However, the economy over the last five years doesn’t seem to be following this trend. In 2007-2008 we experienced a massive “bust”, as the housing market and financial markets crashed. But unlike in decades past, there has yet to be a strong recovery. And while media reports have seemed to indicate that the economy was gathering strength, recent data tells a different story. From a recent Reuters article:

Economic growth regained speed in the first quarter, but not as much as expected, heightening fears an already weakening economy could struggle to cope with deep government spending cuts and higher taxes.

Gross domestic product expanded at a 2.5 percent annual rate, the Commerce Department said on Friday, after growth nearly stalled at 0.4 percent in the fourth quarter. Economists had expected a 3.0 percent growth pace.

“It wasn’t the bang-up start to the year we had hoped for, and the signals from March suggested that we will only decelerate from here,” said Avery Shenfeld, chief economist at CIBC World Markets Economics in Toronto.

Part of the pick-up in activity reflected farmers’ filling up silos after a drought last summer decimated crop output. Removing inventories, the growth rate was a tepid 1.5 percent.

Still, most areas of the economy contributed to growth, with the exception of government, the trade sector and investment by businesses in offices and other commercial buildings.

While consumer spending increased solidly, it came at the expense of saving, which does not bode well for future growth.

A separate report showed worries about finances sapped consumer morale in April. The Thomson Reuters/University of Michigan’s final reading on the overall index on consumer sentiment fell to 76.4 last month from 78.6 in March.

Data ranging from employment to retail sales and manufacturing weakened substantially in March after robust gains in the first two months of the year, and the factory sector appears to have slowed further in April.

Many forecasters expect the economy’s softness to persist into the third quarter until signs of a convincing revival emerge.

To make matters more alarming, this economic weakness is persisting despite an unprecedented level of stimulus from the Federal Reserve, which is pumping billions of dollars into the economy at historically low interest rates. The fact that this stimulus hasn’t been able to re-ignite the economy is a sign that there may be real problems.

As an investor, what does this mean to you? It means that you must be prepared for a worst-case scenario, which could include a stock market collapse, combined with high inflation and rising tax rates.

Is your current portfolio structured to protect you against this “triple threat”? If not, please contact us today—we’d be glad to help you secure your financial future!

Specifically, the Fed’s decision to continually flood the market with “cheap” money. In an effort to spur borrowing, lending, and investing, the Fed has made it possible for major financial institutions to borrow money at interest rates of essentially zero. In addition, the Fed has now purchased trillions of dollars with of treasury securities, enabling the US government to continue borrowing money at low interest rates.

And though these measures have been successful in the short term, many experts are concerned that these actions are setting the economy up for rampant inflation down the road. Last week, Fed chairman Ben Bernanke responded to this criticism. From a Reuters article on the subject:

Federal Reserve Chairman Ben Bernanke on Monday defended the central bank’s aggressive easing of monetary policy, saying while it was aimed at bolstering the economic recovery, it was helping other countries as well.

The Fed’s asset-purchase programs, aimed at keeping long-term borrowing costs down and spurring investment, have been criticized overseas for their adverse impact on emerging market currencies.

But the Fed chief, fresh from a grilling from Congress on the potential domestic risks of his quantitative easing measures, countered the rhetoric about “currency wars,” though he did not use the term specifically.

In prepared remarks to a group of academics in London, Bernanke said the integrated nature of the global economy meant the whole world benefits from a sturdier outlook.

“Because stronger growth in each economy confers beneficial spillovers to trading partners, these policies are not ‘beggar-thy-neighbor’ but rather are positive-sum, ‘enrich-thy-neighbor’ actions,” he said.

In response to a deep financial crisis and recession, and subsequent weak recovery, the Fed not only lowered overnight interest rates to effectively zero but bought more than $2.5 trillion in mortgage and Treasury securities.

While it’s encouraging to see that the economy is starting to pick up speed, both here in the United States and across the globe, prudent investors are left wondering what these developments mean for the future. Specifically, the basic economic law of supply and demand would indicate that flooding the market with cash (which the Fed is now doing) will eventually reduce the value of the currency—a phenomenon also known as inflation.

Inflation is a grave threat to investors as it has the potential to wipe away years of hard-earned investment returns. Severe inflation has the capability to render these gains meaningless and leave investors holding devalued assets. As an investor, it is crucial that you continue to monitor this situation and pay particular attention to factors that may further encourage inflation.

The good news is that it’s not too late—you can still take action and protect yourself from the dangers of inflation. If you’d like to learn more, or if you’d like help creating a portfolio that is protected against the threats of inflation, increasing tax rates, and market volatility, please contact us today!

As you may know, these are cuts designed to reduce the federal government deficit. They will have a broad impact—from defense funding to domestic programs. Unfortunately, economists on both sides of the political spectrum are concerned about the impact that the cuts may have on an economy that is still recovering.

Not surprisingly, there is little hope that the politicians in Washington will arrive at a deal. The Washington Post reports:

The sequester is set to kick in on Friday, leaving Congress little time to prevent across-the-board spending cuts that would start this week and last until they’ve saved up to $1.2 trillion over 10 years.

Democratic and Republican leaders are expected to introduce competing proposals this week that would replace the indiscriminate reductions, but neither side sees much chance of winning passage for their plans.

That means the sequester is almost certain to kick in on Friday.

Republicans have been working on a proposal that would preserve the cuts but give the administration more discretion over how to implement them. They may also produce a plan that would structure the defense reductions to have minimal impact on national security.

The Democratic plan would delay the sequester until January and replace the sequester with $110 billion in new tax revenue and a more narrow menu of spending cuts.

Administration officials have spent the past several weeks sounding alarms over how the reductions would impact everything from government services and national security to federal workers and the economy.

The fundamental concern for most economists is that, while government spending has grown at an unsustainable rate in recent years, cutting this spending dramatically may have a devastating effect. For instance, one of the areas that will be cut is defense spending. These spending cuts translate into less money for contractors and others associated with the defense industry. The ripple effect means that less money is being spent, and that economic growth is likely to slow.

As an investor, it’s hard to say exactly what will happen. If the cuts do go into effect and the economy is weakened, don’t be surprised to see the stock market tumble. If the politicians in Washington are able to avert this crisis, it will be smooth sailing… until the next crisis comes along.

The real question that investors should be asking is “how can we shield our investment so that political dysfunction doesn’t compromise our future?”  The good news is that we can help. If you’d like to learn more about creating an investment portfolio that protects your assets from market volatility, get in touch with us today!

Clearly, the rapidly growing federal deficit is a significant problem. Both parties in Washington agree on this. What they can’t agree upon is any sort of solution. This week, Congress decided once again to “kick the can” down the road for another three months. Yahoo reports:

The House of Representatives voted today to approve a three-month extension of the debt limit in a bill that concurrently pressures lawmakers to adopt a budget or have their pay withheld.

The vote passed by a count of 285-144. Thirty-three Republicans opposed the measure, while 86 Democrats voted to approve it, sending the legislation to the Senate where it is also expected to pass, according to Senate Majority Leader Harry Reid.

“I’m pleased that Speaker Boehner’s House colleagues have decided to change course and pass a bill that defuses yet another fight over the debt ceiling,” Reid, D-Nev., said. “In substance, it’s a clean debt limit increase.”

The bill, known as the No Budget No Pay Act of 2013, directs both chambers of Congress to adopt a budget resolution for fiscal year 2014 by April 15, 2013. If either body fails to pass a budget, members of that body would have their paychecks put into an escrow account starting on April 16 until that body adopts a budget. Any pay that is withheld would eventually be released at the end of the current Congress even if a budget doesn’t ever pass.

Democrats also pledged today to pass a budget in the Senate this year. The Senate has not passed a budget resolution since April 29, 2009.

The measure also temporarily suspends the statutory debt limit through May 18, granting the Treasury Department the additional borrowing authority to meet obligations that require payment over the next three months. Without congressional action, the Treasury Department has warned that its borrowing authority would run out by mid-February.

Hopefully, this all plays out as it is supposed to, and there is a solution put into place in the next three months. But given the dysfunction that has plagued Washington, it’s hard to be optimistic. And unfortunately, Washington’s inability to function threatens investors with higher taxes and high inflation.

The good news is that you can protect yourself. If you’d like to learn more about creating an investment portfolio that protects your assets from the threats of taxation and inflation, get in touch with us today!

The Associated Press reports:

New taxes are coming Jan. 1 to help finance President Barack Obama’s health care overhaul. Most people may not notice. But they will pay attention if Congress decides to start taxing employer-sponsored health insurance, one option in play if lawmakers can ever agree on a budget deal to reduce federal deficits.

The tax hikes already on the books, taking effect in 2013, fall mainly on people who make lots of money and on the health care industry. But about half of Americans benefit from the tax-free status of employer health insurance. Workers pay no income or payroll taxes on what their employer contributes for health insurance, and in most cases on their own share of premiums as well.

It’s the single biggest tax break the government allows, outstripping the mortgage interest deduction, the deduction for charitable giving and other better-known benefits. If the value of job-based health insurance were taxed like regular income, it would raise nearly $150 billion in 2013, according to congressional estimates. By comparison, wiping away the mortgage interest deduction would bring in only about $90 billion.

“If you are looking to raise revenue to pay for tax reform, that is the biggest pot of money of all,” said Martin Sullivan, chief economist with Tax Analysts, a nonpartisan publisher of tax information.

It’s hard to see how lawmakers can avoid touching health insurance if they want to eliminate loopholes and curtail deductions so as to raise revenue and lower tax rates. Congress probably wouldn’t do away with the health care tax break, but limit it in some form. Such limits could be keyed to the cost of a particular health insurance plan, the income level of taxpayers or a combination.

Many economists think some kind of limit would be a good thing because it would force consumers to watch costs, and that could help keep health care spending in check. Obama’s health law took a tentative step toward limits by imposing a tax on high-value health insurance plans. But that doesn’t start until 2018.

Next spring will be three years since Congress passed the health care overhaul but, because of a long phase-in, many of the taxes to finance the plan are only now coming into effect.

What will higher taxes mean for your investment portfolio and your retirement plans? Will you be able to maintain your desired lifestyle if the government is taking an even larger portion of your assets each year?

We can help you answer these questions—and we can help you create a plan to minimize your exposure to taxation and market risk. At Strategic Wealth, we help each client to create a Personal Protected Pension Plan—enabling them to invest their money in a wide variety of alternative and traditional vehicles.  We can increase the value of your retirement income by 50%, with little or no tax exposure, and market risk free—allowing you to sleep well at night without worrying about rising tax rates, while still achieving the rate of return you need to enjoy the lifestyle you desire. Contact us today to learn more!

These are important questions to ask as you continue to plan for your own financial future. USAToday recently published a report detailing the current state of the economy:

The economy grew modestly in October and early November in nine of the nation’s 12 Federal Reserve bank districts but Hurricane Sandy dampened activity in the Northeast, the Fed said Wednesday.

The Fed’s Beige Book said modest growth was reported in the Cleveland, Richmond, Atlanta, Chicago, Kansas City, Dallas and San Francisco districts. A “somewhat stronger increase in activity” was noted in the St. Louis and Minneapolis regions.

The report said the economy weakened in New York, Philadelphia and Boston, at least partly because of the storm.

Unlike most government statistical reports, the beige book, released every six weeks, provides an anecdotal snapshot of the economy based on interviews with businesses across the nation. The report is named for the color of its cover.

The report largely chronicles a continuation of recent trends, with consumer spending and the housing market improving modestly as rising home prices lift consumer confidence. But uncertainty about Congress’s ability to avert the looming tax increases and spending cuts known as the fiscal cliff have doused business’s outlook. As a result, manufacturing and office leasing weakened, while the hiring outlook was mixed.

In New York, consumer spending looked robust before the hurricane and merchants expect to recoup sales as residents replace damaged property. Furniture sales picked up in the Boston and Chicago areas but fell in Cleveland. And electronics sales were tepid in Chicago, but consumer technology sales strengthened in San Francisco.

The good news is that most regions were upbeat about holiday sales.

New York retailers expect to recover sales washed out by the storm, while Boston businesses expect higher online sales. Still, possible tax increases due to the fiscal cliff prompted retailers in the Boston, Cleveland and Chicago areas to say they’re uncertain about holiday sales.

Hotel bookings, meanwhile, slowed in New York because of the storm but “bounced back the next week.” The hurricane devastated businesses in the mid-Atlantic area. Convention activity in the Southeast, particularly Florida, picked up, though cruise line bookings were disappointing.

The housing market also continued to improve in most areas. The Cleveland and Richmond areas said sales were especially strong among high-priced homes. Kansas City contacts said strong sales were reducing home inventories.

There’s a lot to digest there—but the bottom line is that there is reason for optimism as the economy continues to grow. However, the growth isn’t as rapid as many of us would like to see. And significant threats remain on the horizon, most immediately because of the “fiscal cliff” debate in Washington. But beyond that, there is still the matter of the unsustainably large deficits that our federal government is racking up. How long can we continue down this path before inflation becomes a serious problem?

As an investor, it’s important to pay close attention to these economic developments. If you’d like to learn more about what this means for YOUR financial future, or if you’re tired of your portfolio rising and falling on the whims of Wall Street, please get in touch with us today!

Nearly six million jobs through 2014 could be erased if Congress doesn’t do something to avert the package of tax hikes and spending cuts set to hit the economy on January 1, according to a new report, setting America back economically as much as a decade.

The National Association of Manufacturers paints a grim picture of the consequences of falling off the so-called “fiscal cliff” in the report released today. Already this year, one million jobs have been lost as employers brace for the coming economic jolt, NAM says. The loss of six million jobs would send the unemployment rate higher than 11 percent. Currently, the jobless rate stands at 7.8 percent.

Furthermore, NAM reports, if Congress doesn’t avoid the fiscal cliff, the economy will lose 12.8 percent of the average annual real gross domestic product it could have attained with moderate growth. Individual households would take a hit as well, with real personal disposable income shrinking almost 10 percent by 2015. NAM says it would take most of the decade for the economy and employment levels to recover, delivering “a substantial blow” to the nation’s long-term economic potential.

“It is clear from the report that a fiscal shock of this magnitude is unprecedented for the United States and will be similar in impact to some of the ‘big bang’ fiscal adjustments experienced by developing nations and the austerity programs in several euro-area economies,” the report’s executive summary says. “If the fiscal contraction does happen, the economy will almost certainly experience a recession in 2013 and significantly arrested growth through 2014.”

The fiscal cliff includes a series of tax increases and spending cuts that would lower the deficit by $500 billion. It includes the expiration of the 2001 and 2003 tax cuts and the expiration of the payroll tax holiday that Mr. Obama instituted. On top of that, $1.2 billion in cuts to both defense and non-defense programs are set to kick in on January 1 unless Washington acts as a result of the “sequestration” deal put in place when the debt limit was raised.

Should politicians fail to reach a resolution, the economic shock is likely to impact investors in a big way. And given the state of our current political climate, are you really comfortable leaving your financial future in the hands of politicians who have been unable to work together on just about anything?

The good news is that you CAN protect yourself, your family, and your future. Contact us to learn more about constructing an investment portfolio that limits your exposure to market risk, taxation, and economic volatility.

President Francois Hollande’s Socialist government unveiled sharp tax hikes on business and the rich on Friday in a 2013 budget aimed at showing France has the fiscal rigor to remain at the core of the euro zone.

The package will recoup 30 billion euros ($39 billion) for the public purse with a goal of narrowing the deficit to 3.0 percent of national output next year from 4.5 percent this year—France’s toughest single belt-tightening in 30 years.

But with record unemployment and a barrage of data pointing to economic stagnation, there are fears the deficit target will slip as France falls short of the modest 0.8 percent economic growth rate on which it is banking for next year.

The budget will also disappoint pro-reform lobbyists by merely freezing France’s high public spending rather than daring to attack ministerial budgets as Spain did this week in a bid to avoid the conditions of an international bailout.

“This is a fighting budget to get the country back on the rails,” Prime Minister Jean-Marc Ayrault said, adding that the 0.8 percent growth target was “realistic and ambitious”.

“It is a budget which aims to bring back confidence and to break this spiral of debt that gets bigger and bigger.”

With public debt at a post-war record of 91 percent of the economy, the budget is vital to France’s credibility not only among euro zone partners but also in markets which for now are allowing it to borrow at record-low yields under two percent.

The government said the budget was the first in a series of steps to bring its deficit down to 0.3 percent of GDP by 2017—missing an earlier target of a zero deficit by then.

Of the total 30 billion euros of savings, around 20 billion will come from tax increases on households and companies, with tax increases already approved this year to contribute some 4 billion euros to revenues in 2013. The freeze on spending will contribute around 10 billion euros.

To the dismay of business leaders who fear an exodus of top talent, the government confirmed a temporary 75 percent super-tax rate for earnings over one million euros and a new 45 percent band for revenues over 150,000 euros.

Together, those two measures will bring in around half a billion euros. Higher tax rates on dividends and other investments, plus cuts to existing tax breaks will bring in several billion more.

High unemployment. Slow economic growth. A deficit spiraling out of control.

Does any of this sound familiar? It should—because we’re facing all of the above here in the United States. Of course, no politician would dare suggest a 75% tax rate during an election season… but what about after the election? The bottom line is that our government needs to close a massive budget shortfall, and there are only two ways to do it: increase revenue, or cut spending. And unfortunately, despite rhetoric to the contrary, neither political party has shown the ability to enact serious spending cuts. That leaves revenue increases—and that means tax hikes.

So will high earners here in the US face 75% tax rates? Probably not in the next year or two—but if our government continues to fail at addressing the deficit, at some point there will be no other option but to raise tax rates significantly. What will that mean for your investments, your lifestyle, and your future?

At Strategic Wealth, we work closely with our clients to chart an investment course that minimizes exposure to taxes , volatility, and market risk. We help each client to create a Personal Protected Pension Plan—enabling them to invest their money in a wide variety of alternative and traditional vehicles.  We can increase the value of your retirement income by 50%, with little or no tax exposure, and market risk free—allowing you to sleep well at night without worrying about changing tax policies, while still achieving the rate of return you need to enjoy the lifestyle you desire. Contact us today to learn more!

The alarming truth is that, at the rate we’re going, Medicare is going to be bankrupt within a decade or two, depending on whose estimates you rely on.

This much is clear: if you plan to rely on Medicare to provide health care in retirement, you’re taking a serious risk. And recent attempts at health-care reform don’t change this reality.

As a recent article on Lexch.com explains:

The American health system is broken, and not even the Affordable Health Care Act can fix it.

Dr. Gail Wilensky, a Washington, D.C., health-care expert, said that and more during a recent speech.

Speaking on “Healthcare Reform and the Affordable Care Act: Where Do We Go From Here?” Wilensky said that the 2,700-page ACA will bring “a lot of change,” even to employers who already insure their employees.

So far, however, little of that change is specified, and nothing will happen until after this fall’s presidential election, she said.

But by 2016, she warned, Medicare and Medicaid will be financially strapped. Baby boomers – people born between 1946-1964 – are turning 65 at the rate of 10,000 per day. The Medicare population will double by 2019.

“Some 55 percent of the budget is entitlement spending, and that can’t continue,” she said. “While people talk about reform, we have no consensus on what ‘reform’ means.”

Here is what we can be certain of: politicians will continue to bicker with one another about how best to save Medicare—or whether to save it at all. Will they arrive at a sensible solution? If the last couple of years are any indication, probably not.

What does that mean for you? You’d be wise not to depend on Medicare and other social security programs in retirement.

At Strategic Wealth, we work closely with each client to chart a plan that addresses their specific needs—including healthcare during retirement. We help each client to create a Personal Protected Pension Plan—enabling them to invest their money in a wide variety of alternative and traditional vehicles.  We can increase the value of your retirement income by 50%, with little or no tax exposure, and market risk free—allowing you to sleep well at night, knowing that you aren’t depending on government programs for the services you and your family will need. Contact us today to learn more!

A recent Op/Ed in the Wall Street Journal addresses the battery of tax increases that, as of now, are scheduled to kick in on January 1, 2013.

The United States faces an economic collapse thanks to massive tax increases on Jan. 1, and continued deficit spending for years on end.

Keynesians worry about spending cuts and to some extent the expiration of the temporary 2% payroll tax cut. But the looming expiration of the Bush tax rate cuts along with new levies enacted as part of ObamaCare pose the greatest threat.

The breadth of what will hit the country is extraordinary. The top federal rate on personal income will increase to 39.6% from 35%, with an additional 0.9% increase in the payroll tax for Medicare. The highest federal rate on dividends will increase to 43.4% from 15%, and the tax rate on capital gains will increase to 23.8% from 15%.

The rates on capital income are rising because of the expiration of the Bush tax cuts, and a 3.8% tax on investment income for the highest earners enacted as part of ObamaCare. As happens almost every year, there is a large scheduled expansion of the Alternative Minimum Tax (AMT) to ever-lower levels of income. The highest estate tax rate is scheduled to rise to 55% from 35%, with the lifetime individual exemption dropping to $1 million from $5 million. Meanwhile, tax rates will rise in many states.

In all, federal tax increases total almost $500 billion (over 3% of GDP) per year on a static-revenue basis. And that’s not counting the $1 trillion, 10-year increase in excess spending over tax receipts in the ObamaCare legislation. Given that many of the new taxes are rate increases at the margin, they will affect incentives to earn additional income. Thus it is a certainty that we face a lower level of output in 2013.

The blunt reality is that we cannot have a prosperous economy when government is overspending, raising tax rates, printing too much money, overregulating and restricting the free flow of goods and services across national boundaries.

Regardless of whether you think it is the right thing to do or not, the reality is that tax increases on businesses and high-income earners are very likely over the next couple of years. How will those changing tax rates impact your portfolio, your lifestyle, and your plans for retirement?

At Strategic Wealth, we work closely with each client to chart an investment course that minimizes exposure to taxes , volatility, and market risk. We help each client to create a Personal Protected Pension Plan—enabling them to invest their money in a wide variety of alternative and traditional vehicles.  We can increase the value of your retirement income by 50%, with little or no tax exposure, and market risk free—allowing you to sleep well at night without worrying about changing tax policies, while still achieving the rate of return you need to enjoy the lifestyle you desire. Contact us today to learn more!