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In This Issue
Five Financial Resolutions
History Speaks
Chart of the Month
Asset Class Returns
Market Commentary
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IHA MonthlyTop
January 2013
InnerHarbor Advisors, LLC is a private Financial Planning firm based in New York City founded by Michael J. Keating and John O'Meara. We are expert financial advocates your family can trust. 
Financial Planning Highlight
Five Financial Resolutions You Can Keep        
History Speaks
A Diamond May Be Forever But A Deadline Is Immediate 
While it is now amongst the most famous slogans of all time, legend has it diamond company DeBeers' "A Diamond Is Forever" tagline was created late one night in 1947 by a young copywriter- who was working against deadline. Story goes the vision came to Frances Gerety while lying in bed after her nightly prayers and she scribbled the slogan beneath the picture of young newlyweds and brought it to work the next day. It certainly seemed to be divine inspiration for  DeBeers as within three years of creating the 'diamonds are forever' slogan, an estimated 80 percent of wedding engagements in America were consecrated with.... a diamond ring. Gerety herself never married. The strongest proof of the power of the "Diamonds Are Forever" slogan has been its ability to prop up the price of a relatively oversupplied commodity with the illusion of splendor and longevity. Based on the global supply of diamonds (of which DeBeers holds back the majority), experts estimate the true market price for most diamonds is... under $100. Meanwhile the average price paid for an engagement ring in the U.S. is well above $3,000. Washington had its own flirtation with a deadline this week and we can only pray they were as inspired as Ms. Gerety.
Chart of the Month
Federal Reserve Chairmen have themselves coined some memorable phrases in the past (remember 'irrational exuberance' and 'green shoots'?) but there haven't been many that came to dominate news, politics and a two month zeitgeist as Ben Bernanke's 'Fiscal Cliff'. The chart below, from, shows the explosion in searches of the term since the beginning of October.
The number 100 represents the peak search volume
Asset Class Returns
Through December 31st, 2012

Returns assume dividend reinvestment and do not include any types of management fees, transaction costs or expenses. 




Fiscal Cliff Deal Summary - Three Changes That Matter


Douglas Adams, author of The Hitchhikers Guide To The Galaxy, was once quoted as saying he loved deadlines... "I like the whooshing sound they make as they fly by". 

Congress and the President must enjoy that whooshing sound themselves as they officially missed their deadline to avoid the fiscal cliff but did come to a deal New Year's Day that settled some of the tax questions facing the nation, delayed some spending cuts but avoided any real fiscal reform. We offer our take on the three groups most affected by the deal:

  1. Anyone Who Works... the payroll tax holiday of the last couple years ended with the new deal. As a result, workers will contribute a larger share of their paycheck to Social Security in 2013. The employee's portion of the payroll tax will go back to 4.2% from 6.2%.  This payroll tax applies up to $113,700 of wages, so those earning that amount or more will pay $7,049.40 in 2013, compared to the $4,775.40 they would have paid last year.
  2. Many Potential AMT Payers... the AMT exemption for 2012 has been raised to $50,600 for singles, up from $33,750, and $78,750 for married couples, up from $45,000. More importantly, those limits have now been indexed for inflation which means they should move higher in line with wages over time. This will reduce the potential AMT payers by 80%-90%. A cautionary note though, for high-cost, high-tax regions such as New York, this still leaves many taxpayers subject to AMT.
  3. Really High Income Earners...will be subject to new income bracket, 39.6% for couple making over $450,000. For those same taxpayers there is a higher tax rate on capital gains and dividends, 20%, along with the new Obamacare investment tax (3.8%) making that effective rate 23.8%. This last change will have a big impact on real estate investors which helps explain the rush to sell in NYC last quarter.

We wish you a prosperous 2013... Thank you for reading.




InnerHarbor Advisors, LLC
420 Lexington Ave, NYC 10170
Managing Partners:
John O'Meara, CFP, M.S.    
Michael J. Keating, CFP

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