Leonesmoneymonitormonthly's Blog

By Edward Leone Jr.DMD MBA CFP RFC

Contact Information:   leonee@vzw.blackberry.net

I just happened to read a great article by Charles Murray in the Wall Street Journal yesterday. He does a great job of describing the impact of capitalism on global economics and social well-being. “From the dawn of history until the 18th century, every society in the world was impoverished, with only the thinnest film of wealth on top. Then came capitalism and the Industrial Revolution. Everywhere that capitalism subsequently took  hold, national wealth began to increase and poverty began to fall.” “Capitalism has lifted the world out of poverty because it gives people a chance to get rich by creating value and reaping the rewards.” We currently find the capitalist system facing head winds created by government over regulation and corruption in my opinion. Many in our society feel that because you have prospered you have made someone else poor! What will it take to get our society back into the entrepreneurial spirit which got us to the great status we have enjoyed until recent times?

     Banks have positioned themselves in a more favorable status as a result of TARP and  other Federal Reserve activities. There are still concerns over the mortgage mess and housing prices along with potential loan losses. The low-interest rate environment has banks struggling to generate revenue. It may be that banks will engage in higher risk activities to generate revenues. For those of us in small business ventures, there are many head winds to growth and development. The following contrarian approaches to business development may be necessary to consider in future business engagements:

1. Prospecting for business is absolutely necessary.

2. Generating a positive income stream is imperative.

3. Tune out current events. The economic noise around us is temporary in my judgement. Think long-term.

4. Be aware of the future effects of inflation on pricing and purchasing power.

5. Valuation exercises will be a  constant challenge, but must be performed as current conditions change.

6. Risk aversion can be over done.

7. Move toward you projection for the future. Don’t plan with the present as a foundation.

8. You will be recognized in the future for your contrarian approach to business at a point in the future.

9. The more  you experience rejection in your approach, the more you can be assured that you may be correct.

     Above and beyond the necessity for a business plan as opposed to just letting businesses float to success, a personal plan for financial success is imperative. One area which I observe as severely lacking in the area of personal planning is estate planning. My concerns regarding deficient planning are as follows:

1. No estate planning in place is very bad practice.

2. No awareness of future legislation’s potential impact can be troublesome.

3. The appropriate title of property ownership needs attention.

4. Awareness of gift tax rules is important.

5. Development of appropriate estate planning documents is essential.

6. The need for correct beneficiary designations is imperative.

7. Periodic review of estate plans is essential.

     It appears that a more unified banking system is being considered in the Euro Zone. Considerations for plans to address bank failures, new banking regulations, commonality of  new fiscal rules and a tighter centralized European Union are likely in the works. Optimism is being reflected in equity market indexes   over this last week.

For The Record:

DJIA                         13,081.98

NASDAQ                   2,962.91

S&P 500                    1,386.01

Suggested Reading:   “Currency Trading for Dummies” by Brian Dolan

By Edward Leone JJr. DMD MBA CFP RFC

Contact Information:   leonee@vzw.blackberry.net

Well, the Supreme Court has delivered it’s decision on health care reform. I find it confusing, containing contradictions and political. I am not a lawyer, but it appears that the Court has just thrown this issue back into the lap of the Congress! We will have to continue our wait and see approach to a conclusion. It must be understood by all that medical insurance as we know it today is really prepaid cost sharing and not insurance in the purest sense.

One aspect of the health care issue which dates back to the Bush years is the conversion to the electronic health record. The mandate for conversion is targeted for 2014. According to Tania Karas, a writer for Smart Money Magazine, there have been many security problems with the electronic health records in existence now. In 2009, there were 420 security breaches involving 19 million patients. These kind of statistics will likely delay implementation in order to have better security against unauthorized release of information and fraud.

Aside from accelerating health care costs and college tuitions, the price of automobiles is also up. The average cost of a new car sold in the US is $30,748 as compared to $28,771 just a year ago according to the Journal of Financial Planning. We are also seeing elevation in grocery prices while gasoline prices have moderated a little.

It is reported that Social Security disability rolls have increase by 23% since 2007. It is clear to me that the state of the economy has much to do with this trend. Those who qualify and cannot find work, will certainly apply for the benefit which averages $1,111 per month. These individuals can also go on the Medicare program after drawing benefits for 2 years. Last year, the cost for the SS disability program was $132 billion to tax payers as reported by Bloomberg.

Many people are looking for investments which provide an income stream which is better than can be achieved in the investment grade bond market or with bank CDs. Such investment vehicles as REITs and ETFs are areas with this type of potential, but are not well understood by many. It is best to seek the advise of a fee only registed investment adviser over these matters since they are held to a fiduciary standard which causes them to act in the best interest of a client. Broker dealers are not held to this standard.

As we get closer to election time the rhetoric on the economy will turn up. It will be interesting to see if the Federal Reserve will take further stimulus action or hold the money supply and interest rates steady. The soap opera in Europe continues with daily fluctuations in the potential for resolution. These unknowns will further delay economic growth and job creation in my opinion.

For The Record:

DJIA                       12,880.09

NASDAQ                 2,935.05

S&P 500                  1,362.16

Suggested Reading:   “Point and Figure Charting” by Thomas Dorsey