Always Be Prepared

Last fall, there was an interesting news story circulating that some of you may recall.  It was the story of Walter Samasko and his house full of gold coins.  Poor Samasko, whom neighbors described as quiet, reclusive and strongly anti-government, had died from a heart attack and his body was undiscovered for at least a month.  When authorities went to clean Samasko’s house, they discovered boxes of gold coins worth more than $7 million in his garage and crawl space.     Samasko had no will, so local authorities used a list of attendants from his mother’s funeral in 1992 to track down his nearest surviving relative, first cousin Arlene Magdanz, a substitute teacher in California.  Can you say Eureka?

I can only imagine what it would be like to be told I had inherited $7 million from a long-lost relative.  I would like to believe that I would not regret the fact that the government would take over $800,000 in estate taxes and other fees.  I mean, this is found money, right?  But I am sure there is one person who rolled over in his grave:  Walter Samasko.  Remember, Samasko had no will or trust and he had not taken the necessary steps to create a plan that would prevent his estate from the taxation he surely would have hated.  Rather than die intestate, Walter should have drawn up a will and created a trust leaving his assets to charity.  Not only would these documents protect his assets from taxation, the living trust would have prevented probate court, thus preserving the privacy Samasko clearly desired.

The federal estate-tax exclusion now is set permanently at $5 million and is indexed for inflation. But because of inflation, the amount for 2013 works out to $5,250,000 for individuals and $10,500,000 for couples.  The federal gift and generation-skipping transfer tax exemption is the same as the estate-tax exclusion amount.  The top federal estate-tax rate on the largest estates is now 40%, up from 35% in 2012. Transfers from one spouse to the other typically are tax-free.   

These exemptions mean many of us will never need to worry about estate taxes.  This does not mean you don’t need an estate plan.  Wills, trusts, powers of attorney, living wills and health care powers of attorney are all important documents that allow you to determine who receives your assets, who will have guardianship over your children, who will make decisions for you when you are unable, who will manage your financial and legal affairs and so on. 

In our work, we often find people who are reluctant to address the topic of estate and incapacity planning.  While I realize this can be a touchy subject, I always think of the old adage, “Those who fail to plan, plan to fail.”  So please, don’t be like Walter!  If you have not yet created your estate plan, get started today.  If you need help finding an estate planning attorney or if you would like some general guidance on estate planning, your financial advisor is happy to assist.


Tracy H. Allen, CFP®

Financial Advisor


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Market Update through 2/15/13


as of February 15, 2013        
  Total Return
Index 12 months YTD QTD MTD
Russell 3000 15.77% 7.28% 7.28% 1.70%
S&P 500 15.74% 6.86% 6.86% 1.60%
DJ Industrial Average 12.40% 7.11% 7.11% 1.13%
Nasdaq Composite 11.19% 5.85% 5.85% 1.70%
Russell 2000 15.09% 8.80% 8.80% 2.39%
EAFE Index* 8.22% 3.71% 3.71% -1.41%
*EAFE index does not include dividends.        
Barclays US Aggregate 2.71% -0.65% n/a 0.05%
Barclays Intermediate US Gov/Credit 2.59% -0.29% n/a 0.07%
Barclays Municipal  4.90% 0.47% n/a 0.05%
    Current   Prior
Commodity/Currency   Level   Level
Crude Oil    $95.91    $97.46
Natural Gas    $3.15    $3.36
Gold    $1,609.80    $1,668.00
Euro    $1.33    $1.36

Mark A. Lewis

Director of Operations

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Print Me a Heart Valve, Stat!

20 years ago, I was a sophomore in college. I had a phone in my dorm room (connected to the wall by a cord) but I did not have a computer. If I needed one, I went to the computer lab on campus. I did not have an email account until my senior year. That same year, I distinctly remember my chemistry professor telling the class about this crazy thing called “the World Wide Web.” Fast forward 20 years and here I sit, with a tiny device that fits in my pocket and is a portal to the collective knowledge of the human race. And if for some reason I can’t get an answer to something in less than 3 seconds, I go ballistic. If you haven’t seen Louis CK’s bit about “Everything’s Amazing and Nobody is Happy,” you have to go to YouTube right now and watch it. I’ll wait.

20 years ago an iPhone would have seemed incredible, yet now they are ubiquitous and more essential to life than oxygen. On the few occasions I’ve left mine behind at home or at the office, I panic like I’m in one of those dreams where you suddenly realize you’re at the grocery store with no clothes on. I mean, it wasn’t that long ago that I routinely traveled around with NO PHONE AT ALL, oblivious to the perils that such a situation engendered.  

So what do these musings of mine have to do with finance? Nothing. But I was reminded of how fast technology moves when someone asked me about 3-D printing the other day. I’ve heard a little about it on NPR, but I’m not too familiar with the technology, so I did a little online research (ah, Google, another thing I can’t live without). In a nutshell, it’s a Star Trek-like technology that pretty much allows you to print an object. As in, one minute there’s nothing, and the next minute BOOM there’s a pen. (I’m sure it takes longer than a minute, but you know what I mean.) Apparently, the technology has been around for about 30 years, but it’s only now becoming inexpensive and accessible to consumers. There are practical applications for something like this in manufacturing, architecture, and medicine, but also in the consumer world. One that sounds totally awesome is the ability to download data from the web that would allow you to build a spare part for something that is no longer manufactured anywhere. In your home! Or, instead of shipping a product to a far-away destination, the data could be sent digitally to a printer that makes the product locally. How cool is that?

Most of the companies at the forefront of this technology are small-caps. Fewer analysts follow small-cap stocks, and research reports are scarce compared to the companies we follow in our coverage universe. This makes it difficult for me to formulate an opinion on the stock of small companies like these (for as you know, just because you like a company and/or its product, it doesn’t necessarily follow that the company’s stock is a good investment). I think 3-D printing is amazing technology and I imagine the applications will be myriad, but at this stage in the game much of the investment landscape is speculative. When buying individual stocks, our focus is on established, shareholder-friendly companies with strong balance sheets, positive fundamentals, attractive valuations, and good prospects for earnings growth and total return.

Sarah DerGarabedian, CFA
Director of Research

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Market Update through 1/31/13

as of January 31, 2013        
  Total Return
Index 12 months YTD QTD January
Russell 3000 16.90% 5.49% 5.49% 5.49%
S&P 500 16.78% 5.18% 5.18% 5.18%
DJ Industrial Average 12.75% 5.91% 5.91% 5.91%
Nasdaq Composite 13.41% 4.08% 4.08% 4.08%
Russell 2000 15.47% 6.26% 6.26% 6.26%
EAFE Index* 13.49% 5.19% 5.19% 5.19%
*EAFE index does not include dividends.        
Barclays US Aggregate 2.59% -0.70% n/a -0.70%
Barclays Intermediate US Gov/Credit 2.47% -0.36% n/a -0.36%
Barclays Municipal  4.80% 0.42% n/a 0.42%
    Current   Prior
Commodity/Currency   Level   Level
Crude Oil    $97.46    $93.97
Natural Gas    $3.36    $3.42
Gold    $1,668.00    $1,684.90
Euro    $1.36    $1.32

Mark A. Lewis

Director of Operations

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Getting an Early Start

It is well known that an investor’s best friend is time. Many investors that are approaching retirement frequently wish that they had just started saving earlier, which in many cases would have afforded them the ability to retire much earlier than they now plan. According to a recent Wall Street Journal article, nearly two-thirds of American workers between the ages of 45-60 now anticipate delaying their prior retirement plans. Much of this is due to recent weak investment returns, but much of it may be due to the fact that they didn’t begin saving for retirement early on in their careers.

By getting an early start on building your investments in your career you stretch out your investment horizon. This allows you to achieve a return that approaches long term historical averages (as opposed to short investment horizons where asset returns are more volatile).  It also allows for compounded returns on your investment – which is one of the most powerful tools an investor can have. This basically means you are receiving a return on your prior investment returns, and as you stretch out the number of years you are investing then the compounding power continues to grow.

Let’s look at a quick example of two young professionals to see the benefits of extending your investment horizon:

  •  At age 25 both professionals have a starting salary of $50,000
  • Their employer provides a 5% matching 401(k) contribution
  • Each of them receives an average raise of 4% per year – slightly above inflation due to continued career advances and post graduate studies
  • Both will choose a 100% equity allocation due to their long term investment horizons, and over their  career they receive a 9.8% annual compounded investment return (based on Ibbotson data of large company stock returns from 1926-2011)

The only difference between these two will be that one chose to immediately begin participating in the 401(k) plan with a 10% salary deferral. The other chose to wait just 5 years until they were 30 years old to begin a 10% salary deferral. Both continued saving until they were 65 years old, and stuck with a 100% equity allocation over the entire investment period. The difference based on these assumptions: Almost $1.42 million. Over a period of those first 5 years the salary deferrals for the smart investor was just $27,000, but employer matches and compounding investment return power led to this massive difference in their 401(k) balance as they approached retirement. 

For many of you nearing retirement this piece isn’t helpful since time travel is still in the works. But, you likely have children or younger relatives who would really appreciate it if you helped them get on the right path. Maybe they won’t appreciate it now, but in 30-40 years when they have developed sizable wealth then you will certainly be their favorite relative.

Reach out to your advisor and we will be glad to review your retirement options at work as well as those of your younger relatives.


Travis Boyer, CFA

Financial Advisor

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Are They Made from Real Girl Scouts?

I spotted a headline online recently announcing that a new flavor of Girl Scout cookies would have a secret ingredient.  I laughed out loud.  I immediately thought of that line from the “Addams Family” movie, delivered so well by Christina Ricci, “Are they made from real Girl Scouts?”  (Look it up on You Tube.) 

As it turns out, the secret ingredient is not Girl Scouts; it is a vitamin cocktail.  I looked at the ingredient label on their website.  Yes, you get a small dose of vitamins when you eat 3 cookies…along with 8 grams of fat.  Am I supposed to feel better when I eat more than 3 cookies, because the cookies are “good for me?”

We all know that, no matter how nutritious new forms of cookies, potato chips, and burgers may claim to be, they cannot replace a balanced diet that contains fruits and vegetables.  Fad diets come and go.  You might lose a few pounds, only to regain them because who can eat mango smoothies all the time? 

You can apply the same principle to your investments.  Chasing the latest fad in investment strategy can be costly.  It is important to be very thoughtful about your asset allocation.  As we have said many times, it is easy to have an allocation of 100 percent equities in an up market.  It is extremely difficult to stick with that strategy when the market drops 500 points in one day. 

Your investment advisor is here to help you.  If you have not taken a look at your asset allocation in awhile, now is a good time to begin the conversation.  Have your goals changed?  Has your family expanded?  Have you started a new business?  All of these events, as well as many others, can prompt a change.  We are here to help, so put down the Girl Scout cookies and give us a call.

Cristy Freeman, AAMS
Senior Operations Associate

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as of January 15, 2013        
  Total Return
Index 12 months YTD QTD MTD
Russell 3000 17.29% 3.55% 3.55% 3.55%
S&P 500 16.82% 3.30% 3.30% 3.30%
DJ Industrial Average 11.98% 3.37% 3.37% 3.37%
Nasdaq Composite 16.56% 3.03% 3.03% 3.03%
Russell 2000 17.48% 4.17% 4.17% 4.17%
EAFE Index* 17.08% 3.30% 3.30% 3.30%
*EAFE index does not include dividends.        
Barclays US Aggregate 3.64% -0.15% n/a -0.15%
Barclays Intermediate US Gov/Credit 3.47% -0.03% n/a -0.03%
Barclays Municipal  5.80% 0.70% n/a 0.70%
    Current   Prior
Commodity/Currency   Level   Level
Crude Oil    $93.97    $93.49
Natural Gas    $3.42    $3.23
Gold    $1,684.90    $1,693.60
Euro    $1.32    $1.32

Mark A. Lewis

Director of Operations

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2012 IRA Contribution Rules

The deadline to make IRA contributions for tax year 2012 is April 15, 2013.  The maximum contribution is $5,000 of earned income or $6,000 for those 50 and over.   These amounts increase to $5,500 and $6,500 respectively for tax year 2013.

There are income limits which determine whether you can deduct your Traditional IRA contribution or if you qualify to make a Roth contribution.  The following table gives the phase-out range for the most common circumstances. 

Do you qualify to deduct your Traditional IRA contribution?

 If your income is less than the beginning of the phase-out range, you qualify.  If your income is over the phase-out range, you do not.  If your income falls inside the range, you partially qualify.


Modified Adjusted Gross Income                                         Phase-Out Range

Single, participates in an employer-sponsored retirement plan


Married, participates in an employer-sponsored retirement plan


Married, your spouse participates in an employer-sponsored retirement plan, but you do not.



Do you qualify to contribute to a Roth IRA?



Married, filing jointly


 If your filing status differs from those listed above, please contact your advisor and he or she can help you determine whether you qualify.

Tracy H. Allen, CFP®

Financial Advisor

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Market Update through 12/31/12

as of December 31, 2012        
  Total Return
Index 12 months YTD QTD Dec
Russell 3000 16.42% 16.42% 0.25% 1.23%
S&P 500 16.00% 16.00% -0.38% 0.91%
DJ Industrial Average 10.24% 10.24% -1.74% 0.79%
Nasdaq Composite 17.75% 17.75% -2.47% 0.63%
Russell 2000 16.35% 16.35% 1.85% 3.56%
EAFE Index* 13.55% 13.55% 6.17% 3.10%
*EAFE index does not include dividends.        
Barclays US Aggregate 4.22% 4.22% n/a -0.14%
Barclays Intermediate US Gov/Credit 3.89% 3.89% n/a -0.10%
Barclays Municipal  6.78% 6.78% n/a -1.24%
    Current   Prior
Commodity/Currency   Level   Level
Crude Oil    $93.49    $88.91
Natural Gas    $3.23    $3.56
Gold    $1,693.60    $1,710.90
Euro    $1.32    $1.30

Mark A. Lewis

Director of Operations

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New Quarterly Reports

We have introduced new reports for our quarterly review statements that we send out to clients.  As a client, you will receive these over the next few months.  These new reports are an improvement over the former reports both ascetically and informatively.  Take some time to review these reports and let us know if you have any questions about how you should be reading them.  In the new reports you will find:

  • An introductory letter commenting on the financial markets and economic situation;
  • An invoice calculating your fee;
  • Household Overview listing all of your accounts;
  • Portfolio overview that depicts year-to-date contributions and withdrawals, year-to-date realized and unrealized gains, income received and fees charged;
  • Portfolio overview that depicts your asset allocation in graphic and table format, as well as a graph showing the increase/decrease of your portfolio over the quarter;
  • Performance report that shows a time-weighted return (TWR).  TWR is the standard industry performance calculation that accounts for cash flows in and out of the portfolio.  There are columns that show year-to-date, latest 1-year (rolling 12-months), and annualized since inception returns.  The returns shown are for your total account, returns for the equity portion of our account, and fixed income portion if applicable.  We have also provided returns for a variety of indices for your comparison:
    • Russell 3000 Index – largest 3000 U.S. stocks
    • MSCI EAFE Index – an international index for Europe, Asia and Far East stocks
    • S&P 500 Index – largest 500 U.S. stocks
    • Barclays Intermediate Gov’t/Credit Index – corporate bonds and U.S. government securities, 3-10 years in maturity
    • Barclays Muni Bond Index – a national aggregate of municipal bonds

In general our portfolios are comprised of a mix of these investments.  The equities portion often has 20% international (EAFE) and 15% in small and mid-size companies (represented in the Russell 3000).

  • Appraisal that shows a listing of your current holdings.

We hope that you find the new reports informative.  Thank you!

Harli L. Palme, CFA, CFP®


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