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1st Quarter January 2013

Happy New Year!

Finally, the election is behind us. As you know by now, Congress has finally passed a tax bill to permanently address the across the board tax increases and indiscriminate budget cuts that were scheduled to take place on January 1st. This was all referred to as the "Fiscal Cliff." At least, we now know what the personal tax rate and the current estate tax exemptions will be. Nothing was agreed upon on spending cuts, and most anticipate that the debt ceiling issue will be the next big stalemate. Also, a reduced tax on corporations and a revision and simpler tax code is on everyone’s wish list. You may recall during the last debt ceiling debate, which went to the last possible second, created significant market volatility. Talk of reneging on our financial obligations creates uncertainty. These budget challenges will be with us for some time, unless some significant reform can be agreed upon. A more detailed summary of what was included in the tax bill is attached. I suggest you keep a copy for future reference.

Financial Market Update* Year-to-date change as of December 31, 2012
S&P 500 Index 13.41%
Dow Jones Industrial Average 7.26%
NASDAQ Composite 15.91%
Russell 2000 14.64%
MSCI EAFE US$ (International) 13.55%
Barclay's Capital (Lehman) US Aggregate 4.21%
*Indexes are for illustrative purposes only. One cannot invest directly in any index. Assumes dividends are reinvested.
Source: Morningstar

The Markets

Despite all the wrangling on our debt and tax issues in the U.S., problems in the Middle East, and continued concern around Europe, the markets plowed ahead, in response to signals that an agreement would likely take place, and that Europe was moving toward easing monetary policy and working through their issues. As you can see in the table above, international and U.S. markets had double digit returns. The generally accepted thesis of "don’t fight the Fed," suggests that as long as interest rates stay artificially low, money will flow into traditionally riskier assets and out of cash alternatives and treasuries, causing prices to increase. I just attended an investment symposium, where the money managers who spoke believe that rates will be low for another year or two, and GDP (Gross Domestic Product) growth will be around 1 – 2%. In addition, there could be a pull back during the debt ceiling and future budget showdowns, and inflation would remain low.

What's New

As technology becomes more advanced, we will be changing some of the ways we deliver information to you. New reports on performance reporting, cash flow summaries, as well as overall snapshots of how your portfolio is invested, will likely happen later this year. Our goal is for you to have an easy to understand, timely report with helpful information, as soon as possible after the end of a quarter.

We are also going to enhance our newsletter to include contributions from all of our associates who work in specialized areas, so you can know who they are and some of our capabilities including: 401(k)s and retirement plans, financial planning topics, including estate planning and taxes, investments, markets and the economy, to name a few.

Each year, everyone on our team attends educational workshops and continuing education, to help keep us on the cutting edge of our industry, covering topics like technology and regulation.

Wealth Management

Wealth management covers more than just investments, and many of our clients are unaware of our capabilities. I thought that I would mention just a few of the projects that we have worked on in 2012 to give you a sense of what we can do.

  • Insurance policy reviews – with interest rates so low for so long, many policies are not performing and may run out early with no death benefit, especially some "paid up" policies.
  • The sale, merger or capital assistance for companies – Raymond James has a very strong investment banking division that has performed hundreds of transactions with both private and public companies and is considered a leader in that space for many industries.
  • Estate settlement assistance – we work with many attorneys, CPA's and clients to provide assistance, research and cost basis, find certificates, provide values, assistance in insurance pay-outs, rollovers, retitling of assets, and designating new beneficiaries.
  • Home refinance – many people are taking advantage of low interest rates to buy a new home, second home or refinance. New regulations have caused the process to be time consuming, confusing and extremely frustrating. As we hold much of the financial information they need, we are happy to assist you in streamlining this process. We also use Raymond James Bank as a resource for refinancing, and we are happy to connect you with a person there. We have found the rates to be extremely competitive and the process to be somewhat easier.
  • Security based lending or lines of credit – if you need a bridge loan, to pay taxes or for some other reason, Raymond James can lend against a portfolio at a very low fixed rate. This is different than a margin loan and it may make sense, instead of selling securities and paying taxes on gains.
  • Financial plans – modeling cash flow at retirement, determining how much is needed to provide for a comfortable retirement, review tax strategies, and how to value pensions and options, when to take social security, corporate benefits, etc., and help you get a plan into place for your future, no matter what stage of life you are in.
  • Philanthropy – If you make charitable gifts, we can help you with tax effective ways to accomplish your legacy wishes, and other wealth transfer strategies.

Our mission is to help you with a life well planned and help you create some financial freedom for your future and for your family. We thank you for your confidence and your friendship.

Have a happy and healthy 2013.


S&P 500: An unmanaged index of 500 widely held stocks that’s generally considered representative of the U.S. stock market. Dow Jones Industrial Avg.: An unmanaged index of 30 widely held U.S. Stocks. NASDAQ Composite: An unmanaged index of securities traded on the NASDAQ system. Russell 2000: An unmanaged index of small cap securities which generally involve greater risks. MSCI EAFE: An unmanaged index that is generally considered representative of the international stock market. Barclay’s Capital: The U.S. Aggregate Index covers the USD-denominated, investment- grade, fixed-rate, taxable bond market of SEC-registered securities. Past performance may not be indicative of future results. Expressions of opinions are as of this date and are subject to change without notice. Any opinions are those of Sherri Stephens and not necessarily those of RJFS or Raymond James. Stephens Wealth Mgt Group is independent of RJFS. The information contained in this report does not purport to be a complete description of the securities, markets, or developments referred to in this material. The information has been obtained from sources considered to be reliable, but we do not guarantee that the foregoing material is accurate or complete. Any information is not a complete summary or statement of all available data necessary for making an investment decision and does not constitute a recommendation. You should discuss any tax or legal matters with the appropriate professional.

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