It is not just us.....
I've been trying to keep this newsletter light and its been a challenge to say the least. The complexities of the E.U., United States and China are so intertwined, that this month's newsletter is dedicated to what is happening in China as a result of the economic conditions of both the United States and the E.U. First, there are many believers, including myself, that feel a recession is inevitable in Europe for 2012.
Europe is one of China's largest trading partners and a recession in Europe will have a significant impact on Chinese exports, which will have a negative impact on the Chinese economy. China may be able to control things within its own socialistic walls, but there is little it can do about the impact of other countries economical woe's. So, as many of you might read between the lines here, China is on the tail end of the U.S. recession and will likely feel the impact if the E.U. falls into a recession in 2012. The good news is, it will take China longer to gain on the U.S. GDP as the worlds largest economy. It certainly seems that nobody has been insulated from the financial difficulties of
both the United States and the E.U.
The unemployment figures that came out last week showed 8.6%. There was lots of political wrangling about why it dropped .4% from November, with some stating that people have just departed from the labor force and are essentially not looking for work. If that is true, then the actual figures have not changed at all. Additionally, the 8.6% has not been "seasonally adjusted" for the temporary positions that always are needed during the holiday season in the retail sector. http://www.phoenixtitleloan.com/
Here on our own soil there is still lots happening. From 2000 through 2011 you are sure to hear terms like "the lost decade". Statistically, equity in people's homes in 2006 was in excess of 14 trillion dollars and in 2011 that figure has dropped to just over 6 trillion. When I read that statistic, I sucked all the air in my office into my lungs. For families with most of their personal wealth in their homes, that is devastating. With the flood of bank foreclosures and bankruptcies any turn around in the real estate market is, at a minimum, several years away. My guess is at least 5 and maybe more like 7 years.
I noted in the New York Times last week that 44% of bank controlled assets are held by the 3 largest banks and 92% by the 20 largest banks. I had mixed feelings about that statistic.I've been preaching to clients, and pretty much anyone else who will listen, the following three things;
1. Keep what you have, minimize or eliminate losses
2. Make some interest on your assets
3. Spend within reason
If you follow those simple rules, you will likely never run out of money in retirement. As I predicted last month, the "Super Committee" did nothing super at all. In fact, it was all hype and zero results. Such is the status quo with everything in D.C. these days.
Warren Buffet once said about leaving an inheritance; "leave enough money to your heirs that they feel like they could do anything, but not enough money so that they feel they need to do nothing" Philanthropy at the non-billionaire level is at an all time low, which is reflective of the economy. However, if you contribute to charity on a regular basis, it might be a good idea to look at Charitable Remainder Trusts (CRT) or Donor Advised Funds (DAF). Both of these instruments can provide benefits to your charitable organizations and be reflected personally to you and your family through the obvious tax deductions that result. CRT's can be used as a tool to forego capital gain taxes on appreciated assets and can provide income to you, while also presenting significant charitable deductions for as long as 6 years in the future. DAF's provide the same type of deduction but do not allow for the distribution of income back to the donor. These are both advanced planning tools and require some expertise and guidance from an experienced advisor and attorney. There are lots of things to consider when you are evaluating these types of options.
DAF's can leave a "Legacy" for your family name and the responsibility to make the charitable decisions can be placed on your heirs, after your departure. Many people who contribute to DAF's are trying to educate the younger generation on the importance of philanthropy and supporting those who are less fortunate in this world. Over the next 40 years, almost 40 trillion dollars of wealth will be transferred to the next generation. You can imagine what a small percentage of that figure could do in a place less fortunate that the one we live in.
Safe money is still the name of the game in times like this. Guaranteed income planning is critical and can relieve some of the stress and inconsistencies of managing your money. People want to know if they have enough money, and is it going to last long enough for their retirement years.