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CARTER FINANCIAL MANAGEMENT — CELEBRATING 36 YEARS
WINTER 2 0 12
THE NEWSLETTER OF CARTER FINANCIAL MANAGEMENT AND CARTER ADVISORY SERVICES
LET’S TALK ABOUT SECURITY: CYBER SECURITY
LIFE INSURANCE FOR CHILDREN
By Javier Vela, IT Support Technician for CP Tech, L.L.C. | Dallas, TX
Leona Martin, Director of Operations, CFM
want to discuss some important steps to keep you, your computer, and your personal information safe while you Javier Vela participate in online activities such as browsing, chatting, and shopping. Most of us rely on the Internet to keep us connected to things that matter most: family, friends, school, work, sports, music, photos, news, weather, and finances. We are just a click (or keystroke) away from anything including checking the latest football scores to viewing the balances in our personal checking accounts. However, as wonderful and convenient as the Internet is, if you are not careful, you could also be a
Today’s virus attacks have become sophisticated, in some cases requiring hours of cleanup and repair by a professional. A virus attack can happen quickly and easily by clicking on a bad web link you received in an email from a trusted source or even by clicking on a friend’s Facebook post.
click (or keystroke) away from crippling your PC with a virus or falling victim to identity theft. A computer virus is a malicious program designed to penetrate your computer system and do some damage. The damage can range from stealing personal information such as passwords and bank account information, to deleting system files causing your system to become corrupted possibly to the point where it is unusable. Today’s virus attacks have become sophisticated, in some cases requiring hours of cleanup and repair by a professional. A virus attack can happen quickly and easily by clicking on a bad web link you received in an email from a trusted source or even by clicking on a friend’s Facebook post. However, this type of attack can be prevented using free software and tools. For users of Microsoft Windows, the world’s most popular operating system, Microsoft has developed a free Anti-Virus utility called Microsoft Security Essentials. It’s a free download from Microsoft’s website and performs well in actively keeping your system protected. Although Microsoft Security Essentials is a worthy mention, you will receive better protection by purchasing more advanced security software such as Norton Internet Security or Eset Smart Security. These applications include top notch virus protection and also include other goodies that will keep you safe online including an advanced firewall to help keep the bad guys out of your system, continued on page 10
s a new parent to Lincoln, eight months, and Georgia, four years, I have budgeted for the known expenses of rearing my Leona Martin, CFM children; the basic expenses of clothing, food, shelter, childcare, and medical care, and for the non-basic expense of braces, a car, and education. In addition to saving for your own retirement, the added expenses of parenthood can be overwhelming to your budget. However, there is one additional yearly expense that is a reasonable cost and provides further security for your child’s future. Purchasing a life insurance policy on your children is often overlooked in parenthood planning. Life insurance for your little ones, in addition to insuring against the costs of a funeral, helps to ensure their insurability and protects against the unknown health risks that may arise during their lifetimes. Did you know that if your child is diagnosed with Type 1 diabetes, rheumatoid arthritis, or becomes disabled they may not qualify for life insurance? Underwriters may select to insure them but at a much higher premium. Life insurance for your child could be a valid precaution if you already know your family’s history of health problems might continued on page 7
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PRESIDENT’S LETTER Winter 2012 2011 gave us a tsunami in Japan, tornadoes in the southeast, flooding in the northeast and the devastating fires suffered in Bill E. Carter, Texas. Combine CFP ®, ChFC, CLU these natural catastrophes with the constantly changing news about solutions to the European sovereign debt problem – one day there is a solution, the next day there is not – and with what the majority of U.S. citizens believe was a totally dysfunctional Congress as they stalled until at the last minute to extend our national debt ceiling, and uncertainty is bred, creating volatility in the market both domestically and internationally. We endured a horrible third quarter in the U.S. market only to have one of the best single day returns in the fourth quarter. The Dow Jones Industrial Average was up 490 points on November 30th. Finally, we ended the year with the S & P returning zero, but that was better than being down ten percent at the end of the third quarter. The question now is…what will 2012 look like for the stock and bond markets? For long term readers of this newsletter, you know that December and January are two of my favorite months. It is that time of year I pull together all the economic and market forecasts for the New Year. That stack of information is generally about a foot high. In addition, the staff provides me twenty to twenty-five hours of CDs they record from various sources including money managers, economists and chief market strategist of investment firms. When I first approach this task, it seems daunting but with just a few hours into the project, I am in my own ®
comfortable, relaxing and, for me, entertaining world of prognostication about what these many experts believe will unfold in the coming months. Much to my wife’s dismay, I have kept much of this material and it sits in a prime location in our attic. Fran finally convinced me to throw away two-thirds of the material I collected for the white paper I wrote in 1999 about Y2K. I kept one-third of it because I just could not part with it. I digress. Back to 2012, what I find is the usual glass half full and glass half empty opinions. Through the years I have found the bond folks generally negative, the value managers cautious and the growth managers optimistic, generally very optimistic. The economists are normally mixed in their outlook. In this letter, I try to provide some of each so what follows are selected quotes from a wide variety of highly respected investment professionals and economists.
Overall, the tone this year was positive, with the majority of opinions being positive on the US economy…however…much depends on what happens with the debt crisis in Europe. Trying to predict the future is difficult. Overall, the tone this year was positive, with the majority of opinions being positive on the US economy, expecting GDP growth to be in the two to three percent range. However, they all had the same caveat; much depends on what happens with the debt crisis in Europe. Trying to predict the future is difficult. Money Magazine’s December 2011 issue, “Make Money in 2012”,
highlights three major missteps from 2011. Bill Gross, manager of the giant PIMCO Total Return Fund, who is considered a guru in managing bond portfolios, sold Treasuries in early 2011, believing bond yields would rise and prices would fall. Bad call. Meredith Whitney, in late 2010, predicted on 60 Minutes that loads of cities were at risk of defaulting on bond obligations worth hundreds of billions of dollars. That caused chaos in the municipal bond market, but it did not happen. Again, a bad call. Finally, Bruce Berkowitz, Morningstar’s US stock manager of the decade, not just manager of the year, predicted great things for US banks in 2011. He kept 75 percent of his Fairholme fund invested in them. His fund was down 32.4 percent in 2011. I am not sure his thinking was wrong, but for sure he was early to be so bullish on US banks. Let us take a look at what some of the experts are predicting for 2012. Let us start with the negatives and with Europe being the subject. In Barron’s, January 16th, 2012 issue, featuring a Round Table discussion entitled, Listen Up Class; Here’s How to Profit, let me quote Felix Zulauf, president of Zulauf Asset Management. Zulauf: Europe is going to be key this year for the markets and the economy. China is slowing; the emerging world is slowing; and the U.S. is barely above water, constrained by its structural problems. I have called the euro a misconstruction since its birth. The problem is a difference in competitiveness among European countries, and you can’t solve it by lending money to the less competitive countries. You have to deflate wages and prices in the south, and inflate the north. But given Germany’s history, it will never inflate. The members of the euro zone agreed in December that each country could have a structural deficit of no more than half a percent of GDP. If a deficit goes above three percent of GDP, the country, will be sanctioned. This agreement now has to be ratified
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page 3 in all countries. But when you agree to such a prescription and you are uncompetitive, your currency is overvalued by 30 percent, you cannot devalue, and your nominal interest rates are too high. That is a recipe for a depression. It is a death sentence. Several countries will not ratify the contract, and the next day their markets will be repriced accordingly. They will exit the euro, and the turmoil will go to the next level. Greece is bust in either case. If you can devalue your currency by 40 or 50 percent in that situation, at least you will have the chance to see the sun again and recover. What happens at the next level of turmoil? Zulauf: The banking system goes bust. Assume Greece will not repay anything, or at most ten percent of its total debt. It is not just the government but the private sector that is bust. That means banks in other countries will be in trouble, which means they will be nationalized. Governments will not have the money to pay for this, so they will assume even more debt. That is the chain of events I expect in 2012, and if you believe it will not affect the U.S. you are dreaming. The estimated notional value of the over-the-counter fixed-income-derivatives market in Europe is estimated to be about 60 trillion euros. There are many links to the U.S. banking system, although we do not yet know who is positioned
how. If one country exits the euro, all hell will break loose. In the same article, Bill Gross was not very positive either. Gross: The bell-shaped curve of probabilities is out. The probabilities in the next few years are bimodal: deflation or reflation. In policy terms, we have reached the point where money is scarce and credit is overabundant. Think of the financial system as one giant bank. It was a wonderful life for the past thirty years, but now the bank is overextended. It has lent out too much and depositors want their money back. In this bank, $7 trillion or $8 trillion of reserves support $120 trillion of credit. If you include the shadow banking system and rehypothecation (repledging of bank customer’ collateral), the global bank is fifteen or twenty times levered. All the bad debt that has accumulated is migrating back to the central banks. That is where bad debt goes to die. Secondly, there is too little return on money. Central bankers do not understand that because their models do not permit it. There has never been a time, other than the Japanese experience of the past ten years, when money that does not pay a return deflates instead of reflating. In the past thirty years the Federal Reserve lowered interest rates in the hope that credit markets and risk assets would expand proportionately. It worked. But when you get down to zero interest
rates, things start to change. The world changes from Newton to Einstein with regard to the physics of money. Explain that, please. Gross: When money yields nothing, banks will not lend it. If a bank can keep money on deposit with the Federal Reserve at 25 basis points (a quarter of a percentage point) or lend it at 27 basis points, the yield on a twoyear Treasury, why take the two-year risk? The combination of low return and high risk basically freezes the system. The global system is trying to delever and central banks are trying to stop that process and pump trillions of dollars in. In a bimodal world, we could have reflation in 2013-14, or deflation in 2012. The probability of both is high. Yet, you have been buying bonds. Gross: But the returns are low. Since, nearly everyone has mentioned in their remarks the sovereign debt crisis, let us look and see where we are today. There has been one very positive change and that is the European Central Bank, even though it will not say it, has begun its own form of quantitative easing. “The European Central Bank’s balance sheet has increased significantly in recent months and is likely to expand further in 2012. This cannot, by itself, bring the sovereign-debt crisis to an end, but it does help lower the risk of a continued on page 4
FINANCIAL TRENDS . . . . . . . . . . . . . . . 12/31/10 . . . . 3/31/11. . . . . 6/30/11 . . . . 9/30/11 . . . 12/31/11 Dow Jones Industrial . . . . . . . . . . . . . . . . . . . 11,577.51 . . . . . 12,319.73 . . . . . 12,414.34 . . . . . 10,913.38 . . . . . 12,217.56 NASDAQ . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,673.02 . . . . . . 2,783.98 . . . . . . 2,773.52 . . . . . . 2,415.40 . . . . . . 2,605.15 NAREIT Composite . . . . . . . . . . . . . . . . . . . . . . 133.03 . . . . . . . . 142.07 . . . . . . . . 143.42 . . . . . . . . 115.13 . . . . . . . . 136.14 Russell 2000 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 793.22 . . . . . . . . 843.73 . . . . . . . . 827.43 . . . . . . . . 644.16 . . . . . . . . 740.92 MSCI-EAFE . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,658.30 . . . . . . 1,702.55 . . . . . . 1,708.08 . . . . . . 1,369.63 . . . . . . 1,412.55 Prime Rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.25% . . . . . . . . 3.25% . . . . . . . . 3.25% . . . . . . . . 3.25% . . . . . . . . 3.25% Gold. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $1,421.10 . . . . . $1,438.90 . . . . . $1,500.18 . . . . . $1,620.40 . . . . . $1,566.80 10-Year U.S. Treasury. . . . . . . . . . . . . . . . . . . . . . 3.30% . . . . . . . . 3.47% . . . . . . . . 3.18% . . . . . . . . 1.92% . . . . . . . . 1.87% 30-Year U.S. Treasury. . . . . . . . . . . . . . . . . . . . . . 4.34% . . . . . . . . 4.51% . . . . . . . . 4.38% . . . . . . . . 2.90% . . . . . . . . 2.89% 1-Year Certificate of Deposit . . . . . . . . . . . . . . . 0.30%*. . . . . . . . 0.25%* . . . . . . . . 0.25%*. . . . . . . . 0.35%* . . . . . . . . 0.30%* Past performance may not be indicative of future results. Source of Information: Issues of the Investment Book and The Wall Street Journal. *Bank of Texas rate
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page 4 “President’s Letter” continued from page 3 potentially catastrophic collapse in the euro-area banking system.” This was in AllianceBernstein’s European Perspectives – January 6, 2012. In the Economic Insights, Milton Ezrati, partner & senior economist and market strategist for Lord Abbett and former CIC speaker, wrote, “the new policies will offer investors more stable markets in 2012 than they have enjoyed since this crisis began in 2010 and create breathing room for them to assess whether Europe’s government will use the relief to deal with their more fundamental problems.” The other major concern was China. Growing inflationary concerns in China prompted officials to tighten monetary policy in an effort to slow growth. This gave rise to the question, “Will China have a soft landing or a hard landing?” This situation was talked about in many articles and the views and opinions varied greatly. Riverfront Investment Group had the following to say in their publication, Outlook 2012, “The surge in Chinese money supply from stimulus policies was augmented by the money printing required to maintain the Yuan’s value relative to the dollar. As this credit flooded China’s economy in 2009 and 2010, property prices and overall inflation surged. These inflationary pressures spilled into other emerging markets, as they enjoyed the boom in commodity demand from China while attempting to restrain the appreciation of their currencies by expanding money supply.“ “China modestly reduced its reserve requirements. China is signaling that as it moves to a more stimulative policy stance, it will retain current restrictions on real estate lending. This makes long-term sense, in our view, given China’s 2009/2010 over investment in real estate, but such restrictions combined with an apparent end to Yuan appreciation will likely lessen the global impact of
Chinese stimulus in 2012 compared to the 2009/2010 stimulus program. Thus renewed stimulus in emerging markets is unlikely to completely offset the impact of renewed recession in Europe.” Money Magazine, December 2011, wrote “Should China’s growth engines stall, the reverberations would certainly be felt in the U.S. A drop in China’s GDP growth from about nine to six percent would threaten the recovery here, says Diane Swonk, chief economist of Mesirow Financial. If the Chinese leadership can pull off their balancing act, though China’s development would boost the fortunes of weak economies in the West whose major businesses are becoming ever more dependent on the rise of the emerging world.”
The new era of hypervolatility means political news and events ranging from the battle over raising the U.S. debt ceiling to the European debt crisis tend to move stocks much more than fundamental factors like paying down debt or boosting profit margins. To end the China discussion let me leave you with two diametrically different opinions. Richard Bernstein CEO of Richard Bernstein Advisory states, “I’m immensely bearish on China as an investment”. A more bullish sentiment on China was made by U.S. Global Investors, in an article titled, The Heart of China Bull Beats Strong. To summarize the article, it ends with “We believe China is a buying opportunity.” Moving on to other people’s thoughts, Jane Mendillo, president and CEO, Harvard Management Co.,
said in Smart Money, January 2012 reacting to a question about global uncertainty, “It is a complicated world right now. There is plenty of market volatility, but with that comes a lot of opportunity. There are big questions outstanding in Europe, from the health of the banks to the fate of the euro. As long-term investors, we have broad exposure to Europe as well as to emerging markets, and we are intrigued about opportunities coming out of this uncertainty.” As usual there were conflicting ideas on the US economy, China, the dollar, sovereign debt and even specific stocks. For example, in one magazine a money manager had highly recommended a specific stock while in another magazine another money manager named that same stock as one he would avoid in 2012. On the domestic front, Brian Rodgers, chairman and chief investment officer for T. Rowe Price, offered the following in the same roundtable where we quoted Zulauf and Gross, “Bill inadvertently makes a good case for investing in equities. Felix is depressing me, but in a very articulate way. I operate by several maxims. One is that the world doesn’t end often. Another is that people generally react rationally. If I were an ECB policymaker, I would try to find a way to ring fence Greece, and toss a lot of money at Spain and Italy to try to save them. My third maxim is something I adopted today: two percent growth is always better than negative two percent. Felix touched on the most critical thing driving our markets with his reference to the American psyche. After the last decade in equities, the individual investor is terrified. That investor will have an adverse reaction if and when Greece defaults. But that investor will come back. The individual investor panicked after the flash crash of the market on May 6, 2010, and after Standard & Poor’s downgraded the nation’s debt. People have become continued on page 5
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page 5 risk-averse. A crisis of confidence is what’s driving the market.” In that same issue of Smart Money, January 2012, Edward Grzybowski, chief investment officer of TIAA-CREF says, “It’s the long-term performance that matters. To him, the recent volatility in the markets is just “noise.” Forbes’ Investment Guide had an issue on the twenty new rules of money. Rule number six has particular significance this year. It is called, “Watch the Politicians”. It reads, “The new era of hypervolatility means political news and events ranging from the battle over raising the U.S. debt ceiling to the European debt crisis tend to move stocks much more than fundamental factors like paying down debt or boosting profit margins. For example, in early August 2011 a host of blue-chip stocks plummeted as the world wondered whether the congressional stalemate in the U.S. would cause it to default on its debt. Fundamentals are important, but pay attention to the politicians. They can move the markets.” Benjamin Shepherd, in his publication, Wall Street, says the following in the January 2012 edition, entitled, A Favorable Forecast for 2012,
“Presidential election years are generally positive for the markets; 2008 was the only exception to that rule over the last 30 years. Equities should perform well next year, particularly those in the technology, industrial and energy sectors. Despite continued weak U.S. economic growth, commodities should outperform on the back of strong Chinese demand stoked by pro-growth monetary policies. In the bond market, traditional safe havens such as Treasury bonds will pull back, while riskier assets such as corporate and junk bonds will finally outperform. Gold could also lose ground once economic fears abate.” While it seemed most investment advice favored large cap stocks, Francis X. Morris, chief investment officer - Core Equity with Delaware Investments had four reasons he favored small cap stocks, • Valuations, from an absolute level, are becoming increasingly attractive, not only from a priceto-earnings perspective, but also from a price-to-cash on the balance sheet perspective as many of these companies are in very good financial shape.
• Companies in general have realigned their cost structures coming out of the Great Recession, and those cost structures remain low and in place, and that will support the margin and earnings structure throughout 2012. • As I mentioned before, balance sheets are in very good shape, with companies having low to no debt, and in many cases excess cash on the balance sheet. • Which they’re then using for capital management purposes, either to acquire other companies to enhance their growth rate, or what we’re beginning to see increasingly is small cap companies repurchasing their own shares, and therefore returning capital to the shareholders. It is always amazing to me how these experts, all working with basically the same fact scenarios, draw so many different conclusions. In the 35 plus years I have done this, rarely has there been a consensus among all the experts. When there has been a consensus, it seems that consensus has always been wrong. Over the last few years several new continued on page 8
HIGHLIGHTS • Bill Carter was the featured speaker at the Estate Planning Council of North Texas on January 18, 2012 titled “How to Structure a Retirement Portfolio for Income and Growth in the New Normal Economy”. • CFM hosted a quarterly seminar titled, “Today’s Wired World” on January 19, 2012. • Kathy Muldoon was featured in a Wall Street Journal article titled, “Advisers Brace for Another Volatile Year” on January 9, 2012. • Bill Carter attended a Capstone Study Group meeting in Miami, FL January 26-28, 2012. • Bill Carter attended the Raymond James Regional Conference in Atlanta, GA on February 8 – 10, 2012. • Attendees to the Raymond James Regional Conference in Austin on February 15-17, 2012 include: Bob Berg, Tara Scottino, Kathy Muldoon, Lori Peters, Allie Leary, Julie Odom, Sue Spellman & Jonathan Meaney.
• Lori Peters passed the CFP Exam. • Marnie Nebeker passed the registered paraplanner exam. • Chris Peay and his wife, Geidy, welcomed a new baby boy, William Wayne Peay, into their family on February 13th. • The February 2012 issue of Registered Rep magazine ranked Kathy Muldoon 28th out of 100 top women advisors. • CFM Anniversaries: Carol Croy 8 years, Chris Peay 10 years, Brian Fralin 3 years, Marnie Nebeker 1 year, Lori Peters 1 year. • Brandon Ratzlaff attended the Raymond James Portfolio Management Conference on January 26-27, 2012. ■
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JOIN US FOR SHRED DAY! IDENTITY THEFT: MINIMIZE THE RISK By Carmen Bradley, Receptionist
arter Financial Management presents our Annual Shred Day on April 28, 2012 between 8:30 – 11:30am. Drop off will be in the parking garage attached to the rear of our office building. Stop by for a cup of coffee and drop off your unwanted personal documents. There is a list of suggested items to consider bringing at the end of this article. Shred Day was launched to increase the awareness of identity theft and promote a healthy habit of shredding documents that contain personal information. Identity theft is one of the greatest security concerns today, not only in the United States but all around the world. There are many different ways of committing identity theft including; stealing credit card statements, bank statements, tax returns, hacking Internet accounts. The easiest way of committing this crime is, although repulsive to most, going through the garbage. Most of the documents disposed in the garbage are not shredded so it is easy to join the pieces of torn credit card details and access accounts. Therefore, the focus now is not only on document disposal but efficient document disposal. We have partnered with DFW Shredding for this event and they are AAA NAID (National Association for Information Destruction) Certified for On-Site document shredding. This is the most recognized credential for the document shredding industry. In addition, they are also a Better Business Bureau accredited business. They provide locked, security bins and on-site destruction to ensure
sensitive paperwork never ends up in the wrong hands. Tips and Items for Shredding • You do not need to remove staples, paper clips or binders. • You can keep your boxes to reuse or DFW Shredding will take them to recycle. • Computer Hard Drives (Erasing your HD is not enough!) • Magnetic Tapes, CDs, DVDs, Floppy Discs. • Film, X-rays, ID Badges • Credit Cards, Video Tapes • Paper, paper products How long should you keep documents? • Tax Returns – Seven years. The IRS has up to three years to audit your filed returns, and in suspected fraudulent cases, may go back six years. • Paycheck Stubs – One year. Once you receive your annual W-2, ensure it matches up with your information and then shred your stubs. Keep the W-2 with your filed tax return. • IRA Contributions – Permanently. • Bank Records – At least one year. Keep all checks related to mortgage payments, taxes and business expenses permanently. • Brokerage Statements – Keep your annual statements until you sell the securities. Keep all sale and purchase confirmations that will not be reflected on your statements for the specific tax year. • Retirements Savings Plan Statements – Keep the annual summaries until you retire or
close the account. • Bills – One year. However, for larger purchases (jewelry, cars, computers), bills should be kept in your insurance file for proof of their value. • House Records – From six years to permanently. All records documenting the purchase price and the cost of permanent improvements should be kept as long as you own the property. All records of expenses related to buying and selling the property should be kept for at least six years after the final sale. • Credit Card Receipts and Statements – Keep receipts until the monthly statement arrives. Shred the receipts if the two match up. Keep the statements if tax-related expenses are documented. Otherwise, shred the statement. • Insurance and Estate Planning Documents – Keep while in force or while they are effective. These suggested time frames are provided as general guidelines only. Your situation may vary. Unfortunately, there is no sure way to guarantee you will not become a victim of identity theft but getting into the habit of shredding is an easy way to minimize your chances of becoming a victim. Secure document shredding is more than a best practice here at Carter Financial Management. We truly care about you and hope you will join us for Shred Day Saturday, April 28, 2012. ■
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page 7 “Life Insurance for Children” continued from page 1 become a reason for your child to be declined or experience a significant rate increase. While researching for this article Julie Odum, our marketing director, contacted the Department of State Health Services, Center for Health Statistics for insight on how many deaths occurred in children less than eighteen years of age. During the decade from 1999-2009, 38,623 deaths occurred in the state of Texas; 4,352 of those were in Dallas County. A spouse of one of our planners is a hospice counselor for children and shared with us several stories of hardships in particular a family was forced to sell their vehicle to cover funeral expenses. Ms. Odum contacted Sparkman Hillcrest Funeral Home for an anticipated funeral cost for a teenage child. Below are the estimated expenditures provided by Sparkman Hillcrest Funeral Home: • Plot: $24,995 (Texas requires an adult size plot if your child is taller than three feet) • Service: $27,390 (includes costs of casket and opening and closing of grave) • Marker, obituary: $3,000 • Clergy, soloist, pianist, butterfly release, additional limousine: $1,395 The total estimated cost is $56,780. If your family happened to endure such a great loss the last thing you would want to be concerned with is the financial burden of a funeral. Instead you would want to provide your child the most beautiful funeral available. The type and amount of life insurance you can purchase for your children will vary from family to family. One of the benefits of owning life insurance on your children or grandchildren is the growth, or gains, on your insurance premium is taxdeferred. If the cash value is accessed
the first withdrawals are from the premiums which are tax-free. In most states your life insurance policy is fully protected from claims of creditors in bankruptcy filings.
You can use your annual gifting tax exclusion to purchase life insurance on your children or grandchildren thereby securing insurability and providing a gift that may create a legacy that is yet unseen. Purchasing life insurance on your children or grandchildren is guaranteeing they will always be able to have it for the rest of their lives. To start consider your own income during your income earning years. If you had passed prematurely and wanted to replace some or all of your lost income what capital would be required to generate the lost income? That will give you an idea of how much life insurance to purchase.
When life is going well we have a filter that can prevent us from looking outside of the rose-colored lenses and considering contingency plans for all of life’s events. Contacting your financial advisor is the first step to discuss your family history and determine if this is a risk management approach that makes sense for your family. The second step would be to determine an affordable monthly or annual premium that fits within your budget. And thirdly, after
considering which policy type best meets the goals of your family, start the underwriting process. While considering this important safety measure for your children and grandchildren, it may be timely to review your own existing life insurance. Current rates are often more favorable than in years past and the products have many more features you may potentially use to enhance your own financial independence or legacy plan. As I reflect on family and friends there are at least four families whose children are uninsurable: one is a twin who was born blind, a seven-year old girl who had an aneurism, a young teenage boy who had an aneurism, and one who was born with her bladder outside of her body. I encourage you to reflect on those you know and you may find similar examples of how frequently there is a need for life insurance on children. When life is going well we have a filter that can prevent us from looking outside of the rose-colored lenses and considering contingency plans for all of life’s events. Thank you to my sister, Jennifer, who shared with me one weekend she did this for her two children under the age of three and wants her niece and nephew to have the same benefits. ■ Contributions made by: Julie Odum- Carter Financial Management Marketing Director and Investment Consultant The Department of State Health Service Center Center for Health Statistics Sparkman Hillcrest Funeral Home The information contained in this report does not purport to be a completed description of development referred in this material. The information has been obtained from sources considered to be reliable, but we do not guarantee that the foregoing material is accurate or complete. Any information is not a complete summary or statement of all available data necessary for making an investment decision and does not constitute a recommendation. Any opinions are those of Leona Martin and not necessarily those of RJFS or Raymond James.
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page 8 “President’s Letter” continued from page 5 terms have become familiar. Two are “risk on” and “risk off”. “Risk on” signals investors are favoring risk investments such as equities while “risk off” signals investors are favoring low risk investments such as bonds or Treasuries. We are now in a “risk on” environment. Several things have caused the “risk on” environment including good corporate earnings, better than expected unemployment figures and most importantly a calm that has settled in over the European debt crisis. Unfortunately, I think most of these events will reverse soon resulting in another down turn in the markets, i.e. “risk off”.
As we move into 2012, some of the individual predictions I have read or heard will be right; some will be wrong, and importantly, no one has provided me with the crystal ball to know which will be which. So our advice is to diversify, diversify, diversify… I hope by year-end policy makers, worldwide, will make pro-growth decisions and “risk on” will take on a more sustaining presence. If history holds true, the turn that marks the end of this bear market will happen when no one is expecting it. While I hope this current move in the market is signaling the end of the secular bear market, I doubt it. I think we will probably have to wait until later in the year to see that happen. The sovereign debt crisis in Europe will continue for some period of time
and as I send this letter off to the publisher, the Greeks have still not signed off on the necessary reforms to receive additional funding from the International Monetary Funds to avert a default. Plus the jury is still out on China. As we move into 2012, some of the individual predictions I have read or heard will be right; some will be wrong, and importantly, no one has provided me with the crystal ball to know which will be which. So our advice is to diversify, diversify, diversify, or as Ed Davis, PhD and president of the Texas A&M Foundation likes to refer to it, as extreme diversification. This is also the advice of Mohamed ElErian in his book, When Markets Collide. Extreme diversification may lower your returns in a strong bull market, but hopefully will provide more protection in down markets, providing for a smoother journey over the longer term. Of course there are no guarantees, but that is the objective of “extreme diversification.” 2011 was another good year for CFM. I was pleased as I thought we navigated the rough waters of 2011 markets well. Bob Berg, Senior Vice President of CFM and Investment Management Consultant, once again, provided us with an outstanding Carter Investment Conference…our 32nd. We also had a fun filled and inspiring evening as we celebrated our 35th year anniversary with clients and friends. The management team of Kathy Muldoon, CFP® and Senior Vice President of CFM, Bob Berg, Tara Scottino, Senior Vice President of CAS, Leona Martin, Director of Operations, and me, agree we have assembled the best staff in the history of the company. Jim Collins, in his book, Good to Great, says the most important task for any company is to get the right people on the bus and we have the right people on the bus. Finally and most importantly, we enjoyed another year of great support
from our clients. We simply cannot thank you enough for your support and the referrals you send us. Referrals are so important because it allows us to spend time working with you as opposed to spending time marketing. Thank you again for making our 35th anniversary year one of the best in our history.
Bill E. Carter, CFP ®, ChFC, CLU® President The information contained in this report does not purport to be a complete description of the securities, markets, or developments referred to in this material. The information has been obtained from sources considered to be reliable, but we do not guarantee that the foregoing material is accurate or complete. Any information is not a complete summary or statement of all available data necessary for making an investment decision and does not constitute a recommendation. This information is not intended as a solicitation or an offer to buy or sell any security referred to herein. Any opinions are those of Bill Carter and not necessarily those of RJFS or Raymond James. Expressions of opinion are as of this date and are subject to change without notice. Diversification and asset allocation does not assure a profit or protect against a loss. The S&P 500 is an unmanaged index of 500 widely held stocks that's generally considered representative of the U.S. stock market. The Dow Jones Industrial Average (DJIA), commonly known as “The Dow”, is an index representing 30 stocks of companies maintained and reviewed by the editors of the Wall Street Journal.
CHECK US OUT
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ACCOMPLISHMENTS & RECOGNITION Marnie Nebeker, Registered Paraplanner Marnie Nebeker passed the register paraplanner exam this past January. Marnie studied diligently for over three months for this exam, and she is looking forward to applying this enhanced skill set to the clients she serves. Exam topics included tax planning, retirement planning, life & health insurance, and estate planning. Additionally, the exam tests the ability to synthesize complex concepts and apply theoretical concepts to real-life situations. Marnie has over thirteen years of experience in the field, and joined the Carter Financial Management team with Brandon Ratzlaff and Kathy Muldoon over a year ago. Congratulations, Marnie! Lori Peters, Registered Paraplanner and Client Service Representative Almost one year to the day of starting at Carter Financial Management on Bill Carter’s advisory team, Lori Peters passed the Certified Financial Planner® board exam she took in November 2011. She received her results in the mail in mid-January,
and all of us in the office heard her excitement. Among other requirements, an individual must pass the comprehensive CFP® Certification Examination (a 10 hour exam over a two-day period) in order to attain the right to use the CFP® mark. While Lori’s experience, strong work ethic and commitment to studying gave her the edge she needed to pass this very challenging exam, she would like to thank the many clients that helped her in passing it as well. Questions that were addressed to her over the phone by clients that needed to be answered either on the spot or within the same day regarding taxation, deductions, different retirement planning vehicles, long-term care and life insurance helped her the most. Among the activities that one would normally undergo in the course of preparing for the exam, she previously spoke at the Dallas Gilda’s Club on disability income and reasons to use a financial planner and her personal experience in implementing planning strategies by saving for her daughter’s college education as well as planning for life insurance and her own estate
plan helped Lori in preparing for the exam. While other formalities are required before Lori can carry the designation, these will be completed soon. Lori will use this knowledge to continue her efforts in answering questions, planning for portfolio distributions (or accumulation), and listening to clients’ goals and in forming appropriate recommendations based on clients’ resources and time horizon. We are proud of you, Lori! ■
CALENDAR • April 17th – Taxes Due • April 28th – Shred Day • May 28th – Office closed in observance of Memorial Day • July 4th – Office closed in observance of Independence Day • September 3rd – Office closed in Observance of Labor Day • September 22nd – Carter Investment Conference • December 25th – Office closed in observance of Christmas Day ■
THE RECOGNITION CONTINUES… By: Leona Martin and Abby Hammond
arter Financial Management’s leadership continues to be recognized both nationally and locally. We are proud to acknowledge their most recent accomplishments. Kathy Muldoon, CFP®, Senior Vice President of Carter Financial Management, is featured in the 2011 Raymond James Annual Report highlighting her long-time devotion to her clients and philanthropic endeavors. Respected nationally, she continues to offer her financial counsel. In the January 9, 2012 edition of The Wall Street Journal Kathy contributed her perspective towards managing portfolios in volatile markets. And most recently, the
February 2012 issue of Registered Rep. published “The Top 63 Independent Broker/Dealer Women Advisors in 2011” in which she was listed among the top 30 women for her overall success. Advisors are ranked by assets under management, effective Nov.1, 2011. Only those advisors for whom a majority of assets correspond to retail clients were eligible for the list. In October, Bill Carter attended the Texas A&M College of Agriculture and Life Sciences “Centennial Week”, during which he was saluted with the 2011 Outstanding Alumni Award. This award holds special significance to him because he was inducted with Dean Edwin Jackson Kyle who received
it posthumously. Dean Kyle’s name carries on with Kyle Field Stadium. Of more than 350,000 former students Carter is one of an elite few who has received three of the highest honors a graduate can receive. The highest one being the Distinguished Alumni Award in 2000, then he was inducted into the Corps of Cadets Hall of Honor in 2008, and most recently, the College of Agricultural and Life Sciences Distinguished Alumni award in 2011. We look forward to seeing their names and many others in our firm throughout the upcoming year. ■
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page 10 “Cyber Security” continued from page 1 parental controls for tracking, monitoring, and controlling your children’s web activities, and spam blocking to help keep your inbox clean and free of fraudulent messages. These tools are powerful and include other features such as the ability to scan your Facebook wall and block fraudulent websites cybercriminals use to steal your identity and your money. In addition to anti-virus or security software, I also recommend downloading and installing Malware Bytes on your system. Malware Bytes is a free download from malwarebytes.org that can perform a deep system scan to ensure all threats are completely eliminated. I know there are probably Apple Mac users reading this article and assuring themselves they have nothing to worry about. Well, I have news for you: viruses, trojans, and malware DO exist for Mac systems. This may not have been the case years ago, and in fact was a big selling point to buying a Mac system. However, due to the popularity of the Apple brand, times have changed and security for an Apple system needs to be taken a lot more seriously, especially at the user level. Keep your Mac secure by checking out Norton Internet Security and Eset Cyber security for Mac. What if you don’t use a computer or laptop and instead use your smartphone to surf the Internet or tablet PC to shop online? The use of smartphones and tablets is climbing and will most likely increase year after year. However, it only takes downloading one bad or malicious app to put you in the same spot as a computer user who downloads a virus. If you’re not careful with the apps you download for your phone or tablet, you could also become the victim of a compromised device and/or identity theft. You definitely do not want the bad guys to be able to access your personal information on your phone
or even the information from your contacts. Android users can download and install Lookout Mobile Security. CNET rates it as a “Must-Have app” and I couldn’t agree more. This app includes the ability to provide virus and malware protection for your device, it can scan each app you download to make sure it’s safe, can backup and restore your device, and even help you locate your device it if is lost or stolen. If you also want more advanced features such as call blocking and SMS (Text Message) blocking, I recommend Norton
The use of smartphones and tablets is climbing and will most likely increase year after year. However, it only takes downloading one bad or malicious app to put you in the same spot as a computer user who downloads a virus. Mobile Security. It costs $30 but I have been using it for the last month and am impressed with its performance and user interface. For iPad users, check out Norton Tablet Security. When installed, Norton Tablet Security can show you where your tablet is, so you can locate it instantly. It also lets you remotely erase sensitive information on your tablet if it’s lost or stolen, and detects/removes threats that cybercriminals could use to eavesdrop on you, steal your data, and take control of your tablet. Cybercrime and identity theft cannot be completely stopped or prevented by merely installing software on your PC, smartphone, or tablet device. It takes a lot of awareness on the user side to prevent it from happening to you. A few things I suggest you consider when you browse, shop, or download ANYTHING online: 1) Ask yourself; is this from a
trusted source? If you’re downloading music from iTunes or Amazon, you can almost certainly feel a sense of security because you are familiar with the source. However, there are a lot of ads and sites that will trick you and once you click on them, be prepared for what may happen next. Ask one of your friends or family members for advice, you might even be surprised to see which one of them is a little tech savvy. Get their input, have they ever downloaded this app from this site before? Try and Google it! 2) Use a computer account with standard access. In Windows systems, when creating users in Control Panel, create a user that does not have Administrative access to the PC and use THAT account when you browse/shop online. When you are logged into the computer with Administrative access to the entire PC and you get infected with a virus, you just gave the bad guys access to the entire PC. Using a standard user account will not protect you entirely from a virus, but will limit the virus or intruder’s access to the rest of the system. 3) Keep your system updated: Don’t let your PC go through long periods of time without downloading and installing the latest security updates. Doing this leaves your system vulnerable to attack and browsing the Internet on a vulnerable system makes your computer an easy target. Update your system! The latest updates and patches can be downloaded and installed automatically, but be prepared to reboot your system in order for the updates and patches to take effect. 4) Keep track of your personal information online and offline: This is great advice. You don’t need to be online to fall victim to identity theft. There are a lot of continued on page 11
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page 11 people out there who will go through your trash to see if you threw away documents with your social security number, bank names and account numbers, and contact information. Be sure to shred important documents and do not leave personal information lying around the house, your friend’s house, or even at the office. Lock it up or shred it! 5) Read, learn, and pass it along: This is my favorite piece of advice. With the abundance of
information on the Internet, you can read about the latest technology news and trends, including the latest on emerging threats that might have an impact on your system or the type of systems your company uses. PCworld.com and Symantec.com have a section devoted to news and security on their site. Give it a quick look, and read some articles. Maybe they are discussing a cyber attack your friend fell victim to last week with extra tips on removal and recovery of data.
You can use that information and help pass it along, maybe write a newsletter article about it to help spread the word. Cybercrime and identity theft are no laughing matter. With these activities skyrocketing at alarming rates, it’s best to take a few extra steps to ensure we have a fun but safe browsing experience. Just as you would turn the coffee pot off before leaving the house to go to work, or look both ways before crossing the street, take a few extra steps and think before you click. ■
JULIE ODUM JOINS CFM
ulie Odum recently joined Carter Financial Management as the marketing director and investment consultant. Prior to joining Carter Financial Management, Julie was recognized for her achievements while affiliated with Lincoln Financial Advisors and the SageMark Private Wealth Services division working within their national third-party channel for the high net worth clients of Morgan Stanley Dean
Witter and UBS. She has 20 plus years in the industry creating innovative campaigns and highly customized ways to help drive growth at the individual advisor level. She is an accomplished marketing professional who will build upon and maximize the brand equity of CFM. Julie will work with planners by reviewing portfolios and identifying ways to further provide exceptional service to our clients. She enjoys working with retired armed forces and business owners to assist them in discovering alternative ways to maximize their wealth preservation. We are excited to have her as part of our team. ■
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WEALTH MANAGEMENT FOR THIS GENERATION AND THE NEXT
12222 Merit Drive, Suite 1800 Dallas, Texas 75251
CARTER FINANCIAL MANAGEMENT/CARTER ADVISORY SERVICES TEAM Bill Carter, CFP ®, CLU ®, ChFC, President • Robert H. Berg, CFP ®, Senior Vice President • Kathy A. Muldoon, CFP ®, Senior Vice President • • Tara Scottino, CFP ®, Senior Vice President • Sue Spellman, CFP ®, Senior Vice President • Carol Croy, CFP ® • JoAnne B. Galbraith, CFP ® • Patty Hammond, CFP ® • Stephen H. McDonald, CFP ® • Jonathan Meaney, CFP ® • Brandon Ratzlaff, CFP ® • Tyler Russell, CFP ® • Lori Peters, RP ® • Pat Avant • Joel Berg • Bonnie Hunt • Marnie Nebeker, RP ® • Julie Odum • Brian Fralin, CFP ®, Midland Branch • Sheldon Zeiger, CFP ®, JD, Chicago Branch
CFM MISSION & CONTACT Our mission is to become our client’s trusted advisor by providing superior financial planning services that enable our clients to define and achieve their financial and life goals. You can reach us at: Phone 214-363-4200 . Fax 214-363-4369 . www.cascfm.com
EMAIL UPDATES: Help us keep our records up-to-date by sending your name and email to firstname.lastname@example.org. As always, Carter Financial Management and Carter Advisory Services will not distribute your contact information to anyone. All information is kept strictly private.
RJFS DEADLINES Cutoffs: Trades/Mutual Funds.......................................3:00 CST No Load Mutual Funds – Buys: ....................1:00 CST No Load Mutual Funds – Sells:.....................2:30 CST Government Bonds ...........................................4:00 CST Wires-From Customer Accts. ..........................12:30 CST
REMINDER: If you are making out a check for your Raymond James account, please note we can only accept checks payable to Raymond James or Raymond James & Associates. We cannot accept checks payable to Carter Financial Management or Raymond James Financial Services. Thank you for your cooperation.
SECURITIES AND INVESTMENT ADVISORY SERVICES OFFERED THROUGH RAYMOND JAMES FINANCIAL SERVICES, INC. MEMBER FINRA/SIPC. ADVISORY SERVICES OFFERED THROUGH CARTER ADVISORY SERVICES. BUSINESS & FINANCIAL SUPPORT SERVICES OFFERED THROUGH CARTER FINANCIAL MANAGEMENT. Carter Financial Management is an independent firm. The information contained in this report does not purport to be a complete description of the securities, markets, or developments referred to in this material. The information has been obtained from sources considered to be reliable, but we do not guarantee that the foregoing material is accurate or complete. Any information is not a complete summary or statement of all available data necessary for making an investment decision and does not constitute a recommendation. Any opinions are those of Carter Financial Management and not necessarily those of RJFS or Raymond James. Investments mentioned may not be suitable for all investors. Expressions of opinion are as of this date and are subject to change without notice. Past performance may not be indicative of future results.