As a result of the acquisition of Alberty Financial Planning Services, Inc. by The A.I. Group, Inc., we can now be found on The A.I. Group, Inc.’s newly update website:

http://www.theaigroup.com/benefits-services/financial-planning

Best wishes to all of you for 2012!

Laurel

Right now in the financial markets, the tail is wagging the dog. Actually, there are several tails that are driving markets now, including:

– Rampant pessimism among investors worn down by the country’s continuing financial difficulties and spooked by the volatility of the last few months.

– The appearance that Europe – i.e., the European banks – can’t find a way out of their mess. The problem is rooted in the fact that while the members of the European Union share a single currency, they have very different fiscal policies.

– Technology, which continually needs to feed itself. There was a day when you found out about the performance of your investments when you got your monthly statement. Now you can check the status of your investments on your iPhone, and you can watch the financial news networks 24/7. This constant stream of information and commentary can spur anxiety and undermine a long-term approach to investing.

– The market gains that were propelled partly by QE2 are gone. QE2 started on November 16, 2010, with the S&P at 1178.34. When the program ended on June 30, 2011, the S&P closed at 1339.67 – an increase of about 14%. Now the S&P has given up those gains.

– A dysfunctional government in Washington continues to leave businesses and investors uncertain about the future. And markets do not like uncertainty. Our elected officials, from the president through the Congress, need to learn to work together to govern from the center.

All these factors have combined to make investors jumpy. And who can blame them? We are two years into a period of deleveraging, as individuals and corporations work to get rid of their debt, and the process could take several years more. People need jobs, and individuals and businesses need the financial system to work its way back to health. Instead, the Treasury market is showing us that we could be following in the footsteps of Japan and headed for an even more prolonged recession.

But if we forget about those tails for a moment and focus on the dog, there are many positive things:

– Corporate profits are good. Markets go up and down on profits and expectations of profits, and despite some problems recently, profits are still headed for a record year.

– Overall, we are selling at about 11 times earnings, which means that many stocks are still a good value. Expectations are that we will be selling at about 10 times earnings in 2012.

– There are companies that are adapting well to our “new normal” with creativity and strong, astute management.

– Many companies are increasing their dividends. Dividends are critical to investors; since 1930, stock dividends have comprised approximately 50% of the stock market’s total return. Currently the dividend yield for S&P 500 stocks is higher than the yield on 10-year Treasury notes. This also happened in December 2008. However, prior to that, it had not happened in more than 50 years.

– Companies are buying back their own stock, meaning they are confident in the underlying value of their own companies. As of June 28, 30 companies had announced a total of $168 billion in share buy-backs, according to The Wall Street Journal.

As frequent readers know, I focus on earnings. Since the middle of 2009, S&P 500 earnings estimates by Wall Street analysts had been going up. In the May-June timeframe, earnings estimates started going sideways, and over the last few months, they have started trickling down. Earnings season for the third quarter is now upon us. The numbers for that quarter and companies’ outlooks for 2012 will be very, very significant. My hope is that companies will deliver up to Wall Street expectations.

These are difficult times, there is no question about that. But there are still opportunities in the market. Particularly in times like these, it is important to focus at least as much on the health of the dog as on the tails that are doing the wagging.

On a personal note, I would like to note the passing of Steve Jobs. Like other visionaries such as John F. Kennedy and Martin Luther King, Steve Jobs changed the way we live. He was the creative genius of a generation. He inspired us all to strive for excellence, and his legacy can be an inspiration for future generations. The world is a better place because he was in it.

Garry K. Schaefer
Atlanta, Georgia
October 11, 2011

Peachtree Investment Quarterly may offer general financial, insurance, tax and business ideas. However, due to the ever-changing tax laws as well as the complexity of the financial industry, you should seek professional advice before implementing any of the ideas contained in this newsletter. Peachtree Investment Partners, LLC(TM), and Osmosis Digital Marketing, Inc. assume no liability whatsoever in connection with the use of this newsletter.

Building your financial foundation – Tier 1 Budgeting Guidelines

If you would like a copy of the budgeting spreadsheet referenced in the webinar, please contact Laurel Alberty, Certified Financial Planner at LAlberty@theaigroup.com.

*Narration provided by Kelley Buttrick,  kb@kbvoiceovers.com

EMERGING MARKETS: CHALLENGES AND OUTLOOK

Emerging market countries, including Brazil, Russia, India, and China, have experienced dramatic economic growth in recent years, which has left many investors wondering whether the emerging markets can continue to expand so successfully. The answer to that question will have a wide-reaching impact; although only a few decades ago these countries were thought by many to be unworthy of serious investment consideration, they are rapidly increasing in global significance. They are projected to grow at double the rate of developed economies and within two decades will likely account for a larger share of global GDP than the developed world. The emerging markets’ path to continued growth is not certain, however, and may require a shift away from the reliance on cheap labor that has enabled such rapid growth so far. As their economies become more advanced and their people more affluent, the continued success of these countries may hinge upon their ability to transition to an economy built to provide goods and services to a burgeoning and potentially powerful global middle class. Such a shift would change the type of influence the emerging markets have on the developed world and would impact the new wave of less-developed countries, the frontier markets. In this paper we explore the path the emerging markets have taken to this point, the trends that suggest where they are likely to go from here, and the implications of these trends for the US investor.

Enjoy the following article from the NYT and his piece about the Home Team advantage.

Tom Rogerson’s Home Team Advantage Strategy

Teaching Teamwork, but With Real Money – New York Times

If you have children who are over 18, you are no longer their power of attorney by default. It is advisable for your adult children to have their own advance health care directive completed as well.

The advance directive provides you a greater opportunity to make your specific wishes known to your power of attorney and health care providers. The following link is for Georgia’s standard form provided by the GA Bar (GA Advance Directive for Health Care). You may use it if you prefer not to hire an attorney to draft one for you.

Please feel free to contact me with any questions.

LAlberty@theaigroup.com

First, let’s define qualified retirement plans. Qualified retirement plans are accounts with tax-favorable status; this means that growth on the underlying investments held in these accounts is either tax-deferred or tax-free, depending on the account type. Some common types of qualified plans are 401(k), 403(b), traditional IRA, and Roth IRA.

Generally speaking, tax deferred accounts allow for pre-tax contributions, tax-deferred growth, and income-taxable distributions. Accounts with tax-free growth, such as Roth IRAs and Roth 401(k)s, allow for after tax contributions, tax-free growth, and tax-free qualified distributions.

The assets from qualified retirement accounts do not pass through your will when you die. Instead they are passed to your beneficiary, thus making the beneficiary choice critical to preserving the account.

Through my experience, I’ve found that it isn’t widely known that an inherited IRA or other qualified account is required by the IRS to distribute a certain amount to the beneficiary on an annual basis. If beneficiaries are chosen wisely, the distributions can be minimized stretching out the tax favorable status of the account. Please keep in mind that naming a primary and a secondary beneficiary to your qualified retirement accounts are equally critical for stretching out your tax favorable accounts.

Naming the wrong beneficiary or no beneficiary at all will result in a dramatically accelerated distribution period. An accelerated distribution period brings the tax favorable status to an end earlier than necessary and can have very negative income tax implications to the beneficiary for the years of distribution. Add the estate tax on top of the accelerated distribution period and your heirs could receive only 30% of your hard earned retirement savings while the IRS receives the lion’s share of up to 70%.

As I mentioned at the beginning, naming a beneficiary should be simple and easy. However, understanding the tax rules of that beneficiary designation can be complicated and costly when mistakes are made.

In my opinion, the least effective beneficiary designation you can make is not naming a beneficiary for your qualified retirement plan. A blank beneficiary defaults to the account holder’s estate which will accelerate the required minimum distribution schedule. And yes, naming the estate is a popular choice, probably due to the misconception that qualified account assets pass through your will rather than to a beneficiary.

Why is naming your estate a bad choice? The IRS says that any non-person entity that inherits a qualified account must distribute the entire account over a 5 year period. This forces a potentially huge income-taxable cash inflow and ends the tax favorable status of the account assets.

Instead, when an actual person inherits a qualified account, the account is distributed based on the beneficiary’s life expectancy – which could be 30 years or more! With more years to distribute the account, distributions can be smaller and this will allow for a longer period of tax favorable growth and smaller income-taxable cash inflows.

In my opinion, the ideal beneficiary designation for married couples with children who intend to use their qualified accounts as a source of income during their lifetime should be; primary | spouse, secondary | children. Those fortunate enough to not need income from their retirement accounts, and who would like to pass these assets along as part of their legacy should consider this beneficiary selection; primary | children, secondary | grandchildren. The beneficiary designation strategy most effective for achieving the longest period of tax favorable treatment requires selecting the youngest heirs with the longest life expectancies.

Qualified accounts are also a popular and fantastic way to make charitable gifts, but you must carve out the charitable donation and place it into a separate account in order to avoid the 5 year required minimum distribution rule. Even leaving only a portion of a qualified account to a charity will force the entire account into the 5 year required minimum distribution period – including the portions of the account named to specific beneficiaries.

Lastly, it is important to note that the required minimum distribution is determined by the IRS but the maximum distribution is always a decision left to the account holder. Understanding the tax implications of naming a beneficiary on qualified accounts can have a dramatic impact on the legacy you leave your family.

Something has happened to the way we look at investing. It has become less about financial considerations and more about politics. And that can’t be a good thing.

When I got into this business in 1985, we used to talk about things like earnings, P/E ratios and yields. We looked at a company’s management and its competitive advantages. We still consider those things, of course. But increasingly, politics has become a major consideration in the decisions of companies and investors.

Of course, politics has always existed as a kind of backdrop to the financial world. But it seems that now, more often than not, it is the main event. There are several reasons for this. The first is an increasing globalization of both politics and investing.

For example, consider the situation in Greece. Before the European Union, Greece’s inability to rein in its spending would have been a problem mainly for Greece. But now it is a problem for all of Europe, which makes it a huge drag on markets all over the world.

Perhaps the most distressing thing, though, is how American politics has come to poison all kinds of things, including investing. Certainly nasty politics is nothing new in this country. After all, in 1856, South Carolina Rep. Preston S. Brooks beat Massachusetts Sen. Charles Sumner unconscious with a cane on the floor of the Senate – which was not in session at the time. And elections always bring on a spate of hyperbole and accusation.

In recent years, however, it seems that the nastiness is poisoning not only the electoral process, but also the process of governing. Part of the problem is the 24-hour news cycle that, in order to feed itself, starts one campaign season as soon as the previous one ends. And part of it is a feeling of antipathy and hostility that has grown at least since the mid-1990s and continues to threaten governance with gridlock.

The effort to find a way out of our current financial crisis has become a victim of that gridlock. In 2008, when the situation was so bad that Hank Paulson said he literally had the dry heaves before meetings, Democrats and Republicans stopped fighting with each other and took action to keep us out of recession. And overwhelmingly, economists agree that those actions worked — we avoided disaster.

But once we pulled back from the abyss, the spirit of cooperation evaporated and the crisis became a kind of ideological football. One side pushes for increasing regulation, claiming that the meltdown was based partly in the unbridled greed of the banks and investment houses. And while there is some truth to that, the effect of these regulations is uncertain, and they surely have made the markets skittish. We saw that in the drop of the markets after Fed Chairman Ben Bernanke told JPMorgan Chase President Jamie Dimon in early June that he was unsure about the effect of regulations on banks.

On the other side, the crisis has fueled a call for less regulation and for cuts in government spending. Consider the battle over the debt ceiling. Every proposal, including aid to the victims of tornadoes in Missouri, gets passed through the prism of the debt ceiling. That is making it nearly impossible to do the kinds of things most economists suggest will lead to job growth, such as investing in education and research. And now Congress is seriously talking about allowing the U.S. to default rather than raise the debt ceiling, which could have a devastating effect on our fledgling recovery and on the economy of the rest of the world.

Consider also the recent decision by Peter Diamond to withdraw his name from nomination to be a Federal Reserve governor because it was clear to everyone that he could not be confirmed. Diamond has impeccable credentials: He is an economics professor at MIT and the 2010 winner of the Nobel Prize in Economics. But in 2008, Democrats refused to approve George W. Bush’s nominee for the Federal Reserve, and now Republicans are returning the favor. Plus, Diamond supported the bank bailout and the stimulus bill, which despite GOP support at the time, have become an anathema to Republicans. As a result of Diamond’s withdrawal, the seven-seat board has two empty seats — during one of the most difficult financial times in our history.

Given the political climate both at home and abroad, it is no wonder that companies are skittish. U.S. companies are sitting on billions of dollars in profits, but they are not investing in themselves, in things like expanding their offerings or hiring new workers. Perhaps part of that is because they are not sure whether the current political animosity and gridlock mean that Washington is likely to do nothing or likely to do the wrong thing. The markets lack confidence in Washington.

So what can you do as an investor? Continue to invest in strong, stable companies that pay a dividend. In today’s environment, this is more important than ever.

But as an American, and a voter, you should demand civility and accountability in your politicians, no matter which party. Before you cast your vote, consider whether a candidate is willing to work for real solutions. Because like it or not, what happens in Washington matters a lot to Wall Street – and to Main Street.

Finally, with all the pessimism that has engulfed our markets recently, remember that the market is now selling at 13 times 2011 earnings, and soon Wall Street will start focusing on 2012 earnings — which are projected to be a record of $113, up over 13 percent from the record this year. At the same time, companies are raising their dividends at a feverish pace.

As long as corporations remain conservative on hiring and their capital expenditure programs, we should see record margins and profits. U.S. corporations will be financially responsible to their shareholders – and that’s something our politicians can learn from.

Garry K. Schaefer
Atlanta, Georgia
July 6, 2011

Peachtree Investment Quarterly may offer general financial, insurance, tax and business ideas. However, due to the ever-changing tax laws as well as the complexity of the financial industry, you should seek professional advice before implementing any of the ideas contained in this newsletter. Peachtree Investment Partners, LLC(TM), and Osmosis Digital Marketing, Inc. assume no liability whatsoever in connection with the use of this newsletter.

by Laurel S. Alberty

	The sunset provision makes the estate tax law an average taxpayer’s problem again.