ENTERING THE YELLEN YEARS

A look at the economist newly nominated to lead the Federal Reserve.

Janet Yellen - currently the vice chair of the Board of Governors of the Federal Reserve - has been nominated to succeed Ben Bernanke at the helm of the world's most important central bank. A former UC Berkeley and London School of Economics professor and San Francisco Fed president, Yellen is a globally admired economist with many fans on Wall Street. The way it looks now, in January she will become the most powerful woman in the world.1,2,4

The average investor doesn't know that much about Yellen and may be wondering what kind of course Fed policy may take under her watch. So here is a closer look at her.

Is Yellen just a clone of Ben Bernanke? It is true, Yellen has often voted in line with Bernanke regarding Fed policy; that was partly why Wall Street cheered her nomination. It also liked the fact that the controversial Larry Summers had withdrawn his name from consideration. Yet there are discernible differences between Yellen and Bernanke.1

The Fed has a mandate to focus on two goals: the goal of full employment, and the goal of price stability. Some Fed chairs lean more toward the first objective, and some lean more toward the second. While Bernanke built a reputation among his fellow economists as a responsive monetarist, Yellen is known as more of a Keynesian, someone who believes in the power of a sustained government stimulus to promote employment and heal the economy. In fact, earlier this year, she commented that "it is entirely appropriate for progress in attaining maximum employment to take center stage." 1,2

So is Yellen an inflation dove? In the eyes of many, yes. She may end up sustaining QE3 longer than Bernanke might have, and putting off significant tapering of QE3 for longer than her predecessor. Interest rates may stay at rock-bottom levels under her tenure for longer than presumed. Since QE3 began, both Yellen and Bernanke have maintained that easing to the tune of $85 billion in bond purchases per month is needed to fight ongoing high joblessness and subpar growth, even with the threat of asset bubbles or the possibility of losses for the central bank when those bonds are sold.1,2,3

Yellen got it right at a couple of key moments during the 2000s. In 2006, she warned of a housing bubble that could bring down the whole economy, not a particularly dovish moment for her. (Of course, Yellen and her Fed colleagues could have chosen to tighten and try to prevent one from forming 2-3 years earlier.) As the FOMC voted to cut interest rates by 25 basis points in December 2007, Yellen wanted a half-percent cut, stating that "any more bad news could put us over the edge, and the possibility of getting bad news - in particular, a significant credit crunch - seems far from remote." The Great Recession was a fact of life within a year.2,4

While Yellen is widely seen as extending the policies put in place during Ben Bernanke's term with little alteration, the big question is how quickly and how ably the Fed will be able to tighten if inflation becomes hazardous after all this easing. If Bernanke's legacy is that of a great scholar of the Great Depression who reactively managed the economy out of dire straits, Yellen's legacy may be built on how well the Fed can control the side effects and the gradual withdrawal of its current accommodative monetary stance.

Citations.
1 - cnn.com/2013/10/10/opinion/ghitis-janet-yellen/?hpt=hp_t4 / [10/10/13]
2 - tinyurl.com/kawhouj [3/21/12]
3 - bloomberg.com/news/2013-10-09/janet-yellen-s-to-do-list.html [10/9/13]
4 - tinyurl.com/mlqgjyf [10/13/13]

Sincerely,
William T. Morrissey and Tammy Prouty
Sound Financial Planning Inc.
wtmorrissey@soundfinancialplanning.net
Primary Office
425 Commercial Street, Suite 203
Mount Vernon, WA 98273
Phone: (360) 336-6527
Secondary Office
650 Mullis St., Suite 101
Friday Harbor, WA 98250
(360) 378-3022

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 PETER MONTOYA.

A DARK ANNIVERSARY

September 15th marks the 5th anniversary of one of the scariest events in investment history: the collapse and bankruptcy of Lehman Brothers, at the time one of the largest investment banking firms on Wall Street. Many date the market collapse and the start of the Great Recession to Lehman's fall on September 15, 2008.


As we look back at the string of debacles in the last quarter of that fateful year, it's fair to ask whether the conditions which caused the shock to the global economic system have been fixed or changed. The underlying question is: could something like that happen again?

Let's look at the problems one at a time.

1) One of the biggest problems in 2008 was that banks had found ways to borrow up to 50 times what they were worth in net capital, which meant that even small losses caused them to tumble into insolvency and a government bailout. If you and I tried to borrow 50 times what we're worth in order to play the stock market, we would be stopped at the door of the bank.

Have we imposed similar limits on Wall Street since 2008?

Alas, the answer is no. Since the crisis, according to an article in Time magazine, some of the largest U.S. banks have raised the amount of capital they hold on their books. But after furious lobbying efforts, Wall Street managed to stymie any efforts by Congress to put limits on their leverage. In the future, theoretically, they could borrow even more than they did in the last crisis.

2) This might not be so terrible, except that the investment banks used the money they borrowed to gamble in the stock market, and in the highly-risky derivatives market, and in the packaged mortgage pools that they were creating and selling to their customers. Former Federal Reserve Board Chairman Paul Volker has argued that investment banks should not be allowed to speculate or day-trade with borrowed money; they should earn their money by making loans and taking companies public. Others have argued that Wall Street firms should be forced to at least use their own money when they buy and sell investments for their own account--not other people's money.

Has Congress or the regulators restricted this risky behavior?

Alas, no. The so-called Volker Rule was removed from the Dodd-Frank legislation after a successful Wall Street lobbying effort. Today, investment banking firms and their traders buy and sell at a furious rate. The most recent notorious example came when a JP Morgan Chase trader, who was nicknamed The London Whale by his peers, managed to lose $7 billion of the company's (and shareholders') capital in 2012 before newspapers broke the story and alerted the company's sleeping risk management department.

3) A lot of the worst damage to the global financial system was done by complex derivatives investments that were created outside of the regulatory system, and distributed around the globe with zero oversight. When it was discovered that companies like AIG had made guarantees via these products that were many orders of magnitude higher than the net capital of the company itself, regulators were appalled--and at a loss to even calculate the extent of the exposure, much less unravel and repair the damage to bank and pension balance sheets across the globe.

Do we have a way to monitor and regulate these derivatives investments today?

Yes and no. Roughly half of the interest-rate-swaps market must now pass through central clearinghouses in the U.S., allowing the Commodities Futures Trading Commission to track who owes what to whom. But once again, relentless lobbying by Wall Street managed to carve out significant loopholes in this oversight, so that today banks and hedge funds do a brisk (and unregulated) trade in foreign exchange derivatives in international markets. There is nothing to stop another Whale, operating in the U.S., Japan or elsewhere, from playing havoc with Wall Street's balance sheets, and Wall Street can continue to sell guarantees across the globe, invisibly to the regulators.

4) Many of the toxic packaged mortgage products that Wall Street sold to its unfortunate customers had been rubber-stamped by the credit rating agencies as high-grade, safe bond investments. Later, it was pointed out that the ratings agencies who gave AA ratings to packages of junk securities were, as a normal part of their business model, paid by the companies whose products they were rating.

Have we fixed this problem?

No. The ratings agencies like Standard & Poors and Moody's are still paid for their services by the very Wall Street firms and bond underwriters that create the products they are rating.

5) Behind everything else, perhaps the biggest cause of the financial crisis was Wall Street incentive systems--the way that Wall Street brokers, traders and executives are compensated. To see why this is a problem, consider what actually happened in the years leading up to 2008: traders and Wall Street financial wizards knew that they could sell a lot of the products that they were creating, and the result would be a windfall for their companies and a big bonus of more than $1 million in their pockets. They sold a lot, then they sold more, and their bonuses went up accordingly. These products had the potential to blow up and ruin the company, or they might pay off big.

If they paid off big, the bonuses would be astronomical. If they blew up, well, the traders, executives and wizards might be laid off. But they could console themselves for their bad luck by counting the bonus dollars in their retirement accounts, which would be far more money than the average American investor is ever likely to see. Heads they win big, tails they win not quite so big. Where is the incentive for them to actually worry about whether the products they created and sold would blow up and wreck the company, the balance sheets of banks and pension funds, and the global economy?

Have we changed the incentive structure for Wall Street?

Alas, no. There were proposals to create so-called "clawback" provisions, where, if the derivatives or packaged investments were to blow up in the future, traders, brokers, wizards and other responsible executives would have to give back some or all of the bonuses they received. But the proposals went nowhere.

Indeed, it appears that the moral code on Wall Street has actually gotten worse, not better. As evidence, consider a recent poll of 250 Wall Street traders, portfolio managers, investment bankers and brokers (who call themselves investment advisors), where 23% said that "they had observed or had firsthand knowledge of wrongdoing in the workplace." 24% of the respondents said that they would "engage in insider trading to make $10 million if they could get away with it." 26% said they "believed the compensation plans or bonus structures in place at their companies incentivize employees to compromise ethical standards or violate the law." And 17% said they expected "their leaders were likely to look the other way if they suspected a top performer engaged in insider trading."

And these are the people who are integral to the safe and healthy functioning of our financial system.

6) The financial crisis problem that got the most public attention was the "Too big to fail" problem, where the government felt it had no choice but to reach into the taxpayers' pockets and bail out the companies that caused the problem in the first place. People talked about the moral hazard when a company knows that its failure is too painful to contemplate. The company can make huge risky bets, and if it wins those bets, it puts enormous sums of money into its own pockets. If it loses them, the government will bail it out. Once again, heads they win, tails they don't lose--which is not how the economy is supposed to operate.


Have we fixed the "too big to fail" problem?

No. In fact, it has gotten worse, as the healthy companies were given government incentives to buy the less healthy ones on Wall Street.

7) In the aftermath of the global financial crisis, some observers pointed out that banks should ideally function as utilities in the U.S. economy. Their function is to provide capital for companies and individuals who build or create businesses (and jobs). When Wall Street is using that capital instead for its own purposes, to day-trade for their own accounts and create complex investment products that are highly-profitable but serve no economic purpose, they are diverting valuable capital into their own pockets.

Can anything be done about this?

Not currently. Wall Street lobbyists have successfully beaten back all efforts to change their corporate behavior. Meanwhile, an article written by the former chief economist of the International Monetary Fund notes that the financial sector--chiefly the largest Wall Street firms--now earns more than 41% of all domestic corporate profits. That means that Wall Street has used the valuable capital that should be made available to the corporate sector to generate profits for itself that roughly equal the profits of all the aerospace and defense firms, pharmaceutical and oil companies, electric utilities, housing and construction, TV, radio, the movie industry, computer and software companies and the entire health care industry--combined.

Of course, none of this means that another global financial meltdown is going to happen; what happened in 2008 was a perfect storm of unfortunate events. But it is hard to be encouraged by how Congress and regulators have gone about fixing the problems that were exposed by the financial crisis. The anniversary of the Lehman collapse suggests that our elected officials and regulators still haven't learned the lessons of 2008.

Sources:
Time cover story, Sept. 23, 2013
http://dealbook.nytimes.com/2013/07/15/on-wall-st-a-culture-of-greed-wont-let-go/?_r=0
http://www.theatlantic.com/magazine/archive/2009/05/the-quiet-coup/307364/?single_page=true)

Sincerely,
William T. Morrissey and Tammy Prouty
Sound Financial Planning Inc.
wtmorrissey@soundfinancialplanning.net
Primary Office
425 Commercial Street, Suite 203
Mount Vernon, WA 98273
Phone: (360) 336-6527
Secondary Office
650 Mullis St., Suite 101
Friday Harbor, WA 98250
(360) 378-3022

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.

WHAT IF AMERICA SHATTERS ITS DEBT CEILING?

The global economic consequences could be severe.

In October, America may risk running out of cash. Treasury Secretary Jacob Lew recently urged Congress to lift the federal debt limit before October 17. Secretary Lew claims that if nothing is done by that date, the Treasury will have only about $30 billion in available cash to pay down as much as $60 billion in daily net expenditures. The nonpartisan Congressional Budget Office has a slightly different opinion: it believes that the government will run out of free cash sometime between October 22 and November 1 if a stalemate persists on Capitol Hill.1,2

Many Americans may confuse the impasse over the debt ceiling with the sparring over the federal budget, which has made headlines all September. October 1 was set as a deadline for Congress to pass a stopgap funding measure to avoid possible shutdowns of certain federal agencies. The debt ceiling could be breached in mid-October. Technically speaking, the debt limit was already hit on May 19, with the Treasury Department taking what Secretary Lew calls "extraordinary measures" to keep enough cash on hand, such as dipping into exchange-rate funds.1,2

America has never defaulted on its debt before; what would happen if it did? No one particularly wants to find out. "Any delay in raising the debt ceiling would have dire economic consequences," respected Moody's Analytics economist Mark Zandi testified in front of Congress last week. "Consumer, business and investor confidence would be hit hard, putting stock, bond and other financial markets into turmoil."1

If the debt ceiling shatters, the Bipartisan Policy Center estimates that America would have enough cash on hand to pay 68% of its debt through the end of October. It would have to borrow to meet the $42 billion in Social Security and Medicare payments due in November.2

Global markets might get a systemic shock if America defaulted on bond payments. Investors might have one of their core assumptions upended - the assumption that Treasuries are the safest investment on earth.2

Couldn't the government just partially pay its debts for a while? Could the Treasury pay off $30 billion in select debts each day and let other debts linger? This approach - known as prioritization - sounds reasonable, but it may not be doable.

The Washington Post reports that Treasury Department computers receive upward of 2 million invoices per day. Software confirms the math on them and greenlights the payment for each one of them, and this all happens dozens of times per second. According to the BPC, the federal government makes almost 100 million different monthly payments on its debt this way. Secretary Lew dismisses the approach; as he wrote in a letter to House Speaker John Boehner, "Any plan to prioritize some payments over others is simply default by another name."2

Aren't there some "end runs" the Treasury could make around the problem? In the (very) short term, the Treasury could simply let invoices pile up and delay payments for a particular day until it had enough cash to pay every debt obligation for that day. Or, the Office of Management & Budget could tell assorted federal agencies to slow down the rate of invoices headed to the Treasury, informing them that they would have to wait until later in the year to spend certain monies allocated to them (this is called "apportionment").2

Two beyond-the-left-field-fence fixes have also been suggested: the possibility of President Obama declaring the debt ceiling unconstitutional under the 14th Amendment, and the idea to mint a $1 trillion coin.

Section 4 of the 14th Amendment says that "The validity of the public debt of the United States, authorized by law, including debts incurred for payments of pensions and bounties for services in suppressing insurrection or rebellion, shall not be questioned." In 2011, White House legal advisers told President Obama that this 1868 reference to the repayment of Civil War liabilities had dubious value as a tool to lift the debt limit.3

Georgia lawyer Carlos Mucha gained fame in 2012 by proposing that the Treasury authorize the U.S. Mint to make a $1 trillion platinum coin which could be deposited at the Federal Reserve. Once deposited, Mucha claimed, the Fed could credit the federal government's account for $1 trillion and everything would be solved. An obscure passage in the 1997 Omnibus Consolidated Appropriations Act supposedly provides a rationale for this; according to its author, Rep. Mike Castle (R-DE), the passage was written to help coin collectors. In January, Treasury Department spokesperson Anthony Coley told the Washington Post that "neither the Treasury Department nor the Federal Reserve believes that the law can or should be used to facilitate the production of platinum coins for the purpose of avoiding an increase in the debt limit."4,5

The world waits & watches. As we get into October, the debt limit will become more and more of a global concern - one that will hopefully fade through negotiation and compromise.

Citations.
1 - nytimes.com/2013/09/26/business/treasury-warns-of-potential-default-by-mid-october.html [9/26/13]
2 - washingtonpost.com/blogs/wonkblog/wp/2013/09/25/debt-ceiling-doomsday-comes-oct-17-heres-what-happens-next/ [9/25/13]
3 - nytimes.com/2011/07/25/us/politics/25legal.html [7/24/11]
4 - nytimes.com/roomfordebate/2013/01/13/proposing-the-unprecedented-to-avoid-default/platinum-coin-would-create-a-trillion-dollar-in-funds [1/13/13]
5 - washingtonpost.com/blogs/wonkblog/wp/2013/01/12/treasury-we-wont-mint-a-platinum-coin-to-sidestep-the-debt-ceiling/ [1/12/13]

Sincerely,
William T. Morrissey and Tammy Prouty
Sound Financial Planning Inc.
wtmorrissey@soundfinancialplanning.net
Primary Office
425 Commercial Street, Suite 203
Mount Vernon, WA 98273
Phone: (360) 336-6527
Secondary Office
650 Mullis St., Suite 101
Friday Harbor, WA 98250
(360) 378-3022

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 PETER MONTOYA.

YOUR RETURNS VS. THE MARKET

One of the most misleading statistics in the financial world is the return data we are routinely given by the financial media, telling us how much investors made in the markets and in individual stocks or mutual funds over some time period. In fact, your returns are almost guaranteed to be different from whatever the markets and the funds you've invested in have gotten.

How is this possible? Start with cash flows. We are told that the S&P 500 has delivered a compounded return of about 7.8% from 1992 through 2011, which sounds pretty positive until you realize that this return would only be available to somebody who invested all of his or her money at the beginning of 1992 and didn't move that money around at all for the next ten years. If you invested systematically, the same amount every month, as most of us do, then you would have earned a 3.2% compounded return. Why? A lot of your money would have been exposed to the 2008 downturn, and not much of it would have enjoyed the dramatic run-up in stocks from 1992 to 2000.

In addition, there is the difference--only now getting attention from analysts--between investor returns and investment returns. Human nature drives investors to sell their stocks and move to the sidelines after their portfolios have been hammered--which is often the worst possible time to sell. And it drives people to start increasing their equity allocations toward the peak of bull markets when they perceive that everybody else is getting rich. That means less of their money tends to be exposed to stocks when the market turns from bearish to bullish, and more is exposed when markets switch from bullish to bearish.

This would be bad enough, but people also switch their mutual fund and stock holdings. When a great fund hits a rough patch, there's a tendency to sell that dog and buy a fund whose recent returns have been scorching hot. Many times the underperforming fund will reverse course, while the hot fund will cool off. The Morningstar organization now calculates, for every fund it follows, the difference between the returns of the mutual fund and the average returns of the investors in the fund, and the differences can be astonishing. Overall, according to Morningstar statistics and an annual report compiled by the Dalbar organization, investor returns have historically been about half of what the markets and funds are reporting.

And then there's the tax bite. Some mutual funds invest more tax-efficiently than others, and generate less ordinary income. Beyond that, if a fund is sitting on significant losses when you invest, you get to ride out its gains without having the tax impact distributed to your 1040. If the fund is sitting on large gains when you buy in, you could find yourself paying taxes on gains even if the fund loses money.

Sources:
http://onforb.es/1fhmsyI
Investment Returns

http://bit.ly/18SUyzDReturn Explained

http://bit.ly/18lTlmuMorningstar Fact Sheet

Sincerely,
William T. Morrissey and Tammy Prouty
Sound Financial Planning Inc.
wtmorrissey@soundfinancialplanning.net
Primary Office
425 Commercial Street, Suite 203
Mount Vernon, WA 98273
Phone: (360) 336-6527
Secondary Office
650 Mullis St., Suite 101
Friday Harbor, WA 98250
(360) 378-3022

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.

HOW TO NAVIGATE THE NEW HEALTH INSURANCE ENVIRONMENT

The brave new world of health care in the U.S. is about to arrive. The most far-reaching provisions of the Patient Protection and Affordable Care Act--sometimes known as "Obamacare"--will debut on October 1 of this year, when the new health insurance marketplaces (aka "exchanges"), will open for enrollment. The coverage on these plans will start as soon as January 1, 2014, at which time just about everybody (with some interesting exceptions) will be required to have a health insurance policy in place or face tax penalties.


For most of us, this is going to be a dramatic and confusing transition period. Here are answers to some of the most frequently-asked questions about the exchanges, coverages, and new tax law.

Will this make shopping for health insurance easier or harder?

Theoretically, it should be much easier--for four reasons. First, all the policies offered in your area--with prices and policy provisions--will be listed side-by-side on the exchange website. (See below for links to these sites.) Before, this "total market" information was available only to health insurance agents.

Second, you don't have to search high and low for a policy that allows coverage of your pre-existing conditions, or go through a lot of medical underwriting where the insurance company would look for reasons to charge you more or deny you coverage altogether. Private insurers who participate in the network cannot turn you away or charge you more because you have an illness or pre-existing medical condition--and they must cover treatments for those conditions.

Third, the policies are now somewhat standardized into four categories, making the comparison of features much less complicated than before.

And fourth, if you believe in capitalism, the competition should help drive insurance premiums lower. If one company is offering a better price on a particular policy than all the others, and raking in all the business as a result, other insurance companies will be motivated to drop their prices to be competitive. This isn't a guarantee of lower premiums; initially, some insurance companies will set higher prices until they can get a better handle on claims experience, and some are worried that so many people with big health problems will sign up that it will overload the system. But over the long haul, insurance company profits should be lower than they were before.

Are these plans run by the government?

No. They are offered by private insurance companies.

What's different about the policies offered through the exchanges, compared to what I'm used to?

The biggest change is the fact that there is no underwriting or additional charges (or denial) due to pre-existing conditions. The second-biggest is that the plans will be somewhat standardized, which makes it a little bit less complicated to comparison shop.

Beyond that, all plans are required to cover a core set of benefits, called "essential health benefits," including preventive and wellness services, chronic disease management, pediatric services, many prescription drugs, rehabilitative services if you get injured, mental health and substance disorder services, maternity and newborn care, hospitalization and emergency services.

Unlike the previous environment, no plan will be allowed to have deductibles, co-payments or co-insurance greater than the limits for high-deductible plans (roughly $6,000 for an individual, $12,000 for a family) or impose a limit on lifetime healthcare benefits.

Finally, under the exchange system, women cannot be charged higher health insurance premiums than men.

So what are the differences between the policies that I'll be choosing from?

There will be four basic levels (meaning costs) of policies, which have been dubbed bronze, silver, gold and platinum.

If you are not a frequent visitor to the doctor, you might prefer the least expensive option: a bronze plan, which will cover 60% of all health care costs for the average person, leaving you to pay 40%, overall, out-of-pocket.

A silver plan covers, on average, 70% of a policyholder's healthcare costs, a gold plan covers 80% and the platinum plan, for people who are frequent medical consumers and can afford the cost, covers 90% of medical expenses, leaving you with 10% out-of-pocket.

Young adults under the age of 30 will be able to purchase a catastrophic plan, where they would pay the out-of-pocket costs for all health services except preventive services up to an annual limit of $12,700 (in 2014, rising with inflation thereafter).

Suppose I have an HSA plan and make tax-deductible HSA contributions to pay for my health care?

A lot of shrill articles on this subject declared HSA plans null and void under the new health reform regime. But they may have overlooked a provision in the new law that clearly states that people using the HSA strategy on or before March 22, 2010 will be grandfathered. Unless they make a major change to their plan that would cancel their grandfathered status, they can continue their HSA strategy indefinitely.

Meanwhile, recent calculations appear to allow federally-qualified HSA plans with the highest deductibles (around $6,000) to meet the standards for bronze coverage. Basically that means that, with some tweaking of existing policies, you will probably be able to continue to buy high-deductible catastrophic care insurance through the exchange and continue to make those tax-credited contributions and get tax-deferral on the money invested in the HSA account.

However, the Affordable Care Act made one significant change to how HSAs work: the law eliminated the ability to use money in the HSA account to buy over-the-counter drugs. You don't want to make this mistake and write a check to the pharmacy for the drug purchase. The early withdrawal penalty for taking money out of the account for reasons other than to pay medical bills, for anybody under age 65, is 20% of the withdrawal amount. Add in the tax penalties and that bottle of aspirin can get very expensive.


How do I compare the plans and buy them?

You will be able to compare plans (and, most importantly, costs) side-by-side on the web portal of your state exchange--or, if your state has not created an exchange, then through a federal web portal (see below). There will also be toll-free consumer assistance hotlines that can be found on the exchange website.

When you apply for coverage in the exchange, you'll need to provide your Social Security number, the name of the employer of each member of your household who needs coverage and their income, plus the policy numbers for any current health insurance plans covering members of your household. You will also need to provide information on any health insurance policy you and/or a member of your household is eligible for, even if you aren't currently participating in the plan.

What else should I be comparing?

Look at whether the plan lets you visit the doctors and hospitals that you're currently comfortable with. Many of the policies are going to be network-dependent, a fancy word that means you will be confined to working with their preferred provider professionals and facilities.

How workable is this exchange idea, anyway?

There have been a lot of commentaries on both sides of the political spectrum, which might lead you to believe that the exchange concept was conceived in heaven or hell. But one thing to remember is that Medicare has operated as an exchange (although it isn't called that) for decades. Each Medicare-eligible person picks from a number of plans, more in some states than in others, each with a variety of benefits. So to the extent that seniors are happy with their Medicare coverage, there is at least one significant example that the concept can work effectively.

Of course, consultants will tell you that most seniors tend to pay more in out-of-pocket expenses under Medicare than necessary, because they don't know how to match up their personal health profile with the right package. That may also prove to be true with the exchanges.


Which states have their own state exchanges?

You can put in the name of your state on a very helpful website set up by the government: www.HealthCare.gov, and get links to the state exchanges--plus a lot of other explanatory information.

Exchanges have been set up in:

California (Covered California; http://www.coveredca.com/),

Colorado (Connect for Health Colorado; http://www.connectforhealthco.com/),

Connecticut (Access Health CT; http://www.accesshealthct.com/),

the District of Columbia (DC Health Link; http://dchealthlink.com/),

Hawaii (Hawaii Health Connector; http://www.hawaiihealthconnector.com/),

Idaho (Your Health Idaho; http://www.yourhealthidaho.org/),

Kentucky (Kentucky Health Benefit Exchange; http://kynect.ky.gov/),

Maryland (Maryland Health Connection; http://www.marylandhealthconnection.gov/),

Massachusetts (The Massachusetts Health Connector; https://www.mahealthconnector.org/portal/site/connector),

Minnesota (MNsure; http://mn.gov/hix/),

Nevada (The Nevada Health Link; http://www.nevadahealthlink.com/),

New Mexico (The Health Insurance Marketplace; http://www.nmhix.com/),

New York (The New York State of Health; http://healthbenefitexchange.ny.gov/),

Oregon (Cover Oregon; http://www.coveroregon.com/),

Rhode Island (HealthSource RI; http://www.healthsourceri.com/),

Vermont (Vermont Health Connect; http://healthconnect.vermont.gov/) and

Washington (Washington Healthplanfinder; http://www.wahealthplanfinder.org/).

Utah has an exchange for small businesses and employees (Your Small Business Health Options Program; http://www.avenueh.com/) but if you want to shop for individual coverage in Utah, or any coverage in all other states, you go to the government's website at: http://www.HealthCare.gov.

Am I required to buy one of those policies?

Yes and no. If you're covered by Medicare, Medicaid, TRICARE, the veteran's health program or a plan offered by your employer, then the requirement to have health insurance is satisfied. You are not required to buy health insurance if your family income is below $10,000 (individual) or $20,000 (joint).

Otherwise, the answer is still no, but you have to pay a tax penalty if you are not covered by health insurance.

What kind of a penalty?

In 2014, that penalty is $95 per adult and $47.50 per child up to $285 for a family, or 1% of family income above the aforementioned thresholds ($10,000 or $20,000)--whichever is greater. For a family with more than $900,000 in income, the penalty will be higher than the cost of a typical silver-level plan; below that, the decision not to be covered becomes more complicated.

The penalty steps up in subsequent years. In 2015, it jumps to $325 per uninsured adult and $162.50 per uninsured child, up to $975 for a family, or 2% of family income above the thresholds--whichever is greater. In 2016 and thereafter, the penalty steepens to $695 per uninsured adult, $347.50 per uninsured child or 2.5% of family income above the thresholds. In all cases, the penalty is prorated by the number of months without coverage.

How will the government know whether I have health coverage or not?

Health insurance plans will provide documents to the people they insure, that will be used to prove they have the minimum coverage required by law.

Would it make sense to drop the coverage I get from my employer and buy one of these new policies?

It depends on what you're paying now, and what you're getting--but in most cases, the answer is no. In most job-based health insurance plans, your employer pays a portion of your premiums. If you choose a plan from the exchange, your employer does not need to make a contribution to your premiums.

Does the government subsidize some of the cost of health insurance premiums? If so, for who, and how much?

An estimated two-thirds of the American population will receive some form of subsidy. You qualify if your income is under four times (400%) the federal poverty level--which is about $88,000 a year for a family of four. If the family income falls under 250% of the federal poverty level ($27,000 for an individual; $55,000 for a family of four), then that family is eligible for "cost-sharing credits" which help defray co-payments, co-insurance and deductible--plus premium assistance on the policy itself. Above that 250% threshold, up to 400%, families are eligible on a sliding scale for premium assistance.

The Kaiser-Permanente organization has created a calculator telling you what credits and assistance you qualify for: http://kff.org/interactive/subsidy-calculator/. A family of four with two children, where nobody uses tobacco, earning $90,000 a year in 2014 dollars (382% of the poverty level), falls right on the threshold. An unsubsidized silver plan would cost $9,869, but the rules only require a person in this income category to pay a maximum of 9.5% of income for health insurance, so the government will issue a tax credit of $1,319 a year, dropping the actual premium price to $8,550.

The same household with an income of $50,000 is only required to pay 6.73% of its income, which means it would receive a government subsidy of $6,504--66% of the total premium expenses.

All subsidies are based on the premium for the silver plans. If an individual receiving the subsidy wants to purchase a gold or platinum plan, he or she will need to pay the difference between the premium credit amount and the cost of the more expensive plan.

When should I do my insurance shopping?

Sooner is better than later. As the January 1 deadline approaches, you can expect that suddenly many millions of people will suddenly decide they had better get coverage. The result could be a lot of confusion around the end of the year that you would be better off avoiding.

Sincerely,
William T. Morrissey and Tammy Prouty
Sound Financial Planning Inc.
wtmorrissey@soundfinancialplanning.net
Primary Office
425 Commercial Street, Suite 203
Mount Vernon, WA 98273
Phone: (360) 336-6527
Secondary Office
650 Mullis St., Suite 101
Friday Harbor, WA 98250
(360) 378-3022

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.

INTEREST RATES ARE TRENDING UP. SO WHAT?

If you haven't already, you will soon be hearing alarming reports of the "dramatic rise of Treasury bond rates," and the breathless implication in the articles and on the financial cable programs will be that this will have a disastrous effect on bond owners and the economy in general. Higher interest rates! More inflation! Lower economic growth! More interest on the ballooning federal debt! More competition for the stock market, and therefore lower stock prices!


If you look at the recent rise in 10-year Treasury rates in isolation, as several commentators have done, it does indeed look remarkable: a rise of more than 70% from a May 2 low of 1.63% to somewhere in the neighborhood of 2.90% as you read this. If the Dow were to jump that far, that fast, it would have risen from 14,500 to more than 25,500. Yikes! Maybe the headlines are justified after all!

But if you put the recent rate rise into a longer-term perspective, the recent "dramatic rise" looks awfully puny compared with some of the long-term swings in market history, and the current rate still looks quite reasonable. The high percentage shift is more a reflection of how low rates had gotten than a rise to dramatic heights.

So what's really going on here? You probably know why bond investors are asking for an extra 1.3% a year out of their longer-term fixed income investments these days: nobody knows when the Federal Reserve Board is going to stop buying Treasuries, or what, exactly, will happen when the elephant jumps off of the see-saw. The Fed's most recent meeting minutes suggest that it will be cautious about winding down its QE bond buying program. And you can bet that Fed economists will be watching the market for signs of impending damage, and curtail their curtailment if they seem to be causing a ruckus. But that still leaves a bit of uncertainty about where rates will go.

All professional investors know for sure is that when a big buyer walks away from the marketplace, gradually or not, there will be less demand for whatever they were buying than there was before. Therefore, bond issuers--including the U.S.--will have to pay more (i.e., higher yields) to lure in the fewer remaining buyers.

How much more? In other words, how much higher will bond rates go? How much will the bonds you own today lose value during the messy pullback from QE stimuli? We can make this second question easier to answer by simply pulling money back away from longer-term bonds until the dust settles, leaving it to the experts and institutional buyers to make educated guesses and read the tea leaves.

But you have to answer the first question in order to know the answer to the obvious third one: what other consequences will rising bond rates have on your other investments?

When market forces get back in control of the bond markets, they will be responding to three things: how scary are the alternative investments (and therefore how much do I want to put in bonds)? What is the current and expected inflation rate? And finally: where do I want to be on the yield curve? (Are the longer-term rates attractive enough to lure you away from the relative safety of shorter-duration bonds?)

Right now, inflation is pretty low, in part because the high joblessness rate is making it harder for workers to ask for huge raises, in part because the banks have a lot of money to lend and not a lot of people asking to borrow it. A recent report notes that an astonishing 82% of the U.S. money supply is currently on deposit at the Fed, mostly in accounts held by large banks. (To put that in perspective, the average percentage from January 1959 through the end of 2007 was 6.18%.) By the laws of supply and demand, banks don't have a lot of leverage to demand high rates of interest.

If you believe that the unemployment markets are going to tighten up dramatically in the fairly near future, and that somehow millions of people will want to borrow most of the global supply of dollars, then you can project a high inflation rate. If not, then you should probably not worry about an explosion in the inflation rate for the foreseeable future.

When you're talking about alternatives to bond investments, you're mostly talking about stocks. If we see another Fall of 2008 scenario, people are going to flock to government bonds and drive rates lower. About the only thing we know about the Fed's decision-making process, from its notes and internal policy debates, is that it is only going to start exiting its QE program when it thinks the economy is healthy. If the stock market starts to look edgy, or the U.S. starts sliding back into recession, you can bet that the Fed will want to keep interest rates low and be a tad more gradual about ending its QE activity.

As to the yield curve, at the moment, short-term rates on Treasuries and most other fixed-income vehicles are about as close to zero as you will ever see them again. The Fed has announced that its policy rate is 0%, and until the economy gets fully back on its feet and unemployment comes down dramatically, this is likely to continue to be its policy rate. The spread between 3-month T-bills and 10-year Treasuries is currently about 2.8%, which is nearly twice as high as the 1.5% historical average. Can it go higher? Yes. On two occasions since January of 1970, the spread has reached as high as 4%.

If you add up all these clues, you come out with something very different from the disaster scenarios you'll be hearing in the news. The Fed is planning to stop buying Treasuries at some point in the future, and let market forces take over--but only when it feels like the economy is healthy, and only so long as it can do this without harming economic growth or hammering the stock market. The market forces themselves are unknown, but it's hard to see how the ten-year Treasury bond will rise above 4%--or, to put THAT number in perspective, to the point where it is yielding about twice the dividend yield in the overall S&P 500 index. That still looks like pretty weak competition for stocks.


So what we're seeing in the bond market appears, if you can get away from the breathless headlines, to be nothing catastrophic. Bond investors are demanding an extra 1.3% a year to compensate for all the uncertainty they face as they commit their money for the next ten years. They may well ask for a bit more in the future. Can you blame them?

Sources:
http://seekingalpha.com/article/1657072-how-high-are-yields-likely-to-rise?source=google_news
http://bigcharts.marketwatch.com/quickchart/quickchart.asp?symb=10_YEAR&insttype=Bond
http://www.minyanville.com/trading-and-investing/fixed-income/articles/What-if-the-10-Year-Treasury/8/26/2013/id/51458

Sincerely,
William T. Morrissey and Tammy Prouty
Sound Financial Planning Inc.
wtmorrissey@soundfinancialplanning.net
Primary Office
425 Commercial Street, Suite 203
Mount Vernon, WA 98273
Phone: (360) 336-6527
Secondary Office
650 Mullis St., Suite 101
Friday Harbor, WA 98250
(360) 378-3022

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.

WILL THE SYRIA CRISIS SHOCK THE MARKETS?

Are fears of a correction & runaway oil prices overblown, or justified?

U.S. military action in Syria appears imminent. Assuming it happens, what happens to the financial markets?

Investor reaction on August 27 (the day U.S. intervention was mentioned as a possibility) was not exactly surprising. Gold entered a bull market again, oil prices reached a six-month peak (surpassing $109 a barrel), the Dow fell 170 points and the CBOE VIX rose 12%. Overseas markets broadly slumped; emerging market stocks hit a 7-week low. India's rupee fell to a record low versus the dollar. The yield of the 10-year Treasury dipped to 2.72%, decreasing for a third straight day. All of this left market analysts with major questions to consider.1

Will oil hit $150 a barrel? While U.S. investors keep an eye on the NYMEX, the international benchmark is Brent crude. Some analysts do see Brent crude hitting $120-125 in the coming weeks - Michael Wittner, global head of oil research for Societe Generale, told CNBC that he believes that will happen, in the event of military intervention. Wittner also thinks that Brent crude has about a 20% chance of pushing past $150, but not wholly on what goes on within Syria. "Our big worry is Iraq. The Sunni vs. Shiite conflict in Syria has a direct parallel in Iraq, and the violence in Iraq has reached levels not seen since 2008," Wittner wrote in a note to investors. A key oil pipeline in northern Iraq ferrying oil to Turkey has endured multiple attacks since May, severely hampering Iraq's daily oil exports. Other analysts worry about attacks on pipelines in Saudi Arabia.2

On the other hand, U.S. oil output is at a 20-year peak, and Saudi Arabia and other major players in the oil market could tap strategic reserves or increase production in response to a short-term price spike. As business and consumer demand for oil and gasoline typically weaken at some point in response to price hikes, prices would likely moderate.2

Greg Priddy, director of global oil at Eurasia Group, told CNBC that he doesn't see a big disruption in the oil market ahead - he envisions a "very limited attack" that is "not going to change the situation in the region right now." As toppling Bashar al-Assad's government could put rebels in charge but also risk opening a door to al-Qaeda, the view of some analysts - Brent crude temporarily hovering around $120, U.S. oil prices keeping below that level - may prove correct. "This would have to turn into a region-wide conflagration in order for prices to stay [at that level]," John Kilduff of Again Capital remarked to CNBC. "If rockets start flying into Gaza and into Israel and other things happen, such as an attack on Saudi Arabia, all bets are off."2

Would U.S. stocks plunge? The Dow is on pace for a decline of more than 5% in August, so bears wonder if a correction is in progress. No one has a crystal ball, but it is true that the U.S. equity markets have weathered geopolitical crises well in the recent past. Our stock market rose in the year prior to our military's involvement in Libya in March 2011, fell that summer, then rose again. The fall coincided with the debt ceiling struggle on Capitol Hill, not the unrest in Libya. In the case of the Persian Gulf War and the War in Iraq, U.S. stocks were in the doldrums in the quarters preceding the fighting yet rose about the time hostilities began.3

As MarketWatch columnist Mark Hulbert commented this week, "Rising interest rates and above-average valuations are a bigger threat to the stock market than the possibility of U.S. military action in Syria." Opening a wide historical window, he cites a fundamental article from the Journal of Portfolio Management co-authored by none other than Larry Summers, who stands a chance of being our next Federal Reserve chairman. It looked at the impact of 49 major geopolitical events on the stock market from 1941 to 1987, measuring the S&P 500's absolute return on those momentous days (Pearl Harbor, the assassination of JFK, etc.). The S&P's average movement across those 49 days was 1.46% : significant, but not radically removed from the average 0.56% variance occurring across all other market days in a 46-year period. For the record, the S&P rose 0.60% on August 28 while the CBOE VIX dipped 3.6% to 16.17.3,4

Could this crisis make the Fed reconsider tapering? Recent days have seen a real flight to quality - to gold, to the dollar, to Treasuries. You have a couple of currencies seemingly in freefall: the Indian rupee and the Turkish lira. For that matter, Brazil's real recently hit a five-year low versus the greenback. Indonesian stocks just dropped 5% in a single market day. In short, some key emerging markets/developing economies are having it rough - and a lack of economic growth in those nations may not bode well for America. If the trouble in Syria worsens and leads to further trouble for them, some analysts think the Fed might postpone the careful unwinding of QE3 - either out of caution, or out of global economic necessity.5

The takeaway? As Ron Florance, a deputy CIO at Wells Fargo Private Bank in Scottsdale, Arizona, told Reuters on August 28: "Yesterday was a little overdone but investors need to be ready [and realize] that volatility is going to be here for a while." Just think twice before letting short-term volatility affect long-term investment plans.4

Citations.
1 - marketwatch.com/story/syria-intervention-fears-hit-global-markets-2013-08-27 [8/27/13]
2 - tinyurl.com/pjxsoau [8/28/13]
3 - marketwatch.com/story/what-us-intervention-in-syria-would-mean-2013-08-28 [8/28/13]
4 - reuters.com/article/2013/08/28/markets-global-idINL2N0GT1BA20130828 [8/28/13]
5 - marketwatch.com/story/syria-emerging-market-crisis-will-stop-the-taper-2013-08-28 [8/28/13]

Sincerely,
William T. Morrissey and Tammy Prouty
Sound Financial Planning Inc.
wtmorrissey@soundfinancialplanning.net
Primary Office
425 Commercial Street, Suite 203
Mount Vernon, WA 98273
Phone: (360) 336-6527
Secondary Office
650 Mullis St., Suite 101
Friday Harbor, WA 98250
(360) 378-3022

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 PETER MONTOYA.