Debt Ceiling Raised

Dear Friends,

The hard fought debate in Washington has come to an end. A two-step deal to lift
the debt ceiling by $2.1 trillion and cut about $2.4 trillion in spending over
a decade has been signed into law. The increase to the debt ceiling has lifted some
of the uncertainty that has weighed on investors, businesses, and consumers, who
were unsettled by talk about a possible new and deep financial crisis.

Still, the deal does not go far enough to put the United States on a path of fiscal
sustainability, with deficits projected to continue to rise, nor does it decisively
remove the threat of a downgrade to the nation’s AAA credit rating. The size of
the spending cuts will have minimal impact on the economy in the near term as they
will be phased in slowly with little effect until 2013, after the next election.

While investors may be relieved by the agreement to raise the debt ceiling and avoid
default, the market is likely to continue to be held captive by Washington for the
rest of 2011. The budget agreement that averted a government shutdown earlier this
year, and provided a preview of the current battle in Washington, only funded the
government for the 2011 fiscal year which ends September 30, 2011. While the current
deal making in Washington may alleviate the problem of “running out of debt capacity”,
the government will soon “run out of money” if another deal is not reached by the
end of next month to avoid a shutdown. And, this will be exacerbated by the vote
by Congress over the $1.5 trillion second round of spending cuts and boost to the
debt ceiling, which is set for December 23. These two events combined will mean
another market-volatility inducing budget and debt battle is on tap for early this
fall.

While raising the debt ceiling was an important hurdle to clear, the latest battle
over the national debt reflects only a small portion of the nation’s total liabilities.
The biggest budgetary expenses are Medicare, Medicaid, and Social Security, which
account for nearly half of all spending and seven times what is spent on servicing
the nation’s debt. Until these items are addressed through politically polarizing
entitlement cuts and/or revenue increases, the nation is still not on a path to
fiscal sustainability, resulting in the markets having to deal with continued fiscal
fights for the foreseeable future.

In the near term, investors may refocus their attention on the economy. While economic
growth may remain below average and data may be volatile, any signs of improvement
could inspire investors to re-engage the markets and reduce defensive positions
now that the debt ceiling concerns are lifting. One outcome is clear, volatility
is here to stay.

As always, we encourage you to contact us with any questions.

Best regards,

Benchmark Wealth Management

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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.

An obligation rated ‘AAA’ has the highest rating assigned by Standard & Poor’s.
The obligor’s capacity to meet its financial commitment on the obligation is extremely
strong.

Credit rating is an assessment of the credit worthiness of individuals and corporations.
It is based upon the history of borrowing and repayment, as well as the availability
of assets and extent of liabilities.

This research material has been prepared by LPL Financial.

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