Issue: # 59

NOVEMBER 2013

Dear ,

Happy Thanksgiving and welcome to November 2013 issue of The Wealth Chronicle!

Stock Market Correction

As early as last January, mainstream media started complaining about the o verdue nature of a market pullback. The stock market has been full steam ahead this year and the argument can actually be made that there is more room to run. Not that we won't see a healthy correction, but one in which any pullback occurs should be viewed in the context of a continued bull market.

Here is some data from The Wall Street Journal and Liz Ann Sonders, chief investment strategist at Charles Schwab who attempts to Dismiss Bubble Talk...for Now.

The following table offers a "checklist of commonalities" that we typically see at a market top. Currently only one is flashing red: rising real interest rates.

Inflows into mutual funds have risen sharply, but "the total barely makes a dent in the hundreds of billions that have come out of equity funds since the financial crisis in 2008," Sonders opines

Plus traditional pension funds are under-exposed to equities; hedge funds' net long exposure remains below 50% (a very defensive position); and foundations'/endowments' public equity exposure has dropped precipitously over the past decade in favor of alternative asset classes."

Historical Perspective

Of the last 12 bull markets, this current run ranks fifth. At least historically, that might suggest we have more upside to contend with - see Figure 2.

Valuations

Standard & Poor's and Strategas Research Partners tell us the trailing P/E as of November 15 stands at 17.6 compared with the average of 18.7 and the forward P/E equals 15.9 compared with an average of 18.1

Sonders isn't dismissing the possibility of a market correction, especially around the beginning of Fed tapering. I agree with her that we can't be sure how the markets will react once the fed stops tapering. As Warren Buffet stated, financially we are in an experiment that's never been tried before.

We may see a stock market correction in the future, but I think for now this headline I saw on a financial website this week pretty much sums it up: "The Bull Market Doesn't Care That You Think it Should Correct."

Year End Strategy - Tax Loss Harvesting

One year-end strategy to lower your tax requirement is tax loss harvesting. Tax Loss harvesting involves selling securities at a loss to offset a capital gains tax liability. The goal is not to own investments that go down in value, but Tax loss harvesting can be used to limit the recognition of short-term capital gains, which are normally taxed at higher federal income tax rates than long-term capital gains.

There are three benefits to this strategy. First, tax losses represent an interest-free loan that defers capital gains taxes you would otherwise owe into the distant future, and can even eliminate them entirely when you die. Second, after offsetting realized gains, you can use any remaining tax losses to deduct $3,000 from your regular income taxes each year, which can mean an extra $750 or more in your pocket if you are in the 25 percent federal tax bracket. Third, any remaining losses are rolled over into the subsequent years, so each year until your losses are used up, you can defer your capital gains and apply up to $3,000 against your income. Here is an

article from the Bogleheads which details the strategy.

Determine what other year end planning activities you should do by taking the 3 Minute Year End Financial Planning Checklist.

Click to view the checklist

Key Birthdays

Watercooler

JFK Shot: How Wall Street Reacted 50 Years Ago. November 22^nd marked 50 years since JFK was assassinated. If you are a history buff you will find this article on how Wall Street reacted after the tragedy interesting.

The Bumblebee Team dressed up for Halloween

Can't complain about the Jersey Breakfast Sandwich with Taylor Ham although I may have given the nod to the Roast Beef and Cheese from American Hero.

Please contact me if you have any questions about the articles above or about your personal or business finances.

Sincerely,

Marc Bautis
Wealth Manager

office: 201-842-7655

cell: 201-221-6895

fax: 201-754-9760

marc@bautisfinancial.com

Disclaimer:The information contained in this newsletter is for information purposes only and may not be suitable for your specific financial situation. You should consult a financial advisor before making any investment decisions relating to the information contained in this newsletter

What's Inside?

Stock Market Correction

Tax Loss Harvesting

Key Birthdays

MEET MARC

Marc Bautis is a Wealth Manager specializing in working with young families as well as retirees and those nearing retirement. He understands that everyone wants to not only protect their principal, but also be sure that their money lasts. He is committed and proud to deliver independent advice, always in the interest of his clients.

Marc is the creator of the Retirement Fitness Challenge™, a program designed to be sure his clients enjoy the retirement years as they have always envisioned them. Marc's program is designed to prevent outliving your money but also to minimize expenses during retirement and find the best time to start taking Social Security benefits. Marc is also the author of a recent book The Retirement Fitness Challenge: Shape Up Your Finances and Make Your Money Last a Lifetime, which is available on Amazon.com.

Marc is a graduate of Seton Hall University. He is a Bergen County native, from Lyndhurst, where much of his extended family still resides. He currently lives in Hasbrouck Heights with his wife Katie, new daughter Charlotte and Old English Bulldog, Winnie.

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