LookingForward - Commonwealth Financial Network

Levine, Gottfried
& Somberg, LLC
LookingForward
A quarterly newsletter dedicated to helping you get the most from your retirement.
•Inside •
Welcome to Levine,
Gottfried & Somberg ~ p.1
•
Gold ~ p.2
•
New College Savings Plan
Available In Connecticut ~ p.3-4
Economic Update ~ p.3
•
In The News~ p.4
Upcoming Events ~ p.4
•
Investing in ‘Alternatives’ ~ p.5-6
In the Community ~ p.5
F.Y.I. ~ p.5
•
Around the Office ~ p.6
•
Obamacare Takes A Bite Out of
the Donut Hole ~ p.7
•
How to Contact Us ~ p.8
•
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would like to receive this newsletter?
Feel free to forward a copy to them or
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Glastonbury ~ Avon ~ East Lyme March 2011
Welcome to Levine,
Gottfried & Somberg
S
ince 1993, we have specialized in furthering the dreams and visions of our
clients by helping them make smart decisions about their money, their
investments and their pensions. For you, this means helping preserve and
target your assets so your wealth
will be there for you throughout
your life and the lives of your
loved ones.
The long-standing ties we’ve
built over 40 years of combined
experience exemplify both
our successful results and our
passion for building long-term
relationships.
If you would like to find out more about Levine, Gottfried & Somberg, LLC,
please tour our Web site, www.lgsfinancial.com. We will welcome you, give you
straightforward answers to your questions, and do all we can to help you and your
family in the choices you face.
If you’re a current client, you’ll find links to access your account, make
appointments with us, get up-to-date information about the stock markets, and
view useful resources that can help empower you to be more knowledgeable.
If you’re not currently acquainted
with our firm, visiting our Web site
(www.lgsfinancial.com) is a good
way for you to get to know us and to
understand how we can help you get
to that point where you don’t have to
worry about whether your money is
doing right by you.
Levine, Gottfried & Somberg, LLC
is wholly independent, and not
Our main office at 340 Hebron Avenue, Glastonbury, CT
affiliated with any bank, insurance
company, mutual fund family or retail brokerage company.
~ 1~
LookingForward
Gold
If you had a chance to watch TV over the holidays you have seen the ads for gold.
G
ood old Tom, Beckers Jewelers and others would like you to sell your gold. Glen Beck and other
pundits would like you to buy their gold…but why all the interest in gold all of a sudden?
Written by
Joshua Gottfried
Last Century:
In 1944, in a hotel at the base of Mount Washington, the US, along with 43 other nations, met to set up
an economic system to help the world get back to order after the carnage and uncertainty of WWII. To help provide a level of
financial trust across the 44 governments, part of their plan set a fixed exchange rate between gold and the US dollar. The rate
was set at $35 per ounce. This gold backing lasted until 1971. Once separated, gold could increase in value against the dollar, and
it did, peaking in 1980 at a price of $850 per ounce. The next year, the gold bubble bust, and the precious metal’s price started a
two-decade skid.
This Century:
By April 2001, gold was trading at a mere $256 per ounce. In the past twenty years, the world had become a very different
place. Since the 1980’s, the Soviet Union and eastern bloc countries had fallen. High inflation and stagflation that had once
wreaked havoc on economies had been successfully controlled by the Federal Reserve and other central bankers for over a
decade. Communication, through computers, cell phones and fiber optic networks, allowed virtually instant information
across the world. The Dow Jones Industrial average had increased ten
Historically, gold has worked
fold since the early 1980’s. The future looked bright. The stock and
bond markets both had done well for the past twenty years, and in that
well as a long term inflation
environment, gold was out of favor.
“
”
hedge and as an investment to
Within six months, by late 2001, future expectations across the world
protect against a crisis.
changed. The past nine years are scarred with negative economic news.
Dotcom bubble burst, 9/11, and wars in Iraq and Afghanistan, were
followed by a housing and mortgage bubble burst and a Madoff scandal. A sovereign debt crisis in Europe and QE2 are still
underway. How will they be viewed in a few years? The future today looks much dimmer than it did nine years ago, and in that
environment, gold looks bright.
Future:
Historically, gold has worked well as a long term inflation hedge and as an investment to protect against a crisis. Looking back
to 1981, the future turned out brighter than expected. The past ten years, however, showed a different path for both gold and
the economy. As a diversifier, gold has worked well to hedge investments in the stock, bond and real estate markets. As an
outright investment strategy, like most other single investments, it either is a home run or a strike out.
The precious metals market is speculative, unregulated and volatile and prices for these items may rise or fall over time. These
investments may not be suitable for all investors, and there is no guarantee that any investment will be able to sell for a profit in
the future.
Glastonbury ~ Avon ~ East Lyme ~ 2~
LookingForward
New College Savings Plan Available
In Connecticut
• Economic •
Update
I
Matthew Somberg
• As of 2/28/11 the US Equity
markets have been positive for
2011. The S&P 500 has gained
4.95%; the DOW Jones 4.78%; and
the NASDAQ Composite +4.83%
since the beginning of the year.
• Following periods of political
unrest in the Middle East, oil
prices reached $100 per barrel.
Higher commodity prices threaten
to stall a U.S. economic recovery.
• A Noteworthy Quote
“Following the loss of about
8-3/4 million jobs from 2008
through 2009, private-sector
employment expanded by a little
more than 1 million in 2010.
However, this gain was barely
sufficient to accommodate the
inflow of recent graduates and
other new entrants to the labor
force and, therefore, not enough
to significantly erode the wide
margin of slack that remains in
our labor market. Notable declines
in the unemployment rate in
December and January, together
with improvement in indicators
of job openings and firms’ hiring
plans, do provide some grounds
for optimism on the employment
front. Even so, with output growth
likely to be moderate for a while
and with employers reportedly still
reluctant to add to their payrolls,
it will be several years before the
unemployment rate has returned to
a more normal level. Until we see
a sustained period of stronger job
creation, we cannot consider the
recovery to be truly established.”
- Federal Reserve Chairman Ben
Bernanke ‘February 2011’
Glastonbury ~ Avon ~ East Lyme n November, 2010, The State of Connecticut introduced a new
version of the Connecticut Higher Education Trust (CHET) to
be incorporated through Financial Advisors. The new version is
in partnership with The Hartford and is called CHET ADVISOR.
Written by
Matthew Somberg
Previously, the CHET Plan, was available only through TIAACREF and did not incorporate the advice of Financial Advisors.
The basics of the program remain the same: Authorized by the Connecticut General
Assembly, which established the Trust in 1997, CHET is the direct-sold 529-college
savings plan for Connecticut. This state-sponsored education savings program
was created specifically for the purpose of helping Connecticut families save aftertax dollars for future college expenses but does not require the child to attend a
Connecticut college or university.
Like any other 529 Plan, when you contribute to CHET, your account earnings
have the opportunity to grow federal and Connecticut income tax-deferred until
withdrawn. The earnings portion of any distributions used to pay for qualified
higher education expenses will be free from federal and Connecticut income tax.
“
The plan provides the
opportunity for a Connecticut
Previously, the CHET Plan,
Income Tax Deduction: The
was available only through
amount contributed by a
TIAA-CREF and did not
Connecticut taxpayer to CHET
accounts during a tax year is
incorporate the advice of
deductible from Connecticut
Financial Advisors.
adjusted gross income in an
amount not to exceed $5,000 for
a single return or $10,000 for a joint return for that tax year. For example, if you are
a married couple and pay 4% CT state income tax and you contribute $10,000 to the
CHET Plan in 2011 – you will be able to reduce your CT State Income tax by $400
(10,000 X 4%). As a second example, if you contribute $1,000 to the CHET plan and
pay 4% CT State Income tax you will save yourself $40 in CT Tax. This deduction
is only available to CT residents and is the main difference between the CHET Plan
and another 529 Plan.
”
Should you contribute and should you open up a new 529 account with CHET
ADVISOR if you already have one open? Each client situation is unique - the
benefit of the CHET ADVISOR Plan if you are a Connecticut resident is the CT
Tax deduction. To learn more about saving for college and the benefits of CHET
ADVISOR please contact your financial advisor for a personalized discussion.
Continued on page 4
~ 3~
LookingForward
J
• In the News•
oshua B. Gottfried and Matthew A. Somberg,
Principals and Founding Partners, of Levine,
Gottfried & Somberg LLC have been named
Connecticut 2010 Five Star Wealth Managers
by Crescendo Business Services1. Showcased
in Connecticut Magazine December 2010 issue,
Gottfried and Somberg were named to list from
surveys sent to over 113,000 high net worth
households as well as over 16,300 FINRA registered
representatives within Connecticut.
“Receiving recognition is always a nice feeling,” said
Matthew A. Somberg, AIF®, Principal and Founding
Partner, Levine, Gottfried & Somberg, LLC, “But
receiving recognition from existing clients, the
people who we work hard for every day, makes this
more special.”
Both Joshua and Matthew are investment advisor
representatives of Commonwealth Financial
Network, member FINRA/SIPC, a Registered
Investment Adviser and independent broker/dealer
with a national network of more than 1,300 financial
professionals, which has been recognized ten times
as Broker/Dealer of the Year2 by Investment Advisor
magazine.
M
atthew Somberg was quoted in the March
issue of Financial Planning Magazine in
an article regarding a change to Social
Security rules governing early benefits which could
hamper retirement planning strategies.
1- Survey recipients were asked to select only wealth managers whom
they knew through personal experience, and to evaluate them based
upon nine criteria: customer service, integrity, knowledge/expertise,
communication, value for fee charged, meeting of financial objectives,
post-sale-service, quality of recommendations and overall satisfaction.
No fee is paid to be included in the research or on the final list. The
overall evaluation score reflects an average of all respondents and may
not be representative of any one client’s evaluation. The award is not
indicative of the wealth manager’s future performance.
2- Commonwealth was named the top broker/dealer in its division in
1991, 1992, 1994, 1996, 1997, 1998, 1999, 2001, 2002, and 2005. This is
based on financial advisors rating their own broker/dealers for service.
•
Glastonbury ~ Avon ~ East Lyme • Upcoming Events •
Educator Retirement Workshops
3/10, 6p-8p Groton, CT—Mystic Marriott
3/16, 6p-8p Canton, CT—La Trattoria
3/22, 6p-8p Westbrook, CT—Waters Edge
3/23, 6p-8p Glastonbury, CT—The Colonnade
The workshops help educators nearing retirement learn
the ins and outs of the Teacher Retirement System. We
discuss pension and survivor options, health insurance
options, and how to choreograph the teacher retirement
system with retirement income planning.
To attend, please contact Mary LeBlanc at LG&S
at (860)430-9104 x 200 or email her at mleblanc@
lgsfinancial.com. Please let Mary know if you have
a friend or colleague who would also like to attend a
seminar.
6/6 - 6/26 Canned Food Drive—Anyone wishing to
donate should bring non-perishable food items to our
Glastonbury office between 8:30am and 5:30 pm Monday
through Friday
6/26, 2pm-6pm—Client Appreciation Picnic at our
Glastonbury office
•
New College Savings Plan Available In Connecticut
Continued from page 3
The fees, expenses and features of 529 plans can vary from
state to state. 529 plans involve investment risk, including the possible loss
of funds. There is no guarantee a college-funding goal will
be met. Earnings must be used to pay for qualified higher
education expenses to be federally tax-free. The earnings
portion of a nonqualified withdrawal will be subject to
ordinary income tax at the recipient’s marginal rate and
subject to a 10% penalty. By investing in a Plan outside
your State of residence, you may lose any State tax benefits. 529 plans are subject to enrollment, maintenance and
administration/management fees and expenses.
~ 4~
LookingForward
Investing in ‘Alternatives’
For the average retail investor, a
traditional portfolio of stocks, bonds
and cash may provide satisfactory
returns over time.
B
ut with the subprime mortgage crisis
fresh in investor’s heads, Main Street
Dan Heffernan
has been clamoring for investments that
offer additional diversification and low correlation to the equity
markets. Although not suitable for all investors as they involve
substantial risk, for many the answer is alternative investments.
Retail investors now have the ability to invest in mutual funds
employing various alternative investment strategies, at one time
only offered institutional and high net worth clients. As a portion
of the overall portfolio, these alternatives act as a complement to
the long equity and bond positions that are the core holdings of
many portfolios. Below are some examples of such investments.
Of course there is no guarantee that any investment will achieve
its objectives, generate profits or avoid losses.
Written by
Real Estate – As home owners, most everyone knows what
real estate is. But real estate is an integral piece of a diversified
investment portfolio. Although out of favor due to the sub-prime
mortgage crisis, real estate has been considered a great hedge
against inflation and has shown little correlation to the stock
market over time. I am not suggesting you need to go out and buy
a rental property in a local neighborhood. Instead, you can own
mutual funds that invest in income-producing common stocks of
publicly traded companies engaged in the real estate industry. See
First American Real Estate Securities (FARCX) as an example.
Real estate investments are subject to a high degree of risk
because of general economic or local market conditions; changes
in supply or demand; competing properties in an area; changes in
interest rates; and changes in tax, real estate, environmental, or
zoning laws and regulations. • F.Y.I. •
Kim Skerry—the Director
of Operations for Matthew
Somberg and Joshua
Gottfried—is also a licensed
property and casualty insurance
agent in the states of CT and
RI. Kim is an independent
agent affiliated with 12 different insurance
companies. Kim would be happy to conduct a nocost review of your current homeowners and auto
insurance and let you know how your coverage
and premiums compare to the 12 other companies
she is licensed with. If you’d like Kim to conduct a
no-cost review, please call her at extension 214 or
email her at [email protected]
• In the Community •
In December, 2010, David Levine, Joshua Gottfried
& Matthew Somberg, principals and founding
partners along with members of their staff of
Levine, Gottfried and Somberg LLC delivered
approximately 500 books appropriate for
elementary school children at Naubuc Elementary
School in Glastonbury. The books were donated
by their clients through their LGS Book drive
which started in November 2010.This was the first
annual LG&S book drive and the plan is for each
year to donate books to a different elementary
school. Special thanks to May Brockway of
Norwich for her donation of over 300 books.
Managed Futures – Managed futures can be quite enigmatic to
the average investor. For many years, managed futures strategies
were only available to institutional and high net worth investors.
Money managers dealing in managed futures employ various
proprietary trading systems utilizing futures contracts, for
Continued on page 6
Glastonbury ~ Avon ~ East Lyme ~ 5~
LookingForward
Investing in ‘Alternatives’
Continued from page 5
example, to create profits from the ever changing price of commodities. These contracts can be on commodities such as
cotton, coffee & sugar (just to name a few). Research has shown that combining a portfolio of traditional asset classes (stocks
and bonds) with managed futures can effectively lower the overall risk of a portfolio. Increased demand by Main Street for
access to such investments has led to the creation of mutual funds that invest in managed futures. See Altegris Managed
Futures Strategy (MFTAX) as an example.
Futures trading is speculative, involves substantial risk, and is not suitable for all investors. These risks include: potential loss
of your total investment, funds are highly leveraged, your investment could be illiquid, performance is expected to be volatile,
an investment in the fund may not diversify an overall portfolio, and increased competition from other trend-following
traders could reduce the fund’s profitability.
Market Neutral and Long-Short Strategies – Although they differ in their implementation, both market neutral and
long-short strategies have the same basic premise: the strategies have allowed fund managers to profit from both a long
(optimistic) and short (pessimistic) views about the direction of an
underlying investment or the market as a whole. While there is no
Retail investors now have the
single accepted method to achieve the ultimate outcome of ‘absolute
ability to invest in mutual funds
return’, shorting strategies are commonly used within the funds.
This ultimately gives the fund manager more flexibility to capitalize
employing various alternative
on volatile market conditions, and thus has the potential to give
investment strategies...
retail investors an avenue to profit as well. See Highbridge Statistical
Market Neutral (HSKSX) as an example.
“
”
Long-Short Funds use short selling which incurs significant additional risk. Theoretically, stocks sold short have the risk of
unlimited losses.
Commodities - Commodities is a general term. From the food we eat, to gold and silver, to the gas we use to heat our homes,
commodities can play an integral part in our daily lives. They are also traded on global
markets all over the world. There can be potential for wild fluctuations in commodity
prices. Using derivatives, commodity traders create leverage to profit from exposure
to commodities markets rather than owning the commodity itself. Like managed
futures, commodities can be a great hedge against inflation and seek to reduce
the overall risk of a portfolio through increased diversification. See Credit Suisse
Josh Gottfried and Matt Somberg
Commodity Return Strategy (CRSOX) as an example.
completed the ING Hartford Half
• Around •
the Office
The use of derivatives entails substantial risks including loss of principal, lack of a
secondary market, increased volatility, correlation risk, liquidity risk, interest-rate
risk, market risk, credit risk, valuation risk and tax risk.
Marathon on October 9, 2010.
All funds present risks. Investors should consider the investment objectives, risks,
charges and expenses of the fund carefully before investing. Investment return and
principal value of an investment will fluctuate, and shares, when redeemed, may be
worth more or less than their original cost. Past performance is no guarantee of future
results. For a prospectus containing this and other information on a fund, call your
financial advisor. Please read the prospectus carefully prior to investing.
Glastonbury ~ Avon ~ East Lyme ~ 6~
LookingForward
Obamacare Takes A Bite Out of the Donut Hole
A
ssuming the new Congress doesn’t repeal the “Patient Protection and Affordable Care Act of 2010,”
the so-called “Donut Hole” in Medicare Part D prescription drug coverage will gradually be phased
out over the next 10 years, so that by 2020 it will be completely gone. If you’re not quite sure what
that means, join the crowd. It’s a complicated subject.
Let’s begin with the basics. Medicare was initially passed into law in 1965, as part of President Lyndon B.
Johnson’s vision of a “Great Society.” There were two parts to Medicare – Part A and Part B, and we still have
both of them today. Part A is free, as long as you’re at least 65 years old, and have accumulated 40 or more
quarters of social security/Medicare coverage, or are married to someone who has. (There are also a handful
of exceptions to that rule, but we’ll save those for another discussion.) Part A, in a nutshell, pays for hospitalization expenses.
Written by
Jim DeMartino
Part B pays your doctor bills. To enroll in Part B, you need to pay a monthly premium, which today costs a little over $115
per month, unless your adjusted gross income is fairly high, in which case you can expect to pay considerably more for it.
This monthly premium is deducted automatically from your social security benefit. Or, if you’ve just turned 65, but decided
to wait until your full retirement age of 66 (or later) to turn on your social security benefits, then Medicare will bill you
quarterly, 3 months at a time. After you start collecting social security, your Medicare Part B premiums will switch over, and
be automatically deducted from your social security benefit each month.
“
Prior to 2003, a huge shortcoming of Medicare was the lack of any prescription drug coverage. George W. Bush changed
all that, when he signed into law the “Medicare Prescription Drug,
...the Donut Hole will be gone,
Improvement and Modernization Act of 2003.” That was the
beginning of Medicare Part D. It was also the beginning of the
nothing more than a curious
“Donut Hole.”
historical footnote.
”
Here’s how the Donut Hole works. Under Medicare Part D – for
a monthly premium of about $37 – you pay 100% of the cost of first $310 of your prescription drugs each year. That’s your
annual deductible. After that, you pay 25% of the cost of your prescription drugs, and Medicare pays the other 75%, up until
you reach $2,840 per year. There is also “catastrophic coverage” built into Medicare Part D, so that any annual prescription
drug costs above $4,550 are 95% covered by Medicare – all you have to pay is 5% if and when you reach that level.
So what happens in between? What happens if your annual prescription drug costs are more than $2,840? Who pays once
you’re above $2,840, but still below $4,550? The answer to that is . . . . . you do, because now you’ve just entered the “Donut
Hole.” That’s right, once you hit $2,840, and the whole way up to $4,550, you get to pay 100%, while Medicare pays zero. The
Donut Hole is not a fun place to be.
And that’s the way it stayed, from 2003 right up until December 31, 2010. Once the patient entered the Donut Hole, the
patient had to pay 100% of the costs.
But a few weeks ago, all of that changed. On January 1, 2011, thanks to last year’s health reform, the Donut Hole just
underwent a huge change – it went from the patient paying 100% of costs inside the Donut Hole, down to 50%. The other
50% is split between Medicare and the pharmaceutical company. That’s huge, going from 100% down to 50%. And in 2012,
the percentage the patient pays will go down a little bit more. In 2013 it gets a little better than 2012, and so on, each year up
until 2020, at which point the patient will be paying just 25%. When that time comes, the patient will, after satisfying their
annual deductible, pay 25% for all prescription drugs, the whole way up to the catastrophic limit ($4,550). In effect, the Donut
Hole will be gone, nothing more than a curious historical footnote.
At least, that’s the plan. A lot could happen between now and 2020.
Glastonbury ~ Avon ~ East Lyme ~ 7~
LookingForward
Contact Us
David Levine, ext 218
[email protected]
Joshua Gottfried, ext. 265
[email protected]
Matthew Somberg, ext 263
[email protected]
Daniel Heffernan, ext. 203
[email protected]
James DeMartino, ext. 255
[email protected]
Mary Leblanc, ext. 200
[email protected]
Kim Skerry, ext. 214
[email protected]
Linda Levine, ext. 229
[email protected]
TELEPHONE:
OFFICE LOCATIONS:
(860) 430-9104
340 Hebron Avenue
Glastonbury, CT 06033
FAX:
(860) 430-9120
195 West Main Street
Avon, CT 06001
15 Chesterfield Road
East Lyme, CT 06333
Securities and advisory services offered through Commonwealth Financial Network,
Member FINRA/SIPC, a Registered Investment Adviser.
Glastonbury ~ Avon ~ East Lyme ~ 8~