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October 2015


Presented by Matthew Metraw of Axial Financial Group

One bad day doesn’t make a bear market. Two bad days, however, and the prospect of more to come, may well signal one.

Bear market is a scary term, and the past several days have certainly given investors cause for concern. Rather than spend time worrying, though, let’s try to understand what has happened and what it means for our long-term financial goals.

Markets decline worldwide, but U.S. fundamentals remain strong

At times like this, it’s worth reviewing where stock prices come from. The two components are earnings (how much profits companies are making per share) and valuations (how much investors are willing to pay for those earnings). Earnings evolve with the economy as a whole, whereas valuations are much more variable.

Asian markets, particularly China’s, are suffering from a double hit. Earnings growth has slowed substantially for many companies, making them worth less even if valuations remain constant. Valuations, however, have been dropping sharply as investors lose confidence in the economy and in future growth. This double whammy has slammed markets in China and around the world, and it may well continue.

In Europe, the turbulence in China has sapped confidence, but the damage has been mitigated by relatively strong fundamental economic and corporate performance. This shows that investors are still making rational distinctions between markets—a positive sign—and also allows for confidence to recover as fundamentals continue to improve.

Right now, with the exception of energy, the U.S. economy continues to grow at a reasonably healthy rate—better than European economies. Corporate earnings, which are based on the economy as a whole, are relatively strong outside of the energy sector. Even there, lackluster earnings are due to low oil prices, which actually help the rest of the economy. In any event, earnings are expected to increase over the next year.

Just as in Europe, any declines in U.S. markets will be based on what investors are willing to pay for a given stream of earnings, and valuations may well recover as confidence improves again.

Putting it all in perspective

When we consider where we are now, compared with where we have been, it’s important to make the following distinctions:

  • In the financial crisis of 2008, the banking system was in jeopardy. Now it is far more solid, with much higher levels of capital and much lower exposure to risky areas.

  • In the 2008 financial crisis, U.S. consumers and businesses had large stocks of debt and the housing sector was collapsing. Now, the housing market has normalized and household debt has come down substantially to a healthy level.

  • Supportive economic factors are in place—namely, Federal Reserve policy and low oil prices, both of which continue to stimulate the economy.

Combined, these facts suggest we’re unlikely to see the low market valuations that we saw in the financial crisis of 2008. Although we may experience further declines, they will be constrained by the much healthier economic and financial position the U.S. now finds itself in.

A better comparison is probably to the Asian financial crisis. As that situation deepened in 1998, U.S. markets dropped substantially, only to recover shortly thereafter. The damage was real but short lived, as strong U.S. economic fundamentals supported markets and investors from other parts of the world moved capital into what they perceived as a safe haven.

Given that the problem here in the U.S. is largely related to confidence, it’s logical to think that the market will recover as fundamentals continue to improve. We’ve gone several years without a significant decline, and the first was bound to be unsettling. In reality, though, the market’s foundations remain solid.

Taking the long-range view

Over the longer term, this type of adjustment is normal and healthy. Periodic downturns clear out market excesses and set the stage for further advances. To put the recent decline in context, the market is still up substantially over the past five years. And, although down over the past 12 months, it remains above the levels of October 2014, when it dropped and then fairly quickly recovered.

As always, the key is to remain focused on your long-term objectives rather than short-term fluctuations. As unsettling as recent market movements have been, the real economy continues to improve. That, not short-term price fluctuations, is what will determine the ultimate success of your investment process.

Forward-looking statements are not guarantees of future performance and involve certain risks and uncertainties, which are difficult to predict. All indices are unmanaged, and investors cannot invest directly in an index. Unlike investments, indices do not incur management fees, charges, or expenses. Past performance is no guarantee of future results.


Matthew Metraw is a financial advisor located at 5 Burlington Woods, Suite 102, Burlington, MA 01803.  He offers securities and advisory services as an Investment Adviser Representative of Commonwealth Financial Network®, Member FINRA/SIPC, a Registered Investment Adviser. He can be reached at 781-273-1400 or at  

Authored by Brad McMillan, CFA®, CAIA, MAI, chief investment officer at Commonwealth Financial Network.

 © 2015 Commonwealth Financial Network®



Big changes are here for businesses that accept credit card payments from their patients.  Essentially, an EMV liability shift takes place October 1, 2015 that could cost your practice a lot of money if you end up processing fraudulent transactions.

EMV is an acronym for Europay, MasterCard, Visa. And EMVCo is now the organization that will manage the standards for MasterCard, Visa, Discover, American Express, JCB, and China UnionPay.

According to EMVCo's website:

EMVCo exists to facilitate worldwide interoperability and acceptance of secure payment transactions. It accomplishes this by managing and evolving the EMV® Specifications and related testing processes. This includes, but is not limited to, card and terminal evaluation, security evaluation, and management of interoperability issues. Today there are EMV Specifications based on contact chip, contactless chip, common payment application (CPA), card personalization, and tokenization.

This work is overseen by EMVCo’s six member organizations—American Express, Discover, JCB, MasterCard, UnionPay, and Visa—and supported by dozens of banks, merchants, processors, vendors and other industry stakeholders who participate as EMVCo Associates.

In the US, EMV may be implemented as Chip and PIN, Chip and Signature, or other variations.  It is up to the issuer to choose.  As always, an effective strategy to protect against duplicate card fraud is to maintain a "card-present environment".

EMV Liability Shift

Beginning October 1, 2015, if a business accepts a "chip card" without the use of an EMV capable terminal, the business will be liable for any fraud connected with those transactions even if the business receives an authorization for the transaction. 

However, if a business has an EMV capable terminal, receives an authorization and later finds that a fraud occurred with a transaction, the issuer would be liable for that transaction instead.

What Does EMV Mean to Merchants?

If your practice's credit card terminal is more than 12 months old, you probably need to replace that terminal with one that is EMV-capable that supports:

  • Magnetic Stripe Reader

  • Chip Card Reader

  • NFC Reader (Apple Pay, Google Wallet)

What Should You Do At Your Practice?

Even though there has been slow adoption of EMV in the U.S,, POS vendors and processors are now scrambling to meet EMV implementation dates.  Please make sure to talk to your Merchant Services provider, or email Phil Kluge from Transaction Resources Inc, to see if your practice is in compliance.

Transaction Resources Inc. (TRI) offers innovative payment processing solutions by combining the latest technologies, a passion for customer service and competitive rates.  Located in Woburn Mass, you can contact Phil Kluge and his team at 781-496-3454. TRI also maintains which helps businesses build successful gift, loyalty, prepaid cards, and discount programs.



by Andrew D. Schwartz, CPA

While "Time Flies" is pretty much the industry standard, I prefer the words told to me by a Camp Director a few years back when I was dropping my son off at summer camp.  "The days are long but the weeks are short," he said to each nervous parent.

What he is saying is that there is plenty of time each day to accomplish many things, but once days turn to weeks and weeks turn to months, it feels as if time just flies by.

So how are you doing hitting your goals that you set back in January? Assuming the answer is not so good, you can take comfort in the fact that there are still 3 months to get some stuff done.  Please look at this 92 day window as a great opportunity to get some things wrapped up and off your to-do list before we start setting our 2016 goals and resolutions.

Here is all you need to do to get things done.

  • State the goal

  • Break up the goal into a list of doable tasks

  • Start working on the tasks

Thinking about this message reminded me of something that has been on my to-do list ever since my kids' Bar Mitzvahs back in the spring of 2012.  Even though my kids were born fifteen months apart, my wife and I decided to have them celebrate their 13th birthdays together. 

Without my knowing, one of my brothers was generous enough to contribute to a 529 College Savings Account for my two kids every month from the time they were born with the plan to give us those accounts at their Bar Mitzvahs, which is what he did.  It was a very generous gift.

Now, here's the issue.  My brother has a son who just turned 9, and I obviously need to reciprocate with an equivalent gift (everyone knows how gifts between family members generally work). Well, in 2012, my brother' son was 6, and I had 7 years to save prior to his Bar Mitzvah.  Well, this account has not even been established yet, so now there are only 4 years left for me to save up an equivalent gift for my nephew as the gifts my brother gave to my kids.

What's taking so long? Especially since accomplishing this goal that I set back in 2012 to set up an account for my nephew that will be funded on a monthly basis will only actually take these three steps:

  • Decide where to invest the money

  • Complete, sign, and submit the paperwork to set up the account

  • Set up for automatic monthly withdrawals from my checking account

To be honest, I can't believe that 3 years have passed without my getting this done. But October 2015 is the month this will happen. And I definitely want to get this wrapped up before we lose an hour per day when we fall-back from Daylight Savings Time on November 1st. Stay tuned...




Income Taxes

Saving and Investing




2014 & 2015 TAX FACTS

  • For 2014, the standard deduction for a single individual is $6,200 and for a married couple is $12,400. A person will benefit by itemizing once allowable deductions exceed the applicable standard deduction. Itemized deductions include state and local income taxes (or sales taxes), real estate taxes, mortgage interest, charitable contributions, and unreimbursed employee business expenses.
  • For 2014, the personal exemption is $3,950. Individuals will claim a personal deduction for themselves, their spouse, and their dependents. 
  • The maximum earnings subject to social security taxes is $118,500 for 2015, up from $117,000 in 2014.
  • The standard mileage rate is $.575 per business mile as of January 1, 2015, up from $.56 for 2014.
  • The maximum annual salary deferral into a 401(k) plan or a 403(b) plan is $18,000 in 2015, up from $17.5k in 2014.  And if you'll be 50 or older by December 31st, you can contribute an extra $6,000 into your 401(k) or 403(b) account this year, up from $5,500 last year.
  • The maximum annual contribution to your IRA is $5,500 for 2014 and 2015.  And if you turn 50 by December 31st, you can contribute an extra $1,000 that year.  You have until April 15, 2016 to make your 2015 IRA contributions.


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This Month's Topics

As Market Fears Grow, Stay Focused on the Long Term

Practices Accepting Credit Cards Should Beware Of The New "EMV" Standards Taking Effect October 1st

Clock Is Ticking To Meet 2015 Goals

The FICA Refund for Medical Residents 

2014 & 2015 Tax Facts

Tax and Financial Planning Calendar for October 2015


Browse our index of previous months' newsletter topics

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In a shocking development, the IRS recently announced that they will be honoring the FICA tax refunds submitted by residency programs and individual doctors.  The catch is that only FICA taxes paid prior to 4/1/05 qualify.

For more information, go to our April 2010 Newsletter, our January 2009 Newsletter, or our February 2001 Newsletter or read through the IRS' Chief Counsel Advice Memorandum on this issue.

Let's work together to keep current on this hugely valuable tax break.  Please post whatever you read or hear regarding this FICA issue on our new Message Board we set up just for this topic.


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