Baby Boomers and The Looming Fiscal Cliff


As the nation heads toward 2013 facing the much talked about Fiscal Cliff, what are the possible scenarios we can expect and how do we wade through shark infested waters? The following article offers up some suggestions and recommendations for the short term. Stay connected and informed so you can navigate accordingly.

The Looming Fiscal Cliff – By Steven Pomeranz

Okay… so here we are, back again with the election behind us. And, as some of you might recall, about a month back my commentary had a piece about how the elections would impact you with Obama vs. Romney.

So now that Obama has won, let me just summarize what I had mentioned a month ago on Obama’s likely impact on some key economic issues.

The first thing I spoke about was that Obama will let tax cuts expire – those so called Bush Tax Cuts which expire on December 31, 2012, unless Congress does something to keep them in place. I’d mentioned that Obama wants to raise taxes on those earning over $250,000 and use this additional tax money to reduce the budget deficit. These tax cuts represent roughly $400 billion that could potentially flow to the government along with payroll taxes and higher taxes on investments: dividends, long-term capital gains.

Part of the package with the “sunsetting” of Bush era tax cuts were across the board spending cuts that also go into effect on January 1, 2013 – something called sequestration – that would impact discretionary spending on items like defense spending, and total about $200 billion in reduced government spending – with higher taxes and spending cuts jointly aimed at reducing the budget deficit, balancing the budget and reining in our national debt. These measures are expected to reduce the budget deficit by roughly 50% in 2015 and budget and debt by $7.1 trillion over the next 10 years.

It’s this combination of tax increases and spending cuts that everyone’s calling the fiscal cliff that goes into effect on January 1, 2013. It’s this uncertainty over the fiscal cliff that was one of the causes of the markets’ swing sharply lower on November 7, the day after the election.

And the reason everyone’s talking about this fiscal cliff is that it’s likely to increase the risk of a recession in 2013 if we just let it happen as is. Under a baseline scenario, the Congressional Budget Office (CBO) expects GDP growth to go down to 0.5% in 2013 from its current run rate of 1.1% and this contraction in GDP could significantly increase the probability of a recession in the first half of the year. So this “do nothing” scenario is a fearful one for both Main Street and Wall Street because it portends a recession that could hit us while we are only in the early stages of an economic recovery after the mortgage banking crisis of 2008. And economists fear that this could be hard to get out of especially since the world around us is in pretty bad shape too.

Now, none of this is going to be easy. For one, after this election, the Democrats have a firmer grip on the Senate and the Republicans are stronger in the House of Representatives, and neither party appears very willing to strike a compromise. Additionally, our debt ceiling will soon be reached and our lawmakers will have to soon reach some agreement on raising the debt ceiling so we can at least continue to pay our bills as a nation.

And to make matters worse, the European Union recently downgraded its economic forecast for 2013 – it now expects GDP to contract by 0.3% rather than stay flat as was earlier projected. Even strong nations like Germany are now feeling the pain with growth forecasts revised down to 0.8%, less than half of what they were just a few months ago.

The opposite scenario is one where the deadline is simply extended – tax cuts are left in place, at least for now, and spending cuts too are deferred – the kick the can down the road scenario. Under this scenario, the CBO expects deficits to remain high and for public debt to increase, indeed shoot up, from 69% of GDP in 2011 to 100% by 2021 and to 190 percent by 2035 – not a pleasant thought. This scenario would give the new government some more time to strike a compromise but would cause significant uncertainty until some decision is reached… and likely increase market volatility with daily swings tied to pieces of good news and bad news, much like what we’ve been seeing with the European crisis.

Another scenario is one where Republicans and Democrats reach a modest compromise and let some tax cuts expire while retaining others and enforce some spending cuts while ignoring a few others – sort of a give-and-take approach to avoid political confrontation and economic  paralysis. Perhaps this is most likely because the electorate – we, the people too, want both parties to collaborate on this one because a slip-back to recession is bad for employees, businesses and governments that get less tax revenues.

And one final scenario is a grand bargain where both parties work in a bipartisan manner to come up with a solid plan that addresses comprehensive fiscal issues including tax cuts and spending cuts, and put us firmly on a path to balancing our budget and reducing our national debt. Gosh that sounds too good to be true, and unfortunately, it’s less likely because neither party will substantially agree to give up too much.

This grand compromise is also something that the CEOs of over 80 major U.S. corporations urged lawmakers in Washington to reach to address our nation’s fiscal woes.

So as we go into this lame duck session before the new government is inaugurated, my advice to my listeners is that you continue to stay invested through this uncertainty, even Buffett says “hold” right now and seize significant market declines as buying opportunities of companies that will survive all of this over the long run, and not let any volatility over the coming weeks and months shake you off your investment goals.

~ ~ ~ ~ ~
Steve Pomeranz is a Managing Director for United Capital Financial Advisers, LLC, “United Capital”, and owner of On The Money. On The Money is not affiliated with United Capital. Article Source:

Baby Boomers – Defensive Stocks Are Failing Again As A Safe Haven!


Election season is finally over and it’s time to get serious about protecting your finances from increasing taxation and fees, rising inflation that eats up your pension and Social Security and continued economic stagnation that is guaranteed to reduce your standard of living.

Government apparatchiks, bankers and Wall Street gurus have an agenda and a vested interest in keeping you following their ‘expert’ advice. Unfortunately their agenda will continue to increase their wealth at your expense. The following article sheds light on the fallacy of ‘defensive stocks’ and what the real statistics are.

Defensive Stocks Are Failing Again As A Safe Haven! – By Sy Harding

In times of uncertainty, and in preparation for market declines, Wall Street’s advice to investors is always the same.

The market cannot be ‘timed’, and cash does not pay enough interest to even keep up with inflation. So investors need to remain fully invested and continue to buy stocks, but can protect themselves by shifting to ‘defensive’ stocks and sectors.

The advice has always been the same.

No matter what happens to the economy people will still have to eat, drink, and take their medicines. So food, beverage, and drug companies will continue to do well in an economic or market downturn. And the stocks of utilities and other solid companies that pay high dividends will also do well since the dividends will help offset a decline in the stock prices.

They do not explain that although consumers will still have to eat, drink, and take their medicines, investors will not have to continue to value the earnings of those companies as highly as they did in a rising market. Stocks that sell at 20 times earnings in the excitement of a rising market may only sell for 12 times earnings by the time a correction has made investors more fearful. So even though a company’s earnings continue to rise, its stock will still be dragged down by the falling market.

The same holds true for the high dividend payers. They also do not escape the problem of investors not being willing to value their earnings as highly as they did in a rising market.

In fact, since defensive stocks and sectors are touted so heavily by Wall Street near market tops, driving their prices to more over-valued levels than other stocks, their subsequent declines often exceed the decline of the rest of the market.

It doesn’t take much research to check it out, but unfortunately most investors aren’t inclined to bother. However, that is my job, and here are the facts.

Utilities are traditionally among the highest dividend paying stocks. Yet the DJ Utilities Average plunged 60% in the 2000-2002 bear market, considerably more than the 50% decline of the S&P 500. And it plunged 48% in the 2007-2009 bear market, not much different than the 50% decline of the S&P 500.

In lesser corrections the degree of safety promised for high dividend paying stocks has been equally disappointing for those who accepted the theory.

In the summer correction of 2010 the S&P 500 declined 15%. The DJ Utilities Average declined 13%. So far in the current correction, the S&P 500 is down 7.8%. But the DJ Utilities Average is down 11.6%.

Likewise, the ten highest dividend-paying solid companies in the 30-stock Dow are down an average of 18.9% in the current correction, compared to the S&P 500 being down 7.8%.

You could say that high-dividend payers have an added incentive for selling in the current correction since one of the risks of the ‘fiscal cliff’ is that taxes on dividends might jump significantly. And that’s true. But those same ten stocks plunged an average of 65.3% in the 2000 -2002 bear market, and an average of 55.4% in the 2007-2009 bear, much worse than the Dow and S&P 500.

Meanwhile, we’re seeing the same historical pattern for the ‘still gotta eat, drink, and take their meds’ stocks.

So far in the current pullback, while the S&P 500 is down 7.8%, the still gotta eat and drink category is holding up fairly well, although Coca Cola (KO) is down 10.2% and PepsiCo is down 7.3%.

But in the ‘still gotta take their meds’ category, while the S&P 500 is down 7.8%, most major drug-makers are down more. Abbott Labs (ABT) is down 12.4%, Bristol Myers (BMY) is down 14.8%, Eli Lilly (LLY) is down 14.6%, and Merck (MRK) is down 10.7%.

You can blame it on concerns about drug company profits under Obamacare. But just as the high-dividend paying stocks plunged right along with the rest of the market in the 2000-2002 and 2007-2009 bear markets, so too did the drug-makers. Abbott Labs, Bristol Myers, Eli Lilly, and Merck, plunged an average of 54.5% in the 2000-2002 bear market, and an average of 49.1% in the 2007-2009 bear.

Several conclusions could be drawn from that history.

The first is that there seems to be nothing to gain by repositioning into the so-called defensive stocks or sectors. In fact, by doing so one may come out the other side even more damaged than by holding onto current holdings.

Taking profits and moving to cash when risk is high would be a much better strategy, even though the cash would earn nothing, since one keeps the previous profits and can re-enter when the correction ends, rather than having huge losses and needing the next bull market just to get back to even.

And if the expected correction doesn’t materialize, the cost is only some lost opportunity for more gains, not the actual painful losses incurred by remaining fully invested and moving into so-called defensive stocks.

Another approach, which I prefer, is that the best defense is often a good offense.

For instance, an ‘inverse’ etf or mutual fund designed to move opposite to the S&P 500, like the Rydex Inverse S&P 500 fund (RYURX), or the ProShares Short S&P 500 etf (SH) will gain roughly 20% if the S&P declines 20%, more in larger corrections.

But regardless of what decision is made, it’s most important to realize that so-called ‘defensive stocks’ usually are not.

 ~ ~ ~ ~ ~
Sy Harding is president of Asset Management Research Corp. and editor of the free market blog Street Smart Post). Follow him on twitter @streetsmartpost.

Boomers – Expertise Will Drive the Future of Employment


While our nation continues to experience high unemployment, many job openings go unfilled due to an incorrect match between employer needs and potential employee skill sets. The very nature of employment is changing and it’s important to understand that it’s never going back.

Looking for an advantage? Whether your ‘job’ is working for someone else or in your own endeavor, the following article presents what you need to do in order to become and remain in demand.

Expertise Drives the Future of Employment – By Bill Ryan

Everybody wants a job. You want to go out, get hired by somebody, perform some pre-determined tasks, get paid, and go home. Simple, right? It’s the way it has always been. But hold on a moment. The news is that working at a job won’t be the same for much longer. The nature of the job is undergoing a radical shift as we become more of a knowledge-based economy. And those who don’t keep up with how employment is changing will be at a disadvantage in the employment marketplace going forward.

Because American workers are having to engage much more directly with global competitors, companies are required to shift the way they structure operations and employees are being forced to face a new definition of what being successful means. The knowledge-based organization and its talent force must be more agile to meet growing business demands. They need to learn fast, communicate clearly, and adapt to change. The old method of presenting a long list of past experiences on your resume as evidence that you have current value is giving way to demonstrating that you have just-in-time needed expertise that can be applied from day one.

It is expertise more than experience that is separating the future oriented worker from the old fashioned one. If you can link your past experience to applicable expertise that is desired now, then great. You are ready to move forward. But if you think that just having a long history of meeting the same type of responsibilities in a similar manner over time is going to separate you from the pack, then think again. Legacy skills are taking a back seat to specialized skills. Preparing for a world that honors creative and deep specializations expressed within cross-functional teams that are not limited by borders and silos is the future for the successful worker.

Becoming specialized is not anything new, but it is becoming increasingly important. Traditionally we have looked at our interests and early skills, matched them up with a pre-existing list of career options, and made a choice about what we would do for work. But increasingly it is too hard to fix on a list of stable careers. Technology is generating new specialties both directly or indirectly all of the time. From mobile branding experts to global collaboration facilitators the brave new world is characterized by more speed, more innovation, and greater challenges requiring novel solutions. And don’t resist blending your skills into new and valuable hybrids that reflect both your interests and what sells.

Refining a set of skills, collecting quantifiable and qualitative data as evidence of proficiency and continuously scanning the employment horizon for companies coveting your expertise is the strategy to best position yourself for opportunity. This strategy is helped enormously by logging your accomplishments. Each professional should have a portfolio or running record of their achievements, summarized in a resume, telling the story of how expertise has and is developing. There is a big difference between telling what your expertise is and presenting confirmation of what it is.

Much is said about the importance of well-functioning teams in the workplace and with good reason. Shared and collaborative expertise enhances the strength and competitiveness of organizations. Merging common and related spheres of expertise not only benefits companies, but each of the internal players as well. Organizations that encourage continuous learning, a culture of agility, and hire for innate potential over raw experience increase their chances of attracting and retaining a high level of expertise in their workforce.

So, instead of everybody wanting a job we may soon see everybody wanting a project requiring their specialty. Adjusting your perspective now on what a job means will help your upcoming employment prospects.

Article Source:

Baby Boomers and The Electoral College


Will your vote count tomorrow? While this topic can and has been debated for a long time, present big name pollsters, for the most part, only talk with those answering landlines in a day when cell phones rule. How accurate are these polls? Absentee ballot returns are already debunking pollster predictions.

The bigger question is, however, what if one presidential candidate wins the popular vote but loses in the Electoral College? New York City’s chaotic week following Hurricane Sandy’s appearance could be a dry run for what frayed tempers can produce should one party win the popular vote and the other, the electoral.

The following article details how the Electoral College operates, what this could mean for tomorrow’s election and the writer’s position as to why it may need to change. Like most complicated issues, it’s anything but clear cut. What are your thoughts?

Electoral College – By Joseph Parish

The Electoral College is composed of “electors” which have been appointed by each of the various states. It is these electors who actually select the President and Vice President. There are a total of 538 electors appointed in each election as specified by the Constitution. We must understand that in the case of the Electoral College we are not voting directly for our leaders but rather it is an indirect election. The downfall of this system is that the electors may vote for anyone they so desire and are not obligated to any specific candidate.

Initially the proposal for electing our leaders was based upon a procedure known as the “Virginia Plan” which called for the president to be elected by the Legislature similar to how the British selects their Prime Minister. Recommendations were made later that the elections be accomplished by a group of citizens apportioned amongst the states. This effectively eliminated any direct voting by the people for their leaders since the founding fathers considered the common man as incapable of making intelligent political decisions.

Naturally those delegates from the smaller states were greatly in favor of this system since it gave them equal clout with the larger states. The proposal was readily agreed upon and placed into operation.

The method by which the Electoral College functions is initially each state is allocated a specific number of Electors which equate to the number of its Representatives in both house of congress. Prior to the elections each party will submit to their State’s election officials a roster of individuals who have made a commitment for the party’s candidate. The electors are voted on by the people and supposedly the party which wins the most popular votes wins all of the Electors for that State.

The electoral votes are transmitted from the State to the President of the Senate at which time they are opened and read before both houses of Congress. The candidate who gains the most electoral votes is usually declared the president.

I am a firm believer that our present method using the Electoral College is archaic and outdated and should be eliminated. I am in complete favor of allowing a direct election by the people for the president. I defend this position first off on the premises that it is an undemocratic method which provides those swing states a disproportionate influence when selecting our President and Vice President. In the past the closest that we have actually come to abolishing the Electoral College occurred in 1968 when the presidential election concluded with President Nixon acquiring 301 of the electoral votes as opposed to his opponent Hubert Humphrey and his mere 191. The problem encountered was that Nixon had received only 511,944 additional popular which was only 1 percent of the national total.

Representative Emanuel Celler introduced the House Joint Resolution 681 which proposed an amendment abolishing the Electoral College. The proposal was approved in April of 1969 by the House Judiciary Committee. To make a long story short the bill was set aside as a result of a filibuster in 1971 and never reconsidered.

Additional arguments which I propose to support elimination of the Electoral College include not just the disproportional voting power provided to some states but also the indirect election process along with the winner-takes-all method being used. With this indirect election process we have essentially made our national popular vote irrelevant. Our current system supports the premise that the winner of the presidential popular vote could actually lose in the Electoral College votes as displayed in the 1876, 1888 and 2000 elections.

As an example it is entirely possible for a candidate to win an election by merely winning eleven states. If a candidate were to win the following states:

  • California 55 votes
  • Texas 38 votes
  • New York 29 votes
  • Florida 29 votes
  • Illinois 20 votes
  • Pennsylvania 20 votes
  • Ohio 18 votes
  • Michigan 16 votes
  • Georgia 16 votes
  • North Carolina 15 votes
  • New Jersey 14 votes

This would equal 270 votes which is enough to win the presidential election.

One disadvantage which is usually overlooked is the shortcomings related to the nation’s third-party candidates. With our winner-take-all method of allocating the various states’ electors it tends to decrease the importance and possible selection of the minor political parties.

In conclusion, I contend that by the use of the Electoral College we have disrupted our normal understanding of how our democratic system should be functioning. America was founded upon the election of their representatives “by the people” and with our present system this will of the people has been suppressed.

~ ~ ~ ~ ~
For more information relating to survival visit us at Article Source: (Copyright @2012 Joseph Parish)