Financial and UVEST Financial Services Group, Inc., each of which is a member of FINRA/SIPC.

To the extent you are receiving investment advice from a separately registered independent investment advisor, please note that LPL Financial is not an affiliate of and makes no representation with respect to such entity.

Not FDIC or NCUA/NCUSIF Insured | No Bank or Credit Union Guarantee | May Lose Value | Not Guaranteed by any Government Agency | Not a Bank/Credit Union Deposit

Uncertain Fed Means Certain Outcome

Jeffrey Kleintop, CFA
Chief Market Strategist
LPL Financial

Highlights

• In his recent testimony to Congress, Federal Reserve Chairman Ben Bernanke used the phrase “unusually uncertain” to describe the U.S. economic outlook. However, based on the Fed’s own words, this current level of uncertainty is actually common at this stage of the economic cycle.

• The response by the Fed to uncertainty over the economic environment has been anything but uncertain. They always provide the economy with one last booster shot of stimulus.

• We believe the Fed will remain on hold this week, but could undertake additional stimulus if the uncertainty lingers later this year.

In his recent testimony to Congress, Federal Reserve Chairman Ben Bernanke used the phrase “unusually uncertain” to describe the U.S. economic outlook. The word uncertain was used five times in the statement released at the conclusion of the June 23 meeting, and was used 16 times in the minutes released on July 28. We may see more of the word “uncertain” this week, as the Fed releases the statement from its August 10 meeting at 2:15pm that day.

The economy again began to grow last summer, putting the current bout of early cycle uncertainty at about four quarters since the end of the recession. In contrast to Chairman Bernanke’s remark, the current uncertainty is not all that unusual at this early stage of an economic cycle. In fact, based on the Fed’s own words, the current level of uncertainty is actually common at this stage of the economic cycle.

• In March 2003, about five quarters after the 2001 recession had ended, the Fed’s Beige Book used the word “uncertain” 30 times to describe the economic environment, almost twice as often as the July 2010 Beige Book. Also, the minutes of the March 2003 Fed meeting used the word “uncertain” 16 times, three times as often as the five times it was used in the June 2010 meeting minutes.
• In October 1992, about six quarters after the end of the 1991 recession, the word “uncertain” appeared 23 times in the transcript of the October 1992 Fed meeting.

The response by the Fed to uncertainty over the economic environment has been anything but uncertain. They have always provided the economy with one last booster shot of stimulus. During the past four decades, the Fed has cut rates one last time well after the recession had ended when a soft spot emerged. For example, related to the above examples of Fed uncertainty, the Fed cut the Federal Funds target rate in June 2003 and in September 1992.

With the Federal Funds target rate effectively at zero the typical rate cut is not an option this time, so what will the Fed’s uncertainty lead it to do?

• First, the Fed will likely signal its sensitivity to heightened risk by updating the message from the June meeting that it “will employ its policy tools as necessary” to reflect the latest language from the recent semiannual testimony that it “is prepared to take further actions as needed.” This will send the signal that the Fed has a greater bias toward easing monetary policy. This signal alone may have some of the effects desired by the Fed on the markets.
• Second, in lieu of the Fed cutting rates, they may reinvest interest and principal payments on the Fed’s holdings of Mortgage-Backed Securities back into the market with the intention of adding money to the system and keeping rates low. However, we believe the Fed is not likely to take this step without a downgrade to its recently stated growth outlook for above-average Gross Domestic Product (GDP) growth in 2011 and a 1% decline in the unemployment rate over the next year. The Fed has the ability to wait on any additional stimulus given the improvement in market conditions, from the stock market to the TED spread, since the last Fed meeting in June. If the uncertainty lingers, and the Fed further downgrades their outlook, the Fed could pursue the path of further easing consistent with prior early cycle periods of uncertainty.

Uncertainty is to be expected given the challenges facing an economy in the early stages of growth following an unprecedented upheaval. The sentiment of unusual uncertainty is expressed in this excerpt from the pages of TIME magazine:

“If America’s economic landscape seems suddenly alien and hostile to many citizens, there is good reason: they have never seen anything like it. Nothing in memory has prepared consumers for such turbulent, epochal change, the sort of upheaval that happens once in 50 years. “

“The outward sign of the change is an economy that stubbornly refuses to recover. In a normal rebound, Americans would be witnessing a flurry of hiring, new investment and lending, and buoyant growth. But the U.S. economy remains almost comatose a full year and a half after the recession officially ended. Unemployment is still high; real wages are declining.”

“The current slump already ranks as the longest period of sustained weakness since the Great Depression. That was the last time the economy staggered under as many “structural” burdens, as opposed to the familiar “cyclical” problems that create temporary recessions once or twice a decade. The structural faults represent once-in-alifetime dislocations that will take years to work out. Among them: the job drought, the debt hangover, the defense-industry contraction, the savings and loan collapse, the real estate depression, the health-care cost explosion and the runaway federal deficit.”

The same article quoted an economist as saying, “this is a sick economy that won’t respond to traditional remedies. There’s going to be a lot of trauma before it’s over.” But it was over. This excerpt is from September 28, 1992.

The recession ended in 1991 and real GDP was an above average +3.4% in 1992 (about the same pace of growth the economy has averaged this year). Yet, in September 1992, TIME described the economy as “comatose”. When the article was published, the economy had already been growing for six quarters. Hiring had weakened to averaging only +77,000 jobs per month in the four months leading up to this article, but in the following four months it averaged +210,000. In addition, while the structural problems apparent then seemed unsolvable for years to come, real GDP was +2.9% the following year.

It is not easy to assess the health of the economy as we are living through it. The amount of current press coverage devoted to fretting over a double-dip recession will be expanded by last Friday’s lackluster private payroll growth report of +71,000 for last month. We continue to believe the data supports a typical economic soft spot (much like the one in 1992) that always comes about one year after a recovery begins and not the double-dip that has been largely priced into the stock market.

In 1992, the uncertainty expressed in the sentiment from the Fed and in the media at the end of the third quarter set the stock market up for a solid fourth quarter rally after a relatively flat year for stocks in the first three quarters. The stock market in 1992 ended with a modest single-digit total return (including dividends) of 7.6%, very similar to our outlook for a modest single-digit gain this year.

To download this commentary click below

IMPORTANT DISCLOSURES

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which investment(s) may be appropriate for you, consult your financial advisor prior to investing. All performance reference is historical and is no guarantee of future results. All indices are unmanaged and cannot be invested into directly.

The Standard & Poor’s 500 Index is a capitalization-weighted index of 500 stocks designed to measure performance of the broad domestic economy through changes in the aggregate market value of 500 stocks representing all major industries.

Investing in international and emerging markets may entail additional risks such as currency fluctuation and political instability.

Stock investing involves risk including loss of principal. Past performance is not a guarantee of future results.

The TED Spread measures the difference between 3-month LIBOR rate and the yield on 3-month Treasury bills. This is an effective measure of the liquidity available to banks. With bank capital adequacy near the center of the current crisis this is an important gauge of the stress in the banking system. A rise in the TED Spread acts as a negative on the CCI.

Mortgage Backed Securities are subject to credit, default risk, prepayment risk that acts much like call risk when you get your principal back sooner than the stated maturity, extension risk, the opposite of prepayment risk, and interest rate risk.

Weekly Market Commentary, May 24, 2010
Jeffrey Kleintop, CFA
Chief Market Strategist
LPL Financial

Highlights

• We believe this pullback is merely part of the higher volatility in the markets we have been expecting this year to accompany the transition from recovery to sustainable growth.
• We offer ten reasons why we expect the markets to rebound during the second quarter.
• We still believe that while the next week or two could be up or down a little, four or six weeks from now stocks will be up and headed back near the highs of April.

Our outlook for 2010 remains for modest gains in the stock and bond markets, accompanied by a lot of volatility. Over the last couple of months, we presented our reasons for why we believed the stock market, as measured by the S&P 500, was due for another 5-10% pullback. While the current pullback that began on April 24 came as no surprise, the month long decline has exceeded our expectations with a peak-to-trough decline of 12%. Nevertheless, we continue to believe it is a pullback and not the start of a new bear market. This pullback is merely part of the higher volatility in the markets we have been expecting this year to accompany the transition from recovery to sustainable growth.

The market pullback has a number of drivers:

• Financial reform legislation has weighed on the Financials sector.
• China’s measures to slow growth have been raising fears that the sudden withdrawal of stimulus to one of the world’s biggest growth engines may be premature and tip the global economy back into recession.
• Last week’s decline in the Index of Leading Indicators, the first decline in a year, is a sign that economic growth may be slowing.
• However, the big issue affecting the market has been the debt problems in Europe and fear of another global credit crisis.

We expect the markets to rebound during the second quarter for the following ten reasons:

1. Although unlikely to improve much in the near-term, the European debt and deficit problems are unlikely to get much worse. The trillion dollar rescue package has been passed ensuring adequate capital to meet the financing needs over the next few years for Europe’s most troubled economies. Europe has some silver lining to the problems they are facing since the lower euro is a boost to the competitiveness of European exports helping to balance out weaker domestic growth.
2. The derivatives and leverage tied to the sovereign debt is very different than the financial crisis of 2008 (for example, debt-to-GDP (gross domestic product) for Greece is 1-to-1, while at Bear Stearns and Lehman Brothers it was 40-to-1). The smaller magnitude of the debt problem is unlikely to lead to another global financial crisis.
3. The concerns over the debt problems in Dubai and Iceland faded quickly after a month or two of intense concern last year. The budget and debt problems now weighing on Greece are an aftershock of the global financial crisis and not a sign of a new crisis developing. The problems are akin to what many people and businesses that overindulged during the credit boom are now experiencing, as the negative consequences of the global recession have forced belt tightening to try to make ends meet while restructuring debt. That is what happens at the end of a credit crisis and recession, rather than at the beginning.
4. Fortunately for investors, expectations for the Eurozone are low and do not need to be cut drastically leading to further declines in markets. For example, U.S. exports to Europe, European oil consumption, and Europe’s GDP are all already expected to be very low or negative.
5. The problems in Europe are good for the U.S. consumer by putting more cash in consumers’ pockets. The falling price of oil is pulling down gasoline prices as we head in to the peak demand summer driving season and the money flowing into Treasuries is leading to lower mortgage rates and a new wave of refinancing
6. As indicated by the LPL Financial Current Conditions Index, conditions remain favorable for growth.
7. Stock market valuations are now low at a forward price-to-earnings ratio of about 13 times. Also, the stock market is technically oversold by even more than it was overbought in mid-April when we were concerned about a pullback, suggesting selling may soon stall and buyers attracted by value will re-emerge.
8. China’s growth remains on track and the weakness in Europe may keep Chinese officials from invoking further measures to slow their economy in the second quarter.
9. Financial reform legislation may see a lot of changes to moderate it in conference before it is signed by the President, given some objections by the Fed and Treasury. This may help stabilize the Financials sector which has been one of the sectors that has led the stock market lower.
10. The outlook for The Federal Reserve (Fed) rate hikes may now be pushed out with the futures markets now pricing in the first hike not taking place until 2011

We still believe that while the next week or two could be up or down a little, four or six weeks from now stocks will be up and headed back near the highs of April.

What would change our minds? Not a level in the stock market, but a level on spreads and other indicators of contagion like borrowing rates in Europe and signs of bank stress. Material deterioration in indicators of contagion such as:

• The TED spread, a measure of stress in the banking system based on the willingness of banks to lend to each other, has risen this year to a slightly above average 35 basis points (bps), but remains well off of the crisis peak of 463 bps in 2008 and below the levels of 2008 that led up to the peak of the crisis in October 2008.
• The level of European interest rates and credit default swaps, which haveboth declined from the peak levels prior to the announcement of the rescue plan, but some southern European countries are elevated from levels at the start of the year.
• The value of the euro, which has fallen sharply this year but has stabilized in the past two weeks around $1.24.
• Corporate bond issuance, which has contracted sharply reflecting tighter financing conditions.
• The volume of central bank liquidity swaps, which has picked up reflecting the need for dollar-based financing overseas.

These factors would prompt us to re-evaluate our outlook and may warrant a more defensive investment stance.

For the Full Report Download Here

IMPORTANT DISCLOSURES
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which investment(s) may be appropriate for you, consult your financial advisor prior to investing. All performance reference is historical and is no guarantee of future results. All indices are unmanaged and cannot be invested into directly.

Stock investing involves risk including loss of principal.

The Standard & Poor’s 500 Index is a capitalization-weighted index of 500 stocks designed to measure performance of the broad domestic economy through changes in the aggregate market value of 500 stocks representing all major industries.

Investing in international and emerging markets may entail additional risks such as currency fluctuation and political instability. Investing in small-cap stocks includes specific risks such as greater volatility and potentially less liquidity.

Bonds are subject to market and interest rate risk if sold prior to maturity. Bond values will decline as interest rates rise and are subject to availability and change in price.
A basis point is a unit relating to interest rates that is equal to 1/100th of a percentage point. It is frequently but not exclusively used to express differences in interest rates of less than 1%.

See our Important Disclosures

Not FDIC or NCUA/NCUSIF Insured | No Bank or Credit Union Guarantee | May Lose Value | Not Guaranteed by any Government Agency | Not a Bank/Credit Union Deposit

What’s the difference between “billions” and “millions”? About 650 points.
Provided by Los Angeles Financial Planner, Rose Greene, CFP ®

Did a mistake make a selloff more severe? The Dow Jones Industrial Average settled at 10,520.32 Thursday after a 347.80 loss, with fears over European sovereign debt affecting Wall Street. Yet the 347.80 decline was just half the story.

The Dow also saw its greatest-ever intraday swoon Thursday, diving 998.50 below the open at one point and taking an intraday swing of 1,007 points._1,2

What happened? At this point, it looks like the same kind of thing that happened on Black Monday in 1987: technology and trading errors betrayed Wall Street.

That was “millions”, not “billions”! Citing multiple sources on May 6, CNBC and Reuters reported that a trader, possibly at Citigroup, mistakenly typed a “b” for billion instead of an “m” for million – apparently when authorizing a trade concerning Procter & Gamble. P&G shares fell 37% at one point (more than $22) before recovering to lose 3% on the market day._3,4,5

As the selloff gained momentum, some weird things happened Thursday. In a stretch of two minutes, 16 billion e-minis (futures contracts tied to the S&P 500) were sold. Accenture became a penny stock – no kidding, share values were showing up at $.01 on the New York Stock Exchange at one point. PG and 3M shares actually went below the “circuit breaker” level on the NYSE, freeing traders to purchase and sell shares of those companies on other exchanges. Clearly, technology was running wild._4,5,6

Trader Steven Rickard reacts in the S&P 500 futures pit at the CME Group in Chicago near the close of trading. (Associated Press, May 6, 2010)

Will trades be erased? Apparently some will be: Thursday evening, the NASDAQ announced it would cancel all trades of stocks whose prices moved more than 60% between 2:40-3:00pm EST on May 6. Just minutes after that news item, the NYSE said it would do the exact same thing.₇

What’s the lesson here? Don’t panic. Be patient. Don’t succumb to impulse when it comes to stocks. In the last few years, we have seen amazing market volatility AND amazing rebounds – and the resilient bull market we’ve seen has taught every investor that stocks can impressively snap back. Curse the technology that caused this swoon if you like, but keep fundamentals and diversification ever in mind.

Rose Greene is a Representative with Rose Greene Financial and may be reached at www.rosegreene.com, (310)399-1200 or rose@rosegreene.com.

This material was prepared by Peter Montoya Inc, and does not necessarily represent the views of the presenting Representative or the Representative’s Broker/Dealer. This information should not be construed as investment advice. Neither the named Representative nor Broker/Dealer gives tax or legal advice. All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy. The publisher is not engaged in rendering legal, accounting or other professional services. If other expert assistance is needed, the reader is advised to engage the services of a competent professional. Please consult your Financial Advisor for further information.. petermontoya.com, montoyaregistry.com, marketinglibrary.net
 
Citations
1 – money.cnn.com/ [5/6/10]
2 – cnbc.com/id/36988229 [5/6/10]
3 – cnbc.com/id/36999483 [5/6/10]
4 –money.cnn.com/2010/05/06/markets/markets_newyork/index.htm [4/29/10]
5- cnbc.com/id/36988229 [5/6/10]
6 – blogs.barrons.com/stockstowatchtoday/2010/05/06/no-ordinary-collapse-dow-snaps-back-from-1000-pt-drop/ [5/6/10]
7 – reuters.com/article/idUSN0614132620100506?type=marketsNews [5/6/10]

Why the crisis has Wall Street stressed.
Provided by Los Angeles Financial Planner, Rose Greene, CFP ®

It would be wonderful if the U.S. financial markets could “decouple” themselves from what is going on in Greece, Portugal and Spain. Unfortunately, the debt situation in these countries is like a ripple in a pond. The question is, how strong will the ripple ultimately be and will its full force reach our markets?

The problem. Greece, Spain, Portugal, Italy and Ireland are all carrying enormous debts. On May 1, the New York Times put up a chart breaking this down: Greece owes $236 billion, which believe it or not is the smallest debt among these five countries. Portugal’s debt stands at $286 billion – and it owes roughly a third of that to Spain. Spain carries around $1.1 trillion in debt, and its economy is in horrible shape (20% unemployment). According to the Bank for International Settlements, it owes $220 billion to France and $238 billion to Germany. Ireland has $867 billion in debt, with about 40% of that owed to the U.K. and Germany. Italy owes $1.4 trillion, including $511 billion to France (almost 20% of France’s GDP).₁

After the euro was launched, Greece had access to a whole bunch of cheap debt - and the country used it nonchalantly. In the years since the establishment of the euro, Greece’s debt-to-GDP ratio has remained repeatedly above 100%.2

Europe’s biggest banks are heavily exposed to these debts, and so are some of ours: names like Citigroup, Bank of America, Goldman Sachs, JPMorgan Chase and Morgan Stanley. In fact, these five banks have $2.5 trillion of cross-border exposure in the crisis, with Citigroup the most exposed. So you have potential risk to these banks, the euro, and the European and world economy.₃

The offer on the table. Fortunately, Greece has the chance to accept a $146.5 million bailout from the International Monetary Fund and the European Union in exchange for austerity measures (less government spending and a lower standard of living). This would help Greece avoid default – that is, having to renegotiate its debt and possibly assume more. (As a sovereign nation, Greece cannot go bankrupt.) Many economists think Greece will go into a deep recession (or depression) which could last most of the decade._2,4

The potential ripple. It looks like the bailout will be accepted by Greece and its EU partners. This means some confidence will return and other Eurozone nations with big debts will be slightly less threatened. However, Greece still has a risk of default.

Should Greece default even with the bailout, some major lenders in France and Germany would be hit very hard. They would have to raise capital ratios and reduce the frequency of loans. That would hamper economic growth in France, Germany and in turn across Europe. In coming months, the U.S. and other nations could feel the pinch from such a slowdown.₄

Keep in mind, Greece only represents about 2% of the Eurozone economy.2 In the roughest scenario, Spain or Italy defaults and the shock wave to European banks (and U.S. banks exposed to the debt) is significantly greater. What would happen then? A credit freeze across Europe? Diving stocks? A trashed euro? A flight to gold?

These are merely scenarios, not present realities – but in a nutshell, this is what had Wall Street biting its nails this spring.

So is the bailout truly a solution? It was unpopular throughout the EU, but the right step to take. The move certainly helped defend the stability of the euro; in fact, German Chancellor Angela Merkel and French President Nicholas Sarkozy have jointly pledged to preserve the euro’s value.₅

The worry is that other bailouts will be needed to preserve the fiscal health of other Eurozone nations. We all hope these

countries can effectively manage their debt levels, for the sake of the stock market and the economy in our country.

Rose Greene is a Representative with Rose Greene Financial and may be reached at www.rosegreene.com, (310)399-1200or rose@rosegreene.com.

This material was prepared by Peter Montoya Inc, and does not necessarily represent the views of the presenting Representative or the Representative’s Broker/Dealer. This information should not be construed as investment advice. Neither the named Representative nor Broker/Dealer gives tax or legal advice. All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy. The publisher is not engaged in rendering legal, accounting or other professional services. If other expert assistance is needed, the reader is advised to engage the services of a competent professional. Please consult your Financial Advisor for further information. petermontoya.com, montoyaregistry.com, marketinglibrary.net
 
Citations
1 – nytimes.com/interactive/2010/05/02/weekinreview/02marsh.html [5/1/10]
2 – sfgate.com/cgi-bin/article.cgi?f=/g/a/2010/05/07/investopedia44011.DTL [5/7/10]
3 – msnbcmedia.msn.com/i/CNBC/Sections/News_And_Analysis/_News/__EDIT%20Englewood%20Cliffs/Bove2.pdf [5/5/10]
4 – marketwatch.com/story/greek-president-the-brink-of-the-abyss-2010-05-06?dist=countdown [5/6/10]
5- washingtonpost.com/wp-dyn/content/article/2010/05/07/AR2010050701987.html [5/7/10]
6 – csmonitor.com/USA/Politics/2010/0428/Republicans-relent-clear-financial-reform-bill-for-debate/%28page%29/2 [4/28/10]