Medallion WealthManagement, Inc.2605 Nicholson RoadSuite 2103Sewickley, PA 15143724-934-8600www.medallion-wealth.com

May 2019How Does the Federal Reserve Affect theEconomy?

How to Recover from a Mid-Life FinancialCrisis

What is a college income-share agreement?

How much money should a family borrow forcollege?

Mergers & Acquisitions: What's in the Deal for Investors?

See disclaimer on final page

Merger and acquisition(M&A) activity in NorthAmerica and Europereached its second highestlevel on record in 2018.There were 19,501 dealsworth $3.6 trillion — a 6.3%increase in deal volumeover 2017. There was also

a rise in mega deals exceeding $10 billion.1

Collectively, U.S. corporations had plenty ofcash to spend after a long string of solid profitsand a significant tax cut.2 High stock pricesalso provided plenty of equity for dealsinvolving the exchange of stock, whilerelatively-low borrowing costs made it possibleto finance acquisitions.

The primary goal of a merger or an acquisitionis to boost earnings growth by expandingoperations, gaining market share, or becomingmore efficient. Here's a closer look at theseimportant transactions and some possibleimplications for investors.

Deal-making termsAn acquisition is the purchase of one companyby another that is paid for with stock, cash, orboth. The target firm is absorbed by the buyer,and the buyer's stock continues to trade. Thetarget firm's shareholders may receive stock inthe buying company and/or have the option tosell their shares at a set price.

A true merger occurs when two companies ofroughly equal size combine into one and issuenew stock. In this case, stockholders of bothcompanies generally receive shares in the newcompany. Some transactions that aretechnically acquisitions are announced asmergers when the deals are friendly, with bothsides agreeing to fair terms. When onecompany purchases a controlling interest inanother against the wishes of the target, it'sknown as a hostile takeover; these transactionsare typically announced as acquisitions.

Benefits and opportunitiesSynergy is the financial benefit that is expectedfrom the joining of two companies. This mightbe achieved by increasing revenue, gainingaccess to talent or technology, or cutting costs.

Bigger corporations typically benefit fromeconomies of scale, which enables them tonegotiate lower prices for larger orders withsuppliers. In addition, combining twoworkforces into one often results in headcountreductions. Some mergers result in industryconsolidation, but government regulators mayscrutinize deals and/or block mergers thatthreaten competition. In other cases,companies may join forces across industries forstrategic reasons or to diversify their lines ofbusiness. Disruptive competition fromtechnology giants is one reason companieshave been pursuing large mergers and novelcross-sector acquisitions.3

For better or worseA successful merger should create shareholdervalue greater than the combined value of theseparate companies. To accomplish this, thebuyer must have an accurate assessment ofhow much the target company is worth.

When a deal is first announced, the shareprices of both companies are likely to move upor down based solely on investor expectations.Of course, even a well-received merger couldeventually be viewed as a disappointment if themerger fails to create enough value.

When a company pays more than the value ofthe other company's assets, the difference isrecorded as "goodwill" so that assets match upwith liabilities. Sooner or later, underperformingcompanies may have to take a write-down inthat goodwill value, causing the company'sshare price to be discounted. Thus, only timewill tell whether any particular deal will pay offin the form of future earnings growth or investorreturns.

The return and principal value of stocksfluctuate with changes in market conditions.Shares, when sold, may be worth more or lessthan their original cost. Investments offering thepotential for higher rates of return also involvehigher risk.1 PitchBook Data, 2019

2 U.S. Bureau of Economic Analysis, 2018

3 The New York Times, May 3, 2018

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How Does the Federal Reserve Affect the Economy?If you follow financial news, you've probablyheard many references to "the Fed" along thelines of "the Fed held interest rates," or "marketwatchers are wondering what the Fed will donext." So what exactly is the Fed and whatdoes it do?

What is the Federal Reserve?The Federal Reserve — or "the Fed" as it'scommonly called — is the central bank of theUnited States. The Fed was created in 1913 toprovide the nation with a safer, more flexible,and more stable monetary and financialsystem.

Today, the Federal Reserve's responsibilitiesfall into four general areas:

• Conducting the nation's monetary policy byinfluencing money and credit conditions in theeconomy in pursuit of full employment andstable prices

• Supervising and regulating banks and otherimportant financial institutions to ensure thesafety and soundness of the nation's bankingand financial system and to protect the creditrights of consumers

• Maintaining the stability of the financialsystem and containing systemic risk that mayarise in financial markets

• Providing certain financial services to theU.S. government, U.S. financial institutions,and foreign official institutions, and playing amajor role in operating and overseeing thenation's payments systems

How is the Fed organized?The Federal Reserve is composed of three keyentities — the Board of Governors (FederalReserve Board), 12 Federal Reserve Banks,and the Federal Open Market Committee.

The Board of Governors consists of sevenpeople who are nominated by the president andapproved by the Senate. Each person isappointed for a 14-year term (terms arestaggered, with one beginning every twoyears). The Board of Governors conductsofficial business in Washington, D.C., and isheaded by the chair (currently, Jerome Powell),who is perhaps the most visible face of U.S.economic and monetary policy.

Next are 12 regional Federal Reserve Banksthat are responsible for typical day-to-day bankoperations. The banks are located in Boston,New York, Philadelphia, Cleveland, Richmond,Atlanta, Chicago, St. Louis, Minneapolis,Kansas City, Dallas, and San Francisco. Eachregional bank has its own president andoversees thousands of smaller member banksin its region.

The Federal Open Market Committee (FOMC)is responsible for setting U.S. monetary policy.The FOMC is made up of the Board ofGovernors and the 12 regional bank presidents.The FOMC typically meets eight times per year.When people wait with bated breath to seewhat the Fed will do next, they're usuallyreferring to the FOMC.

How does the Fed impact theeconomy?One of the most important responsibilities of theFed is setting the federal funds target rate,which is the interest rate banks charge eachother for overnight loans. The federal fundstarget rate serves as a benchmark for manyshort-term interest rates, such as rates used forsavings accounts, money market accounts, andshort-term bonds. The target rate also servesas a basis for the prime rate. Through theFOMC, the Fed uses the federal funds targetrate as a means to influence economic growth.

To stimulate the economy, the Fed lowers thetarget rate. If interest rates are low, thepresumption is that consumers can borrowmore and, consequently, spend more. Forinstance, lower interest rates on car loans,home mortgages, and credit cards make themmore accessible to consumers. Lower interestrates often weaken the value of the dollarcompared to other currencies. A weaker dollarmeans some foreign goods are costlier, soconsumers will tend to buy American-madegoods. An increased demand for goods andservices often increases employment andwages. This is essentially the course the FOMCtook following the 2008 financial crisis in anattempt to spur the economy.

On the other hand, if consumer prices are risingtoo quickly (inflation), the Fed raises the targetrate, making money more costly to borrow.Since loans are harder to get and moreexpensive, consumers and businesses are lesslikely to borrow, which slows economic growthand reels in inflation.

People often look to the Fed for clues on whichway interest rates are headed and for the Fed'seconomic analysis and forecasting. Members ofthe Federal Reserve regularly conducteconomic research, give speeches, and testifyabout inflation and unemployment, which canprovide insight about where the economy mightbe headed. All of this information can be usefulfor consumers when making borrowing andinvesting decisions.

The Fed's mission

The Federal Reserve is thecentral bank of the UnitedStates. Its mission is to providethe nation with a safer, moreflexible, and more stablemonetary and financial system.For more information on theFederal Reserve, visitfederalreserve.gov.

FOMC meeting schedule

The Federal Open MarketCommittee meets eight times ayear. Scheduled FOMCmeetings in 2019: January29-30, March 19-20, April30-May 1, June 18-19, July30-31, September 17-18,October 29-30, and December10-11.

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How to Recover from a Mid-Life Financial CrisisA financial crisis can be scary at any age, butthis is especially true when you're in your 40s or50s. Perhaps you're way behind on saving forretirement or have too much debt fromunnecessary spending. Or maybe anunexpected challenge, such as a job loss,illness, or break from the workforce forcaregiving responsibilities, took a direct hit onyour finances.

Regardless of how you got to this point, it'simportant to develop a strategy that will helpyou re-establish financial stability.

Regain controlStart by accepting the reality of your situation.This may be easier said than done when you'drather avoid the anxiety, stress, and guilt thatyou may feel when you have money issues. It'sokay to feel these negative emotions as part ofthe recovery process. They are likely to passwith time as you come up with a plan to regaincontrol.

Review your spendingAnother step is to create a budget to helpestablish a positive cash flow. If you'respending more money than you earn, you'llneed to cut back on your discretionaryspending immediately. If you've made cuts andyour monthly income still isn't enough, you'llneed to figure out a way to cut your fixedexpenses or increase your income.

Reduce your debtIt's likely that debt is one of the reasons whyyou're facing a financial crisis. One surveyfound that people between the ages of 45 and54 reported the highest amounts of debtoverall, totaling $134,600.1

To reduce your overall debt, identify the amountand interest rate for each obligation you have.Then tackle it by paying off the debt with thehighest interest rate first, then the next highest,and so on.

You might also consider restructuring yourdebt. This involves negotiating new repaymentterms with creditors so you can meet yourmonthly expenses and pay off your debts withina reasonable amount of time. If you can't affordto hire a professional credit counselor to helpyou manage or restructure your debt, checkwith your local Consumer Credit CounselingService (CCCS) office or another nonprofitcredit counseling service to receive assistanceat low or no cost.

You should also consider other options, suchas seeking part-time work for extra income orliquidating assets, that can help you pay offdebt more quickly.

Rebuild your fundsChances are you've drained your emergencysavings fund. If so, you'll need to build it backup. Otherwise, you'll risk racking up credit carddebt or dipping into your retirement savingswhen the next crisis hits.

It's okay to start small. Set aside a percentageof your paycheck each pay period to go intoyour cash reserve. Continue adding moneyafter reaching your goal.

Revisit your financial relationshipsIn order to prevent another financial crisis, whatchanges will you need to make to your currentfinancial relationships? Consider the following.

• Career. Do you need to increase your incomewith a second or a part-time job? Is thereroom for growth in your current career, orshould you consider additional education ortraining to help boost your earnings?

• Home. Do you currently live in an expensivelocation? Does it make sense to downsizeyour home or move to a lower-cost area?

• Family. If you're financially supporting adultchildren, can you reduce or discontinue it?Similarly, if you support your elderly parents,can your adult sibling(s) share the financialburden of care?

• Habits. Do you overspend to rewardyourself? Are you an emotional shopper? Doyou buy things you actually want, or are youjust trying to keep up with the Joneses?

• Health. Can you make a lifestyle change toimprove your health to help avoid futureissues and potentially reduce medical costs?

Some of these changes will require carefulresearch (e.g., moving or changing careers),whereas others can be easier to implement(e.g., avoiding shopping sprees or reducing aidto adult children).

Reassess your finances periodicallyAs you get back on the right financial track, it'scritical to monitor your progress. Failure to doso in the past might have contributed to yourcrisis, so make it a habit to periodically reviewyour finances. You might benefit from workingwith a financial professional who can help youstay on track with your financial goals as yoursituation changes.1 2016 Survey of Consumer Finances, FederalReserve Board (most recent data available)

Only 48% of workers ages 45to 54 are confident that theywill have enough money to lastthroughout their retirement.

Source: 2018 RetirementConfidence Survey, EmployeeBenefit Research Institute

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Medallion WealthManagement, Inc.2605 Nicholson RoadSuite 2103Sewickley, PA 15143724-934-8600www.medallion-wealth.com

Prepared by Broadridge Investor Communication Solutions, Inc. Copyright 2019

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Broadridge Investor CommunicationSolutions, Inc. does not provideinvestment, tax, or legal advice. Theinformation presented here is not specificto any individual's personal circumstances.

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These materials are provided for generalinformation and educational purposesbased upon publicly available informationfrom sources believed to be reliable—wecannot assure the accuracy orcompleteness of these materials. Theinformation in these materials may changeat any time and without notice.

How much money should a family borrow for college?There is no magic formula todetermine how much you oryour child should borrow forcollege. But there is such athing as borrowing too much.

How much is too much? One guideline is forstudents to borrow no more than their expectedfirst-year starting salary after college, which, inturn, depends on a student's particular majorand/or job prospects.

But this guideline is simply that — a guideline.Just as many homeowners got burned in thehousing crisis by taking out larger mortgagesthan they could afford, families can get burnedby borrowing amounts for college that seemedreasonable at the time but now, in hindsight,are not.

Keep in mind that student loans will need to bepaid back over a term of 10 years (possiblylonger). A lot can happen during that time.What if a student's assumptions about futureearnings don't pan out? Will student loans stillbe manageable when other expenses like rent,utilities, and/or car expenses come into play?What if a borrower steps out of the workforcefor an extended period of time to care forchildren and isn't earning an income? There are

many variables, and every student's situation isdifferent. A loan deferment is available incertain situations, but postponing loanpayments only kicks the can down the road.

To build in room for the unexpected, a smarterstrategy may be for undergraduate students toborrow no more than the federal student loanlimit, which is currently $27,000 for four years ofcollege. Over a 10-year term with a 5.05%interest rate (the current 2018-2019 rate onfederal Direct Loans), this equals a monthlypayment of $287. If a student borrows more byadding in co-signed private loans, the monthlypayment will jump, for example, to $425 for$40,000 in loans (at the same interest rate) andto $638 for $60,000 in loans. Before borrowingany amount, students should know exactly whattheir monthly payment will be. And remember:Only federal student loans offer income-basedrepayment (IBR) options.

As for parents, there is no one-size-fits-all ruleon how much to borrow. Many factors comeinto play, including the number of children in thefamily, total household income and assets, andcurrent and projected retirement savings. Theoverall goal, though, is to borrow as little aspossible.

What is a college income-share agreement?A college income-shareagreement, or ISA, is acontract between a studentand a college where a studentreceives education funding

from the college today in exchange for agreeingto pay a percentage of future earnings to thecollege for a specified period of time aftergraduation. The idea behind ISAs is to minimizethe need for private student loans, to givecolleges a stake in their students' outcomes,and to give students the flexibility to pursuecareers in lower-paying fields.

Purdue University was the first college tointroduce such a program in 2016. UnderPurdue's ISA program, students who exhaustfederal loans can fund their education bypaying back a share of their future income,typically between 3% to 4% for up to 10 yearsafter graduation, with repayment capped at 2.5times the initial funding amount.1

A handful of other colleges also offer ISAs;terms and eligibility requirements vary amongschools.

ISAs are considered friendlier than privatestudent loans because they don't chargeinterest, and monthly payments are based on astudent's income. Typically, ISAs have aminimum income threshold, which means thatno payment is due if a student's income fallsbelow a certain salary level, and a paymentcap, which is the maximum amount a studentmust pay back relative to the initial fundingamount. For example, a payment cap of 1.5means that a student will pay back only 1.5times the initial funding amount. Even with apayment cap, a student's payment obligationends after the stated fixed period of time,regardless of whether he or she has fully paidback the initial loan.1 U.S. News & World Report, September 26, 2018

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