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Welcome to the June edition of The Wealth Chronicle.

Britain Votes To Leave The European Union

Last week British citizens voted on the question, "Should the United Kingdom remain a member of the European Union or leave the European Union?" It was anticipated that the vote would be close, but that Britain would vote to remain in the European Union. The results were not what was expected. Britain voted 52% to 48% to leave the European Union. Now that the leave camp has won, the process of a British exit from the EU will begin. It will take two years to renegotiate trade deals and other policies to decouple the UK from the European Union.

What were the concerns of the "Leave" and "Remain" sides?

If the Brits had voted to stay, the markets would have probably been free to breathe a sigh of relief. But they voted to leave and the markets do not like uncertainty. A country leaving the European Union has never happened before. And David Cameron, the British Prime Minister resigned after the vote. Global markets will be volatile in the near term, but as it becomes clear what Britain's and the European Union's path going forward will be, the markets will stabilize.

A knee-jerk reaction to sell everything is often the worst way to approach these types of events. Instead keeping with the current investment strategy coupled with rebalancing and other tactical moves when they make sense is the best approach. We have seen similar reactions in the market over the past couple of years with Greece, China, the fiscal cliff, and the recent interest rate hike. In each event the market has bounced back pretty quickly. From 1996-2012 there were 5,040 trading days. For an individual who was invested all 5040 days, their annual average return was 8.2%. But, if an investor missed the 10 best days...their return drops to 4.5%

The Health Of Social Security

Lost in the news last week of the British vote was the publication of the Social Security and Medicare Trust Fund Report. The publication of the report is an annual event that details the health of Social Security and Medicare. Here are the highlights of the reports

- $706.8 billion in Social Security benefits were paid to 48.1 million people in 2014.

- The trust fund that supports the paying of those benefits is expected to run dry in 2034.

- The tax revenue that supports Social Security retirement income has not fully covered benefits since 2010. Benefits will be reduced by about 25% in 2034 unless Congress changes the program.

Given the fact that we are in a presidential election year and Congress's propensity to wait until the last minute to make any changes on anything I suspect we will be reading a similar report next year (and the year after that)

Not to throw salt in the wound, but with slow rise of inflation, it's looking more and more that Social Security recipients will not see an increase in their monthly benefits in 2017. That would mark the second year in a row and fourth time since 2010 that there will be no cost of living adjustment (COLA) in Social Security benefits.

Meet The Interns

Bautis Financial added two summer interns to the team this month.

Anthony Rubinich is working at Bautis Financial this summer as a Business Development Intern. Anthony is a junior at the University of Scranton majoring in Business Administration.

Cody Laska is a rising junior at Seton Hall University majoring in finance and accounting with certification in business analytics. Cody is originally from Madison, Connecticut and one day aspires to run a venture capital firm.

Watercooler

Any guess on what the best performing stock has been in the S&P 500 over the past 15 years - You probably would not have guessed that it was Monster Energy drink. Monster has had a 15-year cumulative total return of +40,085%, and a 15 year annualized total return of 49.1%. If you invested $10,000 in Monster Energy stock 15 years ago, it would be worth $4,018,540 today.

I saw a headline recently from an online article that read that was "Tiki Barber Says This Was His Biggest Financial Mistake". I clicked on the article and read that Tiki thinks his biggest mistake was buying a ridiculously expensive apartment on the Upper East Side. His comment was surprising for two reasons. One, he probably wound up making out fine with that apartment. The price of properties in NYC over the years has risen considerably. Secondly I was expecting that he was going to say his biggest financial mistake was having an affair with an intern that cost him a $300,000 a year job at NBC based on a morality clause in his contract.

Here is a pretty cool map from American Enterprise Institute that shows how massive and productive America's $18 trillion economy is on a global scale. The map compares the gross domestic product of US states with the national GDPs of other nations.

America's largest state economy is California. In 2015, the Golden State's GDP was about $2.46 trillion, slightly above France's GDP ($2.42 trillion). But France's population is about 66.48 million, while California's is only about 39.14 million - meaning California produces about the same as France with about 40% fewer people.

Please contact me regarding any of the articles above, or if you would like to discuss your personal or business finances

Sincerely,

Marc Bautis
Bautis Financial
201-842-7655

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