Mecca on Mondays - 1/30/2012

Mecca on Mondays is a popular weekly publication for active clients and other special guests addressing relevant financial topics to inform and educate. Specific topics are deliberately, yet delicately chosen to inform and stimulate vital thought process. The select information may be general in nature but the importance of the topic, its timeliness, and favorable financial impact to your future can be critical. For any topic addressed in these news commentaries, we can arrange more detailed, personal discussions at your convenience.

Reading This Can Enhance Your Financial Security

Protect Yourself And Save Your Money

Proper financial planning is not just investing. That is one component but not the only one. Our firm provides complete and comprehensive financial planning strategies including areas of estate planning, tax planning, college planning, cash flow planning, and insurance planning. We provide objective and specific strategies on various types of insurance including life, long term care, medical, long term disability, and property and casualty.

Today I wish to address property and casualty insurance. Specifically, let's target home, auto, umbrella, and scheduled floater insurance. When was the last time you actually had an independent, objective appraisal of these policies?

Home or renters insurance. You should have it in place. Coverage should be based on a fairly recent appraisal of the property. With real estate values down, you may be over insured and overpaying for this coverage. It is time to properly insure.

Make certain your personal property benefit is on a replacement value basis, not depreciating value. Also, consider at least a $1,000 deductible. Small deductibles may mean you are paying too much.

Older vehicles should have coverage changed. The comprehensive benefit should be lowered as a vehicle gets old. And the respective deductible should be raised to save money.

Add a minimum $1 million umbrella, or excess liability, benefit. It is an inexpensive way of providing an additional million dollars of coverage pertaining to home and auto liability. It is a great way to help preserve your investments from being eroded due to an accident.

Do you have an expensive ring? Fine art? Furs? Collectibles? Then you need to schedule it on a floater policy. In short, this is a special policy within the homeowners insurance that identifies certain valued items and protects against loss not covered under the home policy. This can get expensive so limit your choices.

Make certain your policy provides maximum credits for a low premium. This includes good discount driver, good student award, multiple cars, good driving record, and blanket discount having all the policies with one company.

Having a well-positioned home, auto, umbrella, and scheduled floater policy which provides maximum benefits at minimum costs can be rewarding. How? You have proper protection without paying excessive premiums.

If you have not "tested" your current policy in awhile, allow us to do so putting the full scope of financial planning strategies into practice for the financial security of you and your family.

Each situation is unique and must be individually reviewed. Send your current policies to me where my firm and associates can provide an objective analysis

Week in Review with Commentary

The FOMC left interest rates unchanged. I expected this. What they said is important, that being our economic recovery is slow and will take longer than they hoped. They predicted interest rates will remain at these low levels going into 2015 and possibly beyond. Housing woes, unemployment, and global recession were some major reasons. The FOMC targeted 2% as an inflation target. Our fourth quarter gross domestic product (GDP) was 2.8% and below progress expectations. We are moving forward, for sure, but the two stimulus packages thus far have not produced the anticipated results yet. The FOMC did not state there is a third round of economic stimulus, but did not rule out either.

Read the Mecca Management email news alert sent last week to our clients. It provides more details.

Markets in Review with Commentary

The stock market welcomed the FOMC comments, reversing a 150 point swing to the positive after the announcement. The liquid markets such as savings accounts, money markets, CDs and short term U.S. Treasury yields will continue to be paltry. These may be great for emergency funds and upcoming expenditures but NOT for long term investing. The bond market rallied. The ten year U.S. Treasury was around 2.00% but is now 1.90%. When bonds rally, existing bonds become more expensive as the price goes up. New issue bonds will have lower yields. (See right side bar.) Gold is over $1,700 per ounce. Oil came down a bit.

Mecca Minute

Never view Financial Planning as one-dimensional. It is not. Look at any major sports team like baseball, hockey, basketball, football, etc. Champions in these sports have one trait in common: a strong offense with solid defense. Think of investing as your offense and insurance as your defense. You need a solid combination of both to have financial security.

If you wish to see a portion of my interview with the media regarding investment ideas, go to the media page on my website and click on the link to www.investius.com under the section titled Video Interviews. Select the video titled CEF News 1/4/12.

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Financial Term of the Week

Bonds 101

When bonds rally, like they did after the FOMC position, then existing bond prices generally rise. Investors holding bonds will be delighted as the value of their bonds increase.

New bonds not yet in the system should have lower yields to reflect economic times.

For investors yet to invest in bonds, don't be thinking it is too late. It is not. Investing in bonds is a prudent alternative to bank accounts yielding almost nothing. Conservative investors should consider bonds. Moderate risk takers should have bonds included their portfolios.

We Feel Strongly About Communication

We believe communication is vital which is why we publish our Mecca On Mondays newsletter weekly. No other financial advisor communicates as often as we do. We welcome your feedback to anything stated in this newsletter. Feel free to contact us by calling us at 847-359-2900 or by sending an email to bob@meccaonmoney.com.

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