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    Meet the new wealthy: The cash hoarders

    Posted on August 5, 2013 by

    It seems so long ago. But in 2009, many of the wealthy were stunned to find themselves in a cash crunch. Despite all the talk of cash cushions and risk management, many of the wealthy suddenly realized that they had overborrowed, overspent and overconcentrated on a single asset or industry.

    We had suddenly entered the new age of the High-Beta Rich, where the wealth was volatile and far more cash was needed to absorb the shocks of financial markets.

    Four years later, the lesson still holds.

    A study from Spectrem Group asked wealthy and affluent investors “what do you wish you had done differently in the crisis.”

    (Read more: Retirement, the rich and the superrich )

    For the top earners-those making $750,000 or more-the No. 1 answer was “saved more.” Ranked second was “done more research about finances on my own” and then “not taken on as much debt.”

    Their regrets have turned into real action-with possible impacts on the broader economy. Since the financial crisis, the wealthy have become the nation’s top cash hoarders, filling up deposit accounts and money markets at a rapid clip.

    (Read more: What is rich? Study takes a crack at the answer )

    According to research from American Express Publishing and Harrison Group, the savings rate of the wealthiest 1 percent soared to 37 percent in the second quarter. That’s up from 34 percent in the second quarter of 2012-and more than three times their savings rate in 2007. Read the rest of this entry »

    Asian shares, dollar steady ahead of Fed outcome

    Posted on August 1, 2013 by

    Asian shares were flat on Wednesday and the dollar held onto some slight gains as market momentum stalled ahead of the outcome of the U.S. Federal Reserve policy meeting and release of U.S. GDP data.

    The dollar .DXY was steady against a basket of major currencies after a 0.2 percent rise on Tuesday. The dollar index is down 1.6 percent in July and set to post a second straight monthly loss for the first time since the turn of the year.

    The dollar index hit a five-week trough earlier this week as investors bet the Fed would reassure markets that interest rates would remain low for a long time even if it started scaling back stimulus this year.

    The Fed will release its post-meeting statement at 1800 GMT, but there will no news conference by Chairman Ben Bernanke.

    “Traders globally seem to be in a wait-and-see mode before the outcome of the Fed’s meeting on the timing of quantitative easing tapering,” said Mitsushige Akino, chief fund manager at Ichiyoshi Asset Management in Tokyo.

    The Fed is expected to link the start of any tapering to data signals, and markets have two major reports this week.

    GDP data on Wednesday is expected to show growth slowed to an annualized pace of 1.0 percent in the second quarter from 1.8 percent in the first, while payrolls data on Friday is forecast to show a fall in the jobless rate.

    The European Central Bank and the Bank of England meet on Thursday, and are set to hold policy steady.

    Medical marijuana will be legal Jan. 1

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    Illinois became the 20th state in the nation to allow the medical use of marijuana Thursday, with Gov. Pat Quinn signing some of the nation’s toughest standards into law.

    The measure, which takes effect Jan. 1, sets up a four-year pilot program for state-regulated dispensaries and 22 so-called cultivation centers, where the plants will be grown.

    Quinn, a Chicago Democrat, focused his remarks on how medical marijuana will help seriously ill patients, including veterans, which have been a key focus during his time in office. He also played up Illinois’ standards.

    “It’s important we do whatever we can to help ease their pain,” Quinn said Thursday at a new medical facility at the University of Chicago. “The reason I’m signing the bill is because it is so tightly and properly drafted.”

    Under the measure, only patients with serious illnesses or diseases will be allowed to obtain medical marijuana. The bill lists more than 30, such as cancer, muscular dystrophy and lupus. The patients must have established relationships with a doctor and will be limited to 2.5 ounces every two weeks.


    Obama picks restructuring expert to take over IRS

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    WASHINGTON — President Barack Obama has chosen a retired corporate and government official with experience managing numerous organizations in crisis to take over an Internal Revenue Service under fire for targeting political groups.

    Obama said his nominee for commissioner of the tax agency, John Koskinen, “is an expert at turning around institutions in need of reform.”

    “With decades of experience, in both the private and public sectors, John knows how to lead in difficult times, whether that means ensuring new management or implementing new checks and balances,” Obama said in a statement. “Every part of our government must operate with absolute integrity and that is especially true for the IRS. I am confident that John will do whatever it takes to restore the public’s trust in the agency.”

    Koskinen came in to overhaul mortgage buyer Freddie Mac after its near collapse in the financial crisis at the end of the George W. Bush administration. The 74-year-old also helped restructure the assets of the largest failed life insurance company in U.S. history, Mutual Benefit Life, and reorganize the Penn Central Transportation Company after it became the largest bankruptcy in U.S. history.

    His government experience includes handling preparation for the Year 2000 challenge for President Bill Clinton and helping restore the District of Columbia to financial stability after years of mismanagement as city administrator from 2000-2003.

    Koskinen’s nomination to a five-year term must be confirmed by the Senate.

    If confirmed, Koskinen would take over an agency in crisis, just as it is gearing up to administer large parts of the president’s health care law.

    The IRS has been under siege since May when agency officials acknowledged that agents working in a Cincinnati office had improperly targeted tea party groups for extra scrutiny when they applied for tax-exempt status. The IRS has since released documents suggesting that progressive groups may have been targeted, too.

    Congressional investigations have so far shown that IRS supervisors in Washington — including lawyers in the chief counsel’s office — oversaw the processing of tea party applications. But there has been no evidence that anyone outside the IRS directed the targeting or that agents were politically motivated.

    Obama ousted acting IRS Commissioner Steven Miller in May when the revelations came to light. The president appointed former White House budget official Danny Werfel as acting commissioner while he searched for a nominee.

    Sen. Max Baucus, D-Mont., said Koskinen “has the right background and experience in helping turnaround organizations facing tough challenges.” Baucus chairs the Senate Finance Committee, which will hold hearings on Koskinen’s nomination.

    “I look forward to working with Mr. Koskinen and hope, after a thorough review, the Finance Committee can quickly move his nomination to the full Senate,” Baucus said.

    Sen. Orrin Hatch of Utah, the top Republican on the Finance Committee, promised a thorough vetting of Koskinen. Hatch, who complained that Obama did not consult him in making the nomination, said Koskinen must promise to cooperate with congressional investigators.

    “I will demand significant answers from this nominee to ensure that we not only get to the truth, but that the administration is fully cooperating with our efforts,” Hatch said.

    With about 90,000 employees, the IRS processes more than 140 million individual income tax returns each year. Starting next year, the IRS will administer much of Obama’s new health care law.

    The IRS, which is part of the Treasury Department, will be in charge of enforcing the mandate that most individuals have health insurance, collecting fines from people who don’t. The IRS will also distribute subsidies to help people buy insurance in new state-based marketplaces known as exchanges.

    Obama has asked for a 14 percent increase in the IRS’s budget for next year in part to help the agency administer the health care law. House Republicans have responded by proposing to cut the agency’s budget by about a fourth.

    On Friday, the House is scheduled to vote on a bill that would prohibit the IRS from enforcing any aspect of the health law. It would mark the 40th House vote to repeal some or all of the law. So far, all the bills have died in the Democratic-controlled Senate.

    “Because John has a clear understanding of how to make organizations more effective and an unshakeable commitment to public service, he will be an exceptional leader who will strengthen the institution and restore confidence in the IRS,” said Treasury Secretary Jack Lew.

    An administration official, speaking on condition of anonymity since the search was private, said the president directed his team to above all find someone with extensive experience taking on organizations in crisis and knowledge of best practices to turn them around. Koskinen’s corporate restructuring experience includes 21 years at the Palmieri Company consulting firm, where his positions included CEO and chairman, president, and vice president.

    Larry Hirsch, who served on the Freddie Mac board while Koskinen was chair, credited him with turning around rock-bottom morale at the company as it relied on a government bailout to survive. Koskinen took over as interim chief after its top executive resigned and a month later the chief financial officer committed suicide.

    “Obviously after the financial crisis, the company was in internal and external crisis,” said Hirsch, a Republican who now heads the Washington-based Center for European Policy Analysis and is chairman of private equity group Highland Partners. “John walked in and immediately handled what was happening with the company. He had that quiet strength and openness to take a very depressed management team and employee group to give them a confidence they were valued and the company had a future.”

    Koskinen has been a prolific donor to Democratic political campaigns, giving more than $60,000 since 1999, according to Federal Election Commission records.

    Koskinen also has served as president of the United States Soccer Foundation and was deputy director for management at the Office of Management and Budget under Clinton, who later named him chair of the President’s Council on Year 2000 Conversion. He serves on the boards of AES Corp. and American Capital, Ltd.

    Earlier in his career, he worked for Sen. Abraham Ribicoff, D-Conn., Mayor John Lindsey of New York City and the National Advisory Commission on Civil Disorders. He started his career as a lawyer, and has an undergraduate degree from Duke and law degrees from Yale.

    S&P 500 tops 1,700 for first time

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    The S&P 500 climbed 1.3% and closed above 1,700 for the first time ever, while the Dow Jones industrial average advanced 0.8% to a record high. The Nasdaq gained 1.4% to end at its highest level in almost 13 years.

    Economic data gives a boost: Stocks have been driven by positive economic news this week, and Thursday was no different.

    The Labor Department reported the number of Americans filing first-time claims for unemployment benefits fell to a five-year low. That’s good news ahead of the government’s monthly jobs report, due Friday.

    Economists surveyed by CNNMoney expect the economy will have added 180,000 jobs in July, and that the unemployment rate will have ticked lower.

    Related: Nothing ‘modest’ or ‘moderate’ about market rally

    The Institute for Supply Management also delivered positive news Thursday. The group’s monthly manufacturing sentiment index rose to 55.4, the highest level in two years. Any number above 50 signals growth.

    But a separate report from the Census Bureau showed that construction spending declined 0.6% in June, surprising analysts who were expecting a slight rise.

    Major automakers released their monthly sales results Thursday. General Motors (GM,Fortune 500), Ford (FFortune 500), Chrysler Group and Toyota (TM), the nation’s four largest automakers, had their best July since before the 2007 recession.

    Investors also continued to be soothed by Indications that the Federal Reserve will not be too hasty when scaling down its massive bond-buying program.

    Related: Fear & Greed Index

    What’s moving: Procter & Gamble (PGFortune 500) reported better-than-expected earnings and sales for its fiscal fourth quarter.

    Exxon Mobil (XOMFortune 500) reported quarterly earnings that fell short of forecasts, citing weaker refining margins, while revenue topped estimates.

    Royal Dutch Shell (RDSA) shares dropped after the company reported earnings and revenue that missed estimates. The company cited higher costs, exploration charges and challenges in Nigeria, where oil thefts and supply disruptions have hit Shell’s bottom line.

    Shares of DirecTV (DTVFortune 500) fell after the satellite television provider posted earnings that widely missed forecasts.


    What the ‘Cliff’ Deal Means for You and the AMT

    Posted on January 3, 2013 by

    The “fiscal cliff” deal will help millions of Americans avoid paying the dreaded alternative minimum tax-while making it harder for many upper-middle class taxpayers to escape it, analysts say.

    The reason is that the minimum income levels subject to the AMT are going up, but wealthier Americans won’t be able to take as many deductions as before. (Read more: Your Taxes Going Up)

    The fiscal cliff deal does two things: it permanently adjusts AMT income exemption levels to inflation while giving lower-income taxpayers bigger exemptions and new credits to take them out of the AMT.

    For instance, the AMT exemption for 2012 has been raised to $50,600 for singles, up from $33,750, and $78,750 for married couples, up from $45,000. That will keep millions of lower-income Americans from paying the tax.

    “The big winners in this are those in the $45,000 to $105,000 income range,” said Bob Phillips, CFP, Managing Principal at Spectrum Management Group. “They can now use credits like the child credit, dependent care credit and the life time education credit in their calculations to lower their income and keep them out of AMT tax brackets.”

    The losers are higher-income Americans, who will likely continue to be hit by the AMT because they won’t get the same tax breaks from the deal, said Leon C. LaBrecque, senior financial advisor and CEO at LJPR, LLC.

    Among the tax breaks lost for higher incomes are itemized deductions for mortgage interest. Those will now be capped for individuals making more than $250,000 and couples making more than $300,000.

    “For those in the $450,000 income level they’re getting hit the hardest by the AMT because they are not part of those being able to use any of those deductions that lower income levels are now getting,” said LaBrecque.

    Created in 1969, the AMT is basically a parallel tax that has excluded certain deductions-like state and local income taxes that help lower income levels and taxes-for people making a certain amount of money each year. That means taxpayers in AMT brackets have had to figure out which tax is more, the AMT or regular taxes - and then pay the higher amount. Read the rest of this entry »

    Strong Asian gains overshadowed by U.S. fiscal cliff

    Posted on December 31, 2012 by

    Several major Asian stock indexes closed on Monday with the strongest annual gains in years, but these were overshadowed by the lack of progress in talks to avert the looming U.S. “fiscal cliff”.

    Australian shares ended up 14.6 percent in 2012, the best yearly gain since the recovery of 2009. On Monday the benchmark S&P/ASX 200 index (.AXJO) fell 22.4 points to 4,648.9, according to the latest data. It rose 0.5 percent to 4,671.3 on Friday, its highest close since June 2, 2011.

    Hong Kong shares ended their best year since 2009 hovering near 18-month closing highs on Monday. The Hang Seng Index (.HSI) closed flat at 22,656.9 on the day, ending the session up 22.9 percent on the year, near its highest close since early July 2011.

    The Straits Times Index (STI) (.FTSTI) ended down 0.8 percent at 3,167.78 points, but it has gained 20.6 percent since the start of the year, its best yearly gain since 2009, when it surged 64 percent.

    Monday’s strong closes came during New Year market holidays in Japan, South Korea, Taiwan, Indonesia, Thailand, the Philippines and Vietnam, with half-day trading in Australia, New Zealand, Hong Kong and Singapore.

    Read the rest of this entry »

    Wall Street drops in thin session, led by retailers

    Posted on December 27, 2012 by

    By Ryan Vlastelica

    Stocks fell for a third straight day on Wednesday, dragged lower by retail stocks after a report showed consumers spent less in the holiday shopping season than last year.

    Trading was light, with volume at a mere 4.01 billion shares traded on the New York Stock Exchange, the Nasdaq and NYSE MKT, well below the daily average so far this year of about 6.48 billion shares. The day’s volume was the lightest full day of trading so far in 2012. Many senior traders were still on vacation during this holiday-shortened week and major European markets were closed for the day.

    Many investors said concerns about the “fiscal cliff” kept shoppers away from stores, suggesting markets may struggle to gain any ground until that issue is resolved. The CBOE Volatility Index (.VIX) or VIX, Wall Street’s favorite barometer of investor anxiety, rose 4.46 percent, closing above 19 for the first time since November 7.

    A number of 2012′s strongest performers advanced, a sign that portfolio managers may be engaging in “window dressing,” a practice where market participants buy securities with big gains to improve the appearance of their holdings before presenting the results to clients. Bank of America Corp (BAC), which has more than doubled in 2012, added 2.6 percent to $11.54 on Wednesday.

    Read the rest of this entry »

    Asian shares, euro rise on hopes of U.S. “cliff” deal, BOJ easing

    Posted on December 19, 2012 by

    12/18/12 - Asian shares and the euro rose to multi-month highs on Wednesday as expectations of more aggressive monetary stimulus from the Bank of Japan and signs of progress in resolving the U.S. “fiscal cliff” budget crisis lifted demand for riskier assets.

    European shares were also expected to post gains. However, index futures pointed to a flat opening on Wall Street after the S&P 500 (.SPX) had its best two-day run in a month on growing confidence a deal can be reached in Washington to avoid a raft of painful spending cuts and tax rises. (.N)

    “What is important, and what is driving the market higher, is that the two parties are now in constructive discussions over specific tax levels and spending programs, and working towards a common middle ground,” said Cameron Peacock, a strategist at IG Markets in Melbourne.

    Industrial commodities such as oil and copper consolidated earlier gains, while gold recovered some lost ground but remained not far above its lowest in nearly four months as progress in the U.S. budget talks limited its safe-haven appeal.

    Financial spreadbetters called London’s FTSE 100 (.FTSE), Frankfurt’s DAX (.GDAXI) and France’s CAC-40 (.FHCI) indexes to rise 0.2 percent to 0.3 percent. (.L) (.EU)

    Tokyo’s Nikkei share average (.N225) closed up 2.4 percent, topping 10,000 points for the first time since April, as the prospect of more monetary stimulus and a cheaper yen boosted financials stocks and shares of exporters. (.T)

    MSCI’s broadest index of Asia Pacific shares outside Japan <.MIAPJ0000PUS> gained 0.4 percent, touching its highest level in nearly 17 months, while Australian shares (.AXJO) and Hong Kong’s Hang Seng (.HSI) also reached 17-month highs. (.AX) (.HK)

    S&P 500 index futures were flat.


    The Bank of Japan started a two-day meeting on Wednesday, under intense political pressure to expand its asset-buying program aggressively to snap the world’s third-biggest economy out of its fourth recession since 2000.

    Shinzo Abe, who was elected on Sunday as the country’s next prime minister, called for the central bank to embark on “unlimited easing” and set an inflation target of 2 percent to beat deflation.

    Read the rest of this entry »

    Wall St Week Ahead: “Cliff” worries may drive tax selling

    Posted on December 9, 2012 by

    By Caroline Valetkevitch

    Investors typically sell stocks to cut their losses at year end. But worries about the “fiscal cliff” - and the possibility of higher taxes in 2013 - may act as the greatest incentive to sell both winners and losers by December 31.

    The $600 billion of automatic tax increases and spending cuts scheduled for the beginning of next year includes higher rates for capital gains, making tax-related selling even more appealing than usual.

    Tax-related selling may be behind the weaker trend in the shares of market leader Apple (AAPL), analysts said. The stock is down 20 percent for the quarter, but it’s still up nearly 32 percent for the year.

    Apple dropped 8.9 percent in the past week alone. For a stock that gained more than 25 percent a year for four consecutive years, the embedded capital gains suddenly look like a selling opportunity if one’s tax bill is going to jump sharply just because the calendar changes.

    “Tax-loss selling is always a factor (but) tax-gains selling has been a factor this year,” said Paul Mendelsohn, chief investment strategist at Windham Financial Services in Charlotte, Vermont.

    “You have a lot of high-net-worth individuals in taxable accounts, and that could be what’s affecting stocks like Apple. If you look at the stocks that people have their largest gains in, they seem to be under a little bit more pressure here than usual.”

    Of this year’s top 20 performers in the S&P 1500 index, which includes large, small and mid-cap stocks, all but four have lost ground in the last five trading sessions.

    The rush to avoid higher taxes on portfolio gains could cause additional weakness.

    The S&P 500 ended the week up just 0.1 percent after another week of trading largely tied to fiscal cliff negotiation news, which has pushed the market in both directions.


    This week’s Federal Reserve meeting could offer some relief if policymakers announce further plans to help the lackluster U.S. economy. The Federal Open Market Committee will meet on Tuesday and Wednesday. The policy statement is expected at about 12:30 p.m. EST on Wednesday after the conclusion of the meeting - the Fed’s last one for the year.

    Friday’s jobs report showing non-farm payrolls added 146,000 jobs in November eased worries that superstorm Sandy had hit the labor market hard. Read the rest of this entry »