December 2011Issue 2.0

EDITOR: Lew Jones TUCKER ADVISORY GROUP, INC. 800.734.0076

AS EUROPE SNEEZES, WILL THE WORLD CATCH COLD?

As the end of 2011 approaches, the debt crises in Europe are beginning to cast a pall on the region’s prospects for recovery. The culprit is the increasing costs of borrowing money for central governments. The elephant in the room has so far been Greece, but Italy is facing its own 900 lb. gorilla, driven downward by market forces that recently resulted in the resignation of its Prime Minister.

So far, France and Germany have been the bright spots in the European debt crisis, at least as far as continued growth is concerned. But even these relatively upbeat economies are not immune. “The concern is spilling over to the other candidates that could be next for the domino effect behind Italy,” said Millan Mulraine, an interest rate strategist at TD Securities in New York. “The ubiquitous nature of the increase in yields suggests that the problem is spreading well beyond the troubled peripheral countries.”

In recent weeks, the European Central Bank has been regularly buying government bonds to try to push down interest rates. These moves are an attempt to counter the upward pressure on those rates brought about by nervous investors concerned about the direction European governments are going as they try to reign in their economies’ ballooning debt.

Will it drag Europe into a new recession? Only time will tell.

“Signs of Broad Contagion in Europe as Growth Slows”New York Times Global Business, 09/15/2011

December 2011Issue 2.0

NO MORE PAPER SAVINGS BONDS

Another casualty of the digital revolution: Some popular forms of U.S. Savings Bonds. As of December 31, 2011, series EE and I bonds cannot be readily purchased in paper form. According to Rachel Louise Ensign, writing in the Wall Street Journal, “Grandma’s gift of choice is going digital.”

Seeing this quote sparked a memory, so I went digging in my file cabinet, and sure enough, found two US Savings bonds made out in the names of two of my daughters. They were purchased back in 1972 by my late mother, their grandmother! The girls (and I) had surely forgotten about them.

If Mom were alive today, she would be forced to go online to purchase the bonds, and then could only print out a gift certificate, not the actual bond, which will exist only in cyberspace. Not only that, but in Mom’s day, she was able to buy the bonds for less than their face value, which is no longer the case.

If you are determined to buy some of these bonds for your own grandchildren, you’ll need to go to TreasuryDirect.com and provide your name, social security number and bank account information. In addition, your recipient must have an account as well!

The move to paperless bonds is expected to save the government $120 million over the next five years, according to the Bureau of the Public Debt.

The bright spot for my daughters is that now that I’ve rediscovered the $25 E bonds, their present worth (It’s been a while since 1972) is around $126. Not a lot of money, but I suspect they will find a use for it.

“Savings Bond Goes Digital” Denver Post/Wall Street Journal, 11/20/11

STILL FEELING YOUNG? YOU’D BETTER BE!

Retirement is looking further away than ever for many of the baby boomers. The iconic retirement age of 65 is being stretched ever further, according to a Wells Fargo Bank study recently released. A full three quarters of middle- class Americans now say they plan to work beyond 65. Says Joseph Ready, an executive vice president of Wells Fargo Institutional Retirement & Trust, “It’s really setting in with a lot of people that they’re under-saved and so it might be hard to maintain their lifestyle.”

The answer for many is to continue their working lives well into their 70s, with one in four anticipating working all the way up to age 80. This, however, according to Ready, is fraught with danger, since health can become an issue. “Will they even be able to work then?” he says, especially considering that the risks of ailments such as arthritis, Alzheimer’s, and other forms of dementia skyrocket with age.

You undoubtedly have clients or prospects who can directly relate to this. Tucker Advisory Group can assist you in zeroing in on the most helpful approaches to take. Call your Business Advisor for help with this.

“80 is the New 65”SmartMoney.com, 11/16/11

December 2011Issue 2.0

HISTORICAL PERSPECTIVE:

HISTORY OF THE CORPORATION

We hear a lot these days from the Occupy Wall Street demonstrators about “evil” corporations and the “greed” they so abhor. Therefore, this might be a good time to have a look at just what corporations are, and how they came about.

Corporations generally do four things: They limit the liability of their investors, they provide centralized management, their ownership is transferable, and they have a legal personality.

Some of the first companies to have all four of these characteristics were those chartered by various European governments, starting in the 1500s. Examples include the Dutch East India Company, the English company of the same name, and later, on the North American continent, entities such as the Hudson’s Bay Company. A key difference between these early state-chartered corporations and those in use today: These companies were largely anti-competitive, constituting a monopoly position which was enforced by the government involved.

The inherent unfairness tended to build resentment in the general population against the concept. (Even with all the changes that have evolved over the centuries in government oversight of the corporate form, this resentment lives on, as evidenced by the attitudes of the “Occupy” protestors.)

Some of the concepts that characterize a corporation have their roots in early Roman history, and a case can even be made that in ancient India, there were business structures with similar attributes. The Islamic invasions of around 1000 A.D. halted that idea, however.

One of the slowest to fully develop of the corporation’s concepts was that of limited liability. In the United States, for instance, it was not until around 1860 that most of the states of that day had approved the notion of limiting an investor’s liability to only the amount of money invested. Once this was established, the growth of corporations — and the U.S. economy — quickly followed. Today, the lion’s share of the world’s business is conducted by corporations. Are they really evil? It’s hard to make the case, since your school teacher probably owns oil company stocks and your pastor’s 401k undoubtedly includes shares in uranium mills.

“Corporation or Limited Liability Company” Queen’s University Belfast

“The Economic History of the Corporate Form In Ancient India”law.yale.edu

December 2011Issue 2.0

FOOD STAMPS SNAPSHOT: WAY UP!

Whether it’s the economy or other factors, the government’s food stamp program, now known as SNAP (Supplemental Nutritional Assistance Program) has burgeoned in the last few years, doubling in size since 2007. The Department of Agriculture, which administers the program, says the increase is “likely attributable to deterioration of the economy, expansions in SNAP eligibility, and continued outreach efforts.”

Some of this is due to the department’s expansion of the base of clientele. Included in this are the easing of work requirements and increases in income eligibility. In other words, one can now make more and still be able to get on the program. Also, maximum benefits have been raised as a consequence of the American Recovery and Reinvestment Act. This legislation alone, beginning in 2008, resulted in a 13.6 percent increase in maximum benefits.

According to Casey B. Mulligan, economics professor at the University of Chicago, “The poor economy is not the only reason that safety-net programs are spending more. The food stamp program is another example of a safety-net program that is significantly more costly than it was before the recession began.”

Would the recession alone have caused an increase in the food stamp program? Mulligan says yes, “The program’s spending would certainly have grown if benefit rules had remained as they were in 2007, but much less than it actually did.”

So, next time you’re in the checkout line, smile at the person next to you. As a taxpayer, you may be helping with their grocery bill.

“The Sharp Increase in the Food Stamps Program”New York Times Economix, 11/16/11

“SMUGGLER’S CONTRABAND”:

SHAMPOOThe next time you feel inconvenienced by the TSA requirements regarding packing of your cosmetics and personal care items, consider the ordeal of a Darwin, Australia man. When he tried to re-enter the country one day last year, authorities took one look at his two shampoo bottles and hit the panic button, suspecting the contents to be liquid Ecstasy. Neil Parry was arrested at the airport, thrown in jail, and his boat and the homes of two of his friends were searched. The searches yielded nothing.

Still not convinced, investigators had the bottles’ contents chemically analyzed. What they finally came up with was Pantene Pro-V shampoo and conditioner. Exactly what the labels said!

Parry had the last laugh, however. Australian Customs and Border Protection recently awarded him $100,000, and said in a statement that it was changing its procedures in view of the incident.

Good thing he wasn’t carrying dental floss. It might have been considered a weapon with which to strangle a flight crew member!

“Australian gets $100,000 after shampoo found clean”Associated Press, 11/21/11