An unusual stipulation in the European Union’s bailout of the tiny country of Cyprus has triggered a run on the banks there. Our first article this week focuses on why the country is considering a “tax” on bank accounts and what the likely outcome will be for investors. We next turn to a possible revival of interest in non-deductible IRAs. Michael Kitces explains how a provision in the new 3.8% Medicare Surtax may induce investors to use these IRAs to permanently avoid it. Our third article takes a look at why emerging markets are struggling in 2013. Long considered a high beta proxy for the US equity market, this market segment has been left behind while US markets are seeing a sharp rally. We close with a piece from Doug Short that graphically shows the increasing numbers of older participants in the labor market.
The Cyprus Bailout And Its Effect On International Stocks– A proposed levy on bank deposits triggered a bank run in Cyprus. Michelle Gibley of Charles Schwab & Co. explains how events in this tiny European country could affect international stocks. http://investing.schwab.com/public/schwab/resource_center/expert_insight/todays_market/international/cyprus_bailout.html
Investors May Use A Non-Deductible IRA To Avoid The 3.8% Medicare Surtax–
The non-deductible IRA has a new point in its favor, writes Michael Kitces: It provides a way to permanently avoid the new 3.8% Medicare surtax on net investment income that took effect this year. The law carves out an exception for growth that occurs inside retirement accounts. Using a non-deductible IRA to avoid this surtax is a strategy especially well-suited to a number of high-income earners. It is most appealing to those who are not interested in a Roth conversion and who want to hold fixed-income investments that would be taxed at ordinary income rates. http://www.kitces.com/blog/archives/451-Will-The-New-3.8%25-Medicare-Surtax-Reinvigorate-Non-Deductible-IRA-Contributions.html
Why Are Emerging Markets Struggling in 2013? Despite one of the sharpest rallies in US equities in recent memory, emerging market equities have been left curiously behind in 2013. Through last Friday, the market segment was down 1.0%, compared to the S&P 500 index that was up 10.0%. This seems to violate the regime that investors have gotten used to over the past 10 years, whereby the emerging markets equity index served as a high beta proxy for the US equity market. Ryan Davis of Fortigent explains what may be happening with emerging markets. http://advisorperspectives.com/commentaries/fortigent_031913.php
Labor Participation For People Ages 65+ Is Trending Up– Doug Short’s charts show how the labor force participation rate for people ages 65 and older reached a low in the 1980s and early 1990s. The trend is up over the last 15 years for this group and trending down for younger people. The trend in student loans is also up dramatically. http://advisorperspectives.com/commentaries/dshort_031313.php
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John R. Day, Bill Ennis and Stephanie Davidson