THE SWISS FRANC AND YOUR PORTFOLIO

You've almost certainly read about the recent drop in the global (and U.S.) stock markets, as a result of the "shocking"announcement by the Swiss central banking authority that it would not force the Swiss franc to trade at 1.2 euros. Be prepared to be shocked: you can now buy a Swiss franc with a euro.

If you're like most of us, you've probably wondered why this shocking development would have anything to do with the enterprise value of the individual companies that make up the various global indices. What's the story here?

The story is actually pretty simple-and surprisingly, isn't being told very clearly in the press. The Swiss National Bank had been artificially holding the Swiss franc at 1.2 euros for the past three years. Why? Because the value of the euro has been sinking on global markets. A lower euro means everything manufactured in the Eurozone is less expensive for outside buyers, which is great for exports. By keeping the franc at a steady cost vs. the euro, the Swiss National Bank was protecting Swiss watches, chocolate products and high-end medical diagnostic equipment from becoming more expensive in the countries where Switzerland does most of its export business.

This policy suddenly became more difficult, in part because the European Central Bank is expected to announce, on January 22, what economists delicately call "monetary easing"-buying government bonds, lowering interest rates, and giving banks and corporations more access to more euros. The inevitable result would be a lower euro compared to other currencies. Every time the Swiss Central Bank buys euros and sells francs, it is putting money in the pockets of global currency traders and a variety of hot money speculators who have bet that the Swiss will continue their policy. These traders would have reaped a huge windfall if the euro dropped and the bank continued to fight an increasingly expensive battle to maintain parity. The effect would have been a transfer of billions of dollars from Swiss taxpayers to shady speculators.

But why does any of this affect the value of U.S. stocks, or stocks in Europe, for that matter? Why were floor traders on the New York Stock Exchange experiencing what one described as 'once-in-a-career'market turbulence, and others described as a 'massive flight to safety?'Certain exporting companies in Switzerland will be negatively affected and have to adjust their profit margins downward to stay competitive. But U.S. companies aren't selling their goods and services abroad in Swiss francs, and European companies will be slightly more competitive, globally, after the expected monetary easing announcement.

The only answer that makes any sense is that hot money traders dislike any kind of surprises, and they hit the "sell"button whenever they're startled by news that they didn't anticipate. Then they wait until they have a better understanding of what's going on. And, since these short-term traders make up a majority of all the actual buys and sells, the markets to trade lower even though no fundamental economic reason exists for them to.

This provides a great opportunity for all of us to see the difference between short-term headline moves in the market and long-term fundamental shifts. Make a note to, a month from now, see if you still remember the fact that the Swiss Central Bank is no longer supporting the franc against the euro. At the same time, look to see if any major shift has occurred in the business operations or profitability of U.S. companies due to this adjustment in currency values overseas.

There will be consequences. Over the coming months, you might have to pay a little more for a Swiss watch, and chocolate manufactured in Switzerland might be pricier as well. You will want to steer clear of parking your money in the Swiss central banking system, which is now paying an interest rate of negative three quarters of a percent. If you're a global options trader who took the wrong side of the bet, this was terrible news for your returns this year. But the underlying value of the stocks in a diversified investment portfolio aren't likely to become less valuable based on the latest trading price of options denominated in Swiss francs.

Sources:     http://www.forbes.com/sites/marcelmichelson/2015/01/16/swiss-franc-u-turn-is-realistic-move-as-snb-cannot-stop-tide/   http://www.businessweek.com/news/2015-01-15/swiss-franc-surges-to-record-high-against-euro-as-snb-ends-cap   http://money.cnn.com/2015/01/15/investing/interest-rates-negative-switzerland-ecb/index.html

Sincerely, Bill Morrissey, CFP® and Tammy Prouty, CFP® Sound Financial Planning, Inc.

Primary Office 425 Commercial St., Ste 203 Mount Vernon, WA 98273 Phone: (360) 336-6527 info@soundfinancialplanning.net Secondary Office 650 Mullis St., Ste 101 Friday Harbor, WA 98250 (360) 378-3022 www.soundfinancialplanning.net

PLEASE READ THIS WARNING: All e-mail sent to or from this address will be received or otherwise recorded by the Sound Financial Planning, Inc. corporate e-mail system and is subject to archival, monitoring and/or review, by and/or disclosure to, someone other than the recipient. This message is intended only for the use of the person(s) ("intended recipient") to whom it is addressed. It may contain information that is privileged and confidential. If you are not the intended recipient, please contact the sender as soon as possible and delete the message without reading it or making a copy. Any dissemination, distribution, copying, or other use of this message or any of its content by any person other than the intended recipient is strictly prohibited. Sound Financial Planning, Inc. has taken precautions to screen this message for viruses, but we cannot guarantee that it is virus free nor are we responsible for any damage that may be caused by this message. Sound Financial Planning, Inc. only transacts business in states where it is properly registered or notice filed, or excluded or exempted from registration requirements. Follow-up and individualized responses that involve either the effecting or attempting to effect transactions in securities or the rendering of personalized investment advice for compensation, as the case may be, will not be made absent compliance with state investment adviser and investment adviser representative registration requirements, or an applicable exemption or exclusion. This information should not be construed as investment advice. All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy. WE WOULD LIKE TO CREDIT THIS ARTICLE'S CONTENT TO BOB VERES.

MAKING MORE, GIVING LESS

You probably read that Microsoft founder Bill Gates and Berkshire Hathaway founder Warren Buffett have pledged to give at least half their wealth to charity, and have convinced 38 other billionaires to do the same. From that, you might conclude that the wealthier people are, the more generously they contribute to philanthropic causes.

As it turns out, the situation is exactly the opposite. A recent New York Times article quotes several studies, including one by Independent Sector, a nonprofit organization focused on charitable giving, which show that householders earning less than $25,000 a year gave away, on average, 4.2% of their incomes. Those earning more than $75,000 gave away an average of 2.7%. What makes this especially perplexing is the fact that higher income persons can itemize their deductions and receive a tax break, reducing the cost of their donations. Thus the personal sacrifice of giving is even larger, proportionately, for the unwealthy than for people who earn in the upper 10% of American families.

Another study cited by the article, conducted by the Center on Philanthropy at Indiana University, suggests that people of modest means may have more empathy than those who live more secure financial lives. It found that only a small percentage of charitable giving by wealthier donors was going to the needs of the poor: most of it was directed to cultural institutions and their alma maters--giving which enhanced their own status with their peers.

An article in The Economist reports on an effort to get to the bottom of this interesting disparity. It describes a research project by two professors at the University of California at Berkeley, reported in the Journal of Personality and Social Psychology. The professors asked a group of participants to place themselves on a drawing of a ladder with ten rungs on it, each representing different levels of income, education and occupational status. Then they were taken to a room and given ten "credits," which they were told would represent real money at the end of the experiment. They were asked how many they would keep for themselves and how many they would give to an invisible partner on the other side of a partition.

On average, the participants gave away 4.1 credits, without any expectation of return. But those who rated themselves at the bottom of the ladder gave away 44% more than those who placed themselves at the top. In follow-up interviews, the study participants were asked how much of their total income should be given to charity. Those who placed themselves on the higher rungs said that 2.1% of their incomes was the right number. Those at the bottom felt that 5.6% was the appropriate slice. Whether the higher status was inherited or earned seemed to make no difference in the results; the researchers hypothesized, as did the Indiana University researchers, that poorer people who experience scarcity first-hand tend to feel more compassion for others, and this increases their overall levels of generosity and helpfulness.

Sources:       NY Times article: http://www.nytimes.com/2010/08/22/magazine/22FOB-wwln-t.html  Economist article: http://www.economist.com/node/16690659

Sincerely, Bill Morrissey, CFP® and Tammy Prouty, CFP® Sound Financial Planning, Inc.

Primary Office 425 Commercial St., Ste 203 Mount Vernon, WA 98273 Phone: (360) 336-6527 info@soundfinancialplanning.net Secondary Office 650 Mullis St., Ste 101 Friday Harbor, WA 98250 (360) 378-3022 www.soundfinancialplanning.net

PLEASE READ THIS WARNING: All e-mail sent to or from this address will be received or otherwise recorded by the Sound Financial Planning, Inc. corporate e-mail system and is subject to archival, monitoring and/or review, by and/or disclosure to, someone other than the recipient. This message is intended only for the use of the person(s) ("intended recipient") to whom it is addressed. It may contain information that is privileged and confidential. If you are not the intended recipient, please contact the sender as soon as possible and delete the message without reading it or making a copy. Any dissemination, distribution, copying, or other use of this message or any of its content by any person other than the intended recipient is strictly prohibited. Sound Financial Planning, Inc. has taken precautions to screen this message for viruses, but we cannot guarantee that it is virus free nor are we responsible for any damage that may be caused by this message. Sound Financial Planning, Inc. only transacts business in states where it is properly registered or notice filed, or excluded or exempted from registration requirements. Follow-up and individualized responses that involve either the effecting or attempting to effect transactions in securities or the rendering of personalized investment advice for compensation, as the case may be, will not be made absent compliance with state investment adviser and investment adviser representative registration requirements, or an applicable exemption or exclusion. This information should not be construed as investment advice. All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy. WE WOULD LIKE TO CREDIT THIS ARTICLE'S CONTENT TO BOB VERES.

KEY TAX BREAKS RETROACTIVELY REINSTATED

The clock is ticking ... is opportunity knocking?

 

If you hurry, you might realize some nice tax breaks before 2014 runs out. Once again, Congress has acted at the eleventh hour to bring back some expired tax perks. H.R. 5771, the Tax Increase Prevention Act, was passed and signed into law by President Obama on December 19. Here is a rundown of the key tax provisions it retroactively reinstates for 2014.1

The IRA charitable rollover is back - again. Do you own a large traditional IRA? Are you age 70½ or older? By any chance, have you still not taken your Required Minimum Distribution (RMD) for 2014? If the answer to all three questions is yes, you could partly or entirely fulfill your RMD by donating up to $100,000 from that IRA to a qualified charity or non-profit organization. The gift may be made tax-free and it could help you hold your 2014 taxable income under thresholds at which you would be subject to higher Medicare premiums and taxes on your Social Security benefits. You also get the satisfaction of helping a charity. (If you have already taken your 2014 IRA RMD, you aren't allowed a "do-over;" you can't take back the RMD and make an IRA charitable rollover instead.)2,3

You have the option to deduct state & local sales tax once more. If you live in a state that doesn't tax its residents, the option to deduct state and local sales tax in lieu of state income tax is a big break. It applies again for the 2014 tax year thanks to the passage of H.R. 5771.1

Two mortgage-related deductions were revived by the new law. H.R. 5771 extends the mortgage insurance premium deduction that went away at the start of the year, and it also retroactively reinstates the tax exclusion for canceled mortgage debt - the perk that gave households a chance to exclude as much as $2 million in such debt from gross income.1

So were some key education deductions. The above-the-line tuition & fees deduction that lets parents (and students) lower taxable income amounts by up to $4,000 is back in place for 2014. So is the $250 classroom teacher expense deduction.1
 

Home upgrades could still bring you a tax break. If you know a handyman or vendor who wouldn't mind doing some work for you between now and New Year's Day, this or that upgrade might make you eligible to claim the reinstated dollar-for-dollar tax credit for qualifying energy-efficient home improvements.1

The enhanced easement incentive applies to land donations. Farmers, ranchers and other landowners have long realized tax breaks by gifting real property to land trusts for conservation. H.R. 5771 makes the recently enhanced incentive for such land gifts applicable to the 2014 tax year (it applies to conservation easements donated anywhere within TYs 2006-14). Under the enhanced incentive, a landowner can take a deduction as large as 50% of his/her income as a result of a conservation easement donation (it would be 30% otherwise). For qualifying ranchers and farmers, the permitted deduction may be as large as 100% of their incomes. The enhanced incentive also allows a donor to carry forward their deductions for 15 years as opposed to 5 years.1,4

Mass transit commuters get the size of an important tax break restored. In 2009, Congress equalized the tax breaks for employer-provided mass transit and parking benefits at $245 per month. That lasted through 2013. This year, the parking benefit was adjusted slightly upward to $250 per month, but the mass transit benefit shrunk to $130 per month. H.R. 5771 puts both the parking and mass transit benefit at $250 for TY 2014. If you put in for 100% of your transit costs via your employer's payroll deduction program, you are already in line to claim this retroactively restored benefit, which could provide as much as $576 in 2014 federal tax savings.1,5

Citations. 1 - forbes.com/sites/ashleaebeling/2014/12/19/obama-signs-2014-tax-extenders-money-in-your-pocket/ [12/19/14] 2 - chicagotribune.com/business/yourmoney/sc-cons-1225-journey-20141222-column.html [12/22/14] 3 - blogs.marketwatch.com/encore/2014/08/12/will-retirees-get-their-ira-tax-break-back/ [8/12/14] 4 - landtrustalliance.org/policy/tax-matters/campaigns/the-enhanced-easement-incentive [12/22/14] 5 - forbes.com/sites/ashleaebeling/2013/12/10/commuter-tax-break-set-to-plummet-for-2014/ [12/10/13]

Sincerely, Bill Morrissey, CFP® and Tammy Prouty, CFP® Sound Financial Planning, Inc.

Primary Office 425 Commercial St., Ste 203 Mount Vernon, WA 98273 Phone: (360) 336-6527 info@soundfinancialplanning.net Secondary Office 650 Mullis St., Ste 101 Friday Harbor, WA 98250 (360) 378-3022 www.soundfinancialplanning.net

PLEASE READ THIS WARNING: All e-mail sent to or from this address will be received or otherwise recorded by the Sound Financial Planning, Inc. corporate e-mail system and is subject to archival, monitoring and/or review, by and/or disclosure to, someone other than the recipient. This message is intended only for the use of the person(s) ("intended recipient") to whom it is addressed. It may contain information that is privileged and confidential. If you are not the intended recipient, please contact the sender as soon as possible and delete the message without reading it or making a copy. Any dissemination, distribution, copying, or other use of this message or any of its content by any person other than the intended recipient is strictly prohibited. Sound Financial Planning, Inc. has taken precautions to screen this message for viruses, but we cannot guarantee that it is virus free nor are we responsible for any damage that may be caused by this message. Sound Financial Planning, Inc. only transacts business in states where it is properly registered or notice filed, or excluded or exempted from registration requirements. Follow-up and individualized responses that involve either the effecting or attempting to effect transactions in securities or the rendering of personalized investment advice for compensation, as the case may be, will not be made absent compliance with state investment adviser and investment adviser representative registration requirements, or an applicable exemption or exclusion. This information should not be construed as investment advice. All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy. WE WOULD LIKE TO CREDIT THIS ARTICLE'S CONTENT TO MARKETING PRO, INC.

GETTING A JUMP ON TAX SEASON

What should you bring to your preparer? 

You can file your federal tax return starting January 20. IRS filing season will start right on time in 2015, and there is wisdom in filing your 1040 well before April 15. You can get it out of the way earlier, and if you e-file, you can put yourself in position for an earlier refund.1
   
What should you gather up for your CPA? If you want to save time and possibly money along with it, come to your preparer's office ready with the appropriate paperwork. If you own a business, that list includes all W-2s and 1099-MISC forms you get from clients, any 1099-INT and K-1 forms displaying interest income, your Schedule C and P&L reports, and any and all paperwork you can round up detailing your expenses - your personal expenses too, not only business costs but also any tuition, medical and miscellaneous ones. If you have made charitable contributions worth itemizing, that paperwork needs to reach your preparer. The same goes for documents detailing mortgage interest, other forms of interest paid, and any tax already paid.2
 
If you have receipt management software, your CPA will love you for using it (beats getting a manila envelope, file folder or shoebox full of receipts to sort through). If a calamity or an accident destroyed a bunch of your business records, remember that the IRS may give you a break - but your CPA needs solid proof of the misfortune to try and make a case to the IRS and get you some leniency. 
 
What are some things people too often forget to bring? Social Security numbers for new babies (and taxpayer-ID numbers and contact information for the nannies of those babies). Logs of unreimbursed mileage. Real estate stuff, too: closing letters related to a refi, receipts for real estate taxes (assuming they haven't been paid through escrow).3      
 
If you received any health insurance subsidies, you may want to wait until February. Did you pay for your own health insurance in 2014? Do you remember how you had to estimate your 2014 income when you applied for coverage? If you got a subsidy, it was based on that estimate, and an estimate is by definition inexact. Some taxpayers ended up earning more than the incomes they estimated to the exchanges, some less. That could mean one of two things: a big 2014 tax refund, or owing thousands more in taxes.4
 
If you pay for your own health coverage, the exchange at which you bought it should send you Form 1095-A by January 31. Form 1095-A will list how your household self-insures: who pays premiums, and the amount of any monthly subsidies. Your CPA can plug these details into Form 8962, which explains the breakdown on insurance, subsidies and income for your household to the IRS. If you were only self-insured for part of 2014, your CPA must note any subsidy payments by the month.4
 
In getting a jump on tax season, you can get that bothersome item off your to-do list sooner and focus on the more exciting parts of your career, business or life.

Citations. 1 - forbes.com/sites/robertwood/2014/12/29/irs-announces-2014-tax-return-filing-opens-starting-january-20-2015/ [12/29/14] 2 - outright.com/blog/what-do-you-need-to-bring-to-your-accountant-at-tax-time/ [3/18/14] 3 - foxbusiness.com/personal-finance/2014/03/18/what-documents-should-take-to-tax-preparer/ [3/18/14] 4 - money.cnn.com/2015/01/02/pf/taxes/obamacare-income-tax-subsidies/ [1/2/15] 5 - dailyfinance.com/2014/12/25/hire-cpa-prepare-taxes/ [12/25/14]

Sincerely, Bill Morrissey, CFP® and Tammy Prouty, CFP® Sound Financial Planning, Inc.

Primary Office 425 Commercial St., Ste 203 Mount Vernon, WA 98273 Phone: (360) 336-6527 info@soundfinancialplanning.net Secondary Office 650 Mullis St., Ste 101 Friday Harbor, WA 98250 (360) 378-3022 www.soundfinancialplanning.net

PLEASE READ THIS WARNING: All e-mail sent to or from this address will be received or otherwise recorded by the Sound Financial Planning, Inc. corporate e-mail system and is subject to archival, monitoring and/or review, by and/or disclosure to, someone other than the recipient. This message is intended only for the use of the person(s) ("intended recipient") to whom it is addressed. It may contain information that is privileged and confidential. If you are not the intended recipient, please contact the sender as soon as possible and delete the message without reading it or making a copy. Any dissemination, distribution, copying, or other use of this message or any of its content by any person other than the intended recipient is strictly prohibited. Sound Financial Planning, Inc. has taken precautions to screen this message for viruses, but we cannot guarantee that it is virus free nor are we responsible for any damage that may be caused by this message. Sound Financial Planning, Inc. only transacts business in states where it is properly registered or notice filed, or excluded or exempted from registration requirements. Follow-up and individualized responses that involve either the effecting or attempting to effect transactions in securities or the rendering of personalized investment advice for compensation, as the case may be, will not be made absent compliance with state investment adviser and investment adviser representative registration requirements, or an applicable exemption or exclusion. This information should not be construed as investment advice. All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy. WE WOULD LIKE TO CREDIT THIS ARTICLE'S CONTENT TO MARKETING PRO, INC.

NEW POLICIES FOR GROWTH

As the U.S. economy has slowly, steadily lumbered out of the Great Recession, the biggest drag on recovery has been housing.  Existing home sales have never recovered their 2007 levels, despite several government stimulus efforts.  Meanwhile, newly-constructed single family home sales have been hovering near levels that represented the bottom of previous recessions.  In the latest statistics, groundbreakings on new homes actually fell by 2.8% in October compared with September.

Depressed home sales-both new and used-have a negative effect on many sectors of the economy, from the materials to make the houses, appliance sales-plus, of course, the income of many thousands of construction workers, appraisers and realtors.  During healthy times, home construction and sales make up 9% of all economic activity, compared with just under 6% today.  It's remarkable that the American economy has been able to show continued growth while dragging housing activity like a ball and chain behind it.

But things may be looking up in the housing sector.  In recent weeks, Fannie Mae and Freddie Mac, the two government-backed mortgage companies that provide loan guarantees to lending institutions, have quietly adjusted their loan guarantee guidelines in ways that will make it easier for borrowers to secure loans.  Under the new rules, any loans with no missed payments for 36 consecutive months after they were first issued will be backed by the Freddie or Fannie should they default.  In the past, the agencies kept their policies unclear, and maintained that they could force lenders to buy back nonperforming loans without explanation.  The new policy will make loans less risky for lenders to extend to consumers.

Perhaps more importantly, new guidelines were issued that will make it easier for Gen Y buyers to come into the market.  Since 2008, lenders have been requiring home buyers to have near-perfect credit, and even then to pay 20% down on their home purchase.  Now, going forward, Freddie and Fannie will start backing loans where the borrower puts down just 3%-a huge relief for first-time homebuyers.  Look for these simple shifts in policy to accomplish more stimulus to the housing market-and to the U.S. economy-than any of the emergency measures passed in the wake of the economic downturn.  And, sometime in the first quarter of next year, you might see articles talking about an unexpected housing recovery and windfall GDP growth that has economists scratching their heads.

Sources:   http://useconomy.about.com/od/grossdomesticproduct/f/Real_estate_faq.htm http://useconomy.about.com/od/grossdomesticproduct/f/Real_estate_faq.htm http://www.forbes.com/sites/erincarlyle/2014/11/26/new-home-sales-sluggish-in-october-0-7-increase-reflects-new-normal/ http://money.cnn.com/2014/12/09/real_estate/mortgage-lending/index.html?iid=SF_PF_River

Sincerely, Bill Morrissey, CFP® and Tammy Prouty, CFP® Sound Financial Planning, Inc.

Primary Office 425 Commercial St., Ste 203 Mount Vernon, WA 98273 Phone: (360) 336-6527 info@soundfinancialplanning.net Secondary Office 650 Mullis St., Ste 101 Friday Harbor, WA 98250 (360) 378-3022 www.soundfinancialplanning.net

PLEASE READ THIS WARNING: All e-mail sent to or from this address will be received or otherwise recorded by the Sound Financial Planning, Inc. corporate e-mail system and is subject to archival, monitoring and/or review, by and/or disclosure to, someone other than the recipient. This message is intended only for the use of the person(s) ("intended recipient") to whom it is addressed. It may contain information that is privileged and confidential. If you are not the intended recipient, please contact the sender as soon as possible and delete the message without reading it or making a copy. Any dissemination, distribution, copying, or other use of this message or any of its content by any person other than the intended recipient is strictly prohibited. Sound Financial Planning, Inc. has taken precautions to screen this message for viruses, but we cannot guarantee that it is virus free nor are we responsible for any damage that may be caused by this message. Sound Financial Planning, Inc. only transacts business in states where it is properly registered or notice filed, or excluded or exempted from registration requirements. Follow-up and individualized responses that involve either the effecting or attempting to effect transactions in securities or the rendering of personalized investment advice for compensation, as the case may be, will not be made absent compliance with state investment adviser and investment adviser representative registration requirements, or an applicable exemption or exclusion. This information should not be construed as investment advice. All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy. WE WOULD LIKE TO CREDIT THIS ARTICLE'S CONTENT TO BOB VERES.

SHOULD WE FEAR - OR CHEER - PLUNGING OIL PRICES?

Chances are, you're celebrating today's lower gas prices.  AAA reports that the national average price of gas is $2.60 today, the lowest since December 2009.  The result: an estimated $70 billion in direct savings for U.S. consumers over the next 12 months.  At previous prices, the average American was spending about $2,600 a year on gasoline, so the 20% price decline would result in $520 more to save or spend.

It gets better.  Even though gas prices (and, therefore, the cost of driving) have plummeted, the Internal Revenue Service is raising the standard mileage rates that people can deduct on their tax return for business travel, from 56 cents in 2014 to 57.5 cents per business mile driven next year.

Only the investment markets seem to think that cycling an extra $70 billion into the U.S. economy is a bad thing.  This past week, large cap stocks, represented by the S&P 500 index, saw their prices fall by 3.5%-their biggest drop since May 2012. Why?  The only possible explanation is that rapid Wall Street traders believe that lower oil prices will harm the economies of America's trading partners, and therefore impact the U.S. economy indirectly.

So let's take a closer look.  While U.S. consumers are cheering the decline in oil prices, and non-energy producing nations like Japan and countries in the Eurozone are seeing a boost in their economies, who's NOT celebrating?

As it turns out, some of the biggest losers are American domestic shale oil producers, who basically break even when oil prices are at their current $50-$60 a barrel levels.  Any further drop in prices would slow down domestic energy production, and probably create a floor that would keep prices from falling much further.

Another big loser is the socialist government in Venezuela (remember Hugo Chavez?), which needs oil prices above $162 a barrel to pay for all of its social programs.  You can also sympathize with Iran, which reportedly needs oil prices to move up to $135 barrel to stay in the black, due to continuing sanctions from the world community over its nuclear program, and the high cost of supporting Hezbollah and its own military ventures in the Middle East.

The biggest loser is probably Russia, which requires oil prices of at least $100 a barrel for its budget to withstand international sanctions and finance its own military adventures against neighboring nations.  Economists are projecting that Russia will fall into a steep recession next year, when GDP could decline as much as 6%.  The nation is experiencing what economists call "capital outflows" of $125 billion a year-a fancy way of saying that wealthy Russians are taking money out of Russian banks and either investing abroad or putting their rubles in banks located in more stable foreign jurisdictions.  And in the process, they are exchanging their rubles for local currency, as a way to protect against the recent free-fall in Russia's currency.  Bloomberg News recently published a graphic which many Americans will find entertaining, but which is probably not happy news for Russian President Vladimir Putin.

It's interesting that the markets seem to be worrying about low oil prices when the economies with the most to lose are not just not major trading partners, but actual political enemies of U.S. interests. Cheaper oil will eventually be regarded as a plus for our economic-and political-interests, but the downturn suggests that Wall Street traders are hair-trigger ready to be spooked by anything they regard as unusual. 

Sources:        http://www.marketwatch.com/story/5-countries-that-will-be-the-biggest-losers-from-oils-slide-2014-11-20?page=2 http://blogs.piie.com/realtime/?p=4644 http://www.accountingtoday.com/news/irs-watch/irs-raises-standard-mileage-rate-for-businesses-72990-1.html?ET=webcpa:e3476082:a:&st=email&utm_content=buffer4179f&utm_medium=social&utm_source=twitter.com&utm_campaign=buffer http://www.forbes.com/sites/northwesternmutual/2014/11/27/lower-oil-prices-give-a-gift-to-consumers/

Sincerely, Bill Morrissey, CFP® and Tammy Prouty, CFP® Sound Financial Planning, Inc.

Primary Office 425 Commercial St., Ste 203 Mount Vernon, WA 98273 Phone: (360) 336-6527 info@soundfinancialplanning.net Secondary Office 650 Mullis St., Ste 101 Friday Harbor, WA 98250 (360) 378-3022 www.soundfinancialplanning.net

PLEASE READ THIS WARNING: All e-mail sent to or from this address will be received or otherwise recorded by the Sound Financial Planning, Inc. corporate e-mail system and is subject to archival, monitoring and/or review, by and/or disclosure to, someone other than the recipient. This message is intended only for the use of the person(s) ("intended recipient") to whom it is addressed. It may contain information that is privileged and confidential. If you are not the intended recipient, please contact the sender as soon as possible and delete the message without reading it or making a copy. Any dissemination, distribution, copying, or other use of this message or any of its content by any person other than the intended recipient is strictly prohibited. Sound Financial Planning, Inc. has taken precautions to screen this message for viruses, but we cannot guarantee that it is virus free nor are we responsible for any damage that may be caused by this message. Sound Financial Planning, Inc. only transacts business in states where it is properly registered or notice filed, or excluded or exempted from registration requirements. Follow-up and individualized responses that involve either the effecting or attempting to effect transactions in securities or the rendering of personalized investment advice for compensation, as the case may be, will not be made absent compliance with state investment adviser and investment adviser representative registration requirements, or an applicable exemption or exclusion. This information should not be construed as investment advice. All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy. WE WOULD LIKE TO CREDIT THIS ARTICLE'S CONTENT TO BOB VERES.