September | October 2010

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In This Issue
· Progression of your road map
· Have you reviewed your beneficiaries?
· Required Minimum Distribution
· Joel's Corner
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Welcome!
As your independent financial partner, JSW Financial offers a trusted and experienced team of advisors backed by a national alliance of experts to help solve your problems with personalized, innovative and long-term solutions to help protect, preserve and grow the assets of individuals, families and business owners while potentially reducing their taxes, producing income and enhancing charitable giving.

We add value by providing expert advice for your life planning including diverse investment strategies, estate, retirement and charitable planning, risk management, insurance planning, cash flow, and tax management.

It's your life. Your dreams. Your money. No matter how complex or distinctive your needs, with JSW as your financial partner you can feel confident you are on the right path to live the life you want.
Progression of your road map

Each of us should have a road map to saving and investing. When is the last time you reviewed your road map?

Have you been navigating your road map for a time and feel like you are ready to evaluate your success? Are you nearing the end of your journey and contemplating retirement? No matter what stage of your road map you are at, JSW Financial can help guide and support your financial goals.

Recently our team of advisors has been busy holding second opinion reviews for the friends, neighbors, and relatives who you have referred to us. Thank you for demonstrating your loyalty and confidence in our team members as your trusted advisors.

If we have not scheduled a routine semi- or annual review, or you would like to evaluate the progress of your life plan, please call or email me for an appointment.

As Henry Ford once said, "Coming together is a beginning, staying together is progress, and working together is success."

-- Beth Ashe

Have you reviewed your beneficiaries lately?
A while back, I was making a presentation on estate planning, talking about the importance of reviewing beneficiaries on 401Ks, IRAs and life insurance. One of the attendees piped up that she probably still had her ex-husband listed as the beneficiary on her life insurance policy, and they divorced more than 10 years ago!  

As you know, we review the beneficiaries on your accounts at each meeting you have with us. Still, you may have accounts or other assets not held with us that have named beneficiaries such as 401Ks, 403Bs, life insurance and annuities. It's a good idea to review your beneficiaries every two to three years or when there has been a significant event in your family such as wedding, divorce, birth or death.

-- Mike Jones
Required Minimum Distribution
As a reminder, IRS rules require everyone who will be 70.5 or older by December 31, 2010 to take a Required Minimum Distribution (RMD) annually from their IRA. You may receive a letter from First Clearing Corporation and/or other IRA custodians, stating that you have not satisfied your RMD for the current year. The letters will include the required distribution amount for the specified account only. Please return any forms to our office and not directly to the custodian as the letter states. This allows us to double-check to make sure you have not already satisfied your RMD for the current year before submitting the form to the custodian. If you have any questions regarding your RMD, please contact our office. These letters normally require your signature and asks for tax withholding information. If you have other IRA accounts not held with us, please let us know as this will affect the RMD amount.

-- Robin Clark
Joel's Corner: Bundle Up to Muddle Through
My grandmother, who had a great influence on my life, would always suggest I wear a coat, gloves and hat on these cooler early fall mornings as I ran off to grade school. I always wanted to travel light, as I do even today in my wildlife excursions, because I would end up shedding most of my outer wear throughout the day, just to lose a piece. Then I would be lacking when the real weather set in. Of course, she was always right as I usually ended up with an early fall head cold.

How does this relate to our current plight with this economy, stock market and ability to accomplish some semblance of a previous retirement plan? It's about bundling up.

There are a multitude of angles from which to analyze and comment about the economy. I read and study many opinions of some very good analysts and some pontificators and then attempt to distill that into what I believe is the best action for my clients.

For the past three months or more, there have been improvements here and there, some deterioration here and there, yet there is still no clear direction the economy or stock market will take for an extended period of time. This is a muddle-through period for the economy until net job increases begin showing up, regardless of the rhetoric in the Main Street media.

The primary engine for job growth is start-up companies - entrepreneurs. Although 50% of new businesses do not survive five years, the average annual first-year job growth of start-ups is over 3 million, compared to a net job loss of 1 million for all other companies, according to The Kaufman Foundation.

We still need the jobs provided by the Microsofts, which have net job losses year-over-year percentage wise, but small business start-ups are one of the keys to climbing out of a recession of this depth. All the government, investors and consumers can do to promote business startups should be encouraged.

After 12 months of studying this "great recession," I am less stressed about the short-term possibilities and still concerned about the long-term outcome. Many of you do not wish me to speak about the long term. But the fact remains if you are 80 or 40, we still have at least 20 years for which to plan. And we still can do something about the way the long term will turn out:
  • Have term limits for all elected officials.

  • Align benefits of elected officials with that of the voters.

  • Mandate the federal government live with a balanced budget as do the states.

  • Support policies that encourage entrepreneurship.

  • Learn that increasing economic growth protects a stable economy for all citizens.
In the short term, our government can increase the deficit to avoid a deflationary experience, and normal inflation will not begin until net job increases begin. Hyper-inflation will start when our creditors cut off money to us (i.e. China, but not likely anytime soon). You will begin hearing the term "monetizing our debt" when we are heading toward high inflation.

The stock market remains in a "capricious" range, a teaser that is annoying. True, there can be some real danger, but if investors understand that in the short term there can be wild swings and not exit at a bottom, they will be able to weather this sluggish economic period.

The optimists believe a bull market is forthcoming. I agree, and in my opinion, it is possible we will end 2010 with a net positive gain with the market down about 8% YTD. What I am not sure about is when an 8,000 (or lower) on the Dow Jones will occur -- before or after the bull run?

Not to be flippant about the seriousness of the situation, but we cannot predict with any accuracy the market's behavior over the next three months, much less 2-5 years. Thus our portfolios are structured with three basic tenets:
  1. A balanced component that allows managers to use their expertise to reduce risk in the portfolio as needed (Absolute Return Strategies).

  2. A deep value (buy cheap, high-quality, medium-sized companies) component that provides for higher value of the portfolio to compensate for higher inflation as more cash flow will be needed in the future.

  3. Non-traditional investments for the purpose of reducing portfolio volatility and also producing income to supplement cash flow.
For clients who implemented our recommendations, these tenets range from small IRAs and 403b plans to large portfolios with multiple, separate professional money managers.

In my opinion, there is no evidence that this market has exited the secular bear market. This does not mean that we may not experience a cyclical bull market through the end of this year. But unless you need cash flow for expenditures over the next 2-3 years the next portfolio changes we are planning from a macro perspective will be when data demonstrates we have entered the next secular bull market.

That goes back to the economic situation and will be driven by job growth domestically and globally. So patience is the most important virtue to be practiced at this time. That and keep asking us the hard questions. That is why we have a job, and why you have us as your advisors.

Summary

So, what should you do today?
  • "Bundle up" as MeMe used to tell me. I wish even more than you that there was an easy answer. We will muddle through this and the stock market will continue to drive you crazy, if you allow it.

  • Cash flow planning is the power over the stock market. Come to us to lay out your plan. This is a service for which you have paid by being a client. We charge non-clients $500-$1,000 for this analysis.

  • Recognize that the economy will respond to those who vote with their dollars and civil rights. Hopefully the people will eventually:

    • Elect politicians that put the people first.

    • Vote for taxes where value has been added, rather just on income.

    • Become flexible in their view of entitlements from the labor environment. Examples are not requiring 40-hour work weeks; working more from home and offering flexible hours. From this will come stable business growth.
Soon bankers, private investors and entrepreneurs will increasingly be willing to start new businesses. Also, expect millions of baby boomers to work to age 75, which will lessen the burden on social security that is destined to fail with the current demographics.

So, we may find that many of the traditional economic theories and policies of past cycles may need to be changed. And the outcomes predicted today of the dire circumstances that obliterate all aspects of a retirement dream may not be nearly as hopeless as thought!

What I am confident of is we will get through this - just as we did in '87, '94, '98, '00-01, and '08. Be thankful that you as a group (our clients) have retirement funds and assets for which to worry. We will muddle through this period and be better for it. Our team will adjust portfolios as needed. You will get your cash flow plan done. And together we will dance in the rain, until this storm is passed.

-- Joel Williams
Thanks for reading. Please call with questions or concerns. We're here for you.
 
Sincerely,
JSW Financial
P: 540.961.6706  |  T: 888.553.2211

The above commentary contains opinions and analysis that are provided by the author for informational purposes only and should not be used as the primary basis for an investment decision. Securities and Advisory Services Offered through VSR Financial Services, Inc. A Registered Investment Adviser and Member FINRA/SIPC, JSW Financial is independent of VSR.