First Quarter, 2010
My Comments and Opinions

The Economy

In an article in the April 12, 2010 edition of the Washington Post, Robert Samuelson pointed out that gloom and doom is still popular, but may not reflect the reality of economic growth which is taking place in America. Quoting Mr. Samuelson: "When things were going well, it was said that the United States enjoyed a Goldilocks Economy. Growth was fast enough to produce jobs and higher incomes but not so fast as to generate inflation. In the same vein, it might be said that today we have an Oscar-the-Grouch Economy. Good news is discounted. Pessimism is trendy. Growth is considered too feeble to help real people. But there is some genuine good news -- and it deserves attention.

"It's most obvious in the labor market. The increase of 162,000 payroll jobs in March was the largest in three years. Layoffs have subsided to pre-recession levels. Job openings have ended their precipitous decline. Surveys suggest more gains. A poll of the corporate chief executives in the Business Roundtable found that 29 percent expect to increase jobs over the next six months, and only 21 percent expect to cut; not since the fall of 2008 have more CEOs expected to hire than fire. In March, the National Federation of Independent Business, a trade group for small firms, found no net job cuts -- the first time that's happened since April 2008."

Also from the Washington Post, economist Nariman Behravesh of IHS Global Insight, a forecasting firm, said that U.S. businesses are carrying historically high levels of cash which can be put to work once optimism overcomes pessimism. He further reported that in 2009 business cash flow equaled 11 percent of gross domestic product, the highest in at least half a century. As companies gain confidence that the worst is past, they have the cash "to make a bet on recovery by restarting canceled investment projects" says Behravesh. IHS Global Insight expects business spending on machinery, computers and software to increase 9.6 percent in 2010.

On Tuesday, April 1^st, the Dow Jones Industrial Average reached 10,907.42, an 18-month high. Our U.S. Department of Commerce reported that the savings rate fell to 3.1% in February from 3.5% in January and that consumers boosted their spending by 0.3% in February, the fifth-straight monthly gain. After-tax corporate profits in the fourth quarter of 2009 amounted to 7.6% of U.S. gross domestic product, up from 6.3% a year earlier. This increase in profits is a good sign that companies might start hiring again soon. The Conference Board's gauge of consumer confidence rose to 52.5 in March from 46.4 in February. The confidence index, which regained about half of the 11 points it had lost in February, has been recovering slowly since reaching a record low of 25.3 in February 2009. While consumers' outlook on their present situation and expectations for the future both showed improvement, March's number is still a long way from a reading of 90, which is considered healthy.

The Standard & Poor's/Case-Shiller Home Price Index, reflecting home prices in 20 major metropolitan areas, increased 0.3% in January from a month earlier. The housing report showed that much of the price improvement has been in the nation's most battered markets where home sales and prices had fallen the most. While the U.S. is making strides, the unemployment rate in the 16 countries that make up the Eurozone rose to 10% in February, from 9.9% in the previous three months. The rate is the highest since August 1998, according to the European Union statistics agency Eurostat.

Legislation

On March 23^rd President Obama signed into law the largest and broadest new social program since President Lyndon Johnson established Medicare in 1965 and arguably since President Franklin Roosevelt's Administration created Social Security 1935. It occurred to me that this legislation and the Hoover (Boulder) Dam on the Nevada-Arizona border have a few things in common. Both projects took years from conception to completion. Lake Mead, the vast 110 mile-long reservoir, required about four years before it was filled. The new law will not be fully operational until 2014. Taxes will be assessed for four years before it's completely implemented. Both Hoover Dam and the Health Care Bill were created in recessions - the Dam during the Great Depression of the 1930s and the Health Care Bill during the Great Recession of 2008-2010.

Hoover Dam has more than paid for itself over the past 75 years by selling electricity and preventing floods. It's still considered one of the man-made Wonders of the Modern World. The Health Bill may or may not produce as promised. Here's the recipe for this new law: 2,400 pages of complexity, numerous additions, deletions, parliamentary maneuvering, notorious backroom late night deals, and political vituperations galore. Bake in the dark for a few weeks then take a vote (which was very partisan and close). Voila! A massive new legislative tour de force which many hope will produce the greatest good for the greatest number of us. The question yet remains, however. Will the promised benefits flow to us or will they be dammed somewhere downstream?

Quote Of The Day:

"Let me get this straight…we've passed a health care plan… written by a committee whose chairman says he doesn't understand it,…passed by a Congress that hasn't read it …but exempts themselves from it, …signed by a president who also hasn't read it …and who smokes, …with funding administered by a treasury chief who didn't pay his taxes,… all to be overseen by a surgeon general who is overweight, …and financed by a country that's broke. What could possibly go wrong?"…Anonymous of the Internet.

Here are just a few ideas that I'd like to see included in an affordable national health care program.

1. Tort Reform Part One - Limit court settlements to the costs of health care required plus lost wages for the time the patient is out of work. An appropriate amount for pain and suffering must be included, but not an astronomical amount. Limit court settlements to the actuarial life value of the worker. To simplify, the actuarial life value is the amount above which a life insurance company will not issue a life insurance policy or a disability income policy. For example, a 55 year-old worker in a specific industry earning $60,000 per annum would be expected to live perhaps another twenty to thirty years. Ten to fifteen of those years might be income producing before retirement. Depending on insurability (health status), a given life insurance company might issue a life insurance policy for a certain amount which is a multiple of his/her annual income, but not $20,000,000. The same actuarial factors can be applied to injury and disability. I recommend that all of my clients who need this protection obtain it while healthy, ASAP. Do not count on the law firm of "Rassell, Dassell and Howe" if bad things happen. Be prepared - have adequate, appropriate insurance. Seek high quality, ethical legal counsel when needed. Also, be sure to have your tax returns done by professional tax preparers. Don't cut corners.
2. Tort Reform Part Two - To reduce, hopefully eliminate, all nuisance law suits and spurious class action suits brought by parasitic law firms, the plaintiff should have to pay all legal costs following Common Law practices of other nations especially if the suit be proven frivolous. If the defendant loses, the settlement should be reasonable, subject to judicial review and appeal. The defendant pays his/her/its legal costs, as does the plaintiff. No more lawsuit casinos. Too many legal actions have clogged the courts. Too much greenmail money has been paid by companies who wish to avoid the potentially crushing costs involved in defending themselves in lengthy lawsuits. In my opinion the practice of judicial attack and law firm witch hunting is immoral and against the common welfare of the nation. It seems to be a sort of legalized bribery, not only as it affects our medical professionals, but all persons, companies and organizations, even charitable ones. Our society is very dependent upon the many good lawyers who help us with life's many complexities. Only a few are wreaking havoc, in my opinion.
3. Encouraging the Best and Brightest - The Wall Street Journal on April 13th in an article written by Suzanne Sataline and Shirley S. Wang reported that the Association of American Medical Colleges warns of a shortage of 150,000 physicians over the next fifteen years. The greatest need will be new primary care doctors. How about a federal or state program designed to pay for and then forgive the entire cost of medical education (room, board and books) for all qualified American Citizens who wish to become physicians, and who promise to practice in any of the specialties deemed needed by a board of American medical societies for a specified number of years? Let's use a 15-year term of service as an example. OK, Doctor Bursa, We the People agree to forgive 1/15 of your accumulated medical school indebtedness for each year you work in Family Medicine (or whatever is most needed). So, instead of graduating from med school and passing through the gauntlet of residency with a $250,000 to $300,000 debt, you will be able to earn a decent living commensurate with your extensive medical training and experience. This method of financing is used by our military.
4. Bob's Politically Incorrect Partial Financial Fix - Here's a proposal that will never see the light of day in Washington. Scenario: A non-citizen enters the Emergency Room of any U.S. hospital. It's determined that this person is a citizen of country XYZ. The patient has no insurance, no money and can not communicate in English so is provided a translator at no cost to the alien indigent. We the taxpayers pay. (Question: Of the millions of uninsured, how many are illegal aliens? And I don't mean from Mars.) Almost every American agrees that we have an absolute responsibility to treat all who seek medical help. This help is never refused by any hospital. Now, here's my partial financial fix: Once the nationality of the patient is determined, the hospital/health provider sends the bill to the local embassy or consulate of country XYZ for services provided. If the bill goes unpaid, the bill goes to the U.S. State Department. It's here that the U.S. reduces the amount of Foreign Aid paid to that country of origin so we can reimburse our American health providers at full rates, unlike Medicare/Medicaid, which only reimburses the health provider part of the cost of treatment. If no country of origin can be determined, the Federal Government will deduct the bill proportionally from all countries getting Foreign Aid from us. How long can America be the soft touch patsy for Planet Earth?
5. Portability - For decades the regulation of insurance has been the purview of the individual states. Each state has a Commissioner of Insurance. Insurance rates must be approved by each regulator for each of the companies operating within the borders of the states where coverage is sold. All fifty Insurance Commissioners are members of the National Association of Insurance Commissioners (NAIC). The individual state Insurance Departments grant licenses to agents and brokers who sell insurance products to residents of their respective states. I'd like to see a national system of coverage availability so that no matter where a citizen of the United States lives (we are a very mobile society) the same rules and rates would apply for whatever policy the prospective insured person wishes to purchase. National availability based on sound actuarial research will more broadly avail the population of the purpose of insurance - spreading the risks over a greater number of individuals. This may not work for property and casualty insurance, but could work for life and health insurance policies because younger people have fewer health issues than older folks. The last time a consortium of insurance companies came together during a national emergency to offer life insurance as a united industry was the establishment of the National Service Life Insurance program for military men and women during WW II. The plan offered either a $5,000 or $10,000 term life policy at a very low cost to our military. Our securities laws cover all residents of the United States via the Securities and Exchange Commission (SEC) and FINRA even though each state has some local regulatory authority. Why not have a similar uniform national regulatory system for life and health insurance?

It's becoming clearer by the day that America is a nation which has promised much but hasn't figured out how to pay for it all. There are only 100 pennies in a dollar, not 105. You and I can make more or spend less to balance our own personal budgets. The states are obligated to balance their budgets by law. Only our Federal Government has the printing press, the paper, the ink and the willingness to create more currency while not balancing annual budgets.

This is my clarion call to you to get your family's finances in good order. Don't do what the Feds are doing. Do what makes sense. Build a financial foundation with proper insurance coverage, an accumulation of assets and a reduction of debt over time. Get your will, powers of attorney and health proxy or living will up to date. Create and fund a trust if your estate planning attorney recommends this to you. Don't follow Derrick Coleman's example. The former NBA star athlete earned over $87 million over his 15-year career. According to the Wall Street Journal's Bankruptcy Beat, April 10, 2010, Mr. Coleman is filing for bankruptcy and owes creditors $4.7 million.

Robert W. Brimmer, CFP™

DISCLOSURES

The views expressed contain certain forward-looking statements. Although they are forecasts, actual results may be meaningfully different. This material represents an assessment of the market and conditions at a particular time and is not a guarantee of future results. This information should not be relied upon by the reader as research or investment advice regarding any security in particular. The opinions expressed here are the author's and do not reflect any opinion of National Securities Corporation, my Broker/Dealer, or any of its Affiliates. The Washington Post, The Wall Street Journal, HIS Global Insight, Dow Jones price history, The Conference Board, the U.S. Dept. of Commerce, and Eurostat were used as source material for this letter. Securities offered through National Securities Corporation, Member FINRA/SIPC. Accounts are carried by National Financial Services, LLC, Member NYSE/SIPC, a Fidelity Investments® company.

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Securities offered through National Securities Corporation, Member FINRA/SIPC.
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Accounts are carried by National Financial Services LLC, Member NYSE/SIPC, a Fidelity Investments Company.