Category Archives: Investing and fiduciary requirements

Weekly Economic Update for 9/24/2012





“Treasure the love you receive above all. It will survive long after your good health has vanished.”


– Og Mandino




The fine print on a lease or a mortgage is always worth reading. Ask the business owners and homeowners who have learned this from experience.




How many cubic yards of dirt are in a hole that is 9′ deep, 8′ long and 1′ wide?



Last week’s riddle:

What lives above a star but never burns, has 11 neighbors, and can replace the letters P, Q, R or S in some cases?


Last week’s answer:

The number 7 (on most telephone keypads).


September 24, 2012



According to the National Association of Realtors, the volume of residential resales hit a 27-month peak in August. Sales rose 7.8% for the month while the inventory of unsold homes decreased to 6.1 months (the smallest estimate since January). There was also a 9.5% year-over-year gain in the median sale price. Short sales and foreclosures represented 22% of last month’s transactions, down from 31% in August 2011. Housing starts were up 2.3% in August, the Commerce Department noted, with groundbreaking on single-family projects up 5.5%.1,2


The Conference Board’s Leading Economic Index slipped 0.1% for August in contrast to its 0.5% July increase. The LEI now stands at 95.7 (it was at 100 when created in 2004); stock prices and yield spreads have been the big factors aiding its overall advance since February.3


NYMEX crude tumbled 6.17% last week on ebbing demand, settling Friday at $92.89 a barrel. A gallon of gas was averaging $3.83 at the pump at the end of the week, according to AAA. COMEX gold closed at $1,778.00 Friday after rising 0.30% in five days; the U.S. Dollar Index achieved a weekly gain of 0.71%.4


The Dow (-0.10% to 13,579.47), NASDAQ (-0.13% to 3,179.96) and S&P 500 (-0.38% to 1,460.15) shifted out of rally mode last week, but all three indices were having an unusually good September as of Friday’s closing bell – DJIA, +3.73%; S&P, +3.81%; NASDAQ, +3.68%. The CBOE VIX – the “fear index” – settled down at 13.97 Friday. The Dow went red last week for the first time in three weeks.4,5,6

THIS WEEK: On Monday, EU leaders may announce an economic reform program for Spain that would permit that nation to receive a bailout; stateside, Lennar issues earnings. Tuesday, July’s Case-Shiller Home Price Index and FHFA Housing Price Index arrive, along with the Conference Board’s September consumer confidence poll. Wednesday, the Census Bureau issues the August new home sales report. Thursday, reports on August durable goods orders, August pending home sales and weekly jobless claims complement the final estimate of Q2 GDP from the federal government and earnings from Micron, Discover, Accenture, RiM and Nike. Friday offers September’s final University of Michigan consumer sentiment survey, August consumer spending data and earnings from Walgreens.

DJIA +11.15 +22.06 -0.35 +7.00
NASDAQ +22.06 +25.28 +3.81 +16.04
S&P 500 +16.11 +25.15 -0.86 +7.27
10 YR TIPS -0.71% 0.02% 2.31% 3.10%

Sources:,,, – 9/21/125,7,8,9

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. Marketing Library.Net Inc. is not affiliated with any broker or brokerage firm that may be providing this information to you. 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.


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Individual mandate could lead to penalty on 6 million Americans, says CBO

Friday, September 21, 2012

A change in projections made in April 2010 by the Congressional Budget Office (CBO), along with the Joint Committee on Taxation (JCT), means that it looks like two million more people than originally estimated will be subject to the Patient Protection and Affordable Care Act’s (ACA’s) penalty in 2016. The CBO released new figures recently, and it’s hard to say if this is bad news for the Obama Administration or not.
On the one hand, the CBO reports that the penalty is likely to hit almost six (5.9) million legal American residents. On the other hand, the tax won’t rise to that level until 2016, and it is now expected to bring in almost seven (6.9) billion dollars in revenue for that year, three billion more than originally anticipated.

The penalty will rise to $695 per person in 2016, and will be indexed for inflation thereafter. The CBO report took into account the fact that the penalty is half that amount for children. Wealthier households will owe a penalty based on a percentage (2.5% in 2016) of their income.

The CBO and JCT explain that the reason for the change in estimated numbers is due primarily to a higher than expected unemployment rate and lower than expected wages. They are also attributing the difference to legislation enacted subsequent to the passage of the ACA.

States’ lack of Medicaid expansion could impact penalty revenue. Also, the CBO attributes approximately 15% of the increase to the Supreme Court’s decision to give states the option to refuse to expand their Medicaid eligibility programs without losing all of their Medicaid funding. The number of uninsured is expected to be substantially higher in states that decline Medicaid expansion, and some of those uninsured, says the CBO, will be subject to the penalty tax.

The federal poverty level (FPL) is projected to be $12,000 for a single person in 2016, and $24,600 for a family of four. The CBO advises that approximately 1/3 of people paying the penalty will live in households with income in excess of four times the federal poverty level (FPL) and will provide for around 2/3 of the funds received.

For a comprehensive analysis of the ACA, along with additional information on health reform and other developments in employee benefits, just click here.

Military Leave Treated Differently for Purposes of COBRA and USERRA

From the September 20, 2012 EBIA Weekly

After returning from a 15-month period of active military duty, an employee in the National Guard sued his former employer for discrimination under the Uniformed Services Employment and Reemployment Rights Act (USERRA). USERRA prohibits discrimination against employees because of their military service and provides certain reemployment rights to those returning from active duty unless the employer’s changed circumstances make reemployment impossible or unreasonable. While this employee was away on active duty, the employer sold its assets to another company and—as part of the sale—provided a list of current employees to the buyer, which agreed to make reasonable efforts to hire them. Because his name was not on the list, the employee contended that the employer had fired him due to his military service. He cited as evidence, among other things, the COBRA election notice that he received shortly after his deployment. The notice offered him the opportunity to continue coverage under COBRA due to his “termination of employment.”

The employer argued that employees on military leave—or any kind of leave—were not included on the list provided to the buyer during the asset sale because they were not considered active employees. The court agreed, citing DOL regulations under USERRA stating that an employee on active duty is “deemed to be on furlough or leave of absence.” The court also considered the use of the term “termination of employment” on the employee’s COBRA election notice and noted that “termination” for purposes of COBRA may refer to either a voluntary or involuntary separation from service and did not necessarily indicate that the employee was fired or involuntarily dismissed. The court therefore concluded that the employee had not presented sufficient evidence that he had been fired because of his military service and ruled in favor of the employer without a trial.

EBIA Comment: While this case does not directly involve health benefits, the court’s discussion of the interplay between USERRA and COBRA is interesting. Both COBRA and USERRA provide that employees on active duty must be allowed to continue their health plan coverage for a period of time (generally 18 months for COBRA and 24 months for USERRA). In addition, USERRA requires employers to reinstate health coverage that terminates during military service upon the employee’s return. This case demonstrates one of the inconsistencies between the two laws. While employees on active duty are treated for USERRA purposes as if they are on furlough or leave, the same employees may be treated as terminated for COBRA purposes. Plan sponsors and administrators, who may be experienced in COBRA administration, must also understand the additional continuation coverage obligations imposed by USERRA and how these obligations may differ from those imposed by COBRA. For more information, see EBIA’s COBRA manual at Section XXXVI (“Uniformed Services Employment and Reemployment Rights Act (USERRA)”); see also EBIA’s Group Health Plan Mandates manual at Section XVIII (“Uniformed Services Employment and Reemployment Rights Act (USERRA)”).

Contributing Editors: EBIA Staff.

Liking It or Not, States Prepare for Health Law

By  | Published: September 23, 2012 | New York Times

PHOENIX — Like many Republican governors, Jan Brewer of Arizona is a stinging critic of President Obama’s health care law. When the Supreme Court upheld it in June, she called the ruling “an overreaching and unaffordable assault on states’ rights and individual liberty.”

Yet the Brewer administration is quietly designing an insurance exchange — one of the most essential and controversial requirements of the law. Officials in a handful of other Republican-led states say they are also working to have a framework ready by Nov. 16, the deadline for states to commit to running an exchange or leave it to the federal government to run it for them. That is just 10 days after Election Day, which is likely to decide the future of the law.

Given that the health care overhaul remains a lightning rod — just last week, Oklahoma revised a lawsuit against it — even the most tentative discussions about carrying it out in Republican states tend to take place behind closed doors or “underground,” as the leader of a health care advocacy group in the South put it.

In Mississippi, Mike Chaney, the insurance commissioner, who is laying the groundwork for a state-based exchange there, recently learned the difficulties of moving forward in anything but the utmost secrecy. At a luncheon this summer he found himself facing down an opponent of the law in a confrontation that is now circulating on YouTube.

“I was invited to the picnic, and I was the main course,” said Mr. Chaney, a Republican and an elected official.

The law requires all states to have exchanges, which are essentially online marketplaces where small businesses and individuals can shop for private health plans, in place by January 2014, when a requirement takes effect for most Americans to have health insurance or pay a penalty. If states fail to submit plans for running their own exchanges by the deadline, the law calls for the federal government to set up and run one for them, with or without their help. People with incomes between 133 percent and 400 percent of the poverty level can get federal tax subsidies through exchanges to make the price of coverage more affordable.

“If we have to have one,” said Donald Hughes, Ms. Brewer’s health care policy adviser, “then it would be better for Arizona to do it ourselves rather than defer to the federal government.” He said, however, that Ms. Brewer would not make a final decision on a state-run exchange until after the election.

Only 13 states and the District of Columbia have formally committed to running their own exchanges. All of them but Rhode Island, whose governor, Lincoln Chafee, is an independent, are led by Democrats. The Republican governors in six states — Alaska, Florida, Louisiana, Maine, South Carolina and Texas — have said they will not create a state-run exchange, according to the Kaiser Family Foundation. So has New Hampshire, where Gov. John Lynch, a Democrat, faced opposition from the Republican-controlled legislature.

Most of the remaining states, 22 of them run by Republicans, are exploring their options. Along with Arizona, at least three of them — Mississippi, Nevada and New Mexico — have done enough planning to meet the November deadline should they decide to run their own exchanges, according to officials. Nevada has already created its exchange, appointed its board and hired its executive director. Most Republican governors, including Ms. Brewer, are waiting for the outcome of the presidential race before making a final decision; Mitt Romney has pledged to repeal the law if elected.

But states like Arizona say they want to be prepared in case the law survives. (Even if Mr. Romney wins, repealing the law will require Congressional approval, which will be difficult if Democrats retain control of the Senate.)

Peter Lee, the executive director of the insurance exchange in California, said he had attended meetings with officials from red states who were eager to keep their presence under the radar.

“It’s sort of like A.A.: ‘My name’s Bob, and I can’t tell you the state I’m from,’ ” Mr. Lee said.

Republicans who support state-run exchanges say they are embracing a fundamental conservative belief: that states should make their own decisions rather than cede control to the federal government. But groups that oppose the law have sent emissaries around the country to argue that deferring to the federal government is a shrewder move.

Michael Cannon, a health policy expert at the Cato Institute, a libertarian group, has visited more than a dozen Republican-led states, pressing them not to set up their own exchanges. Mr. Cannon, the opponent who confronted Mr. Chaney in Mississippi, said he tells states that exchanges will in fact be “an entirely federally controlled enterprise.”

Mr. Cannon says that Republican governors who are moving toward state-run exchanges are bowing to the wishes of insurance companies and health care providers. “They happen to be the interest groups that stand to get billions of dollars in federal subsidies,” he said.

Many Republicans in state legislatures, including in Arizona, do not need convincing: they are against state-run exchanges. That could make the challenge of creating them tough even if the framework is in place by November, because most states need legislative approval to establish them. Another option is a “partnership” exchange, one that is created by the federal government but that the state would have a role in operating.

Mr. Hughes said that if Ms. Brewer decided to move ahead with a state-based exchange after the election, she would ask the Legislature to sign off on creating one early next year. “Opinions can change,” he said.

But Tom Jenney, the Arizona director of the conservative organization Americans for Prosperity, said his group would pressure legislators to resist. Mr. Jenney recently challenged supporters of a state-based exchange to debate Mr. Cannon at an event his group sponsored in Phoenix. When no one accepted the invitation, Mr. Jenney played the role of a supporter himself, wearing devil horns.

“Our mission is to make it as uncomfortable as possible for anyone who has not committed to opposing the exchange,” he said.

Creating an exchange takes significant time and resources: states must build the Web sites and other technological infrastructure, a call center, outreach programs and other pieces. Mr. Hughes said Arizona had set standards for health plans that would compete on its exchange and was seeking a vendor to build some of the technological infrastructure and a call center.

But the state, he said, had “included language in all of our contracts with vendors and consultants that would allow us to cancel them.”

In the meantime, a coalition of business leaders, including many from insurance companies and health care providers, is urging Ms. Brewer to go with the state-based exchange.

Mr. Chaney said that while he faced pressure to abandon plans for a state-run exchange in Mississippi — the Tea Party there is an especially vocal opponent — he would not back down. He said that he would, however, honor a request by Gov. Phil Bryant, a Republican, to wait until after the election to submit a blueprint.

“What we’re doing here is an offensive move, and it’s a defensive move,” Mr. Chaney said. “I’m doing what I think is the best thing to give me some alternatives and what’s in the best interest of my state.”

Charleston Accountable Care Organization

An Accountable Care organization is a new entity, created from the Health Care Reform law (PPACA).  The concept is yet another in a long string of “hopeful” solutions to the constantly rising cost of care.  This one has promise, but so did the advent of Health Maintenance Organizations (HMO), PPO’s, POS plans, and a host of other proposed “magic Bullets.”  We can only hope.

The concept is that providers (hospitals, doctors, labs, etc) team up with insurance companies, using technology, to better manage both the outcome and cost of patient care.  In its classic form, the ACO gets paid a fixed cost to manage your condition – regardless of outcome.  No more extra billing if they have to redo tests, or a procedure.  No extra illing for another set of xrays or MRI’s.  The focus shifts to a quality of care focus- doing the right tests, the right procedures, at the right time.  If the ACO gets it right the first time they make money.  If they don’t they may lose money. 

A number of successful examples of this approach already exist, and so it is the hope that the Accountable Care Colation of TriCounties, a recently formed ACO venture between United Physicians and Collaborative Health Systems (a technology company).  The venture is aimed at improving the care for Medicare Patients, with the hope of extending proven approaches to the larger population.  They are one of the 88 ACO’s nationally approved and participating in the medicare Shared Savings Program.

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Reeve Conover is a Registered Representative. Securities offered through Cambridge Investment Research, Inc., a Broker/dealer member FINRA/SPIC. Cambridge and Conover Consulting are not affiliated. Licensed in SC, NC, NY, CT, NJ, and CA. - SIPC - Brokercheck