A FDIC CHEAT SHEET - Leonetti & Associates LLC

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REVIEW & OUTLOOK By Craig T. Johnson, Portfolio Manager As 2012 gets underway, there is little regret by many in the financial markets that 2011 is behind us. The past year offered an extremely difficult environment for the financial markets. Not only did the traditional institutional investor struggle with the market’s volatility, but the hedge fund industry could not find a lifeline either. The rapid up and down movements of the market continually left one trader after another on the wrong side of the market as the next market direction got underway. Commodity traders also experienced rapid turnaround, as areas of strength quickly became areas of weakness. The fixed income market was attractive, but the rapid decline in yields provided fixed income buyers with more risk and less reward. An abundance of reasons exist for the market’s extreme volatility, but none stands out more than the financial debt crisis that gripped the European Union throughout the year. Greece seemed to carry much of the blame along with Portugal, Italy, Ireland and Spain. The real problems came to light when it was realized how intertwined the other countries were and their degree of exposure to not just Greece, but also to the other financially weak members of the European Union. In addition, due to loans given to European countries the major (and I am sure minor) banks in Europe were even more exposed to the financial difficulties than were the countries making up the European Union. An unwanted story developed that began to reflect our own financial crisis in 2007-2009, as it appeared the European Union was headed for a similar fate. One item that made this potential similarity very worrisome domestically was that U.S. money market funds were holding commercial paper from the exposed European banks, a fact that led to fears of a possible breakdown of the money market fund industry that we nearly experienced a couple of years ago. A rapid reduction by the money market funds in those holdings appears to have reduced that concern. The global economy faced other difficulties in 2011. Cracks began to show in what had previously been viewed as the invincible Chinese economy: a continual battle throughout the year with inflation, skyrocketing real estate prices, a slowing economic growth rate and higher labor costs made for a difficult year for China. Brazil felt the pinch from the Chinese economy, as it had been a major exporter of raw materials to China. India, which had also been on a strong growth trajectory, experienced significant budget deficits, high inflation and slowing growth. On March 11, Japan was plagued by the Tohoku Earthquake and the tragic impact of the tsunami that followed in its wake. The disaster, in addition to the human and economic toll, also caused significant damage to three nuclear reactors and forced the evacuation of hundreds of thousands of people from their homes. The overall impact to Japan, which is the world’s third largest economy, is still being felt. The World Bank has estimated the cost of the damage to be about $235 billion, making it the most costly natural disaster in world history. In the United States, our economy also experienced slow growth. Stronger growth is needed to reduce the number of people that are out of work and to get the overall economy back on a positive track. Home prices have continued to decline, as high inventories and a lack of demand have hurt new and existing home sales. Zero or near zero interest rates created by the Federal Reserve to stabilize the banking industry have left depositors in saving accounts, CDs and money market funds with a miniscule return on their money. The loss of interest income is similar to losing a breadwinner in their family. Unfortunately, many of the people being Continued on page 4... Keep Up-To-Date With Portfolio Manager Commentary E-Mails Each Monday and once or twice during the week, Craig Johnson publishes his view of the financial markets. The Weekly Commentary provides market data for the financial markets. In addition, it offers readers a review of the prior week and outlines events that may shape stock market action in the coming week. A Market Update in the middle of the week by Fixed Income Portfolio Manager Matt Varner will highlight the taxable and tax exempt fixed income markets. If you would like to have your name added to the distribution list for these timely publications, kindly e-mail us at info@leonettiassoc.com or call (847) 520-0999 to sign up. L EONETTI & ASSOCIATES, LLC T OLL-FREE (800) 454-0999 The information in this newsletter is for informational purposes only and obtained from sources deemed reliable. Its accuracy or completeness is not guaranteed and the giving of the same is not deemed a solicitation on our part with respect to the purchase or sale of any security or advisory service. Leonetti & Associates, LLC views or opinions are as of a certain date and subject to change at any time without notice. We strongly encourage readers to consult with legal or tax counsel with respect to any specific questions. Past performance is not a guarantee of future results. All investments have inherent risks. Investors may experience a loss. Clients should contact us promptly if there are any changes in their financial situation or investment objectives. Our current disclosure statement as set forth in our Form ADV is available for your review upon request. It describes our business practices, conflicts of interest, advisory services and fees. Circular 230 Notice: In accordance with Treasury Regulations which became applicable to all tax practitioners as of June 20, 2005, please note that any tax advice given herein is not intended or written to be used, and cannot be used by any taxpayer, for the purpose of (i) avoiding tax penalties or (ii) promoting, marketing or recommending to another party any transaction or matter addressed herein. W E B U I L D F I N A N C I A L S E C U R I T Y
CONTENTS MAY HAVE SHIFTED DURING FLIGHT By Sherwin M. Lesk, CFP ® , J.D., LL.M I have not flown in many years; that changed recently when, as did Billy Joel’s old friend in the song My Life, I bought a ticket to the West Coast. (As an aside, it seems to me that during my flightless years the airlines created an almost limitless number of categories of travelers entitled to priority boarding. I say “almost” in recognition of those few who, along with yours truly, made up our plane’s Seating Group 4 and boarded last). For the record, I note that my fellow passengers’ land rush-like behavior in staking out the plane’s overhead bins had not changed all that much since I last took to the friendly skies. I bring up that observation not because I feel the world needs a new kvetch what with Andy Rooney’s passing, although I do. In fact, during my recent employee review, I casually mentioned to our President that one of my 2012 goals was to assume the mantle once filled by that venerable 60 Minutes’ closer and become Leonetti’s resident curmudgeon. Rather, I bring up that observation because it provides a smooth segue for the rest of this essay. But I digress. Having safely arrived at my intended destination (thank you very much) but with the plane still on the tarmac, one of the flight attendants urged my fellow passengers and me to use caution when opening the plane’s overhead bins because – everybody now – “the bins’ contents may have shifted during flight.” Good idea. Who would want a rolling carry-on landing on their head or hitting them in the face, especially if the projectile is not their luggage? As I sat there watching the frenzied baggage retrieving and lining up in the aisle activity in front of me – remember, I was part of Seating Group 4 and was in the plane’s last row – it struck me that what I was observing was probably not all that dissimilar from the Israelites hastily grabbing their belongings and making their way out of Egypt albeit not through TSA checkpoints. But it also struck me that using caution is a good idea when dealing with items that may have shifted during life and not just during flight. You see, just as the overhead bins’ contents may shift during flight, so too may the personal items that you literally and figuratively carry as you make your way through life. Perhaps your job situation changes for the worse or you sense that it may soon do so. Maybe your once dual income household becomes forced to make do on only one salary. Perhaps the interest income on which you had counted to support part of your lifestyle proves to be less than you had envisioned. Maybe your health or that of a loved one deteriorates, leaving you to face a mountain of unexpected medical bills. Maybe your health care costs rise faster than you had anticipated, or your long-term health care insurance premiums skyrocket without warning. Perhaps you find yourself caring for an aging parent, or an adult child struggling to make ends meet. Maybe you long ago bought a prepaid college tuition contract and, having read recent news accounts, now wonder whether the contract will be there when needed. Perhaps your child turns out to have one or more disabilities that leave you facing years of unplanned-for expenses. Maybe a beloved family pet becomes infirm, simultaneously tugging at your heartstrings and your pocketbook in the process. Perhaps you finally had wills and trusts drawn up and you wonder how they have been impacted by recent law changes; Illinois changed its estate tax laws January 2011, and changed them again – for the better – December 2011. On the flip side, perhaps good fortune has smiled upon you and you are considering whether you should take advantage of what to some appears to be a still weak real estate market, or some other investment opportunity. Continuing to blindly follow a financial plan – whether it be one loosely formed in your head or formally committed to writing – after experiencing some turbulence in your life is just as dangerous, if not more so, as pulling the latch on the bin housing your luggage after throwing caution to the wind. Yes, having a suitcase land on your head can be painful and embarrassing, but that pales in comparison to unexpectedly running out of money on which to live, having to pull your kids out of college, having to drop long-term care coverage when you need it most, or being forced to sell the home you cherish. When you get buffeted by wind currents mid-flight, the captain turns on the fasten seat belt sign. When you get buffeted by the unexpected as your life unfolds, steady yourself. If things have changed for you, take the time necessary to think carefully about whether and how those changes may impact you now and in the future. You will not get any frequent flyer miles for your effort, but you will get a lot more mileage out of your financial plan. W E B U I L D F I N A N C I A L S E C U R I T Y
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A FDIC CHEAT SHEET - Leonetti & Associates LLC

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