Personally Speaking...

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CRN-1632145-103116 Doug Lemons

Beth Tinelli

Tyler D Simmons

Roy S Gilbert

Jul-Sep 2016

ployment is now at 5%.1 As

I recall from my college

economics, this may be con-

sidered at or near full em-

ployment. If we’re at or

near full employment, then

why are so many Americans

dissatisfied?

I have been continuously be-

fuddled during this Presiden-

tial election by the amount of

apparent unrest in our coun-

try, particularly given the low

unemployment rate. Accord-

ing to the September news

release by the Bureau of La-

bor Statistics (BLS), unem-Continue on page 2

Our Team

As the second half of 2016

began, the investment mar-

kets faced a litany of con-

cerns. The financial markets

struggled to recover from a

sharp sell-off in January and

February. Economists

warned that interest rates

were finally ready to rise.

Perhaps most daunting, Brit-

ish citizens had just voted to

exit the European Union.

Some “experts” were fore-

casting a dark future and

some scrambled to adjust

portfolios in reaction. While

these issues remain unset-

tled and markets could react

in many ways over the next

few months, at least for

now, the predictions of an

immediate sustained sell-off

were wrong.

We take a different ap-

Quarterly Market Commentary

Continue on page 3

increase at all.

Most Social Security recipi-

ents will see this increase

eaten up by higher premi-

ums for Medicare Part B.

Medicare beneficiaries gen-

erally have their premiums

deducted from their Social

Security checks. According

Social Security benefits will

rise a meager .3% in 2017

according to the federal

government. This will add

$5 to the average monthly

payment for retired workers

which is $1,355 before the

raise.1 Even this meager in-

crease, however, is more

than last year when Social

Security payments did not

Just Out—Social Security’s Meager Increase for 2017

Continue on page 3

Elena Sanoudakis

Inside This Issue

Personally 1

Speaking ...

Just Out—Social 1

Security’s Meager

Increase for 2017

Quarterly Market 1

Commentary

Cybersecurity 5

Update

Aesop’s Corner 6

Ira’s IRA Tip 7

Continuing 8

Education

figure.3

It seems short sighted to

me to exclude workers

from being considered un-

employed if they stopped

looking for work more

than four weeks ago, or if

they work at temporary or

part-time jobs because

they cannot find full time

employment. So I did a

little more research.

I discovered that there is

another measure of unem-

ployment called U6 which

includes all excluded cate-

gories mentioned above.

The U6 unemployment

rate includes all of those

counted in the U3 rate plus

“discouraged workers,”

“marginally attached

workers,” and those

“employed part-time for

economic reasons.”4 The

“discouraged workers” are

those who have not looked

for work in the past year

because there is no work

available or none for

which they would qualify.

The “marginally attached

workers” are those people

who have looked for work

in the past year, but not

the past four weeks. Those

who are employed part-

time for economic reasons

would like full-time work,

but can only find part-time

work. When these catego-

ries are included among

the unemployed, the per-

centage increases dramati-

Just recently, I read an

article stating that the

real unemployment in

America is much higher

than 5%. It may be as

high as 9.3 percent or

even 16.4 percent. If

true, I thought to myself,

this might explain at

least in part why there is

so much discontent in the

face of apparent rising

economic circumstances.

I decided to delve into

the matter a little further.

Here is what I found.

The unemployment fig-

ure used by the BLS is

called the U3 figure.

This is the official unem-

ployment rate. The U3

figure measures every-

one who actively sought

work within the past four

weeks.2 It doesn’t count

people who may have

sought work prior to this

four-week period. A

worker who last looked

for work two months ago

is not counted among the

unemployed. Further-

more, U3 counts among

the employed not only

full time workers, but

also part-time and tem-

porary workers, even if

the latter would prefer

full-time work. Thus, a

temporary worker or a

part-time worker who

would prefer full-time

employment is included

in the U3 employment

Page 2

cally. In September

2016, the U6 unemploy-

ment figure was 9.3%.5

The unemployment rate

is potentially even higher

than 9.3%. This is be-

cause the U6 measure

does not include those

who have not worked in

more than a year and are

not looking for work.

These individuals are no

longer considered part of

the labor force; for sta-

tistical purposes, they

are neither employed nor

unemployed.6 This group

of non-workers is start-

ing to receive more at-

tention lately. A recent

report by the Council of

Economic Advisers indi-

cates that as many as 10

million men in the prime

working ages of 25-54

have dropped out of the

workforce.7 According

to one source, if we in-

clude this group, the ac-

tual unemployment rate

may rise from 9.3% to as

high as 16.4%.8

The unemployment

measures are more com-

plicated than may appear

at first sight. While I

may have over-

simplified some of the

concepts discussed here,

the fact remains that the

5% official unemploy-

ment rate narrowly de-

fines the unemployed

population and may un-

Personally Speaking (cont. from p. 1)

derstate the true problem

of unemployment in this

country.

Does unemployment or

under-employment affect

the financial well-being

of any of your friends or

members of your family?

Let us know what you

think.

Doug Lemons, CFP® CRN-1622897-101916

1http://www.bls.gov/

news.release/pdf/

empsit.pdf 2http://www.bls.gov/cps/

cps_htgm.htm#concepts 3Ibid 4http://

www.investopedia.com/

articles/investing/080415/

true-unemployment-rate-

u6-vs-u3.asp 5http://

unemploymentdata.com/

current-u6-unemployment

-rate/ 6http://www.bls.gov/cps/

cps_htgm.htm#employed 7http://

www.npr.org/2016/09/06/

492849471/an-economic-

mystery-why-are-men-

leaving-the-workforce 8Epoch Times,

“America’s Hidden Un-

employment Crisis,” Oct.

14-20, 2016, Issue 116, p.

A8.

Page 3

Social Security’s Meager Increase (cont. from p.1)

highs as investors once

again focused on valuing

businesses rather than

uncontrollable and un-

quantifiable macroeco-

nomic issues.

Of course, macroeco-

nomic issues will likely

always be with us. As

November approaches,

we can expect a contin-

ued focus on the presi-

dential election. Like

many elections before,

this one has been conten-

tious. As the candidates

banter back-and-forth,

many people are sitting

on the edge of their seats

waiting to see the path

our country and econo-

my will take.

As always, an examina-

proach. Benjamin Gra-

ham, who Warren Buffett

has called one of the great

investment minds, once

said, “Investment is most

intelligent when it is most

businesslike.” Mr. Gra-

ham was advocating view-

ing equity investments

like owning businesses,

not just daily quotes on a

computer. He urged inves-

tors, like good business

owners, to be disciplined

and focus on the things

that can be controlled.

Those principles are core

to how we help clients

manage their money.

This disciplined approach

was rewarded during the

third quarter. Both stocks

and bonds rallied as the

chatter subsided. U.S. eq-

uities surged to all-time

security-cola-medicare-

premiums-cost-of-

living/92051378/ 2http://time.com/

money/4517168/2017-

medicare-premiums-

could-jump-20/?iid=sr-

link1

CRN-1622899-101916

COST OF DOING BUSI-

NESS – Based upon

June 2016 data, 69%

of the total employee

cost that an employer

pays in the private sec-

tor is for wages and

salaries. The other

31% is for the various

benefits that are legal-

ly required (e.g., Social

Security) or are simply

provided to attract

and retain workers

including insurance,

retirement plans and

paid leave (source:

Department of Labor).

FED ACTION - When the

Fed raised short-term

interest rates on

12/16/15, their post-

meeting press confer-

ence included a fore-

cast of 4 rate hikes in

2016 that would result

in a one percentage

point increase, i.e., 4

hikes spread over 8

scheduled meetings of

¼ of 1 percentage

point each. Through

the first 5 meetings of

2016, the Fed has not

raised rates. Meeting

# 6 of 2016 will take

place this week

(source: Federal Re-

serve).

to federal law, most Social

Security payments cannot

decline from one year to

the next. This so-called

“hold harmless” provision

means that higher Medi-

care premiums cannot re-

duce the checks for these

recipients.

Certain groups of individu-

als are not “held harmless.”

As a result of another fed-

eral law, these individuals

must bear the brunt of the

increased Medicare premi-

ums for their brethren.

These groups include (1)

individuals newly enrolling

in 2017, (2) people on

Medicare who have not yet

claimed Social Security,

(3) and higher-income sen-

iors who pay a higher pre-

mium than the base

amount. Officials have

predicted that premiums

could increase as much as

22% for these groups.2

Congress could act to pre-

vent this increase, howev-

er. Last year Congress re-

duced Part B premiums

from 52% to 16% for those

beneficiaries not held

harmless.

Stay tuned!

Doug Lemons, CFP®

1http://www.usatoday.com/

story/money/

personal-

finance/2016/10/18/social-

% Return as of 09/30/2016

Equity Indexes 3rd

Q YTD 3 Yr

S&P 500 3.9 7.8 11.2

Russell 2500 6.6 10.8 7.8

MSCI EAFE 6.4 1.7 0.5

Emerging Market 9.0 16.0 -0.6

Wilshire REIT -1.2 9.7 14.3

Bond Indexes

TIPS 1.0 7.3 2.4

Aggregate 0.5 5.8 4.0

Governments -0.3 5.0 3.3

Mortgages 0.6 3.7 3.6

Investment Corporate 1.4 9.2 5.6

Long Corporate 2.6 16.8 9.5

Corporate High-Yield 5.6 15.1 5.3

Municipals -0.3 4.0 5.5

Cash Equivalents

3-Month T-Bill 0.1 0.3 0.1

Consumer Price Index 0.4 1.0 1.0

Quarterly Commentary (cont. from p. 1)

Continue on page 4

ing wheel and the work

and ingenuity of the peo-

ple is the rail. We are cer-

tainly not saying that the

election is not important.

It is just not likely the

most important thing to

you and your long-term

goals.

Domestic Equities:

Through all of the noise,

U.S. stocks continued to

advance. Apparently, the

business of America was

stronger than the headlines

would lead one to believe.

The S&P 500 advanced

3.9% for the third quarter.

This brings the year-to-

date return to a quite re-

spectable 7.8%. Smaller

stocks, however, led the

way by jumping 6.6% for

the quarter, bringing them

up 10.8% for the year.

International Equities: Af-

ter underperforming do-

mestic stocks for several

quarters, some were start-

ing to lose faith in interna-

tional holdings. Indeed,

given the turmoil with the

European Union and the

lingering doubts regarding

Chinese growth prospects,

one might expect weak-

ness in international equi-

ties. That was not the case.

World developed markets

rose 6.4% for the quarter.

Still, the advance for the

year is a modest 1.7%.

Likewise, emerging mar-

tion of the math is help-

ful. Dr. Jonathan Lemco

studied stock market

returns from 1853-2015.

He compared the aver-

age return of equity

markets and the party

controlling the White

House. The results were

surprising. He found

that over this 162-year

period, the returns were

… identical for each

party!

How could this be? It is

widely believed that the

two parties have differ-

ent philosophies and

agendas. The answer

may be that the party in

the White House has

considerably less effect

than many believe. It

might be comparable to

a ride you might have

seen at theme parks

where children can get

in a car and go around a

track. When the steering

wheel is turned to the

left or right, the car

turns a few inches in

either direction. Upon

closer inspection, one

can see the car is actual-

ly guided by a rail run-

ning along the middle of

the track. While turning

the wheel does slightly

affect the car, the rail

ultimately defines the

path and destination.

The analogy here is that

politicians are the steer-

Page 4

kets had posted poor

relative returns for the

most recent periods.

That changed in the

third quarter when the

Emerging Markets In-

dex rose 9.0%. This

brings the year’s ad-

vance to a powerful

16.0%. Often, when a

large group of investors

loses faith in an asset

class, it can be the worst

time to abandon ship.

Fixed-Income: As the

world reassessed the

global risks of the

“Brexit” sell-off, bonds

posted muted returns.

The Barclay’s Aggre-

gate Index, a measure of

the broad bond market,

edged out a 0.5% gain

for the quarter. The year

-to-date return is still a

respectable 5.8% gain.

Municipal bonds slipped

0.3%, although they are

still up 4.0% for the

year.

We have been through a

lot over the past few

years. We have seen

multiple issues sur-

rounding European debt,

elections and referen-

dums, earthquakes and

epidemics. The list goes

on and on. This is not to

say that the world is

suddenly more danger-

ous than it has ever

been. These types of

things - and far worse -

have always been with

us. We can’t make them

go away. We can help

you manage the potential

effects on your portfolio

and move forward.

What it takes to move

forward is perspective,

solid planning and a bit

of courage. Winston

Churchill once said,

“Courage is what it takes

to stand up and speak;

courage is also what it

takes to sit down and lis-

ten.” We are committed

to doing both. We will

speak with you about

world events and the con-

struction and risks of

your portfolio. We are

also committed to listen-

ing carefully to what is

going on in your life and

with your family.

We will be here through

whatever the elections

bring and beyond. We

know there are people

attached to the money we

help manage for you.

Thank you for your confi-

dence in us. Please call if

you need anything.

CRN-1612487-100616

Quarterly Market Commentary (cont. from p. 3)

Continue on page 5

Whether you like it or not,

we live in an on-line world.

Each year, we access goods

and services using the inter-

net to a greater extent than

the year before. That’s why

we are seeing the increase in

cyber-threats… because

that’s where the money is.

It is crucial that we remain

alert and aware when access-

ing the internet. Let’s take a

look at just a few recent re-

ports:

On 9/22/16 CNET.com

reported the on the Ya-

hoo hack which oc-

curred in 2014. This

breach may have af-

fected hundreds of

millions of Yahoo

passwords;

On 8/26/16 the Wall

Street Journal reported

on new malware de-

signed to steal banking

credentials which in-

fect mobile devices

when a malicious link

in a text or ad is

clicked;

On 9/18/16 krebsonsecu-

rity.com reported that

malware on Kimpton

Hotels terminals may

Page 5

have affected debt and

credit cards of its patrons

from February through

July of this year. Kimp-

ton now shares a

”breach” history with

other hotel brands in-

cluding: Hyatt, Trump,

Hilton, Mandarin Orients

and White Lodging.

On 5/20/16 blog.aarp.org

reported that security

firm Endgame discov-

ered that hackers were

buying domain names

similar to popular web-

sites, but with a typo.

The goal is to clicking on

these bogus domains so

that ransomware can be

downloaded to overtake

the users device.

What’s the answer? New reg-

ulations may help increase se-

curity in connection with many

of the online companies we do

business with. But in the end,

we must be vigilant. The most

dangerous thing we do when

going online is click. There-

fore we need to look and think

before we click.

We, at the Family Wealth Deci-

sions Group offer an education-

al event “One Hour to Savvy

Cybersecurity.” We encour-

age all who are reading this

article to inquire about at-

tending this presentation.

CRN-1628374-102616

YOU STILL MADE MONEY - The

S&P 500 peaked on 10/09/07

before beginning a 17-month

bear market that saw the raw

index fall 57% before bottom-

ing on 3/09/09. An investment

in the S&P 500 on 10/09/07

(i.e., at the market’s top and

before the fall) is up +66.1%

(total return) as of the close of

trading on Friday 9/16/16 (i.e.,

nearly 9 years later), an annu-

alized return of +5.8% per

year. The S&P 500 consists of

stocks chosen for market size,

liquidity and industry group

representation. It is a market

value weighted index with each

stock's weight in the index pro-

portionate to its market value

(source: BTN Research).

HUGE-The US Stock Market was

worth 23.7 trillion as of

06/13/16. The S&P made up

81% of the total US stock mar-

ket capitalization as of

06/13/16, equal to 19.2 trillion.

(source BTN research)

BIGGER THAN HUGE-The US

Bond Market (including treas-

ury, municipal, mortgage, cor-

porate, and asset-backed debt)

was worth 40.7 trillion as of

06/30/2016. The US bond mar-

ket was worth 12.4 trillion on

12/31/96 (source: Securities

Industry and Financial Mar-

kets Association).

Cybersecurity Update-October 2016

Page 6

After the Lion died, all of the animals of the forest gathered together to choose another king. As a result of his silly antics, the Ape was overwhelmingly elected. The Fox was jealous of the Ape and induced the Ape through mock humility to try to access meat which the Fox knew was bait on a trap.

The trap snapped and caught the Ape’s fingers. The ashamed Ape in pain repri-mandedthe Fox for his trickery and disloyalty. The Fox replied: “You a king, and not understand a trap”.

The Moral of this Fable is: Those who cannot manage their own affairs may be unfit to manage

others.

This moral seems to offer logical and common sense advice. Do you know whether those who provide advice to you are able to manage their own affairs? It is possible (though not necessarily easy) to secure educa-tional and prior lawsuit information about the doctors, lawyers, teachers and accountants in your life. It may be much more difficult to secure dis-ciplinary histories for these professionals.

However, the educational, employment and histories of your financial advisor may be easily accessed at http://brokercheck.finra.org. Have you looked?

CRN-1628380-102616

AESOP’s CORNER

Page 7

Ira’s IRA TIP

Ira's IRA TIP

The PATH Act, signed by President Obama

on 12/18/15, may permit the rollover of IRA

funds to a SIMPLE IRA – if they have par-

ticipated in the SIMPLE IRA for at least

two years.

This flexibility was not available

previously.

Another reason to talk with your tax

advisor

CRN-1628376-102616

Ira, the IRA man

Page 8

We continually try to offer some basic education

to professionals as well as to our clients and others

who are interested.

Please examine the topics below and sign up for

any presentations that interest you. Refreshments

will be served at each presentation.

You may sign up by calling Beth Tinelli at

516-682-7564. You may also email her at

BethT@FamilyWealthDecisions.com or contact her

on our website:

http://www.familywealthdecisions.com/contact

If you would like to arrange for a private or closed

educational event, please contact us.

Seminar – Social Security Planning I

Presented by Presented by Doug Lemons, CFP®

Location: 6900 Jericho Turnpike, *Suite 101E, Syosset, NY 11791 *Please look for Sagemark Consulting

Dates: Tuesday, 11/15/2016 Time: 12:30 pm Thursday, 12/1/2016 Time: 5:00 pm

Duration: 1 hour