You are cordially invited to the Investor Symposium hosted by Matson Money.
When: Thursday, July 31, 2014 – Saturday, August 2, 2014
Where: Horseshoe Casino & Conference Center
1000 Broadway, Cincinnati, OH USA

Speakers Include:
Arthur B. Laffer, PhD: Chief economic advisor to Ronald Reagan
Terrance Odean, PhD: Professor at Cal-Berkley, expert in the field of investor behavior
Lyman Ott, PhD: Expert in the field of statistics, providing validity to Free Market Portfolio Theory
Concert featuring country singer (and former leader of Hootie & The Blow Fish) Darius Rucker

Seating is limited. RSVP by emailing Admission is free to all Matson & Cuprill clients and their guests.

In The Headlines

Rising Home Prices Fuel the Feeling of Wealth in the U.S.

Household wealth in the U.S. climbed in the first quarter, helped by labor market improvement and gains in the stock and residential real estate markets that are giving balance sheets a lift.

Net worth for households and nonprofit groups increased by $1.49 trillion from January through March, or 1.9% from the previous three months, to $81.8 trillion, the Federal Reserve announced in its flow of funds report. Flow of funds accounts are a system of interrelated balance sheets for a nation, calculated periodically by the Federal Reserve. These balance sheets measure levels of assets and liabilities. From each balance sheet a corresponding flows statement can be derived by subtracting the levels data for the preceding period from the data for the current period.

Data in the current report shows that household real estate assets climbed by $758 billion. Owners’ equity as a share of total household real-estate holdings increased to 53.6% last quarter from 51.6% in the previous three months. Rising stock prices and home values helped Americans feel wealthier at the start of the year, even as unusually harsh weather held down consumer and business spending. Bigger gains in the labor market may help further boost household balance sheets and spur the consumer purchases that make up about 70% of the economy.

For example, automakers are enjoying a boost in industry sales as consumers feel comfortable enough to replace aging vehicles. Cars and light trucks sold at a 16.7 million annualized rate in May, the fastest since February 2007, according to data from Ward’s Automotive Group.

“The deleveraging on the consumer front has largely run its course, and we’ve obviously been helped by the run-up in financial assets,” said Omair Sharif, a U.S. economist at RBS Securities, Inc., in Stamford, Connecticut. “Balance sheets have been improving pretty substantially over the last few years.”

Household net worth is now $12.9 trillion above its pre-recession peak of $68.9 trillion, reached in the second quarter of 2007. The value of financial assets owned by American households, including stocks and pension-fund holdings, increased by $721 billion in the first quarter, the Fed report showed.

Equity prices have risen at a faster pace so far this quarter than in the first three months, with the Standard & Poor’s 500 Index advancing 3%, while the first quarter saw a 1.3% increase.

The improvement in household wealth has encouraged Americans to borrow again. The flow of funds report showed household debt increased at a 2% annualized rate from January through March. Consumer credit, including auto and student loans, climbed at a 6.6% pace, while mortgage borrowing fell at a 0.9% pace.

Sign Me Up: Will Subscriptions Replace Ownership?

Subscription-based and recurring revenue business models are in vogue for practically every type of product. Businesses have been selling monthly subscriptions for all sorts of goods and services for years—for example magazines. But more recently, all sorts of unexpected industries have started dabbling in subscription-based business models, offering everything from online software to toothbrushes to genome sequencing for a flat monthly fee.

One company leading this change is Zuora, a Foster City, California-based startup founded by former WebEx and executives. The company sells software that helps other firms move towards a subscription-based revenue business model, including tools for billing, accounting, and analytics.

More and more industries are turning to a subscription-based, recurring revenue model. At the top of the subscription-based model list are cloud software companies like and Box, which have always charged a monthly per-user fee for their online enterprise products. But now other types of firms are exploring this model, and their reasoning is that people today would rather subscribe to services than pony up the cash to own products.

Innovators like Netflix, Zipcar, and Spotify have certainly proven that subscriptions can work for more than just software. Consumer behavior, especially among younger people, is changing, and the need to own and house goods, from music to cars to physical documents, is waning. While Wall Street grapples with how to evaluate some of the subscription-only companies, it has clearly worked up an appetite for a recurring revenue model that gives companies all sorts of new ways to engage with old and new customers. But transitioning is not easy, and each company needs to evaluate the needs of its customer base—and how subscriptions could potentially open the door to new users.

A case in point is Adobe Systems. Last year, the company decided to transition its software suite for “creative” to the cloud. The move was far from flawless, but the results have mostly been positive. The company says 20% of customers that are purchasing the updated online tools were not Adobe customers before the switch. And now that the software is cloud-based, Adobe can better track how customers are using it and constantly push updates to individual users.

“We were really trapped inside the box that we shipped—both literally and figuratively,” said David Wadhwani, Senior Vice President of Adobe’s digital media division.

Other companies that made the switch have found they are able to attract a broader customer base by offering a subscription-based model, which has a much lower upfront cost to consumers. But the transition is sometimes easier on the customer than on the company, where the transformation to a new business model can be incredibly disruptive to the way sales and marketing is run. Incentivizing and commissioning salespeople with this model is particularly challenging. “It is an organizational issue,” says Mark Field, CTO and VP of software services at LifeTech, a biotech company owned by Thermo Fisher Scientific. “Our processes were set up to support selling instruments.”

Zuora is naturally bullish on the growth of the subscription economy and believes there are lots of untapped industries that will also jump on the bandwagon, from manufacturing to legal services to education. And even if you are not buying your toothbrush via a monthly subscription service, chances are you are already part of the subscription economy yourself. The way we consume movies, listen to music, or even drive around in cars, is changing. Zuora hopes the trend will continue.

1. – Bloomberg
2. – Federal Reserve
3. – Fortune
4. – Zuora

The Good News Is . . .

• Ventas, the nation’s biggest healthcare real estate investment trust, said on Monday that it had agreed to acquire the American Realty Capital Healthcare Trust for $2.6 billion in stock and cash. In a separate transaction, Ventas also announced that it would acquire 29 independent senior living housing communities located in Canada from Holiday Retirement for $900 million in cash. According to a statement by Ventas CEO Debra A. Cafaro, these acquisitions are consistent with the company’s strategy to be the leading owner of healthcare and senior living properties globally.

• Toll Brothers, Inc., the leading builder of luxury homes in the U.S., reported earnings of $0.35 per share, an increase of 149.9% over year-ago earnings of $0.14. The firm’s earnings topped the consensus estimate of analysts by $0.09. The company reported that revenues rose 66.7% to $860.4 million. Management attributed the company’s earnings performance to solid demand for new homes and increased efficiencies which led to an expansion of its operating margin.

• Nonfarm payrolls grew at a pace in line with recent trends rising 217,000 in May as the unemployment rate held steady at 6.3%, according to a report released Friday by the Bureau of Labor Statistics. The measures were in line with the results in a Reuters survey of economists revealing their expectations of 218,000 U.S. jobs created and 6.4% unemployment. Taken together, the numbers seem unlikely to change Federal Reserve policy as the U.S. central bank unwinds its monthly bond-buying program while keeping short-term interest rates near zero.

1. – NY Times Dealbook
2. – CNBC
3. – Toll Brothers, Inc.
4. – Toll Brothers, Inc.
5. – CNBC

Planning Tips

Tips for Protecting Your Spouse’s Income After Your Death

Caring partners each want the other to be financially protected, if left alone. But it is easy to make shortsighted choices or accidentally cut a spouse out of money that he or she needs by failing to submit the right paperwork. Below are some things couples should think about that can save a spouse from financial harm. Be sure to discuss these options with your financial advisor.

Leave a larger income Social Security income – When will you start taking Social Security? Here is an example that might help you get a clearer perspective on just how well you can do by making the right choice for your individual circumstances: A person retires with a pension at 60. He wants to continue to work and lands a different and well-paying job, but intends, like many Americans, to take his Social Security at 62. It is common to think you should take Social Security at 62 so that if you die early, you will not have lost income that you should have received from Social Security. But in this example, his wife has savings and a pension of her own, and they do not need extra money now. By waiting until age 66, his Social Security check will be 33% larger (plus inflation adjustments) than if he starts at 62. Even better, waiting until age 70, his Social Security check will be an impressive 76% higher. So, taking your Social Security at 62 if you do not need the extra money could be a two-way mistake. First, if you are healthy, you will probably live longer than you expect. By waiting to file for Social Security until age 66 or 70, you are storing up extra income for the later years of your retirement. Second, married people should not think only of their incomes today. Whichever spouse has consistently been the higher paid throughout the marriage, the longer he or she waits before collecting Social Security, the larger the income will be for the surviving spouse.

Select the right type of pension payout – Pensions come in two versions—those with a larger payout that covers only the lifetime of the person who earned it, and those with a (generally) smaller payout that also covers the lifetime of his or her spouse. Be sure to choose the, latter which is also called a joint annuity payout.

Check your individual retirement account beneficiary – Whoever you name on your IRA beneficiary form will get the money, whether it is fair or not. Say that you divorced and remarried, named your new spouse as your heir in your Will, but forgot to take your ex’s name off the IRA form. Your ex will get the money, even if the divorce decree states otherwise. Be sure to clean up all your beneficiary forms when you marry, divorce, or re-marry to avoid accidentally disinheriting a spouse.

Determine how you want your 401(k) benefits assigned – Who will inherit the savings in your 401(k) or similar plans? Here, spouses have super-protection. When you marry, your spouse is entitled to every penny in your 401(k), from the moment you both say “I do.” That is federal law. The beneficiary form is irrelevant, and so is your Will. If you want a different outcome, for example to leave part or your entire 401(k) to children of a previous marriage, you can ask your spouse to waive his or her rights. The waiver has to be in writing, notarized or witnessed by a Plan representative, and filed with your Plan. This cannot be done in advance of the wedding. Only a spouse can waive these rights. If you have a prenuptial agreement, it should include a promise to sign.

Ensure that your variable lifetime annuities benefits cover your spouse – These annuities combine an investment with a guaranteed lifetime income. But the income normally lasts only for the buyer’s lifetime and ends if he or she dies. Any spousal benefits might cover only the annuity’s current investment value or a death payout. If you want the annuity to cover both yours and your spouse’s lives, you generally have to pay more or accept a lower income guarantee. Couples often do not realize that their annuity cuts out the survivor. Some annuity salespeople also have no idea. If you enter into one of these complex contracts, think spouse first.

1. – CNN / Money
2. – Social Security Administration
3. –
4. – AARP
5. – FndLaw
6. – U.S. Dept. of Labor
7. – U.S. Securities & Exchange Commission

Please don’t hesitate to give us a call if you need help with any component of your financial planning.