Merle’s Blog - Swan Sessions

Swan Session for October 3, 2012

Where is Your Glass Slipper?

Caution: That first step into 2013 could cost you more than a glass slipper…

Written for Ventura Magazine

It’s been labeled ‘The Fiscal Cliff.’ And it’s man-made. Headlines are appearing at an exponential rate. Moving past the elections, we approach a not-so-Cinderella Midnight in December. The sound and volume surrounding this ‘event’ will become deafening. As rightly it should. Your wallet will be affected.

No matter which side of the ’aisle’ one sits on, this freight train has been heading right for us since The Bush Tax Cuts of 2001 and 2003 with their built-in ’Sunset’ clauses. This means these laws and their tax breaks were set to expire, but not until the administration that put them into place is long since out of office…and out of the way of the consequences of the expiration. Combine this with ‘The Compromise’ reached to raise the debt ceiling that will impose massive spending cuts across the board at the same midnight moment.

The United States Congressional Budget Office has prepared, as it always does, baseline projections that start with the assumption that current laws generally remain in place. However, this time their August 22, 2012 update states: “The outlook for the budget deficit, federal debt and the economy are especially uncertain now because substantial changes to tax and spending policies are scheduled to take effect January 2013.” So the CBO has also prepared projections under an “alternative fiscal scenario.”

If not stopped, a perfect storm (pun intended) will be created from four directions:

  • Expiration of the Bush Tax cuts
  • Expiration of the payroll tax cut
  • New healthcare reform taxes
  • Spending Cuts

This storm (my term-not theirs), according to the CBO, “will lead to economic conditions in 2013 that will probably be considered a recession, with real GDP (Gross Domestic Product) declining by 0.5% between the fourth quarter of 2012 and the fourth quarter of 2013.”

Yes, there are quite a few variations. Many respected economists and financial experts have this GDP effect going from the CBO’s 0.5% up to a 3.5% reduction. Even CNN financial anchor, Ali Velshi is looking for a 1.6% reduction.

Now the good news from the CBO (really!): “the rate of inflation as measured by the personal consumption expenditures price index (what you are expected to spend) will remain low in 2013 and interest rates on Treasury securities are expected to be very low next year.”

And none of this needs to happen.

Yes, there are a lot of ‘ifs’ to avert the storm. We will probably get wet, but at least hopefully, we won’t get drenched.

We are unlikely to see any significant legislation before Election Day given the current working relationship on the Hill. Then ‘The Decider’ (thank you for that one, Mr. Bush), if at all, will be a lame duck Congress convening between Thanksgiving and Christmas 2012. Regardless of who gets elected to Congress, it will be the current Congress that will be called to session.

Presidentially speaking, the inauguration isn’t until January 21, 2013 (never on a Sunday!), so it will be Mr. Obama at the helm.

The hope is that, standing on the edge of the fiscal cliff, the parties and their leaders will negotiate a compromise during the lame duck session. Compromise is possible on all four issues. And with both Standard & Poor’s and Moody’s having announced that a failure to implement the spending cuts agreed to in August 2011 will result in another downgrade in U.S. debt, the toughest compromise will be on those spending cuts.

And markets that usually calm down once the uncertainty of the election is past, will probably remain in turmoil as Cinderella’s Midnight draws near. Hopefully, your portfolio has the storm fences in place.

Will the American people ‘win’ this one or will it be dogmatic ideology? We have a say this November. I encourage you to be informed from multiple sources and speak up.

It’s up to us to make sure insulated Washington hears us. The alternative will be most unpleasant.

Chicken Little was, and is, wrong. With vast amounts of information, we’re just more aware of the issues affecting multiple facets of our lives on many levels. Knowledge is power. Use yours with intention.


  1. ‘An Update to the Budget and Economic Outlook: Fiscal Years 2012-2022,’ Congress of the United States, Congressional Budget Office, August 2012
  2. U.S. Fiscal Cliff Notes, J.P. Morgan, April 26, 2012
  3. “What is the ‘Fiscal Cliff’?”, Andrew H. Friedman, The Washington Update, Legislative Update, Eaton Vance, May, 2012
  4. ‘How Much Will It Cost You If Bush Tax Cuts End? A Lot,’ Jeff Cox,, Senior Writer, August 15, 2012
  5. ‘The Cliff We All Saw Coming,’ Edited by Weston Kosova and Kristen Hinman, Bloomberg Businessweek, August 6-12, 2012

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested into directly.

Securities and asset management offered through LPL Financial, a Registered Investment Advisor, Member FINRA/SIPC. Financial Planning offered through The Renaissance Group, LLC, a registered investment advisor and separate entity from LPL Financial. SWAN Investing ® is a federally registered investment philosophy and the sole property of Merle R. DiVita, CFP®, CIMA®.

Copyright © 2012 Merle R. DiVita, CFP®, CIMA®


Swan Session for July 20, 2012

Mid-Year Outlook 2012: What the Elections Hold for Investors

At the end of last year finding a middle ground, or Meeting in the Middle, was key for growth in the markets and economy. So far, this has been reflected in economic and market data. Notably, at this year’s midpoint, the gap between consumer confidence and leading economic indicators has narrowed about halfway.

However, when divergent rational facts and emotional feelings attempt to converge, it usually comes with some ups and downs. We have experienced this in the first half of 2012, with large upswings and dramatic downdrafts in market performance. We do anticipate that this volatility will persist for the rest of 2012—though it hopefully mellows a bit as we get some clarity around the November elections.

We continue to believe that:

  • The U.S. economy will grow about 2%, supported by soft sentiment and hard data continuing to converge.
  • The U.S. stock market will likely post high single-digit to low double-digit gains, backed by mid-to-high single-digit earnings growth.
  • Corporate bonds will post modest single-digit gains and outperform government bonds.
  • Policy-driven events will hold major consequences for investors.*

In our 2012 Outlook, we stated that the party that emerges in control following the November 2012 elections will forge the decisions that represent one of the biggest shifts in the federal budget policy since World War II. During the next several months, the elections will likely become an increasingly potent driver of the overall markets and particular investments as well as determine whether our expectations for the year come to fruition.

In our Mid-Year Outlook, we explore the potential investment impacts of policy and legislative changes resulting from the election. Our outlook over the second half of 2012 for the economy, the stock market, and the bond market are on track based on our 2012 Outlook forecasts. However, financial markets will react in anticipation of potential election impacts and influence stock and bond market performance. In the stock market, we continue to focus on sectors that derive more of their growth from more rapidly growing emerging markets and business spending. In the bond market, we continue to focus on higher yielding sectors that may outperform in a low-yield environment resulting from political uncertainty, sluggish economic growth, and ongoing risks from Europe.

This election can be broken down into many issues for analysis. We can think of these issues as campaign stops on our journey across the current political landscape. As we explore these issues, we will be making stops at the White House, Congress at the Capitol Building, and the Federal Reserve. We will head down Main Street to discuss the budget, move on to talk taxes in the town square, and then make a pit stop to talk about the sector impacts of policy changes on Wall Street. Finally, we will move on to Europe for the impact of the numerous elections on the second half of 2012.

As always, if you have questions, I encourage you to contact me.

Important Disclosures
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which investment(s) may be appropriate for you, consult me prior to investing. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and cannot be invested into directly.
The economic forecasts set forth in the presentation may not develop as predicted and there can be no guarantee that strategies promoted will be successful.
* Please reference the Mid-Year Outlook 2012 and Outlook 2012 for additional perspective on our beliefs mentioned within this letter.
Past performance is no guarantee of future results.
This research material has been prepared by LPL Financial.

Swan Session for July 16, 2012

Take a Deep Breath!

Hear it all the time: ‘What’s going to happen next?’ ‘When is it going to get ‘better’?’
Anyone who has been in my office knows that I keep a beautiful crystal ball on my desk. Took me years to get that. It was on backorder for the longest time. And when it was delivered, it didn’t come with any instructions.

No one can see the future, although there are many in the media who try to tell you otherwise.

With over 30 years of experience as a financial services professional, I can tell you this:

The economy is a lot like a human being.

As humans, there are many things that our bodies do automatically. We don’t have to think about them (for the most part). One such is breathing. And when we breathe; we inhale and we exhale. Thousands of times a day.

When the two year old tells his mother: ‘I’m going to hold my breath until you let me!’ Mom’s response is usually: ‘Go right ahead, dear.’ Mom knows, and we know, that Bobby can only hold his breath for so long until he must exhale and then inhale again .

Ever been gut punched? All of the air feels like it’s been completely knocked out of our lungs. May take a second, but we start inhaling again.

Air in. Lungs full. Air out. Lungs empty. Days, weeks, months, years for as long as we are on this planet.

One follows the other, over and over and over. Our economy, which is also a very alive entity, does much the same. Inhale: bringing periods of prosperity and growth. Exhale: releasing the hot air and preparing to grow again.

 Some of us seem to forget that every exhale is always followed by an inhale. When will the inhale happen? How deep a ‘breath’ will it be? And how quickly will it happen?

Just like people, sometimes the economy breathes a little slower and deeper and can hold that breath for a seemingly long time. But just as we know that the ’exhale’ will come, we also know that the next inhale is not far away. Expansion. Contraction. Over and over.

As the main stream media tries to tell you that this ‘exhale’ is the worst it has ever been, remember that the next ‘inhale’ has already begun.

Securities offered through LPL Financial. Member FINRA/SIPC. The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.

Swan Session for January 5, 2012

Looking Back to Go Forward

As your 2011 financial statements start to appear, is it time for a fresh point of view?
If you would like a review of where you are financially, I am taking appointments starting January 16, 2012. Initial consultations are always complimentary.

You can reach me at

Swan Session for December 6, 2011

How Much Social Security For You?

This is a ’Need to Know’ item. And you need to know this one!
Changes to Our Communication from the Social Security Administration
We have been alerted to another cost savings item from the federal government that will take a few extra minutes of your time. It will be well worth the extra minutes to calendar this for once a year.
The Social Security Administration has been sending annual personalized Social Security benefit statements to workers for many years. No longer. Now, we will need to go online to get estimated benefits. Here is an article that appeared in US News and World Report in early September, 2011 detailing the changes and how to use the new system.
Should you have any questions, please contact me at:

Swan Session for November 15, 2011

What if Wall Street’s Occupying Army Met Tevye the Milkman?

There has been much in the media about the ’Occupy’ happenings across the country.  I thought you might appreciate a different point of view on the issue.  If you would like to discuss this further, please contact me at

Swan Session for April 2011

Merle R. DiVita, CFP®,CIMA® is committed to helping her clients sustain and improve their long term financial independence. Her customized programs are designed to conserve and help grow your wealth by delivering an unprecedented level of personalized service.

Please explore the site and learn more about this extraordinary woman. Whether it’s your next career, a new business, a child in school, an aging parent that needs assistance, or your own life transitions, Merle would like to help you make your dreams a reality. Should you have any questions or would like more information, please e-mail or call Merle at 805-643-7600.