Weekly Economic Update September 5, 2011

Phillip Statler  Presents:
WEEKLY ECONOMIC UPDATE
WEEKLY QUOTE “Friendship either finds or makes equals.” – Publilius Syrus     WEEKLY TIP If you are divorcing and will have joint custody of your children, clarify who will claim them as dependents on a federal return. If you both claim the same dependents, it might be a red flag for the IRS.   WEEKLY RIDDLE It weighs nothing, but when you put it into any container it makes the container lighter. What is it?   Last week’s riddle: In a drawer are 6 pairs of red socks, 4 pairs of white socks and 5 pairs of blue socks. In total darkness, how many socks would you have to grab to be certain you had a matching pair?   Last week’s answer: You would have to grab 4 socks – 4 is the maximum number you’d need to pull to insure you had at least 2 socks that matched. (Don’t believe it? Give it a try!)	September 5, 2011   NO JOB GAINS IN AUGUST In August, nonfarm payroll employment totaled 131.1 million – as it did in July. The Labor Department measured no job growth in the economy for the first time since September 2010. Additionally, employers reduced the average work week slightly to 34.2 hours. The unemployment rate remained at 9.1% last month.1 CONSUMER SPENDING IMPROVES BY 0.8% This hugely encouraging July figure from the Commerce Department trounced forecasts and represented the best month for the statistic since February. Personal incomes improved by 0.3% in July; the personal savings rate hit a four-month low.2 PENDING HOME SALES DOWN, HOME PRICeS UP The National Association of Realtors announced pending home sales had declined by 1.3% in July following three months of gains. The number of sales contracts was still 14.4% better than a year before. July’s Case-Shiller Home Price Index was notable for indicating a 3.6% 2Q gain in home prices, though the index was still down 5.9% year-over-year.2,3,4 MANUFACTURERS SIGNAL MINOR EXPANSION The Institute for Supply Management’s August purchasing manufacturers index ticked down to 50.6 from July’s 50.9 mark. So the sector is growing, but not by much (50 is the line between expansion and contraction). The new orders sub-index improved 0.4% to 49.6.5 STOCKS GIVE BACK SOME GAINS While the NASDAQ managed a 0.02% advance last week to settle at 2,480.33 on Friday, the S&P 500 and Dow had minor weekly losses. The DJIA retreated 0.39% to a Friday close of 11,240.26, and the S&P pulled back 0.24% to settle Friday at 1,173.97. Gold futures gained 4.43% on the week – prices jumped $47.70 on Friday alone.6,7 THIS WEEK: U.S. markets are closed for Labor Day. On Tuesday, ISM releases its August service sector index and Pep Boys issues earnings. Wednesday, the Fed puts out a new Beige Book and we have an earnings report from Hovnanian. Thursday promises to be interesting: the Bank of England and European Central Bank will each conclude policy meetings, Fed chief Ben Bernanke speaks in Minneapolis, President Obama addresses the nation on jobs and the economy, and of course new initial claims figures come out. Friday, we have earnings from Kroger. % CHANGE Y-T-D 1-YR CHG 5-YR AVG 10-YR AVG DJIA -2.91 +8.92 -0.39 +1.24 NASDAQ -6.50 +12.74 +2.62 +4.01 S&P 500 -6.65 +7.69 -2.09 +0.36 REAL YIELD 9/2 RATE 1 YR AGO 5 YRS AGO 10 YRS AGO 10 YR TIPS 0.00% 1.05% 2.25% 3.50% Sources: cnbc.com, usatoday.com, bigcharts.com, treasury.gov, treasurydirect.gov – 9/2/116,8,9,10 Indices are unmanaged, do not incur fees or expenses, and cannot be invested into directly. These returns do not include dividends.
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This material was prepared by MarketingLibrary.Net Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. The Dow Jones Industrial Average is a price-weighted index of 30 actively traded blue-chip stocks. The NASDAQ Composite Index is an unmanaged, market-weighted index of all over-the-counter common stocks traded on the National Association of Securities Dealers Automated Quotation System. The Standard & Poor’s 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general. It is not possible to invest directly in an index. NYSE Group, Inc. (NYSE:NYX) operates two securities exchanges: the New York Stock Exchange (the “NYSE”) and NYSE Arca (formerly known as the Archipelago Exchange, or ArcaEx®, and the Pacific Exchange). NYSE Group is a leading provider of securities listing, trading and market data products and services. The New York Mercantile Exchange, Inc. (NYMEX) is the world’s largest physical commodity futures exchange and the preeminent trading forum for energy and precious metals, with trading conducted through two divisions – the NYMEX Division, home to the energy, platinum, and palladium markets, and the COMEX Division, on which all other metals trade. Additional risks are associated with international investing, such as currency fluctuations, political and economic instability and differences in accounting standards. All information is believed to be from reliable sources; however we make no representation as to its completeness or accuracy. All economic and performance data is historical and not indicative of future results. Market indices discussed are unmanaged. Investors cannot invest in unmanaged indices. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional.Citations. 1 – latimes.com/business/la-fiw-jobs-20110903,0,2844276.story [9/2/11] 2 – nj.com/business/index.ssf/2011/08/consumer_spending_climbs_more.html [8/29/11] 3 – realtor.org/press_room/news_releases/2011/08/phs_july [8/29/11] 4 – blogs.wsj.com/economics/2011/08/30/vital-signs-home-prices-remain-low/ [8/30/11] 5 – ism.ws/ISMReport/MfgROB.cfm [9/1/11] 6 – blogs.wsj.com/marketbeat/2011/09/02/data-points-u-s-markets-47/ [9/2/11] 7 – blogs.wsj.com/marketbeat/2011/09/02/data-points-energy-metals-518/ [9/2/11] 8 – usatoday.com/money/index [9/2/11] 9 – bigcharts.marketwatch.com/historical/default.asp?symb=DJIA&closeDate=9%2F2%2F10&x=0&y=0 [9/2/11] 9 – bigcharts.marketwatch.com/historical/default.asp?symb=COMP&closeDate=9%2F2%2F10&x=10&y=18 [9/2/11] 9 – bigcharts.marketwatch.com/historical/default.asp?symb=SPX&closeDate=9%2F2%2F10&x=0&y=0 [9/2/11] 9 – bigcharts.marketwatch.com/historical/default.asp?symb=DJIA&closeDate=9%2F1%2F06&x=0&y=0 [9/2/11] 9 – bigcharts.marketwatch.com/historical/default.asp?symb=COMP&closeDate=9%2F1%2F06&x=0&y=0 [9/2/11] 9 – bigcharts.marketwatch.com/historical/default.asp?symb=SPX&closeDate=9%2F1%2F06&x=0&y=0 [9/2/11] 9 – bigcharts.marketwatch.com/historical/default.asp?symb=DJIA&closeDate=9%2F4%2F01&x=0&y=0 [9/2/11] 9 – bigcharts.marketwatch.com/historical/default.asp?symb=COMP&closeDate=9%2F4%2F01&x=0&y=0 [9/2/11] 9 – bigcharts.marketwatch.com/historical/default.asp?symb=SPX&closeDate=9%2F4%2F01&x=0&y=0 [9/2/11] 10 – treasury.gov/resource-center/data-chart-center/interest-rates/Pages/TextView.aspx?data=realyield [9/2/11] 10 – treasury.gov/resource-center/data-chart-center/interest-rates/Pages/TextView.aspx?data=realyieldAll [9/2/11] 11 – treasurydirect.gov/instit/annceresult/press/preanre/2001/ofm71101.pdf [7/11/01]

White House Plans to Wind Down Fannie and Freddie

Congress will consider three suggestions.

A fundamental reform for the housing market. For two-and-a-half years, economists and housing industry analysts have wondered what would happen with Fannie Mae and Freddie Mac. On February 11, they got an answer: the Obama administration announced plans to shut down both of the troubled mortgage giants by 2018 or sooner.¹

As he met with the press, Treasury Secretary Timothy Geithner cited the “very broad consensus” that the government should play “a much smaller role” in the housing market. Capitol Hill Republicans would agree, pointing to the $154 billion price tag for the 2008 bailout of both firms. (That is the Treasury’s estimate.)^2,3

The choices on the table. The Obama administration’s white paper offers three proposals to Congress, with the hope of legislation emerging by 2014.^1,2,4,5

• Option 1. The government walks away from the mortgage market except for the FHA, VHA and a few other programs designed to help low-income and moderate-income homebuyers.
• Option 2. The government offers a kind of downside protection. In addition to backing home loans via the entities mentioned in Option 1, it would also provide “reinsurance” to guarantee private mortgages in the event of a real estate downturn and/or recession. But the guarantee would only apply in a crisis.
• Option 3. A variation of Option 2 that would provide a “reinsurance” backstop for a range of mortgage investments already guaranteed by private insurers. The “reinsurance” would take effect if a private insurer couldn’t pay (i.e., if its shareholders were wiped out).

The timeline. The Obama administration may be long gone by the time all this plays out, but here is the three-stage conception of how it will wind down both agencies.^2,6

• Stage 1. Between now and 2014, the government gradually reduces its subsidy for the housing market. The conforming loan limit for Fannie and Freddie – now $729,000 in some metro areas – is scheduled to shrink to $625,000 in October. In addition, Fannie and Freddie would start to require 10% down for all loans and fees would rise for the government guarantee.
• Stage 2. Starting around 2013-2014, the federal government will “accelerate the pace of transition” (in Geithner’s words) to a mortgage market based in private capital with government intervention occurring only as needed.
• Stage 3. This stage depends on Congress. The idea is that by the middle of this decade, legislation emerges spelling out Option 1, Option 2 or Option 3 above in detail and a new law is passed.

The big picture. By the end of this decade, it could be considerably harder to buy a home. If the government gets out of the mortgage market (or at least drastically reduces its role), a major influx of private capital needs to flow into the housing system to replace the federal subsidy, with the following possible effects:

• A 30-year fixed rate mortgage could become significantly more expensive. How much more expensive? In early February, Credit Suisse projected that interest rates on a basic 30-year FRM could rise by up to 2% if Fannie and Freddie disappeared.⁷
• If the Option 1 scenario occurs, you could see considerably fewer FRMs and more ARMs. In fact, you would likely see fewer fixed-rate mortgages if Options 2 or 3 were chosen by Congress.
• Big banks could grab a bigger chunk of the mortgage market.
• Higher mortgage rates could negatively impact home sales – and in turn, home prices.

We’ll have to wait and see how this all plays out, all while hoping it won’t lead to a decline in home ownership.

 

This material was prepared by Peter Montoya Inc., and does not necessarily represent Statler Financial Services, Inc. This information should not be construed as investment, tax or legal advice. The publisher is not engaged in rendering legal, accounting or other professional services. All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy. If assistance or further information is needed, the reader is advised to engage the services of a competent professional.

Statler Financial Services, Inc. is registered as an investment adviser with the state of Florida. The presence of this Web site on the Internet shall in no direct or indirect way to be construed or interpreted to suggest Statler Financial Services, Inc. is soliciting to sell advisory services or offering to sell advisory services to residents of any other state other than the state of Florida.

Citations
1 – money.cnn.com/2011/02/11/news/companies/fannie_mae_freddie_mac_white_house_proposal/ [2/11/11]
2 – usatoday.com/money/economy/housing/2010-10-21-fannie-mae-freddie-mac-bailout_N.htm [10/22/10]
3 – cnbc.com/id/41529671 [2/11/11]
4 –blogs.abcnews.com/george/2011/02/the-end-of-fannie-mae-and-freddie-mac.html [2/11/11]
5 –nytimes.com/2011/02/12/business/12housing.html [2/11/11]
6 –finance.fortune.cnn.com/2011/02/11/fannie-mae-the-long-goodbye/ [2/11/11]
7 – cnbc.com/id/41533702 [2/11/11]
8 – http://montoyaregistry.com/Financial-Market.aspx?financial-market=the-financial-security-rulebook-5-crucial-steps&category=3 [2/13/11]

Obama’s Midterm Tax Proposals

The President recommends what amounts to a second stimulus package.

Many Americans are frustrated with the pace of the economic recovery; many Democrats are worried that their party will lose its majority in the House and Senate. As elections loom, President Obama has offered a new platform of tax initiatives for Congress to consider and potentially approve.

Extending the Bush-era tax cuts (for the middle class). President Obama wants to extend the EGTRRA and JGTRRA cuts of the last decade – but not to what Treasury Secretary Timothy Geithner referred to as the “most fortunate 2% of Americans.” Taxpayers who earn more than $250,000 would see those tax breaks disappear in 2011, while others would still benefit from them.¹

Why not extend the Bush-era tax breaks for the demographic that is probably the most economically influential? “We don’t think that’s responsible economic policy,” Geithner commented during an interview on the FOX Business Network. He felt that preserving the cuts for the highest-earning Americans would be analogous to “borrowing hundreds of billions of dollars from our children.”¹

Some contend that EGTRRA and JGTRRA have had broader impact. The Tax Foundation (a non-partisan Washington D.C. think tank which often criticizes tax policy) claims that the Bush-era tax cuts have saved the median U.S. family of four about $2,200 per year.²

However, an August Gallup poll indicated that only 37% of Americans wanted to keep the 2001 and 2003 tax cuts in place for all taxpayers. A plurality (44%) wanted to end them for those earning above $250,000, and 15% wanted them gone altogether. In partisan terms, 60% of the Democrats polled favored extending the cuts for all but the wealthiest Americans; 54% of Republicans polled wanted them retained for everyone.³

Offering tax breaks for capital spending and R&D. President Obama wants to allow businesses to write off 100% of their investment costs through 2011. He also wants to bring back the research tax credit for businesses – it would be expanded and made permanent.

What would a 100% expensing credit do for the business sector? On the right, Harvard economist Greg Mankiw calls it a “good idea” yet feels “the impact will be relatively modest.” In his view, this tax break amounts to “a zero-interest loan if [companies] invest in equipment. But with interest rates near zero anyway, the value of the loan is not that great.” On the left, UC Berkeley economist (and former Labor Secretary) Robert Reich thinks that “the economy needs two whopping corporate tax cuts right now as much as someone with a serious heart condition needs Botox. The reason businesses aren’t investing in new plant and equipment has nothing to do with the cost of capital. It’s because they don’t need the additional capacity.”⁴

Historically, the R&D tax credit has favored larger companies with long track records in research rather than smaller firms. Since 1981, Congress has allowed the R&D credit to sunset 13 times – it expired again at the end of last year. In the Obama proposal, the most popular R&D tax credit offered to businesses would rise to 17% from 14%. Many Silicon Valley firms and biomedical firms would love any break they can get – R&D credits in India, China and Brazil are all greater than in the U.S., and France’s R&D tax credit is six times more generous than ours.⁵

Infrastructure projects to provide added stimulus. The President also wants to devote another $50 billion to infrastructure spending on roads, railroads and airports. The money would be used to repair 150,000 miles of highways and 4,000 miles of railways, among other uses.⁶ Some transportation industry analysts see it as merely a drop in the bucket – but also possibly a step toward the creation of a national infrastructural fund.

What might the effect be? Moody’s Analytics chief economist Mark Zandi thinks the proposed tax breaks would be “helpful but they’re not going to jump start the economy, at least not in the next six to twelve months.” Interviewed by CNN, Zandi noted that “Investment spending has picked up very nicely, that’s not the problem. The problem is a lack of hiring.”⁷

David Rosenberg, chief economist at investment bank Gluskin Sheff, is one voice more skeptical about the business tax breaks. He notes that “We already have business spending running at its fastest rate in three decades … how ridiculous is it for the government to be targeting tax relief to the one part of the economy that needs it the least?”⁷

Standard & Poor’s chief economist David Wyss feels that any new government stimulus is better than none, saying that “going cold turkey” in 2010 would severely damage growth.⁷ The debate on Capitol Hill over these tax initiatives will likely amplify as we head into fall.



This material was prepared by Peter Montoya Inc., and does not necessarily represent the views of Statler Financial Services, Inc. This information should not be construed as investment advice. Statler Financial Services, Inc. does not give tax or legal advice. All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy. The publisher is not engaged in rendering legal, accounting or other professional services. If other expert assistance is needed, the reader is advised to engage the services of a competent professional. Please consult your Financial Advisor for further information.. http://www.petermontoya.com, http://www.montoyaregistry.com, http://www.marketinglibrary.net

Statler Financial Services, Inc. is registered as an investment adviser with the state of Florida. The presence of this Web site on the Internet shall in no direct or indirect way to be construed or interpreted to suggest Statler Financial Services, Inc. is soliciting to sell advisory services or offering to sell advisory services to residents of any other state other than the state of Florida.

Citations

1 – foxbusiness.com/markets/2010/09/09/treasury-secretary-geithner-urges-approval-economic-tax-package/ [9/9/10]

2 – boston.com/business/personalfinance/managingyourmoney/archives/2010/09/expiring_bush_t.html [9/10/10]

3 – theatlantic.com/business/archive/2010/09/59-of-americans-want-to-mess-with-bush-tax-cuts/62779/ [9/10/10]

4 – economix.blogs.nytimes.com/2010/09/07/reactions-to-obamas-business-tax-write-off-proposals/ [9/10/10]

5 – mercurynews.com/politics-government/ci_15990903 [9/5/10]

6 – newsweek.com/blogs/the-gaggle/2010/09/08/does-obama-s-infrastructure-proposal-have-the-right-priorities.html [9/8/10]

7 – money.cnn.com/2010/09/07/news/economy/obama_proposal_react/ [9/7/10]

Financial Reform: The Table is Set

Congress agrees on a bill. How would it change the financial landscape?

Next month, President Obama will likely sign a bill into law ordering changes in the ways banks, credit card issuers and mortgage lenders interface with consumers. Here are the key features of the financial reform agreement that the Senate and House of Representatives came to on June 24, with a vote pending.

#1: The Bureau of Consumer Financial Protection. This new consumer agency answering to the Federal Reserve would supervise mortgages, credit cards, student loans and the banks, credit unions and private lenders that issue them. Institutions holding less than $10 million in assets wouldn’t be regulated by the BCFP – but they would have to follow its rules. The BCFP would aim to make these products easier to comprehend for consumers and crack down on any possible deceptive practices.^1,2

#2: See your credit score for free. If you are turned down for a mortgage or a loan, the new reforms would give you the power to see the credit score supplied to your lender. Right now, you can request three free credit reports each year but you can’t see your actual score.^1,2

#3: Tougher rules for mortgage lenders. These rules should have come into play years ago, of course, but better late than never. Mortgage lenders would need to verify the assets and income of borrowers, thwarting any surreptitious comeback for “liar loans”. Loan officers and mortgage brokers would not be able to receive bonuses for guiding you into this or that loan. Borrowers with ARMs and other types of complex home loans could not be hit with prepayment penalties should they want or need to pay off a mortgage before the end of its term.^1,2

#4: Retail minimums for the use of credit cards. Score one for retailers, who don’t want to see people make $2 credit card purchases when the swipe fee alone cancels out the revenue. Under the new legislation, stores could set minimums for credit card use. The minimum transaction level could be as high as $10 if a store chooses; the Federal Reserve could raise that $10 limit on the minimum with time.^1,2

Alternately, stores could offer consumers discounts if they pay for items with cash or debit cards. (They wouldn’t be able to vary the discounts for different debit cards.)²

Additionally, the proposed reforms could allow colleges and universities and the U.S. government to set maximums for credit card transactions.²

#5: Brokers could be held to a fiduciary standard. Under the new reforms, the Securities and Exchange Commission now has the chance to hold brokers to the same fiduciary standard common to financial advisers – that is, investment brokers would have to put a client’s best interest first and not simply recommend a “suitable” investment to a client. That new standard may or may not come into play, however; the SEC is undertaking a six-month study to see if such a rule would amount to regulatory overlap or not.³

#6: The “Volcker Rule” would be put into play. This is the rule that would prevent banks from trading with their own money. It would kick in with small concessions. While the reforms would halt most proprietary trading by banks, some limited investment would be permitted – they could provide up to 3% of a fund’s equity, and invest up to 3% of Tier 1 capital in hedge or private equity funds.⁴

The big banks got another key concession from Congress: they don’t have to get rid of their swaps-trading desks (some legislators had contended that this decision would drive such trading to foreign markets). They can still be involved in foreign-exchange and interest-rate swaps dealing.⁵

#7: An Office of Credit Ratings would appear. It would oversee the actions of Moody’s, Standard and Poor’s and other big names, and one of its objectives would be to flag potential conflicts of interest that could influence ratings judgements.¹

#8: The SEC would no longer regulate equity-indexed annuities. The promotion and sale of these annuity contracts has generated much flak in recent years. Interestingly, they would be overseen by state insurance regulators if the reform bill passes, and treated strictly as insurance products.²

Now, what about Fannie Mae and Freddie Mac? Good question. Nothing made it into the final reform bill to address that dilemma. Some analysts expect another bill will emerge in 2011 to propose their restructuring or elimination.⁵

This material was prepared by Peter Montoya Inc., and does not necessarily represent the views of the presenting Representative or the Representative’s Broker/Dealer. This information should not be construed as investment advice. Neither the named Representative nor Broker/Dealer gives tax or legal advice. All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy. The publisher is not engaged in rendering legal, accounting or other professional services. If other expert assistance is needed, the reader is advised to engage the services of a competent professional. Please consult your Financial Advisor for further information.. http://www.petermontoya.com, http://www.montoyaregistry.com, http://www.marketinglibrary.net

Statler Financial Services, Inc. is registered as an investment adviser with the state of Florida. The presence of this Web site on the Internet shall in no direct or indirect way to be construed or interpreted to suggest Statler Financial Services, Inc. is soliciting to sell advisory services or offering to sell advisory services to residents of any other state other than the state of Florida.

Citations

1 –abcnews.go.com/Business/financial-reform-bill-means-big-consumers/story?id=11012343 [6/25/10]

2 – cnbc.com/id/37921188 [6/25/10]

3 – nytimes.com/2010/06/26/your-money/26money.html?pagewanted=2 [6/26/10]

4 – businessweek.com/news/2010-06-25/banks-dodged-a-bullet-as-congress-dilutes-rules.html [6/25/10]

5 – cnbc.com/id/37927853 [6/25/10]

6 – reuters.com/article/idUSTRE65O1BK20100625 [6/25/10]

The Affordable Health Care for America Act

What does it mean for now, for later … and for you?

March 23, 2010, President Obama signed historic health care legislation into law following a year-long struggle with congress to follow through on what was a pivotal piece of his administration’s domestic policy agenda.

“I am signing this bill for all the leaders who took up this cause through the generations,” said the President, “from Teddy Roosevelt to Franklin Roosevelt, from Harry Truman to Lyndon Johnson …”

But what does it mean? What Obama signed may not include all the provisions and changes you think it does. Many alterations have been made along the way and, at this point, many Americans are unsure of exactly what the AHCA Act entails.

What changes are slated for 2010? The “immediate” changes include extending the length of time a child can remain on his/her parents’ plan – through age 26 (ending on the child’s 27^th birthday).¹ Also, children can no longer be denied coverage due to pre-existing conditions, and policies can no longer be rescinded by insurers when a person becomes ill (unless fraud or misrepresentation is proven).³

What changes are slated for the future? Some of the most sweeping reforms won’t take effect for a few years. The “biggie” that has everyone buzzing involves required health care insurance. Beginning in 2014, Americans (except those with religious objections, inmates and Native Americans) will be required to have health insurance coverage … or face an annual penalty.³

And what about taxes? The other “biggie” getting buzz involves a new tax which starts in 2013 – a 3.8% tax on investment income for individuals earning more than $200,000 and households earning more than $250,000.⁶

Where can you get more information? The white house has provided a website. You can visit whitehouse.gov/healthreform to find out how the Act will impact you.

Is it settled? Nope. Amendments to the bill have already been proposed, and Attorney Generals from 14 states have filed a lawsuit claiming the new bill is unconstitutional.⁴ Justice Department spokesman Charles Miller, however, is “confident that this statute is constitutional”. ⁵






These are the views of Peter Montoya Inc., not Statler Financial Services, Inc., and should not be construed as investment advice. Statler Financial Services, Inc. does not gives tax or legal advice. All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy. The publisher is not engaged in rendering legal, accounting or other professional services. If other expert assistance is needed, the reader is advised to engage the services of a competent professional. Please consult your Financial Advisor for further information. http://www.petermontoya.com, http://www.montoyaregistry.com, http://www.marketinglibrary.net

Statler Financial Services, Inc. is registered as an investment adviser with the state of Florida. The presence of this Web site on the Internet shall in no direct or indirect way to be construed or interpreted to suggest Statler Financial Services, Inc. is soliciting to sell advisory services or offering to sell advisory services to residents of any other state other than the state of Florida.

Citations

1 – cnn.com/2010/POLITICS/03/23/health.care.timeline/index.html?hpt=T1 [3/23/10]

2 – prescriptions.blogs.nytimes.com/2010/03/24/the-public-option-resurfaces [3/24/10]

3 – csmonitor.com/USA/Politics/2010/0319/Health-care-reform-bill-101-Who-must-buy-insurance [3/19/10]

4 – rttnews.com/Content/PoliticalNews.aspx?Id=1250155&SM=1 [3/24/10]

5 – nevadaappeal.com/article/20100324/NEWS/100329823/1070&ParentProfile=1058 [3/24/10]

6 – usatoday.com/money/perfi/taxes/2010-03-24-investtax24_ST_N.htm

Weekly Economic Update for the Week of March 29, 2010

Reforms become law. President Obama signed his long-envisioned health care reforms into law on March 23, and he will sign the amendments to the bill into law on March 30. Most of the major changes will take effect in 2014, when health insurance will become compulsory for nearly all Americans. New taxes will help fund the reforms. The Congressional Budget Office estimates that the modifications will cut the federal deficit by $118 billion by 2020.^1,2,3

Home sales still underwhelming. Existing home sales dipped 0.6% for February while new home sales slipped 2.2% to another all-time low (although data only goes back to 1964). Any positives in the new Commerce Department report? Yes. The median sale price of new homes was about 5% above where it was a year ago.⁴

A gain in durable goods orders. The 0.5% rise in February was accompanied by news that durable goods inventories increased by 0.3%, the best such gain since December 2008.⁵

USDI surges north. When the U.S. Dollar Index is up 1.10% for the week (and 4.82% for the month), what happens with gold and oil? Well, gold and oil prices respectively fell 0.30% and 1.20% last week, with crude futures at exactly $80.00 per barrel at Friday’s close on the NYMEX.⁶

S&P 500 climbs 5.62% in 4 weeks. Stocks had another fine week from March 22-26, with the NASDAQ advancing 0.87%, the Dow 1.01% and the S&P 500 0.58% as part of a great 4-week run.⁷

% Change	Y-T-D	1-Yr Chg	5-Yr Avg	10-Yr Avg
DJIA	+4.05	+36.92	+0.78	-0.16
NASDAQ	+5.55	+50.92	+4.06	-5.17
S&P 500	+4.62	+40.07	-0.08	-2.34
Real Yield	3/26	1 Yr Ago	5 Yrs Ago	10 Yrs Ago
10YrTIPS	1.62%	1.30%	1.90%	4.34%

(Source: CNBC.com, BigCharts.com, ustreas.gov, bls.gov, 3/26/10)^8,9,10

Indices are unmanaged, do not incur fees or expenses, and cannot be

invested into directly. These returns do not include dividends.

___________________________________________________________________

These views are those of Peter Montoya Inc., and not Statler Financial Services, Inc., and should not be construed as investment advice. The Dow Jones Industrial Average is a price-weighted index of 30 actively traded blue-chip stocks. The NASDAQ Composite Index is an unmanaged, market-weighted index of all over-the-counter common stocks traded on the National Association of Securities Dealers Automated Quotation System. The Standard & Poor’s 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general. It is not possible to invest directly in an index. NYSE Group, Inc. (NYSE:NYX) operates two securities exchanges: the New York Stock Exchange (the “NYSE”) and NYSE Arca (formerly known as the Archipelago Exchange, or ArcaEx^®, and the Pacific Exchange). NYSE Group is a leading provider of securities listing, trading and market data products and services. The New York Mercantile Exchange, Inc. (NYMEX) is the world’s largest physical commodity futures exchange and the preeminent trading forum for energy and precious metals, with trading conducted through two divisions – the NYMEX Division, home to the energy, platinum, and palladium markets, and the COMEX Division, on which all other metals trade. All information is believed to be from reliable sources; however we make no representation as to its completeness or accuracy. All economic and performance data is historical and not indicative of future results. Market indices discussed are unmanaged. Investors cannot invest in unmanaged indices. The publisher is not engaged in rendering legal, accounting or other professional services. If other expert assistance is needed, the reader is advised to engage the services of a competent professional. Please consult your Financial Advisor for further information. Additional risks are associated with international investing, such as currency fluctuations, political and economic instability and differences in accounting standards. http://www.montoyaregistry.com http://www.petermontoya.com

Statler Financial Services, Inc. is registered as an investment adviser with the state of Florida. The presence of this Web site on the Internet shall in no direct or indirect way to be construed or interpreted to suggest Statler Financial Services, Inc. is soliciting to sell advisory services or offering to sell advisory services to residents of any other state other than the state of Florida.

Citations.

1 nytimes.com/2010/03/23/health/policy/23health.html?ref=us [3/23/10]

2 voices.washingtonpost.com/44/2010/03/obama-to-sign-health-care-fixe.html?wprss=44 [3/26/10]

3 cnn.com/2010/POLITICS/03/21/health.care.main/?hpt=Sbin [3/21/10]

4 foxbusiness.com/story/markets/industries/industrials/february-new-home-sales–annual-rate/ [3/24/10]

5 reuters.com/article/idUSN239670720100324?type=marketsNews [3/24/10]

6 cnbc.com/id/36057788/page/2/ [3/26/10]

7 blogs.wsj.com/marketbeat/2010/03/26/data-points-us-markets-221/ [3/26/10]

8 bigcharts.marketwatch.com/historical/default.asp?detect=1&symbol=DJIA&close_date=3%2F26%2F09&x=0&y=0 [3/26/10]

8 bigcharts.marketwatch.com/historical/default.asp?detect=1&symbol=COMP&close_date=3%2F26%2F09&x=0&y=0 [3/26/10]

8 bigcharts.marketwatch.com/historical/default.asp?detect=1&symbol=SPX&close_date=3%2F26%2F09&x=0&y=0 [3/26/10]

8 bigcharts.marketwatch.com/historical/default.asp?detect=1&symbol=DJIA&close_date=3%2F25%2F05&x=0&y=0 [3/26/10]

8 bigcharts.marketwatch.com/historical/default.asp?detect=1&symbol=COMP&close_date=3%2F25%2F05&x=0&y=0 [3/26/10]

8 bigcharts.marketwatch.com/historical/default.asp?detect=1&symbol=SPX&close_date=3%2F25%2F05&x=0&y=0 [3/26/10]

8 bigcharts.marketwatch.com/historical/default.asp?detect=1&symbol=DJIA&close_date=3%2F27%2F00&x=0&y=0 [3/26/10]

8 bigcharts.marketwatch.com/historical/default.asp?detect=1&symbol=COMP&close_date=3%2F27%2F00&x=0&y=0 [3/26/10]

8 bigcharts.marketwatch.com/historical/default.asp?detect=1&symbol=SPX&close_date=3%2F27%2F00&x=0&y=0 [3/26/10]

9 ustreas.gov/offices/domestic-finance/debt-management/interest-rate/real_yield.shtml [3/26/10]

9 ustreas.gov/offices/domestic-finance/debt-management/interest-rate/real_yield_historical.shtml [3/26/10]

10 treasurydirect.gov/instit/annceresult/press/preanre/2000/ofm11200.pdf [1/12/00]

Weekly Economic Update for the Week of December 28, 2009

Another strong consumer spending gain. The Commerce Department announced consumer spending rose 0.5% in November, following a 0.6% increase in October. Personal incomes rose in November by the most in six months.¹

Hashing out the home sales data. New home sales fell 11.3% last month, undoubtedly affected by the perception that the first-time buyer credit would expire. Existing home sales soared by 7.4% as buyers scrambled to meet the possible deadline. The median price for an existing home was $172,600 last month compared to $217,400 for a new one – that certainly also helped residential resales.^2,3

Health care reform clears Senate. On Christmas Eve, Senate Democrats got the 60 votes needed to pass that chamber’s version of a historic health care reform bill. The House and Senate will work to reconcile their respective bills next month.⁴

Mortgage rates edge above 5%. Freddie Mac has average rates on 30-year FRMs at 5.05% in its latest survey. Over the weekend, its deputy chief economist Amy Crews Cutts told the Washington Post that “anything we get at or below 5% is a gift at this point.” She thinks rates will hit 6% by the end of 2010.⁵

Catching up with gold & oil. Last Thursday, gold posted a gain of $10.80 to reach $1,104.80 per ounce. With the dollar strengthening, gold prices fell about $123 during December 3-24. Oil prices ended the week at $78.05, rising about 5% in 3.5 market days.⁶

Lower volumes, higher stocks. Santa Claus dropped by Wall Street – the Dow ascended almost 2% to end a relatively quiet week at 10,520.10. The NASDAQ closed at 2,285.69 Thursday; the S&P 500 closed at 1,126.48.⁷

% Change	Y-T-D	1-Yr Chg	5-Yr Avg	10-Yr Avg
DJIA	+19.87	+24.23	-0.57	-0.78
NASDAQ	+44.94	+49.89	+1.16	-4.24
S&P 500	+24.71	+29.76	-1.38	-2.28
Real Yield	12/24	1 Yr Ago	5 Yrs Ago	10 Yrs Ago
10YrTIPS	1.50%	2.07%	1.62%	4.14%

(Source: CNNMoney.com, ustreas.gov, bls.gov, 12/24/09)^8,9,10

Indices are unmanaged, do not incur fees or expenses, and cannot be

invested into directly. These returns do not include dividends.

___________________________________________________________________

These views are those of Peter Montoya Inc., and not Statler Financial Services, and should not be construed as investment advice. The Dow Jones Industrial Average is a price-weighted index of 30 actively traded blue-chip stocks. The NASDAQ Composite Index is an unmanaged, market-weighted index of all over-the-counter common stocks traded on the National Association of Securities Dealers Automated Quotation System. The Standard & Poor’s 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general. It is not possible to invest directly in an index. NYSE Group, Inc. (NYSE:NYX) operates two securities exchanges: the New York Stock Exchange (the “NYSE”) and NYSE Arca (formerly known as the Archipelago Exchange, or ArcaEx^®, and the Pacific Exchange). NYSE Group is a leading provider of securities listing, trading and market data products and services. The New York Mercantile Exchange, Inc. (NYMEX) is the world’s largest physical commodity futures exchange and the preeminent trading forum for energy and precious metals, with trading conducted through two divisions – the NYMEX Division, home to the energy, platinum, and palladium markets, and the COMEX Division, on which all other metals trade. All information is believed to be from reliable sources; however we make no representation as to its completeness or accuracy. All economic and performance data is historical and not indicative of future results. The market indices discussed are unmanaged. Investors cannot invest in unmanaged indices. The publisher is not engaged in rendering legal, accounting or other professional services. If other expert assistance is needed, the reader is advised to engage the services of a competent professional. Please consult your Financial Advisor for further information. Additional risks are associated with international investing, such as currency fluctuations, political and economic instability and differences in accounting standards.

Statler Financial Services, Inc. is registered as an investment adviser with the state of Florida. The presence of this Web site on the Internet shall in no direct or indirect way to be construed or interpreted to suggest Statler Financial Services, Inc. is soliciting to sell advisory services or offering to sell advisory services to residents of any other state other than the state of Florida.

Citations.
1 abcnews.go.com/Business/wireStory?id=9408799 [12/23/09]
2 marketwatch.com/story/new-home-sales-crater-as-subsidy-ends-2009-12-23 [12/23/09]
3 blogs.wsj.com/developments/2009/12/23/why-us-home-sales-are-both-up-and-down/ [12/23/09]
4 cbsnews.com/stories/2009/12/24/politics/main6017779.shtml [12/24/09]
5 washingtonpost.com/wp-dyn/content/article/2009/12/26/AR2009122600031.html [12/26/09]
6 abcnews.go.com/Business/wireStory?id=9419535 [12/24/09]
7 cnbc.com/id/34584961 [12/24/09]
8 money.cnn.com/data/markets/dow/ [12/24/09]
8 money.cnn.com/data/markets/nasdaq/ [12/24/09]
8 money.cnn.com/data/markets/sandp/? [12/24/09]
8 money.cnn.com/quote/historical/historical.html?pg=hi&close_date=12%2F24%2F08&mode=add&symb=DJIA [12/24/09]
8 money.cnn.com/quote/historical/historical.html?pg=hi&close_date=12%2F24%2F04&mode=add&symb=DJIA [12/24/09]
8 money.cnn.com/quote/historical/historical.html?pg=hi&close_date=12%2F24%2F99&mode=add&symb=DJIA [12/24/09]
8 money.cnn.com/quote/historical/historical.html?pg=hi&close_date=12%2F18%2F08&mode=add&symb=COMP [12/24/09]
8 money.cnn.com/quote/historical/historical.html?pg=hi&close_date=12%2F24%2F04&mode=add&symb=COMP [12/24/09]
8 money.cnn.com/quote/historical/historical.html?pg=hi&close_date=12%2F24%2F99&mode=add&symb=COMP [12/24/09]
8 money.cnn.com/quote/historical/historical.html?pg=hi&close_date=12%2F24%2F08&mode=add&symb=SPX [12/24/09]
8 money.cnn.com/quote/historical/historical.html?pg=hi&close_date=12%2F24%2F04&mode=add&symb=SPX [12/24/09]
8 money.cnn.com/quote/historical/historical.html?pg=hi&close_date=12%2F24%2F99&mode=add&symb=SPX [12/24/09]
9 ustreas.gov/offices/domestic-finance/debt-management/interest-rate/real_yield.shtml [12/24/09]
9 ustreas.gov/offices/domestic-finance/debt-management/interest-rate/real_yield_historical.shtml [12/24/09]
10 treasurydirect.gov/instit/annceresult/press/preanre/1999/ofn100699.pdf [10/6/99]

Clearing Up the Health Care Debate

Who would fund the reforms? Would there really be a “death list”?

Sorting out the possibilities, facts and misconceptions.

The town hall debates over health care reform have ignited Americans like few recent issues. Discourses have become shouting matches. Away from the noise, here is a roundup of where things currently stand.

Who would pay for all this? Over the next 10 years, the federal government will need (by President Obama’s estimation) $950 billion to fund its health care programs. As planned, roughly a third of the money will be raised through increased revenues (i.e., limiting tax deductions for the wealthiest Americans) and two-thirds of it is supposed to come from reallocations of taxpayer money the federal government is already scheduled to receive.¹ A coalition of pharmaceutical industry CEOs met with the President in July and have since pledged $80 billion in cost savings over the coming decade to help pay for the reform.²

Would Medicare be cut? Republicans and Democrats disagree. “Nobody is talking about trying to change Medicare benefits,” President Obama stated during a July AARP teleconference. “What we want to do is to eliminate some of the waste that is being paid for out of the Medicare trust fund.” The non-partisan Congressional Budget Office figures that the House of Representatives version of the bill would trim Medicare spending by $500 billion across the next decade with no impact on Medicare benefits. AARP claims that “none of the health care reform proposals being considered by Congress would cut Medicare benefits or increase your out-of-pocket costs for Medicare services.” However, in an August 15 Republican Party radio address, Sen. Orrin Hatch contended that “hundreds of billions of dollars” will be cut from Medicare and used to “expand a financially-strapped Medicaid program and create another government-run plan.”^3,4

Would this run up the deficit further? The Congressional Budget Office says yes. It forecasts that President Obama’s reforms would add $239 billion to the federal deficit. Few on Capitol Hill think the reform effort could pay for itself.⁵

Would health care be rationed? That’s what ex-Alaska Governor Sarah Palin contended in a Facebook post. The potential Republican presidential candidate stated that the reforms would lead to a system that would “refuse to allocate medical resources to the elderly, the infirm, and the disabled who have less economic potential.” Democrats and other supporters of the reforms counter her claim by saying that the current health care system already features “rationed” care dictated by health insurance company bureaucrats.⁶

Would there really be “death panels”? Earlier this month, Palin contended that the President’s health care reform proposals included “death panels” that would decide if seriously ill patients would live or die. In the eyes of many legislators, Palin was wildly misinterpreting a provision in the health care reform bill that would allow doctors to offer voluntary consultations about living wills, hospice care, health care directives and pain medication to patients and loved ones facing end-of-life decisions. (If the reforms pass, Medicare would pay physicians to provide this consulting.) The Senate Finance Committee has dropped this idea from its version of the proposed legislation; it remains in the House version.⁷

Would the government (and taxpayer dollars) pay for abortions? It is uncertain. In one variant of the health care reform bill, abortions would have to be available via at least one insurance plan; however, Democrats say any abortions would be paid through patient premiums.⁵

Would undocumented immigrants get free health care? On the CBS Evening News, Sen. Ben Cardin (D-MD) was heard stating, “Illegal aliens will not be in this bill, period, the end.” As currently written, the legislation states that only those lawfully present in the United States can qualify for health coverage. Yet what if one family member is in America legally, but others aren’t? Could his or her relatives become eligible? Republicans say that the proposed legislation offers no way to effectively stop undocumented immigrants from applying for health care benefits.⁵

The debate rages on. Politically, the health care reform effort seems poised to end up being the story of the year – and the contention and negotiation will certainly last into fall. Stay tuned.

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These are the views of Peter Montoya Inc., not Statler Financial Services, Inc. and should not be construed as investment advice. Statler Financial Services, Inc. does not give tax or legal advice. All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy. The publisher is not engaged in rendering legal, accounting or other professional services. If other expert assistance is needed, the reader is advised to engage the services of a competent professional. Please consult your Financial Advisor for further information.

Statler Financial Services, Inc. is registered as an investment adviser with the state of Florida. The presence of this Web site on the Internet shall in no direct or indirect way to be construed or interpreted to suggest Statler Financial Services, Inc. is soliciting to sell advisory services or offering to sell advisory services to residents of any other state other than the state of Florida.

---

Citations.
1 baltimoresun.com/health/health-care/bal-health care-faq,0,5260471.story [8/14/09]
2 baltimoresun.com/business/bal-bz.pharma14aug14,0,5384283.story [8/14/09]
3 politics.theatlantic.com/2009/08/gop_dems_want_to_spend_money_to_cut_medicare.php    [8/14/09]
4 factcheck.org/2009/08/seven-falsehoods-about-health-care/    [8/14/09]
5 cbsnews.com/stories/2009/08/12/eveningnews/main5237960.shtml [8/12/09]
6 politicalticker.blogs.cnn.com/2009/08/14/palin-warns-of-disturbing-health-care-rationing/    [8/14/09]
7 latimes.com/news/nationworld/nation/la-na-health-end-of-life14-2009aug14,0,4670272.story    [8/14/09]