The pupil dilates in darkness and in the end finds light, just as the soul dilates in misfortune and in the end finds God. ~ Victor Hugo, Les Misérables

The Bipartisan Budget Act of 2015

Yesterday the Budget Act of 2015 was signed into law. The link below will give you a summary of want it could mean to you.



The Bipartisan Budget Act of 2015

Puerto Rico: Small Island, Big Debt

Puerto Rico: Small Island, Big Debt

TAKE STEPS TO PROTECT THEMSELVES FROM IDENTITY THEFT

NAIC REMINDS CONSUMERS TO TAKE STEPS TO PROTECT THEMSELVES FROM IDENTITY THEFT FOLLOWING ANTHEM SECURITY BREACH If you have difficulty displaying this article, please click on the link below: http://www.naic.org/Releases/2015_docs/protecting_consumers_after_breach.htm WASHINGTON, D.C. (Feb. 12, 2015) — The National Association of insurance Commissioners (NAIC) is reminding consumers to take extra precautions regarding identity theft protection following a security breach at Anthem, Inc. The Indiana-based health insurer provides coverage for 37 million policyholders. State regulators have learned the cybersecurity hack may have also compromised data of past enrollees, which could mean as many as one in four Americans—80 million people—could be exposed to risk. “Regulators from states affected by the breach are meeting with Anthem executives on a daily basis and consumers can be assured we are asking the company to provide the best possible protection to all current and former policyholders,” said Monica J. Lindeen, NAIC President and Montana Commissioner of Securities and Insurance. “We appreciate the identity protection services being put into place by Anthem, but reviewing the scope and implications of this event will be a long process.” Regulators have called for a multi-state examination of Anthem and its affiliates. The NAIC Cybersecurity (EX) Task Force will monitor these efforts, update best practices and determine whether regulatory action is warranted. Past and present policyholders are urged to find information provided by Anthem here. Anthem has committed to contacting affected policyholders with specific information regarding protective measures. Further information may be provided by your state insurance department here. “We encourage consumers to carefully review financial statements and routinely monitor credit reports from one of the national credit reporting companies,” said North Dakota Insurance Commissioner and Cybersecurity Task Force Chair Adam Hamm. A free credit report is available online at www.annualcreditreport.com.

About the NAIC The National Association of Insurance Commissioners (NAIC) is the U.S. standard-setting and regulatory support organization created and governed by the chief insurance regulators from the 50 states, the District of Columbia and five U.S. territories. Through the NAIC, state insurance regulators establish standards and best practices, conduct peer review, and coordinate their regulatory oversight. NAIC staff supports these efforts and represents the collective views of state regulators domestically and internationally. NAIC members, together with the central resources of the NAIC, form the national system of state-based insurance regulation in the U.S. For more information, visit www.naic.org.

New Legislation Extends Popular Tax Provisions

New Legislation Extends Popular Tax Provisions

Client Alert: New Legislation Extends Popular Tax Provisions

The Tax Increase Prevention Act of 2014 Extends Expired Provisions - December 19, 2014 In one of its final actions, the 113th Congress passed the Tax Increase Prevention Act of 2014. This legislation extends through 2014 a host of popular tax provisions (commonly referred to as "tax extenders"). Client Alert: New Legislation Extends Popular Tax Provisions We'll continue to pass along timely, relevant information.

LIFE INSURANCE KEY TO MOST EXECUTIVE COMPENSATION PLANS

The vast majority of large businesses rely on life insurance to fund key portions of their executive compensation plans, according to a new report.

The latest edition of The Newport Group’s “Executive Benefits: A Survey of Current Trends” found that 73 percent of America’s largest companies—those with $1 billion or more in annual revenue—use company-owned permanent life insurance, or COLI, to fund their non-qualified deferred compensation (NQDC) plans for key executives. Even more—82 percent—use life insurance to fund their supplement executive retirement plans (SERPs).

NQDC plans and SERPs are often used as incentives to attract and retain high-level employees. Among those surveyed, 78 percent said they offer an NQDC plan to executives. Among those who didn’t, 55 percent said they plan to offer one in the next one to two years.

The report shows, when it comes to funding NQDC plans and SERPs, COLI was heavily favored over all other investment vehicles, including mutual funds, bonds and company stock, by the businesses surveyed. Why? Life insurance has several advantages over other investment vehicles when it comes to funding NQDC plans and SERPS, including:

• The inside build-up of cash value occurs tax free, though some employers are subject to the alternative minimum tax (AMT).
• The owner of the life insurance policy—in this case, the company—can make tax-free withdrawals from the policy up to the amount of the owner’s basis. After that, the owner can take a tax-free policy loan, depending on the policy’s contract limitations and charges.
• Life insurance death benefits are income tax-free to the employer (yet still subject to the AMT).

Employers can use the policy’s cash value distributions to pay the employee’s retirement benefits or, upon the employee’s death, the death benefit can be distributed to the employee’s beneficiaries. Cash value distributions or the death benefit can also be used to reimburse the employer for funds paid out to the employee in the form of retirement or disability benefits.

Want to learn more about life insurance and its role in executive benefits packages? Contact Schnack Financial today at 888.734.6575. 

IRS and Treasury Department Provide Guidance on Same-Sex Marriage

The U.S. Department of the Treasury and the Internal Revenue Service (IRS) have announced that same-sex couples who are legally married in jurisdictions that recognize same-sex marriage will be treated as married for all federal tax purposes. Guidance has been provided in the form of a Revenue Ruling (Rev. Rul. 2013-17) and associated Frequently Asked Questions.

State granting marriage is key, not state of residence

If a same-sex couple is legally married in a state that recognizes same-sex marriage, the couple will be treated as married for all federal tax purposes. This is true even if the couple resides in a state that does not recognize same-sex marriage. So, a same-sex couple legally married in a state that recognizes same-sex marriage, but residing in a state that does not recognize same-sex marriage, will be treated as married for federal tax purposes even though it's possible the couple may not be treated as married for state tax purposes. Recognition also applies to same-sex couples legally married in the District of Columbia, a U.S. territory, or a foreign country.

Registered domestic partnerships, civil unions, and other formal relationships recognized under state law do not qualify--only couples legally married under state law will be treated as married for federal tax purposes.

Applies for all federal tax purposes

Legally married same-sex couples are treated as married for all federal tax purposes. This applies for federal estate and gift tax purposes, and for federal income tax purposes, including:

• Filing status issues
• Personal and dependency exemptions
• Standard deductions
• Employee benefits
• IRA contributions and deductions
• The earned income tax credit (EITC)
• The child tax credit

2013 tax year implications

If you are legally married on the last day of the year, you generally have to file your 2013 federal income tax return as a married individual. That means same-sex couples treated as married for federal income tax purposes will generally have to choose whether to file their 2013 federal income tax return as married filing jointly, or as married filing separately.

Prior tax years

If you were married prior to 2013, you may also amend prior year federal income tax returns, choosing to be treated as married for federal income tax purposes (assuming that you were legally married on the last day of the tax year(s) being amended). You're only able to file an amended return, however, for any tax year still open under the statute of limitations. Generally, the statute of limitations for filing a refund claim is three years from the date a return was filed, or two years from the date tax was paid, whichever is later. For most individuals, that means claims can still generally be filed for tax years 2010, 2011, and 2012. You are not required to amend a prior year return, however.

It's important to note that if you choose to amend a prior year federal income tax return in order to be treated as married, all items on the return must be adjusted to consistently reflect your marital status (i.e., married filing jointly or married filing separately). That is, if you amend a prior year tax return to be treated as married, you are treated as married for all items and issues related to the return.

Note: If your employer provided health coverage for your same-sex spouse and included the value of that coverage in your adjusted gross income (AGI), amending your prior year return to reflect your status as a married individual may allow you to recover the income taxes paid on the value of this coverage. Similarly, if you paid premiums for health-care coverage for your same-sex spouse with after-tax dollars, you may be able to reduce your income by these premium amounts.

Note: For tax year 2012, same-sex spouses who filed their federal income tax returns before September 16, 2013 (the effective date of the Revenue Ruling) may choose--but are not required--to amend their 2012 federal income tax returns to file as married (i.e., married filing jointly or married filing separately). Same-sex spouses who file an original federal income tax return for the 2012 tax year (or for any prior tax year, for that matter) on or after September 16, 2013, will not have a choice--if legally married for the tax year, they will generally have to file their federal income tax return as married filing jointly or married filing separately.

Guidance issued in response to recent Supreme Court decision

The Treasury Department and IRS guidance was issued in response to the recent Supreme Court case striking down Section 3 of the Defense of Marriage Act of 1996 (DOMA), which defined marriage as the union of a man and a woman.

Investment Adventures in Emerging Markets - Turmoil Shouldn’t Derail Turkey

Mark Mobius, PH.D., Executive Chairman, Templeton Emerging Markets Group, Singapore

In 2012, Turkey’s stock market (as measured by the Istanbul Stock Exchange National 100 Index) rose more than 50%1, posting one of the strongest performances of any global equity market last year. However, recent news of protests sweeping the nation has started scaring off some investors, at least in the short term. We consider turmoil to often be a natural part of change and development, and these short-term political disturbances likely won’t be the last. What we try to remind investors is the importance of remaining focused on the long-term opportunity in Turkey and not be spooked by short term issues. I’ve invited my colleague
Carlos von Hardenberg, Managing Director, Turkey, based in Istanbul, to share some local insight.

Carlos von Hardenberg, Managing Director, Turkey
Franklin Templeton

In Turkey, what began as peaceful protests against the government’s plans to redevelop Gezi Park in Taksim Square turned into riots met by police with tear gas and water cannons, creating public uproar. This unfortunate disturbance has spread beyond the issue of the park and into political discourse, as there is a fundamental political conflict in Turkey between those who want a secular state and those who prefer an Islamic-based government. The resulting turbulence is likely to continue in the short term. While many have been quick to criticize the government, there is a large part of the population that supports Prime Minister Recep Tayyip Erdogan, who seems to now be making efforts to calm the situation by agreeing to hold discussions with protest organizers after tensions began to escalate.

The geopolitical uncertainty has caused a sharp decline in Turkish equities in recent weeks, unraveling what had been a positive start to the year. However, from a long-term point of view we remain positive on Turkey, which outperformed other emerging markets generally last year. Of course, past performance does not guarantee future results. We are bullish on Turkey for a few reasons. From an economic and
investment standpoint, we think the track record of the government has been outstanding, with policies conducive to attracting foreign investment there. The government has privatized public assets, and has been investing in infrastructure. Its plans include high-speed rail, a third bridge over the Bosphorus, tunnels, as well as plans to build what could be the largest airport in the world. Currently, investment sentiment in this regard
remains positive.

Turkey also boasts positive fundamentals. Its GDP has increased dramatically since 2002, and its banks are generally very well capitalized and more stable than in most parts of the world, including much of Europe. Interest rates are low compared with many other emerging markets. Turkey’s central bank cut its key interest rates by 50 basis points (0.5%) in May. The one-week repurchase lending rate was reduced to a record low of 4.5%, while the overnight lending and borrowing interest rates were cut to 6.5% and 3.5%, respectively.

In addition, Turkey has developed into a very important trading partner with the EU and established a very competitive export industry that has seen vibrant growth in the past 10 years.

This year, Moody’s Investors Service became the second international ratings agency to upgrade Turkey’s credit rating to investment grade. Moody’s raised the country’s sovereign bond ratings by one level to Baa3 from Ba1, with a stable outlook. The agency cited “recent and expected future improvements in key economic and public finance metrics” and “progress on structural and institutional reforms that Moody’s expects will reduce existing vulnerabilities to shocks to international capital flows over time” as reasons for the upgrade. The recent civil disturbances in the country could undermine its economic outlook, however.

Turkey’s central bank has been able to manage the currency. Inflation has come down significantly, from as high as 120% in 1994, (as measured by the consumer price index on a year-over-year basis), to just over 6% in 2012.

Despite all of this, it is now important for the Turkish government and the prime minister to show that they are the leaders of all of Turkey to help the country return to a normal state. In our

1. Source: Bloomberg LP. Borsa Instanbul Stock Exchange National 100 Index, priced in local currency. Past performance is not indicative of future results. Indexes are unmanaged and one cannot directly invest in an index.
2. Source: MSCI Indexes. All MSCI data is provided “as is.” MSCI makes no express or implied warranties or representations and shall have no liability whatsoever with respect to any MSCI data contained herein. The MSCI data may not be further redistributed or used as a basis for other indices or any securities or financial products. This report is not approved, reviewed or produced by MSCI. 

Past performance is not indicative of future results. Indexes are unmanaged. One cannot directly invest in an index.

Schnack Financial Newsletter for November

On the Precipice: the "Fiscal Cliff" The phrase "fiscal cliff" has been used to describe the unique combination of financial realities scheduled to take effect in 2013: expiring tax breaks; the imposition of new taxes on high-income individuals; and automatic deficit-reduction spending cuts. More Details

Ways Grandparents Can Help with College Costs As the cost of a college education continues to rise, many grandparents are stepping in to help. This trend is expected to accelerate as baby boomer grandparents start gifting what could be trillions of dollars over the next few decades. Helping to finance a grandchild's college education can bring great personal satisfaction and can be a way for grandparents to minimize potential gift and estate taxes. More Details

Two Social Security Strategies for Married Couples Deciding when to begin receiving Social Security benefits can be especially complicated when you're married because you and your spouse will need to plan together. Fortunately, there are a couple of strategies that are available to married couples that you can use to boost both your Social Security retirement income and income for your surviving spouse. More Details

As a business owner, what should I know about using temporary workers? Use of temporary workers (sometimes referred to as temps) may provide you with some flexibility to handle employee absences due to illness, vacation, or maternity leave. They may also help you handle special projects, busy times, or seasonal work. More Details As a business owner, what should I know about using remote employees? Interest in the use of remote employees has greatly increased along with growth in the number of service jobs and developments in technology that enable some workers to work almost anywhere. You might be able to use a remote employee in your business if the employee does not need to be at a specific location in order to do the work required. More Details

New Client Alert Explains IRA and Retirement Plan Limits for 2013 - October 22, 2012

IRA contribution limits

The maximum amount you can contribute to a traditional IRA or Roth IRA in 2013 increases to $5,500 (or 100% of your earned income, if less), up from $5,000 in 2012. The maximum catch-up contribution for those age 50 or older remains at $1,000. (You can contribute to both a traditional and Roth IRA in 2013, but your total contributions can't exceed this annual limit.)

Traditional IRA deduction limits for 2013

The income limits for determining the deductibility of traditional IRA contributions have also increased for 2013 (for those covered by employer retirement plans). For example, you can fully deduct your IRA contribution if your filing status is single/head of household, and your income ("modified adjusted gross income," or MAGI) is $59,000 or less (up from $58,000 in 2012). If you're married and filing a joint return, you can fully deduct your IRA contribution if your MAGI is $95,000 or less (up from $92,000 in 2012). If you're not covered by an employer plan but your spouse is, and you file a joint return, you can fully deduct your IRA contribution if your MAGI is $178,000 or less (up from $173,000 in 2012).

If your 2013 federal income tax filing status is:	Your IRA deduction is reduced if your MAGI is between:	Your deduction is eliminated if your MAGI is:
Single or head of household	$59,000 and $69,000	$69,000 or more
Married filing jointly or qualifying widow(er)*	$95,000 and $115,000 (combined)	$115,000 or more (combined)
Married filing separately	$0 and $10,000	$10,000 or more

*If you're not covered by an employer plan but your spouse is, your deduction is limited if your MAGI is $178,000 to $188,000, and eliminated if your MAGI exceeds $188,000.

Roth IRA contribution limits for 2013

The income limits for determining how much you can contribute to a Roth IRA have also increased. If your filing status is single/head of household, you can contribute the full $5,500 to a Roth IRA in 2013 if your MAGI is $112,000 or less (up from $110,000 in 2012). And if you're married and filing a joint return, you can make a full contribution if your MAGI is $178,000 or less (up from $173,000 in 2012). (Again, contributions can't exceed 100% of your earned income.)

If your 2013 federal income tax filing status is:	Your Roth IRA contribution is reduced if your MAGI is:	You cannot contribute to a Roth IRA if your MAGI is:
Single or head of household	More than $112,000 but less than $127,000	$127,000 or more
Married filing jointly or qualifying widow(er)	More than $178,000 but less than $188,000 (combined)	$188,000 or more (combined)
Married filing separately	More than $0 but less than $10,000	$10,000 or more

Employer retirement plans

The maximum amount you can contribute (your "elective deferrals") to a 401(k) plan has increased for 2013. The limit (which also applies to 403(b), 457(b), and SAR-SEP plans, as well as the Federal Thrift Plan) is $17,500 in 2013 (up from $17,000 in 2012). If you're age 50 or older, you can also make catch-up contributions of up to $5,500 to these plans in 2013 (unchanged from 2012). (Special catch-up limits apply to certain participants in 403(b) and 457(b) plans.)

If you participate in more than one retirement plan, your total elective deferrals can't exceed the annual limit ($17,500 in 2013 plus any applicable catch-up contribution). Deferrals to 401(k) plans, 403(b) plans, SIMPLE plans, and SAR-SEPs are included in this limit, but deferrals to Section 457(b) plans are not. For example, if you participate in both a 403(b) plan and a 457(b) plan, you can defer the full dollar limit to each plan--a total of $35,000 in 2013 (plus any catch-up contributions).

The amount you can contribute to a SIMPLE IRA or SIMPLE 401(k) plan has increased to $12,000 for 2013, up from $11,500 in 2012. The catch-up limit for those age 50 or older remains unchanged at $2,500.

Plan type:	Annual dollar limit:	Catch-up limit:
401(k), 403(b), governmental 457(b), SAR-SEP, Federal Thrift Plan	$17,500	$5,500
SIMPLE plans	$12,000	$2,500

Note: Contributions can't exceed 100% of your income.

The maximum amount that can be allocated to your account in a defined contribution plan (for example, a 401(k) plan or profit-sharing plan) in 2013 is $51,000 (up from $50,000 in 2012), plus age-50 catch-up contributions. (This includes both your contributions and your employer's contributions. Special rules apply if your employer sponsors more than one retirement plan.)

Finally, the maximum amount of compensation that can be taken into account in determining benefits for most plans has increased to $255,000, up from $250,000 in 2012; and the dollar threshold for determining highly compensated employees remains unchanged at $115,000.

WEEK IN REVIEW: PERVASIVE WEAK DATA RAISE HOPES FOR BANK STIMULUS

For the week ended August 10, 2012

• Weak eurozone pulls down German economy
• UK slowdown deepens
• Italian economy contracts for four quarters
• Chinese economy slows
• Freddie Mac profit reflects home price recovery

A number of separate reports confirmed that the European economy continues to weaken, with deepening troughs in Germany, Italy, and the United Kingdom. China reported lower export levels, slowing inflation, and sharply lower bank loan activity. Taiwan and South Korea also had steep declines in exports. The United States stood in contrast, with growing exports.

Despite the rising tide of negative economic data, markets were buoyed by better-than-expected corporate earnings and rising expectations of renewed central bank stimulus efforts to promote growth in the United States, Asia, and Europe.

US and global economic news

Germany falters as economic weakness spreadsEconomic weakness in the eurozone appears to be spreading into Germany, driving the region’s largest and strongest economy into contraction. Germany’s industrial output fell 0.9% in June in adjusted terms, after a 1.7% gain in May. German exports decreased more than expected in June as demand from eurozone trading partners declined. Germany’s factory orders also shrank 1.7% in June, twice as much as had been expected.

UK industrial production falls to 20-year low, BoE cuts forecastsThe UK economy has fallen into a steep slump, according to a number of reports. Industrial production reached its lowest point in 20 years in June, falling 2.5% between May and June, as the industrial sector was hurt by weak domestic demand and slowing exports. UK house prices fell in July, according to figures from Halifax, the country’s home mortgage lender. The United Kingdom posted its largest overall trade deficit in at least 15 years, as weak export demand is hampering efforts by the country to trade itself out of recession. The Bank of England cut its forecasts for growth and inflation, signaling that it might add economic stimulus in the near future.

Italy’s economy marks four quarters of contractionItaly’s economic output shrank in the second quarter, marking an entire year of consecutive quarterly contraction, according to Istat, its official state statistical agency. The country’s gross domestic product shrank 2.5% in the second quarter from a year earlier. Italy’s domestic economy has seen declining retail sales, record low consumer sentiment, and weak bank lending. Istat reported a 1.4% drop in industrial output in June from May and a decline of 8.2% from June 2011.

Evidence mounts of Chinese slowdown Chinese economic reports painted a clearer picture of a slowing economy in China, with new yuan loans by Chinese financial institutions down more than 40% in July from June, exports rising just 1% in July from a year earlier, and inflation slowing to 1.8% in July from a year earlier. The data are particularly worrisome because of how heavily dependent many other countries have become on China as a customer for their goods. Taiwan and South Korea reported sharply lower July exports, down 12% and 8.8%, respectively, from a year earlier.

US economic reports positive overallThe US economy, while not robust, appears to be in better shape than any other major nation’s, as data from elsewhere continue to show softening. The US trade deficit narrowed to its lowest level in two years in June, as exports reached a record high and imports eased largely because of declining oil prices. However, the trade gap with China grew because exports to China declined while imports continued to grow. The US housing market showed signs of a pickup: Three of five banks surveyed this summer by the US Federal Reserve Board said demand increased for home-purchase loans during the past three months; home prices rose by 2.5% in June from a year ago; and 11.9% of mortgage loans were 30 days or longer past due or in foreclosure at the end of June, down from 12.9% a year earlier.

US corn crop forecast down, prices much higherThe size of this year’s US corn crop is forecast to drop by 17%, and prices will rise by up to 39%, according to the US Department of Agriculture. The widespread US drought is expected to have a similar impact on the country’s soybean crop. As a result, food prices are expected to rise, including those of meats and poultry that rely on corn and soybeans for feed. The USDA also predicts that grain exporters and other US businesses that use corn will cut back on their consumption.

US and global corporate news

Freddie Mac profit reflects rising home pricesFreddie Mac, one of two US government-sponsored home mortgage market facilitators, reported a $3 billion second-quarter profit, after a $2.1 billion loss a year earlier. Freddie Mac benefited from rising home prices, which reduced the amount of money it set aside to protect against future credit losses. It also paid a $1.8 billion dividend to the US Treasury Department, which bailed it out in 2008.

HP to take $8 billion charge PC (personal computer) maker Hewlett-Packard said it plans to write down the value of its services segment by about $8 billion, acknowledging that it overpaid for its $13 billion acquisition of Electronic Data Systems in 2008. HP's services business has struggled with profitability amid the global economic downturn.

US Justice Department will not charge Goldman SachsThe US Department of Justice said it would not bring charges of financial fraud against Goldman Sachs or its employees. The decision not to prosecute was announced Thursday, after a year-long investigation could not meet the burden of proof.

Commerzbank posts profit, warns of slowdownGerman bank Commerzbank posted a much higher second-quarter profit than a year ago but warned that its second-half profit would decline because of the challenging economy and declining consumer activity.

Deutsche Telekom dials up higher earningsGermany’s Deutsche Telekom reported sharply higher second-quarter net profit as recent staff reductions led to lower expenses. However, the firm warned of ongoing business challenges, including intense competition, onerous regulations, and difficult economic conditions, particularly in Greece.

News Corp posts large loss on write-downMedia conglomerate News Corp posted a $1.55 billion loss for its fiscal fourth quarter after a multibillion-dollar write-down of its unprofitable publishing businesses. The firm plans to separate its film and television divisions from its publishing arm.

The week ahead

• The European Union releases its flash gross domestic product data for the second quarter on Tuesday, August 14.
• The US Department of Labor reports the July Consumer Price Index on Wednesday, August 15.
• The United Kingdom releases its monthly retail sales report on Thursday, August 16.
• Wal-Mart Stores announces its quarterly earnings on Thursday, August 16.
• The Conference Board releases its leading indicators report on Friday, August 17.

Stay focused and diversified
In any market environment, we strongly believe that investors should stay diversified across a variety of asset classes. By working closely with your financial advisor, you can help ensure that your portfolio is properly diversified and that your financial plan supports your long-term goals, time horizon, and tolerance for risk. Diversification does not guarantee a profit or protect against loss.

The information included above as well as individual companies and/or securities mentioned should not be construed as investment advice, a recommendation to buy or sell, or an indication of trading intent on behalf of any MFS product.

Securities discussed may or may not be holdings in any of the MFS funds or of Schnack Financial Group, Inc. For a complete list of holdings for any MFS portfolio or Schnack Financial Group, Inc., please request the most recent annual, semiannual, or quarterly report. Full MFS holdings are also available on the individual Fund Profile tab in the Products and Performance section of mfs.com.

Past performance is no guarantee of future results.

Sources: MFS research; The Wall Street Journal; The Wall Street Journal Online; Bloomberg News; Financial Times; Forbes.com; CNNMoney.com; msnbc.com.

Issued in the United States by MFS Institutional Advisors, Inc. ("MFSI") and MFS Investment Management. Issued in Canada by MFS Institutional Advisors, Inc., and McLean Budden Limited (carrying on business as MFS McLean Budden). No securities commission or similar regulatory authority in Canada has reviewed this communication. Issued in the United Kingdom by MFS International (U.K.) Limited ("MIL UK"), a private limited company registered in England and Wales with the company number 03062718, and authorised and regulated in the conduct of investment business by the UK Financial Services Authority. MIL UK, an indirect subsidiary of MFS, has its registered office at Paternoster House, 65 St Paul’s Churchyard, London, EC4M 8AB and provides products and investment services to institutional investors globally. Issued in Hong Kong by MFS International (Hong Kong) Limited ("MIL HK"), a private limited company licensed and regulated by the Hong Kong Securities and Futures Commission (the "SFC"). MIL HK is a wholly-owned, indirect subsidiary of Massachusetts Financial Services Company, a US based investment adviser and fund sponsor registered with the US Securities and Exchange Commission. MIL HK is approved to engage in dealing in securities and asset management regulated activities and may provide certain investment services to "professional investors" as defined in the Securities and Futures Ordinance ("SFO"). Issued in Latin America by MFS International Ltd. For investors in Australia: MFSI and MIL UK are exempt from the requirement to hold an Australian financial services license under the Corporations Act 2001 in respect of the financial services they provide. In Australia and New Zealand: MFSI is regulated by the US Securities & Exchange Commission under US laws and MIL UK is regulated by the UK Financial Services Authority under UK laws, which differ from Australian and New Zealand laws.

--See Disclaimers Below--

July Monthly Newsletter

Mid-Year Reality Check: Covering Your Bases in Uncertain Times More Details Ways Parents Can Help Their Boomerang Kids More Details Natural Disaster Planning for Small Businesses More Details Is it true that Social Security beneficiaries are being required to receive their payments electronically? More Details Is the Social Security Administration mailing out annual Social Security Statements? More Details

Refer a friend

This material is designed to provide information on the subjects covered. Pursuant to IRS Circular 230, it is not, however, intended to provide specific legal or tax advice and cannot be used to avoid tax penalties or to promote, market, or recommend any tax plan or arrangement. Please note that Schnack Financial Group, Inc., its affiliated companies, and their representatives do not give legal or tax advice. Use of this material constitutes understanding and acceptance of these provisions. Schnack Financial Group, Inc. and specifically Randall Schnack, its president, is licensed to solicit and sell insurance, annuities and/or securities in the following jurisdictions only: AZ, CA (#0E19595), FL, GA, IL, IN, IA, MI, OH, NE, TX, WI. We are not able to discuss or sell insurance, annuities and securities to individuals or entities who reside outside of these jurisdictions. Residents living in any jurisdiction where we do not hold the appropriate license will be referred to an associate who is licensed in that resident's jurisdiction. This communication is strictly intended for individuals residing in the state(s) of AZ, CA, FL, GA, IL, IA, MI, OH, NE, TX and WI. No offers may be made or accepted from any resident outside the specific states referenced.

Additional Medicare Payroll Tax: High Income Individuals Face New Medicare Taxes in 2013

Additional Medicare Payroll Tax: High Income Individuals Face New Medicare Taxes in 2013

Week in Review: Spain bank woes drive fresh flight to safety

For the week ended June 1, 2012



As the economic situation in Italy and Spain continued to deteriorate, the flight to safety picked up this week. Benchmark borrowing costs in the United States plunged to levels last seen in 1946 and those in Germany and the United Kingdom hit all time lows. German two-year bund yields fell to zero for the first time, while government yields in Italy and Spain hit worrisome levels.
Concern that Spain would not be able to save its troubled banks sparked a broad selloff in global equity markets and the euro. For the week, major stock benchmarks declined 2% to 3%. For the month of May, broad equity indices, including the Dow Jones Industrial Average and Standard & Poor's 300 Stock Index 500, gave back 6% or more after peaking early in May. It was the Dow’s worst month in two years. Crude oil futures fell to seven-month lows — below $83 a barrel — reflecting renewed signs of weakness in the US economy, rising oil stockpiles, and deeper eurozone worries. Oil prices have plunged by close to 25% since their $110-a-barrel peak in February; the price of a gallon of regular gasoline in the United States fell 45 cents to $3.67 per gallon and is expected to drop further.
After May ended with financial markets down substantially for the month, June began with a spate of more bad news from the eurozone, including record-high unemployment, along with disappointing data on Chinese manufacturing activity and US employment, which grew by its smallest monthly margin in a year. The US unemployment rate rose to 8.2%.

US and global economic news

Spanish woes intensify eurozone crisisThe eurozone crisis reached a new level of intensity this week as the Spanish government battled to save the troubled Bankia. Last Friday Spain announced plans to nationalize the bank, which is a real estate lender in need of a €23.5 billion bailout. The European Central Bank this week refused the Spanish government's request to recapitalize Bankia. That refusal has forced the Spanish government to consider an alternative––issuing bonds to the bank, which then would be used as collateral to raise cash from ECB lending facilities. As leaders grappled with a solution, ECB President Mario Draghi urged Europe's political leaders to come up with a longer-term vision for the region. Elsewhere companies and banks seemed to be steeling themselves. Multinational companies focused on retrieving cash from Greece and some of China's biggest banks cut off European counterparts from borrowing and derivatives trading.
Spanish retail sales fell by a record 9.8% in April from a year earlier, the twenty-second consecutive monthly decline. The country’s unemployment rate is at 24.4%. The European Commission said it would recommend extending the timeline for the country to reach targets on its deficit level, recognizing the challenges faced by the region’s fourth-largest economy and the financial strain of having to bail it out. 

Weak US jobs data adds to spate of bad newsMonthly US payrolls rose by much less than expected in May, as American employers added 69,000 jobs, far fewer than the 150,000 that had been forecast. The nation’s jobless rate rose to 8.2% from 8.1% in April, while hours worked fell. Private payrolls rose 82,000, half of the projected 164,000 increase. Government payrolls declined by 13,000. April’s jobs increase was revised down to 77,000 from a previously reported 115,000. Initial unemployment insurance claims rose by 10,000 to 383,000 for the week ended May 26. The US economy grew just 1.9% annually in the first quarter, according to the latest update from the US Department of Commerce, which had previously estimated a growth rate of 2.2%. The Conference Board’s consumer confidence index fell to 64.9 in May from 68.7 in April, the third straight month of declines. 
Eurozone data show continued regional weaknessUnemployment in the eurozone reached an all-time high of 17.4 million people in April, 1.8 million more than a year earlier, and 110,000 higher than in March. The seasonally adjusted unemployment rate remained at 11%. Manufacturing activity in the 17-nation economic region reached a three-year low, as the final manufacturing purchasing managers’ index fell to 45.1 in May from 45.9 in April. It was the index’s tenth straight month of contraction. Eurozone economic confidence fell to its lowest point since October 2009, according to a report from the European Commission. An index of eurozone executive and consumer sentiment dipped to 90.6 in May from 92.9 in April. 
Gap between safe-haven and risky sovereign bonds growsYields on two-year German bunds fell to -0.012% while 10-year bunds yielded 1.123%. In sharp contrast, 10-year Spanish government bond yields climbed to 6.56%. This is viewed as dangerously close to the 7% mark, at which point Spain’s sovereign bonds may be seen as unsustainable, prompting a bailout initiative. Italian 10-year bond yields inched up to just below 6%, also indicative of troubles in the eurozone’s third-largest economy. 

Chinese manufacturing activity slows, economic stimulus initiatedTwo measures of Chinese manufacturing activity indicated further slowing in the world’s second-largest economy. The official China purchasing managers index fell to 50.4 from 53.3 in April, while HSBC’s gauge fell to 48.4 in May from 49.3 in April. Various reports indicated that Chinese leaders are quietly beginning to add stimulus to the country’s economy. Since early April, the National Development and Reform Commission has approved major infrastructure projects including clean-energy hydropower stations, four new airports, and the renovations or expansions of three large steel mills.
India’s economy slowsIndia’s economic growth tapered to its slowest pace since 2003 in the first quarter of 2012, with the nation’s gross domestic product growing 5.3% from a year earlier, far slower than its 8% growth rate of recent years. Economists had forecast 6.1% GDP growth.
Japan posts positive dataCapital spending by Japanese companies rose 3.3% in the first quarter, corporate current profits were up 9.3%, and corporate sales were 0.6% higher than a year earlier. Japan’s economy grew an annualized 4.1% in the quarter, based on preliminary GDP data. Much of this activity is a result of government spending to spur recovery from the earthquake and tsunami of March 2011. Domestic Japanese sales of new cars, trucks, and buses rose 66% in May from a year earlier, according to the Japan Automobile Dealers Association.

US and global corporate news

IPO issuers get cold feet after Facebook’s disappointmentWould-be issuers of initial public offerings appear to be waiting for signs of a shift in market conditions before they attempt to go where Facebook ventured and stumbled. London-based jeweler Graff Diamonds, travel-listings website Kayak, and Formula One Group are holding off from going public for now. Graff was a day away from pricing its IPO when it hit the pause button. Kayak has yet to launch its roadshow to pitch its stock to potential investors; it is now taking a break, but its revenue is growing despite the company facing stiff competition in the online travel services space. Formula One was planning to launch a preliminary prospectus for a $2.5 billion IPO with the Monetary Authority of Singapore on June 5.
Two more Canadian banks post solid profitsBank of Nova Scotia and Canadian Imperial Bank of Commerce joined three other Canadian banks in posting strong earnings for the latest quarter. Scotiabank’s profit fell almost 10% after benefiting from acquisition-related gains a year ago. Excluding those gains, the bank grew its earnings by 16%. Its adjusted earnings beat expectations. CIBC also beat analyst expectations in posting a 6% increase in earnings.
Research in Motion warns of money-losing quarterCanadian BlackBerry maker Research in Motion warned that it would likely lose money for the second straight quarter. The firm is trying to cut costs and turn its business around before launching the next BlackBerry later this year and has hired external advisers to help management determine how to salvage or sell parts of its business.
Moody’s downgrades Nordic banksMoody’s Investors Service this week downgraded the ratings of nine Danish financial institutions, citing a “weak operating environment, pressurized asset quality, and poor profitability.” Last week, Moody’s lowered its ratings for two Swedish banks and a Norwegian bank. Just as noteworthy is the criticism some of these banks and asset managers have had for Moody’s, and the market response, which has been to ignore the downgrades and send bond and stock prices higher. Among the most severe downgrades was a three-notch downgrade of mortgage lender Nykredit Realkredit A/S and its Nykredit Bank A/S unit.
US automakers post robust sales in MayChrysler Group continued to register rapid sales growth, with a 30% increase in May from a year earlier, while fellow US automakers Ford Motor (a 13% sales increase) General Motors (up 11%) also did well.

The week ahead

• The US Department of Commerce releases its May factory orders report on Monday, June 4.Japan issues its monthly industrial production report on Wednesday, May 30.
• The Institute for Supply Management releases its non-manufacturing report for May on Tuesday, June 5.
• Markit releases the eurozone Services Purchasing Managers' Index for May on Tuesday, June 5.
• The European Union issues its gross domestic product (GDP) data for May on Wednesday, June 6.
• The US Federal Reserve Board releases its Beige Book for May on Wednesday, June 6.
• Japan ues its quarterly GDP report on Thursday, June 7.

Stay focused and diversified
In any market environment, we strongly believe that investors should stay diversified across a variety of asset classes. By working closely with your financial advisor, you can help ensure that your portfolio is properly diversified and that your financial plan supports your long-term goals, time horizon, and tolerance for risk. Diversification does not guarantee a profit or protect against loss.
The information included above as well as individual companies and/or securities mentioned should not be construed as investment advice, a recommendation to buy or sell, or an indication of trading intent on behalf of any MFS product.
Securities discussed may or may not be holdings in any of the MFS funds. For a complete list of holdings for any MFS portfolio, please see the most recent annual, semiannual, or quarterly report. Full holdings are also available on the individual Fund Profile tab in the Products and Performance section of mfs.com.
Past performance is no guarantee of future results.

Sources: MFS research; The Wall Street Journal; The Wall Street Journal Online; Bloomberg News; Financial Times; Forbes.com; CNNMoney.com; msnbc.com.

--see disclaimer below--

Week in Review: Ongoing eurozone uncertainty weighs on global markets

For the week ended May 18, 2012

• Eurozone uncertainty heightened by Greek government crisis
• Italian, Spanish bank debt downgraded
• Japan rebounds while Chinese activity cools
• Facebook IPO raises $16 billion
• Fallout continues from JPMorgan trading loss

 A multi-week slide in financial markets continued with widespread and deep losses globally, as uncertainty about Greece's ability to form a government fueled speculation about a Greek exit from the eurozone and its common currency. In line with those concerns, Fitch downgraded Greek sovereign debt, and the European Central Bank halted monetary operations to several Greek banks. Bond yields reflected investor risk aversion. Spanish 10-year bond yields rose to more than 6%, and safe-haven German two-, five-, 10- and 30-year bond yields dropped to all-time lows. US 10-year Treasury yields stood at 1.73% Friday morning, after closing Thursday at an all-time low of 1.702%.
Broad stock market indices in Europe, Asia, and North America continued to fall, with many major stock indices down more than 3% for the week. The Dow Jones Industrial Average has declined on 11 of the past 12 trading days. The S&P 500 Index is at a four-month low. About $4 trillion has been lost from global equity markets this month, according to Bloomberg News. The euro hit a four-month low of $1.264 against the US dollar, and the price of a barrel of crude oil dipped below $93.
back to top

US and global economic news

Greek drama unfolds with more uncertainty Uncertainty persisted around Greece’s government this week, as talks to form a coalition collapsed; Greece’s electorate will vote again next month. Critical questions remained, including whether Greece would honor its debt obligations, whether it would follow austerity measures that its electorate has largely repudiated, and whether Greece would leave the eurozone. Greek bank depositors grew nervous and withdrew €700 million (almost $900 million) from local banks Monday. Fitch downgraded its debt to CCC from B- in recognition of heightened risk that the country would not be able to remain in the eurozone.

Italian, Spanish bank debt downgradedMoody’s lowered debt ratings at 26 Italian banks, as government austerity measures have cut demand for loans, and 16 Spanish banks, as bad debts held by Spanish banks rose to a 17-year high. Moody’s cited concerns about the banks' exposure to Spain's critically weak economy and the ability of the Spanish government to support them in a crisis. The Italian bank downgrades note the banks' vulnerability to mounting loan defaults. Italy and Spain have both entered a double-dip recession.
Germany helps eurozone escape recession by a whiskerA strong rebound by Germany helped keep the eurozone from entering a technical recession of two consecutive quarters of contraction. The eurozone gross domestic product for the first quarter this year was unchanged following a 0.3% contraction in the fourth quarter of 2011. Germany’s GDP rose 0.5%, while France’s was unchanged, and Italy and Spain’s economic activity contracted 0.8% and 0.3%, respectively.
US economic reports remain largely upbeatUS housing starts rose more than expected in April, by 2.6% to a seasonally adjusted annual rate of 717,000, the US Department of Commerce reported. The percentage of homeowners delinquent on their mortgages in the first quarter fell to the lowest level since 2008, with 11.8% of all mortgages at least 30 days past due or in foreclosure, down from 12.8% a year ago, and 14.7% two years ago, according to the Mortgage Bankers Association. Industrial production in the United States rose 1.1% in April, the most since December 2010, driven largely by motor vehicle sales. The US rate of consumer inflation was unchanged from March to April after increasing for three months. The consumer price index was up 2.3% in April from a year earlier, its smallest annual increase since February 2011. Core inflation (prices excluding food and energy) also rose 2.3% for the year. Weekly initial jobless claims were unchanged at 370,000 for the week ended May 12, the US Department of Labor reported.

Chinese foreign investment declinesForeign direct investment into China receded for the sixth consecutive month in April. For the first four months of 2012, foreign direct investment in China was 2.38% below the year-earlier period, influenced by the sluggish global economy. China’s central bank announced it would cut the reserve-requirement ratio for banks by 0.5 percentage point. The leaders of China, Japan, and South Korea are planning to begin free-trade negotiations this year and could create the world’s third largest free-trade zone after the North American Free Trade Agreement and the European Union.
Recovering Japanese GDP rises 4.1%Japan’s economy rebounded, growing at an annualized rate of 4.1% in the first quarter, fed by government spending and increased domestic demand. Public investment grew 5.4% for the quarter. Although government spending has supported Japan’s post-tsunami recovery, in contrast to Europe’s austerity measures, it is seen as unsustainable, given that Japan’s sovereign debt is twice the size of its economy, the highest level among industrialized countries.
back to top

US and global corporate news

Much anticipated Facebook IPO raises $16 billionFacebook’s initial public offering sold 421.2 million shares at $38 each, raising $16 billion. Facebook’s IPO is the third largest in the history of the United States, behind those of General Motors and Visa. At a valuation of $104 billion, the social network’s market value is greater than that of McDonald’s, Citigroup, and almost all other well-established American companies. There’s wide divergence of opinion on whether Facebook is overhyped and overvalued or whether its base of 900 million users presents tremendous long-term potential. Facebook has been compared to a mining company sitting on valuable deposits that could take time to dig up and mine.

JPMorgan Chase trading loss leads to increased scrutinyFallout continued after the announcement last week of JPMorgan Chase’s $2 billion-plus derivatives-disaster trading loss, with speculation that it would lead to increasingly stringent financial regulations. JPMorgan CEO Jamie Dimon has been among the most vocal opponents to these regulations. Dimon is scheduled to appear before the Senate Banking Committee sometime in June.
Wal-Mart, Home Depot profits top expectationsThe world’s largest retailer and the nation’s largest home-improvement retailer posted better than expected first-quarter earnings. Wal-Mart’s quarterly net income rose 10% on an 8.5% increase in revenue. Home Depot had a 27% increase in first-quarter earnings, aided by unseasonably warm weather in much of the United States. Sales rose 5.9% and the firm’s gross margin widened slightly.
Japanese banks prosper on heavy bond salesJapan’s three largest banks posted total profits of almost ¥2 trillion, or $25 billion, their best quarterly performance since before the global financial crisis began in 2008. Mitsubishi UFJ Financial Group, Sumitomo Mitsui Financial Group, and Mizuho Financial Group’s results were all lifted by substantial gains from sales of Japanese government bonds, something that is likely to decline sharply moving forward, according to the banks’ executives.
Coty withdraws offer for AvonAfter Avon Products took too long to respond, would-be suitor Coty withdrew its offer of $10.7 billion for Avon and said it would explore other opportunities. Avon had rejected an earlier bid from Coty as uncertain and too stingy.
Hewlett-Packard plans job cutsHewlett-Packard is planning to cut its workforce by 25,000 to 30,000 employees, according to The Wall Street Journal. This would reduce its global employees by 8%. H-P has been struggling with declining revenue and profits for a couple of years.
back to top

The week ahead

• US existing home sales data is released on Tuesday, May 22.
• Hewlett-Packard announces its quarterly earnings on Wednesday, May 23.
• The European Union releases flash results for its PMI Manufacturing Index on Thursday, May 24.
• Japan releases its Consumer Price Index data on Thursday, May 24.
• The University of Michigan issues its Consumer Sentiment Index on Friday, May 25.

Stay focused and diversified
In any market environment, we strongly believe that investors should stay diversified across a variety of asset classes. By working closely with your financial advisor, you can help ensure that your portfolio is properly diversified and that your financial plan supports your long-term goals, time horizon, and tolerance for risk. Diversification does not guarantee a profit or protect against loss.

The information included above as well as individual companies and/or securities mentioned should not be construed as investment advice, a recommendation to buy or sell, or an indication of trading intent on behalf of any MFS product.

Securities discussed may or may not be holdings in any of the MFS funds. For a complete list of holdings for any MFS portfolio, please see the most recent annual, semiannual, or quarterly report. Full holdings are also available on the individual Fund Profile tab in the Products and Performance section of mfs.com.
back to top


Past performance is no guarantee of future results.

Sources: MFS research; The Wall Street Journal; The Wall Street Journal Online; Bloomberg News; Financial Times; Forbes.com; CNNMoney.com; msnbc.com.

--see disclaimer below--