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5 Huge Myths About Social Security

Social Security has been providing Americans with old age, disability, and widow and orphan insurance for as many as 77 years. But like so many of today’s crucial financial topics, it’s also shrouded in myth. Here are five big ones.

Myth No. 1: Social Security is going bankrupt
The biggest misunderstanding out there relates to Social Security’s financial challenges. (A Google search for “Social Security bankruptcy” turned up 50 million hits.) But the fact is that Social Security isn’t going bankrupt, nor is bankruptcy really possible as the system is currently set up.

Here’s the source of the confusion: Historically, Social Security has collected more than it paid out. The extra money built up in a trust fund that collects interest. But due to demographic and economic changes (more on that in a minute), it’s expected that insurance payments will begin to exceed income in 2021. Around 2033, the fund will run out.   Read More

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Advisers still shaky on social media policy

In this photo illustration, a Facebook logo on a computer screen is seen through a magnifying glass held by a woman in Bern May 19, 2012. Picture taken May 19, 2012. REUTERS/Thomas Hodel

In this photo illustration, a Facebook logo on a computer screen is seen through a magnifying glass held by a woman in Bern May 19, 2012. Picture taken May 19, 2012.

By Jason Wallace and Suzanne Barlyn

(Reuters) – As the securities industry finally warms up to using social media sites such as Facebook and LinkedIn, regulators are discovering that brokerages and investment advisers are off to a rocky start.

Some firms are making major missteps as they ramp up their presence on the sites, and many do not even have social networking policies. Or if they do, many have inadequate guidelines.

And while many brokerages and investment advisers were once reluctant to use social media for their work, a growing number find they cannot ignore the marketing opportunity. They are increasingly using social media sites to increase their presence among customers and to recruit new business from investors.

A recent survey by the Massachusetts Securities Division found that 44 percent of the state’s investment advisers use at least one social media site. More are expected to use social media within the next year.

Social networking sites, however, have caused a great deal of angst for compliance departments at firms. Many compliance professionals have worried that using social media would expose their firms to scrutiny from regulators for, among other things, not saving copies of the messages sent through the sites.  Read More

JPMorgan Discloses $2 Billion in Trading Losses

Jamie Dimon, the chief executive of JPMorgan Chase, in New York City in May.
Mario Tama/Getty ImagesJamie Dimon, the chief executive of JPMorgan Chase, in New York City in May.

JPMorgan Chase, which emerged from the financial crisis as the nation’s biggest bank, disclosed on Thursday that it had lost more than $2 billion in trading, a surprising stumble that promises to escalate the debate over whether regulations need to rein in trading by banks.

Jamie Dimon, the chief executive of JPMorgan, blamed “errors, sloppiness and bad judgment” for the loss, which stemmed from a hedging strategy that backfired.

The trading in that hedge roiled markets a month ago, when rumors started circulating of a JPMorgan trader in London whose bets were so big that he was nicknamed “the London Whale” and “Voldemort,” after the Harry Potter villain.

For a bank that earned nearly $19 billion last year, the trading loss, which could go higher, will not cripple it in any way. Still it demonstrates how a market blunder can shake even a financial giant that celebrates its “fortress balance sheet.”

It is a rare blow to the reputation of Mr. Dimon, 56, a native New Yorker known for his hands-on management style and a confident swagger. After successfully steering his bank through the market turmoil of 2008 and the recession, he is perhaps the most influential bank executive in the country — and a vocal critic of the efforts to write rules under the Dodd-Frank regulatory overhaul.  Read More

ETFs land in 401(k)s, 529 college savings plans

Exchange traded funds, the hottest trend in the mutual fund industry, are making inroads into 529 college savings plans and 401(k) retirement plans, but they are still a small part of both markets.

ETFs are mutual funds that trade on the stock exchanges. ETF assets have soared to $1.2 trillion in March from $151 billion in 2002, according to the Investment Company Institute, the funds’ trade group.

Initially, ETFs were the domain of traders, because you could buy and sell them at any time during trading hours. Traditional open-ended mutual funds are priced once a day, after the exchanges close.

Now ETFs are making their way into tax-deferred savings plans, albeit slowly. State Street Global Advisors rolled out an all-ETF 529 plan in April. The SSgA Upromise 529 plan, a new arrangement with the state of Nevada, offers three all-ETF options:

•College-date portfolios, which are managed to be less risky as your child approaches college age.

•Risk-based portfolios, designed to fit aggressive, moderate and conservative investors.

•Static portfolios, which allow you to create your own ETF portfolio.

Investors can change their portfolios only once a year, so people can’t day trade with their child’s college savings plan.

The main advantage is cost, says Steve Coyle, director of U.S. subadvisory services for SSgA. The average annual cost for the portfolios is 0.49%, vs. 0.87% for open-end funds, Coyle says.

Like many ETF-based offerings, the plan is attractive to investment advisers, who can create portfolios for clients, charge fees for the service and still be cost-effective.   Read More

The Week Ahead: Will Europe Spoil Apple’s Party?

If this surprisingly good week makes you want to jump back into stocks with both feet, be patient, writes MoneyShow’s Tom Aspray. A cautious approach will pay off in the leading sectors and plays he has uncovered.

The strong earnings last week were indeed enough to push the stock market higher, with the Spyder Trust (SPY) showing a nice gain of 2.6%, while the PowerShares QQQ Trust (QQQ) was up 3.2%.

Of course, it was earnings from Apple (AAPL) that saved the day. After trading as low as $555 on Tuesday afternoon, it surged as high as $618 early Wednesday in response to the reported 35 million iPhones sold.

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Apple (AAPL) looks ready to close April above its monthly Starc+ band for the third month in a row. For those who are not familiar with Starc band analysis, these bands identify extreme price levels in any market. When prices are at or above the Starc+ bands, it is a high-risk time to buy.  Read More

How the Government is Threatening Your Business – and What To Do About It

A Pakistani money dealer counts US dollar note...Government financial policies – and a lingering aversion to addressing the national debt – could spell trouble for your business. (Image credit: AFP/Getty Images via @daylife)

Think the national debt won’t impact your business? Think again. As James Kwak, co-author (with Simon Johnson) of White House Burning: The Founding Fathers, Our National Debt, and Why It Matters to You, revealed to me in a recent interview, “It’s quite plausible [the national debt] will start having serious economic effects within the next 5-10 years.” The government’s mix of high spending and deep tax cuts risks one of two negative consequences. The first, says Kwak, is that “over time, if the national debt stays high, investors will lose confidence in the federal government and interest rates will go up, which affects everybody because it makes it harder to do things like borrow money to build factories. Or the other possibility is the Federal Reserve might start creating a lot of money in order to fund the national debt and that could cause inflation.” Either outcome is bad for the economy – and your business.  Read More

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