Thanks and Happy New Year

For my final entry of the year I thought I’d simply share with you what I wrote today to all of my clients. I think the message is applicable to everyone.

It is just before 2:00pm on the final day of 2012. Fortunately the Mayans were wrong and we’re all still here to be thankful that 2012 is about to pass into history. I, for one, am looking forward to welcoming the new year and saying a (not quite so fond) goodbye to this one. This year has been a very difficult one on so many levels: politically, economically and climatologically. We marveled at the Arab Spring where much of the Middle East saw political upheavals. We watched the European Union rush to the brink of collapse, yet somehow manage to remain solvent for another year. In this country we survived an interminable political process that culminated in the reelection of President Obama. We struggled all year with a stagnant economy and a withering march towards the Fiscal Cliff. We endured a number of catastrophic weather events around the world, including right here in the New York area as Sandy ravaged our coastal communities. Most recently we also watched in horror at the news of another deadly rampage leaving many innocent lives lost to senseless violence. 

Yet through it all, we survived to raise a glass tonight to toast our friends and loved ones and to appreciate all the blessings that we have as citizens of the United States. Notwithstanding all of the troubles I’ve listed above, and the hundreds of daily problems and inconveniences that we all struggle with, we are all blessed to live here, in the country that affords us the greatest freedoms and opportunities on this planet. We must always remember to not only appreciate how fortunate we are, but to never take it for granted. 

Personally, I have so much to be thankful for, not the least of which is the continued faith and support of each of my wonderful clients. I’ve been in business for over 15 years now and I could not have done it without each and every one of [them]. I never take for granted the trust that [they] place with me and I appreciate it very much. And while I approach every year with a certain amount of caution, and next year is no different, I am growing more and more optimistic about the future. While we may have another few years of choppy times ahead of us, and we will certainly deal with at least one recession before things really turn around, I think we’re headed again toward a period of unprecedented change and prosperity. I’m not sure exactly when that time will begin, but I am sure that it will occur. Within a few more years we will start to benefit from advances in medicine and technology that we can barely conceive of today. Cures will be found for disease, people will live longer and better, there will be tremendous advances in communications, advances in biotechnology and nanotechnology will create businesses and riches that cannot yet be imagined. Trust me, it will be an exciting time to be alive and we will benefit from the journey.

For now though, we will continue to be vigilant and prudent. We will continue to work together to ensure that your financial goals and aspirations can be met. So thank you again for working with me for another year. I very much look forward to serving you again for years to come. 

So, for those of you who are not my clients (and why aren’t you??), I extend the same message and wishes to you. Cherish your friends and loved ones, and remember to never take your many blessings for granted. Happy New Year and best wishes for a happy and healthy 2013.

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Musings on Death and Taxes

Last night my family enjoyed our blended holiday celebration. We shared gifts, laughter and hugs and kisses just days after an entire community was devastated by the horrific act of a madman and less than two months after Superstorm Sandy cut a path of devastation through much of the New York/New Jersey area. There are 27 families in Newton, CT who will not be celebrating the holidays this year as they mourn the loss of their children or siblings or parents. And there are likely hundreds of additional families still homeless or trying to piece their shattered lives back together. It truly makes you appreciate life’s blessings and reminds you to never take them, or your loved ones, for granted.

This random act of senseless violence in the Newton massacre once again brings the issue of gun control front and center. It’s hard to understand how any logical, sane person can oppose the idea of keeping automatic and semi-automatic weapons of mass destruction out of private hands. The Founding Fathers, when they crafted the 2nd Amendment to the Constitution, never envisioned weapons such as these. There is simply no place for them in civilized society. Period. I challenge any gun advocate to reply with a cogent reason why those types of weapons should not be banned. It’s time for our politicians to stand up to the NRA, and the rest of the gun lobby, and loudly proclaim that enough is enough; that they will not be bullied any longer and that’s it’s time for a national debate on what weapons can and cannot be owned by private citizens. President Obama, if you’re reading this, since you are not up for re-election, it’s your job to take a stand and get something done.

And Mr. President, while I have your attention, it’s time to get a deal done on the Fiscal Cliff. Enough is enough. Both sides MUST stop the posturing, eliminate all the partisan BS and craft a compromise that the entire country can live with. It shouldn’t be that difficult. You all have to agree that taxes will go up on many, if not all Americans. And those tax increases will likely be tilted towards those Americans who make the most money. Republicans, just accept it and move on. And at the same time, the government must spend less. There is simply no alternative. Democrats, deal with it and move on. So lock yourselves in a room until an agreement is reached. Because if you can’t get this deal done, then as a nation we are truly screwed because the bigger debate is forthcoming.

What nobody is talking about is that the Cliff negotiations are just the first act in what will be a much more contentious debate over the big issues of what to do with Medicare and Medicaid and Social Security. Those expenditures represent about 41% of the entire federal budget. Throw in another 15% or so for the military and you see that those three programs account for a staggering 56% of the entire $3.5 trillion spent by our government. Cutting a billion here or a billion there is simply noise. We, as a nation, must accept that we have been living well beyond our means for far too long. That unless we want to leave our massive debts for our children and grandchildren to deal with, leaving them with far diminished prospects and lives to that which we’ve enjoyed for so long, we must all make sacrifices for the common good. As a society, are we ready to do that? We’ll find out. And in the meantime, let’s talk about it. Write to me and let me know what you think.

 

Prepare For Year-End, Not the Fiscal Cliff

There are three weeks left in the year and the world won’t be coming to an end, literally or figuratively, regardless of what the various doomsday prognosticators have to say. It’s impossible to turn on the television or open a newspaper without being assaulted with dire warnings about the impending disaster that is the “Fiscal Cliff”. It’s gotten to the point where I can only watch CNBC is when it’s on mute.

For those of you who’ve been living under a rock, the Cliff is the December 31st deadline after which substantial tax increases and mandatory spending cuts will take effect. The tax increases are largely from legislation passed by President Obama to pay for his health care program along with the end of the Bush tax cuts. The spending cuts were mandated during the last failed deficit negotiations. It’s been estimated that should all of these tax increases and spending cuts come to pass, it will shave 4%-5% from GDP growth, sending the country into a deep recession.

While I’m growing more and more angry and frustrated (if that’s even possible) at the intransigence emanating from both parties in Washington, I honestly don’t think the looming fiscal cliff is really the nightmare everyone is saying it will be. It is HIGHLY UNLIKELY that every tax increase and spending cut will, in fact, come to pass. Some compromises will certainly be made by our leaders in Washington, despite the radical bleatings of the far right and far left.

Whether the deal is brokered in the next two weeks or the next two months, I’m confident a deal will be made that will leave both sides less than happy but will stave off the worst result, which would be simply doing nothing. It is truly in the best interests of everyone, other than perhaps that fiscal terrorist Grover Norquist, to get a deal done. There is simply too much self-interest in Washington, especially in the House of Representatives, where they must stand for re-election every two years, to allow a fiscal calamity to happen on their watch. That’s a great way to get thrown out of office by a pissed off electorate.

So if we’re able to drown out the noise about the cliff, what should you be truly focused on between now and the end of the year? Given all of the current uncertainly, there are no simple answers, but here are a few suggestions for you to ponder:

  1. If you have large unrealized gains, consider realizing some of them this year to take advantage of the low capital gains tax rate, which is likely to rise next year.
  2. If future capital gains taxes aren’t really an issue, don’t forget to match gains with losses where possible to minimize your tax bill this year.
  3. Check your portfolio to see if your holdings need to be re-balanced. Avoid having any one position be too large a percentage of your overall holdings. I generally like using 10% as a maximum position size. Similarly, either add to, or get rid of, positions that are simply too small to make a difference.
  4. If you have a large estate, consider making gifts of up to $5.1 million before year-end to take advantage of the large estate tax credit that expires this year. Unless a compromise is reached, it reverts back to $1 million next year.
  5. Speak with your adviser to make sure your investments are suitable for your financial objectives and risk tolerances. Times and conditions often change, and our investment approaches sometimes must change as well.
  6. If you don’t have a will; write one. If you have a will, but haven’t updated it in more than five years, it’s probably time to look at it again.
  7. If you haven’t already done so, consider giving some of your time and/or money to a worthwhile charity. There are so many organizations out there that desperately need your help, especially during the holidays. So open your heart and your wallet and make a difference for those in need.