“I don’t know why you say goodbye, I say hello.” The Beatles
By most accounts, 2012 was a very good financial year. The US Economy grew. Employment and manufacturing improved. Real estate prices rose and vacancy rates declined. Retail sales were up. The DOW, the S&P 500, and NASDAQ enjoyed their best year-end closes in five years. The fiscal cliff was more like a small divot. On the first business day of 2013, the DOW closed up 308 points and the major averages had their biggest gains on an opening day of trading this century! Goodbye to 2012 and hello to 2013.
Market Stats for 2012: S&P 500 +14%, NASDAQ +15%, DOW +9%, MSCI EAFE (International) +20%, Gold +5%, High Yield Bonds +10%, Financials +27%, Consumer +21%, Telecom +17%, Healthcare +16%.
It was a truly great year for Pac Sun. The move to Charles Schwab has already paid dividends. Our costs are lower and our service is faster and easier. Can you tell? Fund expenses have been reduced. Checks, wires, and automatic deposits are quicker. The speed of information has increased. We’re saving time and saving trees with paperless delivery. Of the 28 projects on our list of improvements for 2012, we accomplished 17. These positive undertakings included our special client appreciation events, upgrading technology, obtaining more high-quality new client introductions, and making our charitable contributions to help children and young adults.
Corporate bad guys paid hefty fines in 2012: Amgen $795M, Glaxo-Smith Kline $3B, Abbott Labs $1.5B, HSBC Bank $1.9B, British Petroleum $4.5B. Citibank, Bank of America, JP Morgan Chase, Ally Bank, Wells Fargo and other US Banks were dinged $10.7B last year for their part in the mortgage debacle.
The compromise in Congress last week is good for those earning less than $400,000. The American Taxpayer Relief Act of 2012 was signed into law on January 2, 2013. The capital gains tax rate will remain at 15%. This is positive news for dividend investors. Those earning more than $400,000 will pay a 20% gains rate plus a new Medicare surcharge of 3.8%. The new law retained most of the Bush era tax cuts although new caps will apply to certain tax deductions. Inheritance taxes are now set at 40% above $5.25M, indexed for inflation. The payroll tax cut was not extended. The budget issues were delayed for two more months, so get ready for more political wrangling over how to divide up the money.
“I could end the deficit in 5 minutes. You just pass a law that says any time there is a deficit of more than 3% of GDP, all sitting members of Congress are ineligible for re-election.” Warren Buffett
Judy or Aaron will be calling soon to schedule a check-up and to ask a few service questions. We want to know how the transition to Schwab has affected you and if we can make things easier. Please let us know how often you would like to meet. We want to review your beneficiaries and to help you with any financial decisions coming up soon. Collaborating with other advisors is important for us, too. If you respect your accountant and/or attorney, we would like to meet them.
Housekeeping items: You should soon be receiving two 1099R Tax Forms one from National Financial Services covering January to July-August…and one from Charles Schwab for the balance of 2012. You will need both of these for your taxes. These forms will also be available to you online.
Top 3’s for 2012. Google analytics show the biggest trending stories last year were Hurricane Sandy, the Olympics, and Kate Middleton. Michigan, Ohio and South Carolina were the states with the best recovery in GDP and employment. The highest paid entertainment producers were Oprah Winfrey $165M, Michael Bay $160M, and Steven Spielberg $130M. The best paid musicians in 2012 included Dr. Dre $110M, Roger Waters (Pink Floyd) $88M, and Elton John $80M. The CEOs with the most compensation were John Hammergren (McKesson) $131M, Ralph Lauren $66M, and Michael Fascitelli (Voronado Realty) $64M. The most expensive paintings sold last year were Edvard Munch’s “The Scream” $119M, Mark Rothko’s “Orange Red Yellow” $86M and “Royal Red Blue” $79M. The top three stocks in 2012 were US Airways (LCC) +152%, Sprint-Nextel (S) +143%, and CVR Energy (CVI) +142%. The top grossing movies last year were “The Avengers” $623M, “The Dark Knight” $448M, and “Hunger Games” $408M.
“I never make predictions, especially about the future.” Casey Stengel
Sam Stovall would beg to differ with Casey. As chief equity analyst at Standard & Poor’s, Sam makes a living by turning historical, economic statistics into predictions. He favors healthcare, industrials and consumer discretionary sectors in the first half of 2013. “In general, we are trending at a 23% discount to historic market average for earnings. 2013 will be a recovery year. In the US, we are looking for growth of about 2.2% expanding to 2.7% in 2014…and upward trajectory. ” Chapman University President James Doti also predicts a steady recovery of 2% growth and increase in consumer spending and affordable housing. “There have been 14 quarters of recovery and the economy is 7% higher since the recession ended. We are currently at a position where there is no more excess housing. If people want to buy a house, someone has to build it, and that will positively affect residential construction.”
“I predict future happiness for Americans, if they can prevent the government from wasting the labors of the people under the pretense of taking care of them.” Thomas Jefferson
Today’s the day.
Pacific Sun Financial Corp; 95 Argonaut, Suite 105, Aliso Viejo, CA. 92656 Phone: (949) 716-8646 Fax: (949) 716-8645 Website: www.pacsunfinancial.com
National Asset Management, Inc. (NAM) is a Registered Investment Advisor with the SEC. NAM provides fundamental investment management services. The views expressed contain certain forward-looking statements. NAM believes these forward-looking statements to be reasonable, although they are forecasts and actual results may be meaningfully different. Actual events may cause adjustments in portfolio management strategies. This material represents an assessment of the market at a particular time and is not a guarantee of future results. This information should not be relied upon as research or investment advice regarding any security. One cannot directly invest in an index. Index performance returns do not reflect any management fees, transaction cost or expenses. Indices are unmanaged. S&P 500 Index is an unmanaged index of 500 common stocks chosen to reflect the industries in the US economy. DOW Jones Industrial Average is a price-weighted average of 30 significant stocks traded on the New York Stock Exchange. NASDAQ is a computerized system that facilitates trading and provides price quotations on more than 5000 of the more actively traded over the counter stocks. The MSCI EAFE Index is a stock market index that is designed to measure the equity market performance of developed markets outside of the U.S. & Canada. Investment Advisory Services offered through National Asset Management, Inc SEC Registered Advisor. NAM or Pacific Sun Financial does not offer any legal or tax advice. One should consider consulting with a legal or tax professional before implementing investment strategies.