Good afternoon.

In the investment markets, the last month was positive for most asset classes except U.S. small companies which dipped a bit but are still up for the year so far.   We have a full second quarter market update below. 

Also in this newsletter we have articles on whether gold belongs in your portfolio, an opportunity for a "Money Story Audit" with Dr. Tim Kincaid, and more.  As always, feel free to e-mail me at jean@keenerfinancial.com with requests for newsletter topics you'd like to see covered or to discuss concerns or questions on anything in the financial world. 

I will be out of the office for the early part of next week attending the Garrett Planning Network annual conference in Denver.  I expect to return with lots of great learning to share with you.  This newsletter is a July/August combined issue, so look for your next newsletter in September.  I hope you enjoy the rest of your summer.  Thanks for reading, and Live Well!

Special Offer: Money Story Audit

Tim Kincaid

 I had a lot of positive responses from the article in the April Personal Finance newsletter, "What's Your Money Story?" (Click the link to read it if you missed it the first time.)

 The author, Tim Kincaid, is a certified professional Coach. When he heard that his article sparked so many conversations, Tim created a special limited-time offer just for newsletter readers. 

Tim is offering a complimentary Money Story Audit, which includes a quick self-assessment exercise followed by a confidential 30-minute debrief by phone. He explains: "This is an easy way to briefly explore how deeply held beliefs about money impact various contexts of your life. With new awareness, you are free to re-write your personal Money Story to better feeling, more accurate beliefs about money that are authentically yours."  

This offer is limited to the first 10 Keener Personal Finance newsletter readers who request it. The offer is good through August 31, 2012. To request a Money Story Audit, contact Tim at drtim@kincaidcoaching.com or via his website www.kincaidcoaching.com by August 31, 2012. 

I'm delighted that Tim is providing this unique opportunity to us, and, if it seems interesting to you, I hope you'll get in touch with him.

Gold in Your Portfolio

Shared with permission of Dimensional Fund Advisors

During a weak global economy and uncertain financial markets, many investors tout the benefits of holding gold. Some proponents claim that gold deserves a significant weighting in most investors' portfolios. Gold's often-cited portfolio benefits include a strong long-term return, a hedge against inflation, and safe haven during turbulent times.

But does the evidence build a case for holding gold as a separate asset class? Let's look at historical returns for the answers

Gold's Long-Term Performance

Investors who think of gold as having strong long-term returns base their belief on two strong performance periods in the past four decades-the most recent decade and the 1970s. These periods account for most of gold's price appreciation.

Figure 1 documents gold's strong performance since 2000. After hitting a twenty-year low in 1999, gold began a steady climb in the wake of the dotcom bust, stock market downturn in 2001, and the 9/11 attacks. As the decade wore on, there were Wall Street scandals, natural disasters around the world, and record oil prices. Gold's strongest performance period has come since 2008-and investors can still recall the emotional and financial stress that came with the mortgage meltdown, volatile financial markets, and worldwide recession.

From 2000 through 2011, gold outperformed major equity asset classes around the world. In terms of real (inflation adjusted) growth, gold turned a dollar investment into $4.05, and US small cap stocks (as represented by the CRSP 6-10 Index) turned a dollar into $1.58, while the S&P 500 Index and MSCI World ex US Index lost value. Gold had a 12.3% annualized real return, versus -1.88% for the S&P 500 Index, -1.4% for the MSCI World ex US Index, and 3.9% for the CRSP 6-10 Index.

Second Quarter Market Review

Social Security to Stop Mailing Paper Checks

 If you know someone still receiving paper checks from social security, please pass this information on to them. 

On March 1, 2013, the U.S. Treasury Department will stop mailing paper benefit checks. After that date, all Social Security beneficiaries (as well as anyone receiving another type of federal benefit, such as Supplemental Security Income benefits, Railroad Board annuity payments, federal retirement benefits, or veterans benefits) will be required to receive their benefits electronically. The federal government estimates that switching to electronic payments will save taxpayers $1 billion over 10 years, and cut down on the risk of lost and stolen checks.

Most Social Security beneficiaries are already receiving benefits electronically, and if you're among them, you don't need to do anything-you'll continue to receive your benefits via the method you've chosen. But if you're receiving a paper check, you need to choose one of two electronic payment options as soon as possible.

The first payment option is to have your benefit directly deposited to a bank or credit union account. The second option is to have your benefit put on a Direct Express® Debit MasterCard® prepaid card.  If you haven't chosen an option as of March 1, 2013, you'll be automatically enrolled in the Direct Express ® card option.

To sign up for electronic payments, you need to visit the government website, www.GoDirect.org, or call the U.S. Treasury Electronic Payment Solution Center at (800) 333-1795. You can also sign up for the direct deposit option at your bank or credit union, or for the Direct Express ® card at www.usdirectexpress.com.

Material adapted with permission from Broadridge Investor Communication Solutions, Inc.

Potential Outcomes with the Federal Estate Tax

As you may be aware, the federal estate tax currently in effect is scheduled to revert back to 2001 levels on January 1 next year.  While there's no way to know what Congress will enact, understanding the possibilities can allow you to think through your planning options.

 So, let's take a look at what could happen. There are five possibilities: (1) Congress could extend current tax law (commonly referred to as the "Bush tax cuts"); (2) Congress could do nothing, essentially turning the calendar back to 2001; (3) Congress could compromise, agreeing on something between the 2001 tax rules and the rules that apply in 2012; (4) Congress could enact new estate tax reform; or (5) Congress could repeal the estate tax altogether.

Congress could do nothing

Congress could allow all or some of the provisions that sunset to expire, reverting to the 2001 tax rules. The top gift and estate tax rate would be 55% with a 5% surtax on estates that exceed $10 million but do not exceed $17,184,000. The GST tax rate would also be 55%. The gift and estate tax exemption would be $1 million. And, the DSUEA would no longer apply. The GST tax exemption would be $1 million indexed for inflation (estimated so far to be $1,360,000).  Some analysts have proposed letting the Bush tax cuts expire as part of a plan to balance the budget over time.

Congress could compromise

Congress could pass a compromise bill that would set the top tax rate to 45% and the exemption amount to $3.5 million. Whether portability would expire or be extended is anyone's guess.

President Obama supports this option. His 2013 budget plan would return the gift and estate tax, and the GST tax, to 2009 levels; the top tax rate would be 45%, the exemptions would be $3.5 million (but only $1 million for gift tax purposes), and portability would be made permanent.

Congress could enact estate tax reform

Many believe that permanent and comprehensive estate tax reform is needed. However, the political landscape is probably not currently amenable to this option. Besides, permanent tax reform does not really mean that it will be permanent (it could, of course, be modified or repealed by future legislation).

Congress could repeal the estate tax altogether

The arguments for and against the repeal of the estate tax continue to wash in, like ocean waves. The tide was high for repeal a few years back, but the current economic and fiscal situation may have slowed its momentum, and the tide seems to be ebbing.

Some material adapted with permission from Broadridge Investor Communication Solutions, Inc.

Personal Finance Workshops are held on the third Tuesday of the month at 6;30 pm at the Keller Public Library.

September's topic is Women and Money.  We will discuss the unique opportunities and challenges women encounter in managing our personal finances throughout our lives.  We'll also review some straight-forward solutions to balance competing priorities in working with our money.  This will be an interactive discussion, and women of all ages are invited to attend.  Women and Money is Tuesday, Sept. 20 at 6:30 pm.  Please RSVP to library@cityofkeller.com for planning purposes.

October's topic is Investing Basics: How to build a diversified portfolio and keep more of your money.

The Keller Public Library is at 640 Johnson Rd.