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Cypen & Cypen
NEWSLETTER
for
DECEMBER 16, 2004

Stephen H. Cypen, Esq., Editor

Never Forget - September 11, 2001

1. STATE AND LOCAL GOVERNMENTS REQUIRED TO PROVIDE NEW SOCIAL SECURITY NOTICE:

Effective January 1, 2005, state and local governments that hire individuals in positions not covered by Social Security must provide notice under Section 419 of the Social Security Protection Act of 2004 to such individuals. The notice explains the possible reduction of an employee’s future Social Security benefit because he is taking a non-Social Security covered position. These reductions occur by operation of the Government Pension Offset and the Windfall Elimination Provision. The individual must sign the notice, and the employer must then send it to the retirement system that covers the individual. The Social Security Protection Act of 2004 became law on March 2, 2004. The form can be downloaded at www.socialsecurity.gov/form1945/SSA1945.pdf. We adhere to our long-standing view: get rid of the GPO and the WEP!

2. MORE SPECIFICS ON MANAGERS’ FEES:

We recently did a piece on a survey of investment management fees for various asset categories (see C&C Newsletter for November 18, 2004, Item 7). A new survey from Mercer Investment Consulting, reported by plansponsor.com, shows that the average small-cap management fee is around 85 basis points in the United States. On the other hand, the average large-cap fee is 58 basis points for the same size fund. Although emerging markets are the most expensive asset class (at 95 basis points), other traditional asset classes are far less expensive. Fixed-income, for example, averages 25 basis points -- even less for stable government bonds. And bond investing tied to indices comes in cheaper yet: between 15 basis points and 30 basis points.

3. DOLLARS AND SENSE:

The dollar is already down more than 20% against the Euro in the past two years. So far, only Americans traveling abroad or hankering for Italian shoes have been hurt. But were the dollar to fall more than another, say, 15%, you probably would start to feel the impact even if you buy only American. We depend on foreigners accepting our dollar-denominated assets to finance the U.S. trade and federal budget deficits. And if the dollar continues sinking, interest rates will have to rise to keep attracting that money. Federal Reserve Chairman Alan Greenspan warned as much in a recent speech to international bankers.

Copyright, 1996-2004, all rights reserved.

Items in this Newsletter may be excerpts or summaries of original or secondary source material, and may have been reorganized for clarity and brevity. This Newsletter is general in nature and is not intended to provide specific legal or other advice.


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