New Year Resolutions 2011

 Tis the time of year when we look ourselves straight in the mirror and lie.  We promise the image staring back, all innocent and guileless, that the next twelve months will be different. Pounds will be shed, dentists will be visited every six months and exercise ,to boost the old cardiovascular, will be instituted immediately or as soon as the snow clears off the neighbor’s walk. Others will promise to quit smoking, cut down on the adult beverages or take a class on foreign languages instead of nightly vegetating in front of the boob-tube. It doesn’t make a difference what we pledge. We promise too much and by the beginning of March Madness the face in the mirror slyly winks back at our weakness.  We’ll do better next year.

As an expert on breaking resolutions or failing to follow-through I offer some words of wisdom for this years resolution makers:

1. Keep the list of promises small. Maybe one good resolution. Two if you have a strong constitution and a sympathetic partner.
2. Make your resolution attainable. Don’t promise something you know you can’t achieve.

That being said here’s some financial resolutions:

1. Maximize your 401k-403b without consideration of a match in 2011.
2. Less than $50,000 invested? Simplify your portfolio to one or two mutual funds. More than that and you’re confusing yourself.
3. Know what you own. Broom what you don’t.
4. Get with your advisor to make sure you’re all on the same page.
5. Educate yourself. Learn one thing about investing a month. Don’t make it difficult: It could be dollar-cost averaging, it could be dividends. Read my blog for ideas.

That’s it and wishing all a Happy, Prosperous and Healthy 2011 because you deserve it!

Questions call Paul @ 877 783 7080 or write him at pstanley@westminsterfinancial.com. Share this blog with someone who cares about their money.

 

That Was The Week That Was – 4th Week December

• Monday last the Dow sank as AmEx lead the sector’s decline. Other indices up.
• Getting ready to buy, buy, buy. Blackstone Group finalized plans for huge $15 billion buyout fund. The amount less than the $26 billion raised in 2006 is considered an enormous achievement in today’s  economic market. Blackstone’s stock has not been getting any respect in 2010. Up a paltry 8%.
• AT&T is gearing up to jump start its stock price. In addition to a 2.4% dividend increase the company will pay almost $2 billion for a bundle of spectrum licenses from Qualcomm. This is needed to provide advanced 4G mobile broadband services for new era smart phones. Can you say, Watson, I need to see you?
• A return to days of yore as banks are lining up to profit from the declining finances of U.S.cities and states, according to the WSJ on-line December 21st. CDS are back. Credit default swaps compensate buyers of a muni-issuer when it misses an interest payment or restructures its debt. Remember AIG, anyone?
• In spite of investor kvetching from February to September the Dow did an about face 2010 and was up 10.6% by Tuesday December 21st and climbed 76% since hitting a 12-year low March 2009.
• Banks lead the way on Tuesday. China helped when Vice Premier Wang Qishan said it supported efforts by European officials to stabilize the global markets hit by the euro zone debt crisis.
• The WSJ reported December 21st that traders are actually hoarding raw metals in warehouses for delivery! Normally traders simply sell before taking delivery because of the cost to warehouse and ensure. Today there is a trader who owns $3 billion of copper and holding it in warehouses. This is about half the world’s exchange registered copper stockpile. Barclays Capital announced that copper demand is likely to outstrip supply this year by an estimated 455,000 metric tons.
• The Lords of Go-Zintas are in deep trouble as accounting firm Ernst & Young is accused by NY AG and future Governor Cuomo of aiding Lehman Brothers in erasing as much as $50 billion in bad assets off the books to make the company look healthier. And Deutsche Bank agreed to pay more than $550 million and admitted criminal wrongdoing to settle a long-running probe over creating tax shelters that allowed clients avoid paying billions in U.S. taxes. Where is H&R when you need them the most?
• The economy has shown signs of accelerating according to the WSJ, on heels of another positive market day. New and existing home sales increased from the previous month and investors were less concerned with a double dip recession. GDP, a measure of goods and services produced, increased by 2.6% in the 3rd quarter, more than the government previously estimated. Inventory of homes fell to an adjusted 9.5 month supply.

Questions call Paul @ 877 783 7080 or write him at pstanley@westminsterfinancial.com. Share this blog with someone who cares about their money.

That Was The Week That Was – 3rd Week December

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• A reminder that your local homeless shelters will accept food stuffs, blankets along with cash donation. If you’ve received food goodies as a Holiday gift and you don’t want it to go to waste  call your local shelter. You can find where by going on line or calling your city offices.
• Monday last markets mixed as China did not raise rates. This was good news as Bruce McCain, chief investment strategist at Cleveland;s Key Private Bank said, ‘Anything that puts them on hold or slows their efforts to dampen inflation is good for the U.S.’
• Is it just me or does Sarah Palin make Hillary more appreciated?
• Buying Treasuries by the Fed was supposed to reduce rates but instead stocks up and so are the yields on bonds. Mortgage rates, too, have increased, which threatens to kill off the recovery in a market that needs all the help it can get. Rates have increased from 4.17% to 4.61% on a 30-year fixed just from early November. Tuesday saw the Ben Bernanke say that the Fed would continue to buy and keep rates low.
• The U.S. dollar is also up when the goal was to make it cheap with Quantitative Easing 2.
• FDIC estimates it’ll take 17 years before it’s fighting fit. They’ve hiked the cost to banks and raised the reserve amount needed to 2% of insured deposit.
• It’s not always about ME. Americans are really self-indulgent when it comes to investing but watch the recent $20 billion dollar deal China and India cut, which covers banking, power and infrastructure sectors. This ain’t your usual emerging markets.
• I’ve never seen a Chinese restaurant go out of business.
• Barrons.com’s Alan Abelson reported over the weekend that insolvency stalks China’s banks. An Asian version of The Ben Bernanke ‘kick the can’ management style stalks the Chinese banking sector with an estimated $1 trillion in non-performing loans on their books.
• Where was the action in November? According to Barrons.com U.S. Stock ETFs garnered (who talks like that?) $8 billion while taxable bond ETFs saw outflows of $660 million (a mere piffle). iShares Silver also saw strong inflows.
• Treasury selling is accelerating as many buyers loaded up on the QE2 announcement by The Ben Bernanke. Ten-year broke 3.5% with 40 basis points in just the first 2 weeks in December.
• Wednesday markets ended slightly down. News from Spain downgrade contributed to the decline.
• Twitter valued $3.7 Billion. The company announced a round of funding that placed the value on the firm.
• Mom and Pop are trading currencies and not stock. That’s the news from the WSJ last Thursday as two on-line currency trading firms went public in December.  Experts contend that daily foreign exchange has surged to a record $4 trillion a day in 2010. (That’s a T not a B, dear reader.) Leverage is the key to trading currencies and may cool the ardor of amateur investors once burned. Traditional, established on-line brokerages are expanding their services to include the foreign-exchange trade. Trading foreign currencies by people who for the most cannot make correct change could be a recipe for disaster.
• Stocks continued their run on better than expected jobs report last Thursday and a bullish view from FedEx for the coming year. Credit card issuers came under attack as new rules on debit card transaction fees will cost them billions in revenue.  Vegas may be coming back to life as casinos are getting bullish and Las Vegas Sands expects group room rates to rise at least 10% in 2012.
• Talking to a bond manager Thursday and he whispered that Bill Gross invested $17 million of his own money into bond funds. He was wrong. Gross invested $21.4 million into several closed-end Pimco funds. Obviously he believes QE2 will drive down interest rates – eventually. 
• Moody’s downgraded Ireland’s debt.
• From the Opps Department –Corporate execs sold $19 billion of their company shares during the previous two months in anticipation of ‘Obama’ tax hike. Sales locked in 15% cap gain tax. List of Captain’s of Industry included: Bill Gates, Berkshire Hathaway’s Charles Munger and Microsoft’s CEO Steve Ballmer.
• Finally – markets ended the week up a bit with markets mixed. The Conference Board’s index of leading economic indicators in November made its biggest jump in eight months. The index climbed 1.1%.

Questions call Paul @ 877 783 7080 or write him at pstanley@westminsterfinancial.com. Share this blog with someone who cares about their money.

 

What To Expect 2011

 Last year’s prognostic romp into the future by Yours Truly was almost spot on. In a nutshell I was wrong on housing and unemployment saying it would stabilize but right on the money (get it?) with the investment markets being just okay but nothing to write home about. I was also correct on interest rates and the American consumer coming back to the market place. I thought we’d see more inflation coming at the end of 2010 and we did, sort of. The inflation we are seeing is in commodities and not in the Fed raising interest rates. Although we are seeing an anomaly as rates raise even as the Federal Reserve attempts to keep them low. I also wrote in December 2009 that something would happen we’re not concerned, or thinking, about and that things we are concerned about won’t. Case in point was the BP disaster that no one could foresee and what didn’t happen, which everyone worried about, was a double dip recession.

I write this before the professional soothsayers buff their crystal balls and publish their predictions. The reason is to prove you don’t need a doctorate in economics to look forward and guess. Think the pre-football game show and watching the football experts bat .500; and that’s without the spread! Guys and gals in the office pool do better and that’s with the spread.  Here’s my thoughts, which are subject to change, amendment or denial:

• We’re due for a good 2011 market year. Figure double digit domestic markets.
• Emerging markets, the traditional Brazil, India and China musketeers should do well going forward.
• Expect more pain from EU, Spain and Portugal.
• Interest rates will go up fourth quarter as the Fed sees unemployment numbers fall.
• Big surprise of the year as metals tumble and recover.
• Housing does stabilize and prices get a bit stronger.
• Consumer spending increases over 2010.  Retail starts looking good.
• Look to manufacturing to add jobs and increase profits.
• Inflation starts its peskiness as rates go up a bit; a force of the consumer spending more and with emerging market consumers joining the party and wanting the same things Americans have and go on their own spending binge.

Finally, expect the unexpected which will cause concern and market gyrations. Keep your allocations simple. Review what you own and if you don’t understand what you own maybe it doesn’t belong in your portfolio.

Questions call Paul @ 877 783 7080 or write him at pstanley@westminsterfinancial.com. Share this blog with someone who cares about their money.

 

Sucker List – The Free Dinner Seminar Scam

 

Here’s a blog I wrote this past summer and had it approved to be published but thought it needed a bit more polishing. If you're of a certain senior age there are some in the financial business think you need a free meal and incentives to do business with them. If you enjoy being thought of as a ‘fool’ attend one of their dinner seminars and discover how the pro’s manipulate suckers.

I used to get one or two a week but for the longest time  I haven't gotten a dinner invitation to an investment seminar. The last few days I received three, from folks I never heard of but all wanting to break bread with me and join them for convivial conversation and sharing of ideas. One even offered me a gas card for simply showing up and filling my face at the hot buffet. When was the last time a friend said, ‘Come over for a bite and I’ll pay for your gas?’ - it’s like being invited to the Oscars and getting one of those Gucci bags loaded with free goodies!

Let me tell you what I got in the mail. The first invite is from Kim and Al, according to their mailing these folks have been advising both retirees and pre-retirees for years (it doesn’t say how many years or how they’ve done,  just that they’ve been doing it for years). This was to help us aging boomers avoid common costly financial mistakes (it also doesn’t say what those mistakes are). My second invite is from Terry. Terry has a nice picture of himself wearing a suit, smiling, with his back to a window overlooking a busy downtown that could be New York City or  downtown Dayton, you just don’t know. He looks like he’s a mogul. The invite tells you he is Founder and Chairman of the firm doing the inviting. That’s impressive. I’ve never had the chutzpah to name myself a founder of anything.

Kim and Al don’t have a picture so I wouldn’t recognize them if I bumped into them at Costco. They do not say what their official titles are and no language if they’re licensed in securities, which probably means they’re not. There is a law that says you have to state what your licenses are on all your advertising and if you don’t there are fines and penalties. My third host makes a big deal of the free gas card  he’ll give me when I show up to his shindig.

All are offering personalized solutions to today’s financial problems. They’re also pretty vague as to what the problems are. Terry says that the financial crisis is far from over and suggests that he knows how I can avoid it. He also wants to know if I still trust the same people I knew before the crisis. (I was never that crazy about my brother-in-law, if that helps.) Kim and Al have the identical question on their invite. (Maybe they all went to the same printer or mass mailing house?)

It doesn’t take a genius to figure out that Kim, Al and Terry are trying to say they are super savvy people and saw this past financial crisis coming  while the rest of us hung around and took a beating. Which means that American Funds, Fidelity, Vanguard, T Rowe, PIMCO, American Century, Templeton, and all the rest are not the people that you and I should be doing business with.  This also eliminates Bogle, Buffett, Munger, Bill Miller and a host of other very capable money people that need to be thrown on to the scrap heap of investment management history.

All three dinner hosts advertise that this is a ‘special’' event, something I wouldn’t want to miss. I like that word, ‘event’. It makes it more than it is. I don’t know how they define ‘special’. I never miss a World Series or a American League Playoff game, and those I consider really special. I’ve also never really missed a meal except when I was in the Air Force and then I was doing something really special. They also offer me these little incentives that makes it hard to say no. There’s the gas card and another promises that if I show up there is a free drawing for a savings bond. Free eats, gas and a chance to make money - better than Thanksgiving dinner with the in-laws and scrounging for change in the sofa seat cushions.

Ages ago raw land was sold through dinner seminars. This was in the 50s and early 60s and outfits would sell swamp-land in Florida and sand in Arizona at dinner seminars.  Imagine a swimming pool, manicured green lawns, shopping centers and schools…ah….just imagine..I remember seeing some of those ads on the inside cover of Reader’s Digest. When I was a teenager there was an office on Eight Mile with a real estate raw land marketing outfit name on their marquee.  It was there for years and then it was gone. Eventually there were lawsuits and the marketing companies were sued out of business but the concept of selling suckers something by tossing them a breaded fried cutlet and some wilted green beans has been in the arsenal of con artists for ages.

Of course, you know all this but it doesn’t hurt to remind you.

FINRA and the SEC have warnings on their web site about seniors attending financial dinner seminars. The warnings don’t amount to much since every year old poops like me attend, eat and later allow the thieves into their homes and sob afterwards when their hard earned money disappears or gets locked up in a 15 year redemption insurance product. We’ve all seen the newsreels on Action News at 11 we just never think it’ll happen to us.

It’s hugely expensive to stage one of these ‘events’ and some of these dinner seminar folks do six or eight a year. Mailings are costly, figure about $1.00 for every invite that goes out and usually these dinner seminar people send out twenty to thirty thousand invites to get about 60 couples to attend with half of those ending up buying some investment product. Add in a dinner and the cost of the room and a dinner seminar can cost the organizers upwards of $35,000.

All of the products sold are high commission products. They have to be in order for these people to continue to run the dinner seminar racket and make money. They don’t give away anything at these dinners, once you buy you buy and there is no such thing as no-load, free or inexpensive trading.  Most of us don’t need a free anything that badly. When you attend one of these things and look around there are folks who are looking for a savior and instead find themselves getting rooked. My advice is ignore the invite, the gas card and the savings bond drawing.

There is no free lunch and if you want information sign up for WSJ, Barrons and maybe a Morningstar subscription. No one gives something for nothing and we’re all too old to believe in the Tooth Fairy.

If you have questions call Paul at 877 783 7080 or write him at pstanley@westminsterfinancial.com share this blog with someone who cares about their money.

 

 

That Was The Week That Was – 2nd Week December

• Just in case you’re out of town and the news hasn’t hit- we got snow in the Midwest!
• Monday last markets ended mixed after The Ben Bernanke speech and political television appearance on 60 Minutes. Randall Forsyth at Barrons.com got his nose out of joint watching The Ben Bernanke Show & Tell and wanted to know, ‘If the Fed’s policy is to lower rates through quantitative easing why are Treasuries up to nearly 3% from 2.5%?’ And why did German Finance Minister Wolfgang Schaeuble label The Ben Bernanke policy as, ‘Clueless.’? Also, ‘many officials aboard accused the Fed of deliberately debasing the dollar as the primary means to stimulate the economy.’ (Of course, dear reader, with all our debt the Fed’s marching orders are to get a cheap dollar to compete with shhhhh China!')
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• Tuesday the markets responded with vigor to the Republican’s convincing the Dems to go-along with an extension of the Bush tax cuts. The rally fizzled right about tea- time and ended with markets mixed. 
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• Investors are holding the biggest positions on record in the commodities markets as prices surge, according to Wednesday, December 8th WSJ. There is a January 2011 deadline which requires regulators to set limits on how many commodity futures contracts in energy and metals as a speculator it can own.
• Wednesday saw a broad but itsy-bitsy rally across all indices except metals. Improvement in gaming Argus Research stated they see significant growth potential in casinos. Banks carried the day for the Dow on Wednesday, with Citi, Bank of America and J.P. Morgan Chase all up.
• Worst states for retirees? According to TopRetirements.com are: Illinois, California, New York, Rhode Island, New Jersey, Ohio, Wisconsin Massachusetts, Connecticut and Nevada. Reasons? Fiscal health, climate and taxation.
• Thursday saw mixed markets along with stock-market soothsayers starting to polish their crystal ball fortune telling globes in readiness for 2011 predictions. As always you can count on me to be right there with my insight and far sight.
• What’s wrong with emerging markets and why do folks have mixed views? David Wessel in WSJ 12-8 believes that some emerging market citizens. aka China, will start spending. Opting for the good life, spending much like their American friends. Yes, predictions by David suggest our days as pious over-savers will continue as other emerging market citizens take up our slack at the retail counters of world merchants. When that happens, 2011, he suggests we’ll see higher interest rates also more increases if emerging markets start to step up infrastructure and other investments.
• There is an old joke of a stuntman who created an act which called for him to crawl into a cardboard box and blow it, and himself, up with dynamite. The first night he did it he knocked himself into a six month coma and immediately upon awakening announced, ‘Ta-dah!’.  And so –Ta-dah! Stocks ended Friday at 2-year high. All indices were up led by GE which raised its quarterly dividend by 17%. (Never forget, dear reader, the value of dividends!).
• In 2001 the Estate Tax’s top rate was 55% with an exemption of $675,000. The estate tax in 2010 was zero. The estate tax going forward in 2011 in based on $5 million and a 35% tax. Gift tax exclusion remains the same at $13,000 per person tax free with no limits. 
• There was a threat that legislation would have forced the old 2001 estate tax rate and exemption on all Americans beginning in 2011.
• Finally, for the week all markets were slightly up along with consumer confidence as we move closer to the holidays.

Questions call Paul @ 877 783 7080 or write him at pstanley@westminsterfinancial.com. Share this blog with someone who cares about their money.

The Santa Claus Rally

 

You may have heard or read that December is usually a good month for stocks because of something called a ‘Santa Claus’ rally. No matter how bad the year, and for reasons we can only surmise, the broader equity markets do especially well the week before Christmas and New Year.

Suspicious minds place this anomaly on investment manager’s ‘window dressing’ their fund portfolios in order to present a better picture for clients, and more importantly, their superiors in order to gather a richer ‘year-end bonus’.

Other ‘studious’ minds feel that the ‘rally’ is due to an increase in ‘new money’ entering the market from clients who invest their Holiday bonuses or the rush to maximize retirement accounts.

I have usually stepped back from investing client’s money in the month of December only because whatever gains the month affords is not usually indicative of what to expect going forward.

Mark Hulbert, writer for MarketWatch.com, has access to numbers that most of us do not and reports that since 1896 the average return for all non-December months has been 0.5%. For December, Hulbert reports, the average return has been 1.2%! He goes on that the rally itself does not manifest itself until close to the actually Christmas and New Year holidays.

Hoping this is of some interest and solace why some brokers and financial planners avoid long-term investing for their clients in the month of December.

Questions call Paul @ 877 783 7080 or write him at pstanley@westminsterfinancial.com. Share this blog with someone who cares about their money.

That Was The Week That Was –1st Week December

•  No more Hollywood in Michigan? According to Bloomberg BusinessWeek the new Gov Rick Snyder may want to curb the state’s tax incentives to the film industry. Out of the 355 full time jobs created as a result of the aggressive tax cutting program to lure the industry here it cost the state about $193,000 for each employee. (Ready when you are, CB.)
• High unemployment may be with us for a good long while. In Global Economics report in last week’s Bloomberg BusinessWeek many companies are doing better with less.  Campbell Soup  huddles up management and workers, before their shift, in order to find ways to save the company money. Over 8.5 million jobs have been slashed during the recession but most S&P 500 companies are doing just fine. The reason is that Campbell's, UPS, DuPont and others are asking current employees to help them save money using existing technology and workers.
• Markets fell last Monday with worries surrounding the Irish debt even though the EU came up with $112 billion. Investors look to Italy, Spain and Portugal as next in line for aid. 
• T Boone Pickens, billionaire oilman, was the first to predict oil would hit $100 before it would ever again see $40 petitioned the US to use natural gas in all their vehicles instead of oil and was given the bum’s rush for the idea by Washington. Now, in China, Boone may find a more receptive audience as the country ramps up to eventually gobbling  45 million barrels a day, more than half of the current global supply. ( Can ya’ll say ‘Howdy’ in Mandarin?)
• Tuesday saw markets give up more as metals shined and dollar strengthened against the poor euro.  More stress tests for overseas banks in 2011.
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• Investors are still fearful of whether certain European governments can rebuild or will they default on their obligations. This fear carried over to our domestic markets as bond markets across the most vulnerable nations in Europe fell last Tuesday.
• The domestic S&P 500 index stayed respectfully above its key level of support last Monday and Tuesday illustrating that there were enough buyers to buoy the markets from a major selloff.
• Wednesday everyone was a winner! Almost every stock in the S&P 500 index was up for the day and bullishness was …like good cheer and Salvation Army bell ringers -everywhere. Dow was up almost 250 points even as the U.S agreed to put ‘a little something extra’ into the EU collection plate aka International Monetary Fund to help with the broader package to stabilize certain countries. The U.S. added 93,000 private  sector jobs in November and spending on construction projects unexpectedly rose by 0.7%. Both GM and Ford rose as U.S. auto sales grew by 11% over November 2009. It was a good day.
• From the country that brought the world Vasco da Gama and Magellan; Portugal now declared as a lousy credit risk by Egan-Jones.
• The Fed Beige Book, a survey of the 12 districts that make up the Federal Reserve, shows the economy IMPROVING in service, tourism and manufacturing especially autos. Here! Here!
• Rangel censure. When will folks learn it’s never the crime but always the cover-up that bites them. Anyone remember Tricky…ah, you know who.
• Stocks up- on momentum Thursday. As the cats would say it was solid, baby, really solid.
• A land of 2 Euros? Don’t bet on having the euro split with one supported by the conservative Germans and the other sponsored by…well see the map above. The 2 euro argument would be too costly to implement. In the end, according to Jessica Hoversen, foreign-exchange and fixed income analyst at MF Global in Chicago, Germany will be the one country to lead and decide the euro’s fate.
• What ETF are investment representatives  researching more than any other? It’s the TIPs ETF, as brokers and customers are thinking inflation and not deflation going forward.
• Nothing like your crackpot neighbor lobbing a few missiles into your backyard to get you back to the bargaining table. A few weeks back South Korea gave our president the gate. He was supposed to sign a huge trade agreement but the S. Koreans turned nasty. A few days later their nutty northern neighbor decides to use one of the South Korean islands for artillery target practice and suddenly everything is hunky-dory with the good old U.S. of A. The president sends one of our flat-tops to cruise the peninsula. The end result no more shelling and the South is or will sign a trading deal worth about $11 billion for the U.S.A. (It’s good to be King.  And, have real big boats!)
• Gossip gasp-Carnie Wilson, zaftig songstress with Wilson Phillips, fired from Fresh Diet ad gig for gaining weight while promoting her ‘cheesecakes’ instead of losing pounds per sponsors contract. Gotta be a lesson there somewhere, anyone?
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• Friday last the markets were morose on the incomprehensible news that less than expected jobs were created in the month of November. Investors sucked their thumbs for most of the session until someone recognized that the fundamentals were still good, the job numbers didn’t jibe with other Beige book news and the US just inked a deal with the Koreans which could be as big a Trade deal as NAFTA. All markets up for the day and week.
• Here we go again! Deficit Plan fails to win panel support. When will the idiots in Washington understand we want them to compromise and not stand on their hind legs and pound their chests?
• Finally, for some early Holiday cheer.  Retired research director at Value Line Sam Eisenstadt predicts double digit returns in 2011. Eisenstadt spent 63 years at Value Line and is considered one of the most eminent market forecaster.

Questions call Paul @ 877 783 7080 or write him at pstanley@westminsterfinancial.com. Share this blog with someone who cares about their money.

Two- Cents Plain Speak With Heirs

Most families are fairly open with their children about how much money they have and what the kids can expect when they pass on. It’s like Judy gets the piano and Johnny the old Charger in the backyard. Other families would give WikiLeaks a run for their money in keeping financial secrets until after they died.

Ages ago I visited my buddy’s grandmother who lived in a small home on the edge of Detroit. Sitting in her cluttered living room I picked up one of the dozens of knick-knacks she had and noticed glued on the bottom there was a white label with someone’s name written on it. When I later asked my buddy what it was all about he said it was his granny’s way to make sure everyone in the family got something when she died. It was her concept of a Will. Unless someone started ripping off labels there was no question who was going to get what.

While I am of the school that believes some things in the family are best left as a holiday surprise the estate planning process should not be one of them. Once someone has created a Will, possibly a Trust, a Living Will, health care power of attorney, financial power of attorney and have named a personal representative; those involved should know what’s- what before the time comes. Nothing, I have found, is more disruptive after a parent passes on is the beneficiary in-fighting for money and possessions.

Contrary what some parents think most kids grow up to be responsible adults and deserve to be treated as such.

One surprise any ill prepared child could do without would be getting a phone call from a stranger at a hospital saying a parent is gravely ill and they need to know what treatments to or not provide. Preparation is key to ensure what you want is what you get and everyone knows their role.

Here are a few ideas to communicate with those that will inherit your assets:

1. Invite everyone involved to a breakfast meeting at the house to talk about their inheritance. Don’t hold it until everyone is available.  Don’t do it one on one or you’ll only breed mistrust.
2. Lay out your estate plan the way you developed it and explain why.
3. Make sure there is a list of bank accounts, insurance policies, brokers, financial advisors, lawyer and accountant for everyone.
4. Let everyone know where you are financially and physically. You do not have to be exact but kids should know if you are close to being destitute or comfortable.
5. Explain who you have picked as health care power of attorney, financial power of attorney and personal representative:and what their duties will be.  Allow discussion and those that desire can opt out.
6. State how you have divided up your assets and why. Again I suggest percentages and not exact numbers since that will change.
7. If your state has a ‘no contest clause’ make sure you write that into your plan and tell the kids.
8. Ask the kids about certain ‘keepsakes’ and if they have a preference who should get what.
9. Set up a meeting with your financial advisor and the person you’ve chosen as having financial power of attorney. These two people may be working together upon your behalf for a very long time and you want them to be on the same page.
10. If this is your second or third marriage sitting with the kids from all unions is a great idea to ensure no one is forgotten, given preferential treatment or gets their nose bent out of shape.

Every family dynamic is different and should be treated as such. All questions on estate planning and your estate should be handled with your attorney and this is merely an outline of ideas that is meant to provide a broad working outline.

Questions call Paul @ 877 783 7080 or write him at pstanley@westminsterfinancial.com. Share this blog with someone who cares about their money.

 

 

Economic Experts versus Ish Kabibble

Ish Kabibble wasn’t really Ish Kabbible as anyone old enough to remember the big bands and especially Kay Kyser and his Kollege of Musical Knowledge would know. Ish who played the cornet and appeared in ten motion pictures with Kyser and his clan was born Merwyn Bogue of North End, Pennsylvania. Ish wore his hair in a Moe ‘Stooge’ Howard style and played the role of a simpleton. In reality Ish or Merwyn was an accomplished musician, studied law at West Virginia University and was the business manager for Kyser from 1931 to 1951; and finally, when the days of the big bands died away, he had a successful career in real estate. The whole idea of a smart person playing the part of an idiot is easy enough for us to accept. Believing an idiot is a genius is something that strains our credulity. Unfortunately there are more people in the financial information business today who are more like Ish Kabibble than even Ish Kabibble was like Ish Kabibble.

If it doesn’t confuse the public then it doesn’t make it to print or video. Take the recent quantitative easing that the Federal Reserve is doing. The Ben Bernanke is simply buying cheap treasuries to lower interest rates and the dollar. I got so many questions, rightly so, on what the heck does quantitative easing mean I could have sold my answers for a nickel and retired. That was just one instance in how silly people in my business are. And a lot of time folks in Wall Street just make stuff up and neglect to tell anyone else. Then, out of the blue everyone on CNBC is using a new word or phrase like we’re all supposed to know what their talking about. It seems like high school all over again.

If it doesn’t confuse it doesn’t make it to the public.

I am also finding that most of the financial experts only think they know what they’re talking and writing about; and if whatever they say, or scribble, fits a comfort level with the people they reach they get a standing ovation as being brilliant. It isn’t until after the disaster happens that their audience reruns why they did what they did and who was the root cause of it all.

Historically there is no reason why the values of homes should not continue to increase. –any Wall Street or Investment Bank prior to 2oo8

At one time Alan Greenspan, who headed the Federal Reserve, was lauded as a brilliant political economist in part because few people understood what the hell he was talking about. Everyone loved Alan and Alan loved Alan and the whispers were how well Alan handled himself politically out and about the Washington DC cocktail circuit. Greenspan himself cultivated the image as a brainy eccentric peering down at the rest of us mere mortals as but worker drones and dunces. He once said, ‘I guess I should warn you, if I turn out to be particularly clear, you’ve probably misunderstood what I’ve said.’ But Mr. Greenspan was one of the culprits in the eventual economic 2008 crisis as he left interest rates at exceedingly low rates for an extraordinary period of time. In his memoirs Greenspan reflects on his mistake as something he did not consider during his reign as Fed chief. You would think that someone who was so prescient to warn about the dot com craze as ‘irrational exuberance’ would have seen the bus of disaster coming around the bend with the low rates forever mantra. He didn’t. In fact just the opposite Greenspan commented that, ‘The housing boom will inevitably simmer down.’

Greenspan was right about the housing boom but not in the way he imagined.

Very few, if any, political economists were right about the economic crash. Those that were, if you read the books, were ahead of the curve and outside the culture of Wall Street and started placing massive bets a year or more ahead of the disaster. It was like someone today building an ark in their backyard just before the spring rain. It was that kind of bet that had every economist laughing and pointing fingers until the first raindrop dropped which was a hedge fund run by Bear Sterns.  Bear is no longer and Lehman Brothers was next and the race for the stock bottom was on as everyone had to get liquid quick.

Political economic soothsayers come cheaply to the party but if allowed can leave with everyone’s goodies. The only way to protect yourself is to indeed listen to everyone’s opinion but make sure that your own opinion is at least as important and in the end has the loudest voice.

When making a decision make sure you listen to everyone but always give your voice the most importance.

In one of my favorite movies, ‘Let It Ride’, Richard Dreyfus played a horse player who never had a winning session until one day he just couldn’t lose. In a particularly memorable scene he picked the winner of one race by asking every horse racing expert at the track what horse they liked in that race and then scratching that horse’s name from his racing form. The one horse no one liked was the one he bet on and, of course, the one that won.  Everyone he had asked became angry when he won and demanded why he didn’t share the name of the winner with them. He said he didn’t because he got the name from all of them. All the so-called horse racing experts were wrong and Dreyfus knew enough to just ask and then act on it.

Don’t be swayed by someone who you think knows more than you. The fact is that most people can make intelligent successful investment choices if they spend the time to read, listen and learn. But the most important ingredient that the average investor has is common sense. You’ll never run into a political economist who has that.

Questions call Paul @ 877 783 7080 or write him at pstanley@westminsterfinancial.com. Share this blog with someone who cares about their money.

 

 

 

That Was The Week That Was –4th Week November

• Just finished reading, ‘The Monster’,a new book on predatory lending and how deregulation let Wall Street Bankers and lenders run wild. ‘Questionable loans flooded the mortgage pipeline and one appraiser went to check a subdivision where Argent Mortgage had made loans. The appraiser called and asked to double check the address as he was standing in a corn field. The entire subdivision did not exist!’ Lenders didn’t worry as they said all loans would be bundled and sold as securities 20 minutes after the loan was made. The problem would be for investors to worry about. 
• GM’s IPO grew to $23.1 billion making it the 2nd largest (in common stock) behind Visa as underwriters exercised their rights to buy a big ‘chunk’ of stock.
• While the U.S. has borrowed itself to the eyeballs it is safe to say that the stocks of America’s businesses are doing just fine, thank you. In 3rd quarter earnings the S&P 500’s increase over last year was a massive 31% and 47% of those gains in 2009 were generated outside the United States.
• Markets ended mixed Monday. Tech’s provided some upside. IBM seems to have found some vigor and is significantly higher.
• Tuesday saw problems overseas with North Korean shelling a disputed South Korean inhabited island and Irish woes continuing. Traders sold off to be on the safe side. Triple digits.
• GDP revised Up. Not enough to slow the slide on Tuesday.
• Beginning January 1st HSAs get a makeover as new rules require prescription for reimbursement on over-the –counter drugs. Exceptions include insulin, eyeglasses, contact-lens solution, bandages, dental care and test kits. Doctors will be placed in awkward situation if they believe something unsafe or unwarranted.
• Jobless claims fell to a 2 year low-consumer spending increased for the 4th straight month.
• Kinder-Morgan is a –coming public- again. Kinder Morgan, an oil company, was taken private in 2006 in a management buy-out that included Goldman Sachs and 2 hedge funds. This should be one of the largest oil patch IPOs ever offered.
• Insider Trading investigation by the FBI has widened. The WSJ reported that even Goldman Sachs has been questioned. Janus Capital was involved in after hour trading scandal in the early part of the decade, now this investigation. Wellington provides investment management to many firms including Vanguard. Insider trading is acting on information that is not known outside of the firm or firms involved and is highly illegal contrary to Gordon Gekko.
• From the ‘Looking Into My Crystal 8- Ball Department: Phil Gramm, Vice Chairman of UBS Investment Bank (Yes, that Phil) predicted all Bush tax cuts would be extended and in 2011 a compromise on the estate or death tax would be made. Mellody  Hobsa, President Ariel Investments said, ‘ If you have courage and cash in this market…it’s fat city.’ (I like the way she rolls, what do you think, dear reader? I picked that up from you know who. )
• According to Mark Hulbert at MarketWatch.com there is no correlation over the past 114 years between how well retailers do on Black Friday and the stock market. The myth has been if sales are robust on BF than the markets will respond but for the last decade the reverse has been true.
• Del Monte (I love their Blue Lake green beans) agrees to a $4 billion buyout to KKR and a consortium of hedge fund investors. FYI Del Monte also sells Kibbles and Bits, Meow Mix and Milk Bone. You can expect cost cutting and have the company brought back for IPO in the not to distant future.
• Consumer sentiment UP, joblessness down, spending UP but factory orders down. All that shows the American economy improving – slowly.  However new home sales tumble while personal income rose; as reported by the Commerce Department.
• The Ben Bernanke must be slamming his head against a wall as the European crisis keeps the dollar supreme. His buying of US debt was supposed to weaken the dollar but the crisis with Ireland has flowed over to Portugal and Spain causing the euro to weaken instead. Traders target those two countries with bearish bets on their bonds. The cost for insuring $10 million of Irish debt is an astonishing $605,000. The cost to insure the same of Spain’s debt is $300,000.
• With saber rattling in Korea and worries over defaults in Europe the markets lost ground in an abbreviated session Friday.

Questions call Paul @ 877 783 7080 or write him at pstanley@westminsterfinancial.com. Share this blog with someone who cares about their money.

Tax Cutting Strategies for Year-End

Tis the season to do some year-end tax planning and possibly slash your tax bill. I am not an accountant, nor do I practice accounting but there are a few tips I picked up over the years that may make a difference in your income tax bill next year. As always I suggest you discuss any and all tax related questions with your tax professional. 

1. Now is an excellent time to sell off both stock and mutual fund winners and losers. Lock in gains with stocks that have made you money and get preferential tax treatment and cull your losers and get losses moving forward. This is a great maneuver if you think you are going to be changing investment strategies in 2011. 
2. No matter if you’re selling winners or losers make sure you have the cost basis for all your investments. Waiting until next March-April will not give you enough time to get numbers from various fund and brokerage firms.
3. Bulk up your 401k-403b retirement plan if you haven’t already. Check and see what you need to add to max out your contribution and get it done before the end of December. 
4. Talk to your boss and see if you can push income into 2011 instead of getting paid this year. If you work for a small firm the boss may appreciate your generosity.
5. Make a charitable deduction. This is the time when charities need you and you need them.  Don’t forget to get receipts.
6. Required Minimum Distribution from your IRA or if you inherited an IRA – make sure that you take the required amount for 2010. The IRS allowed participants to skip 2009 but the RMD is back in 2010. The penalty is severe- 5o% of the amount required to be withdrawn.
7. Any tax deductions coming due in January write the checks in December for this year. This includes mortgages with interest deductibility, taxes on property and business expenses. 

That’s it-only seven but if a nudge got you thinking and you did just one it could save you a lot of tax dollars. For more ideas call your tax professional.

Questions call Paul @ 877 783 7080 or write him at pstanley@westminsterfinancial.com. Share this blog with someone who cares about their money.

 

That Was The Week That Was – 3rd Week November

•   Monday last started off great guns, ignoring European and Asian modest losses, and perched to break a triple digit upside on better than expected retail news, especially positive results from the autos, when the sell-off shredded any gains for the day. Fears of a China slowdown  and European bank worries may have been to blame or simply investor wariness.
• ‘Take the bailout!’ and Irish banks resist and there lays the European mess. Possibly Spain and Portugal may need assistance but first the Irish who say they need no new money. In the meantime markets labor under lack of clear guidance and information.
• Both WSJ and Barrons.com reported on how billionaire investors are modifying their portfolio holdings. Warren Buffett sold all shares in Home Depot, Car Max and reduced stake in Nike, Ingersoll- Rand and Fiserv. Buyout specialist Bill Ackman sold off Yum Brands and reduced stakes in Kraft and Target. David Einhorn of Greenlight Capital bought more shares in Apple, Ingram Micro and Verigy.
• Buy and Hold Forever for Warren Buffett- don’t you ever believe that!
• Hedge Fund billionaire Paulson, as reported in same publications, reduced stake in Citigroup, Inc., Bank of America and J.P. Morgan Chase with no investment in Goldman Sachs Group. Telling?
• Awful Tuesday as a global wave of selling hit markets. The Dow off some 200 points settled around 175 points down along with every major index including metals. Investors everywhere wondering if the markets had ended their run with worries over China’s inflation woes and Irish banks.
• WSJ last Wednesday reported EU preparing more money to stabilize Irish banks and Christian Thwaites, chief executive of Sentinel Investments in Montpellier, Vt said, ‘…the markets have over- reacted…China is strong enough to grow through any anti-inflation steps.’
• ‘China may have surprised people, but I think the markets have overreacted,’ said Christian Thwaites of the recent global sell-off.
• If this doesn’t boil your turnips I don’t know what will. If you headed, or were an exec, at a failed U.S. bank the FDIC is conducting a criminal investigation and this means jail, fines, sayonara to lattes and long walks on the beach. The pressure is on to identify and prosecute bankers that contributed to the largest number of failures in 20 years. But – the hundreds of bankers bailed out including: Wells, State Street, Bank of America, Citi, JP Morgan –and the rest, get to skate! Again, it’s the small bank, usually community bank CEO, caught in the crosshairs of a meltdown and unable to get bailout funds who’ll end up in jail and probably spending all their savings on legal fees.  Not that I’ll lose sleep, a crooks a crook, but the big banks are different from everyone.
•  From the Department of: It Ain’t Supposed to Work That Way- Bond Yields have been expected to fall with the buying of Treasury debt but the opposite has been happening.  (see chart above) Last Monday the yield on a 7-year rose to 2.14%, a 2 month high, despite the Fed’s buying $7,2 billion of same that ayem. Quantitative Easing 2-so far phooey.
• Am I the only boomer who is embarrassed by conservative Palin while she says she’s considering a run for the presidency with such founding father homilies as, ‘I just tweet, that’s just the way I roll…’ from the recent NY Times interview… (Take me now, Lord!)
• 
• Wednesday last markets ended mixed with the Dow off 15 and all other indices up. Barry Diller added to his Coke shares as a strong buy on the stock was issued by Esther Kwon analyst at S&P’s Equity Research. Diller has been a director at Coca-Cola since 2002.
• Banks were chop-blocked on Wednesday’s trade as the Federal Reserve said they had to go through another stress test before paying dividends to shareholders.
• What the Street took away Tuesday it gave back Thursday on the IPO of General Motors. GM stock opened to us lesser mortals at $36 and promptly fell to close at $34.  While Street talk was about how well the shares did if you bought in the morning  the fact is you were a loser by dinner.
• The good news was all indices did well and the markets swallowed the GM story and motored on like brave soldiers. (Ya’ll wait for the Chrysler IPO a-coming next year, maybe.) Fiat bringing Italian styling to the House in Auburn Hills.
• Speaking of…Housing still stuck at depression levels and Gabriel Stein of Lombard Street Research in London isn’t surprised. Most Americans are underwater on their mortgages and have high levels of debt. Moving or selling is not in the cards and Gabriel estimates that it won’t be until 2o16 before this inventory is cleared and people move on.
• The Ben Bernanke talked back to critics on Friday and told them not to call quantitative easing quantitative easing but rather ‘securities purchases’. I only wish The Ben Bernanke would have told the world that a long time ago that and it would have saved this writer from explaining over and over again what exactly the Ben Bernanke was doing.
• Markets ended the week UP a skosh, which this writer would like to explain is the technical term for not very much or a smidgen.
• Finally, have a safe and relaxing Thanksgiving!

Questions call Paul @877 783 7080 or write him at pstanley@westminsterfinancial.com. Share this blog with someone who cares about their money.

Hot Tips

The so called free hot tip is costing amateur investors oodles of money.  In my 40 plus years in the business I cannot count how many tips, whispers and suggestions of stock and other investments I’ve heard, read and ignored. In today’s internet age it doesn’t take much of a stretch to Google a chat room or web site that touts a stock or even have a penny tip come right to your e- mail. There have been suspicions that many of the financial magazines have been complicit in spreading a tip by quoting a ‘respected’ economic source. However, most of the time the origin of the tip is so anonymous that Colombo would throw his hands up in frustration trying to find out who started it. Still amateur investors routinely invest hard earned money at these fables and usually end up sorry but most often none the wiser. Whenever you ask someone who told them about the so-called ‘off-brand' investment they’ll say something like, ‘I got it from my wife’s brother who got it from his golf buddy who heard it from a reliable source at the car oil change garage…’

It’s pretty hard to dissuade people from throwing money at these tips. I remember when K-Mart filed for bankruptcy and people got very angry with me when I told them their money would be worth nothing when the company emerged from bankruptcy. It was as if I was trying to stop folks from getting rich. The same was true with General Motors and Woolworth. (You do remember Woolworths, the world’s largest retail chain until 1997?)

A dentist I went to see about his investments proudly told  me his entire retirement plan was invested in Woolworth’s second mortgages. Should I say how well that turned out or can you guess?

Even the pros are wrong a lot of the time. To prove my point I found an old Smart Money magazine. There was an article that offered up the only 10 stocks one had to buy for the next decade. Buy these ten, the article boasted, and forget about buying anything else. Maybe the timing was wrong since this piece was written in 2007 a year before the markets went poof. Still  you can’t use that as an excuse for every investment since in the real world many stocks have recovered and others have surpassed their pre-recession price.

Without boring you with my research out of the Smart Money list of 10 stocks touted : 4 stocks lost money,  2 were relatively even and 4 were up. One company was bought by another at a hefty premium shortly after the article was written and subsequently the acquiring firm’s stock price has fallen.

And, in the same issue there was a mock debate that centered on Apple and if the stock, at the time trading around $88 a share, had seen its best days. Today the shares are north of $300.

It’s not only the experts that can get it wrong there are family members who’ll hit you up so you to get in on the ground floor of a fountain pen that’ll write under whipped cream or a perpetual motion machine; and for the few thousand that’s collecting dust in your seat cushions you could be a billionaire.  In most cases you’d be better off loaning the relation the money and having them sign a note so you can write off the eventual loss.

Most amateur investors expect hefty returns as soon as they plunk down their money into a specific stock or investment. Alas, dear reader, even the best professional money manager doesn’t get it absolutely, positively right and that’s using computer programs, technical assistance and decades of experience. 

The point is most hot tips end badly but here’s a checklist of things to do before you invest your money:

• Credentials of the Tip Giver. Is it a Buffett or someone at the water cooler who thinks he’s a Buffett.
• What’s the motivation? Is there a finder’s fee or a relation somewhere in the mix? Or is it simply that misery loves company?
• What is the background of the investment? Is the potential investor given all the facts such as risk and history?
• How liquid is the money invested? Can you bail at a reasonable time?
• What are the fees and expenses and how do they stack up with other investments.
• Is the investment registered and conforms with the state Blue Sky Laws or is it a under the table type of investment? One call to the state can save you money.
• Finally, can you afford to lose all the money without having a detrimental change in your lifestyle?

And if you cannot do the above get a second opinion from someone you trust like your CPA or financial advisor. The money they’ll charge is small potatoes compared to how much you may lose.

Questions call Paul @ 877 783 7080 or write him at pstanley@westminsterfinancial.com. Share this blog with someone who cares about their money.

 

Longevity Insurance- Solving The Income Needed For Living Too Long Problem

Detroit Lion 1950s football star quarterback Bobby Layne once said his retirement plan was to die when his money ran out. He was pretty much right on and died a relatively young and close to broke man.One of the most difficult things for investment professionals to create for clients is a lifetime income plan that meets all their needs. The two biggest hurdles to consider are creating sufficient immediate income and the possibility of needing that income over a very long period of time.

In the past it was acceptable to create a systematic withdrawal plan from mutual funds or use dividends from common stock to illustrate a consistent income stream. The 2008 market meltdown taught us that events not in our control could disrupt the best conceived plan. Both planners and clients discovered they needed to be a bit more cautious in their income plan design. Any sudden market implosion could slice years off the assets needed for income. A drastic drop in the markets plus an aggressive withdrawal plan is a doubly whammy to disrupt any plan.

Blue chip global stocks with a history of paying increasing dividends are not immune from abandoning shareholders and eliminating dividends.

Fixed annuities are also little help during periods of low interest as insurance companies need higher yields to provide more attractive fixed long-term income. 

Finally, even during relatively benign periods of consumer prices increases fixed income plans are at the mercy of cost of living hikes. A simple 2% annual inflation rate can compound and reduce the purchasing power of a dollar in as short a period as a decade by as much as  twenty-five percent.

The partial answer for long-term income seems to be longevity insurance. While this writer is not a great lover of the insurance industry they seem to have arrived with a product that solves some of the problems of a client living too long. Longevity insurance is basically a fixed deferred annuity with a starting date far into the future.

The mechanics are simple enough. A client who is age 65 desires to ensure that he will receive $1,000. a month for life beginning at age 85. For that agreement he pays a one time premium (currently with some companies less than $20,000. for the $1,000 a month). This amount is not only cheaper but about 10% of the amount of a single premium immediate annuity. If the client wants income for his spouse there is a separate policy that has to be purchased.

I like this for several reasons: (1) A retiree can get a bit more aggressive with creating more immediate income. (2) A retiree does not tie up a tremendous amount of money to buy a deferred income annuity. (3) It’s an actuarial product that doesn’t 100% depend on current interest rates.

Before you decide to buy this product you need to do some homework: You have to ensure the company who is issuing the product is currently in great financial shape. The reason is that the guarantees are with the company and not an independent outside firm.

Next you have to answer if  there is a history of living a long time in your family? If all your relation’s lifespan only make it to the national average the chances of getting value is little and none.

Do some immediate income planning. How much do you think you need now and if spending down assets how much income will you need down the road. Run the inflation calculation using one of the calculators at my web site at www.primaryplanner.com.

And finally, if you neglected to buy long-term care insurance and everything else being equal you may be able to fund a self-created income stream for exactly that future purpose. 

As always call me for direction and assistance.

Questions call Paul @ 877 783 7080 or write him at pstanley@westminsterfinancial.com. Share this blog with someone who cares about their money.

 

Roth IRA- The Conversion Question

The Roth IRA provides an opportunity of investing after-tax money and allowing it to grow tax-free. Rules for taking money out of the plan are more liberal and there is no required minimum distribution at age 70 1/2. Taking advantage of tax-free money to some investors is like a free steak and lobster dinner. It is an event enjoyed only a few times a lifetime. And while I have no issue with an investor opening a Roth either individually or through a 401k plan I do have problems associated with converting a perfectly good tax-deferred IRA into a Roth IRA and paying taxes on the conversion.

This year wealthy investors were given the opportunity  of converting their IRAs into Roth accounts. This is a once in a lifetime occasion and has spilled over to the average investor who has given serious thought about converting their tax-deferred account into a tax-free IRA.

Investors who convert from regular IRAs to a Roth need to come up with a substantial amount of money to pay the normal income tax created by the conversion. The money to pay the tax usually comes from after tax savings and a $10,000 tax payment would cost an investor about $13,000 in earned money. In some cases the conversion also creates a higher personal income tax bracket altering the total amount of taxes on the year’s earned income. The argument is that today’s taxes may be cheaper than tomorrow’s income taxes. The fact is we don’t know that. In fact a few decades back investment wizards were all spouting that interest rates would be in the mid double digits by the turn of the century and look where we really are. Taxes may well be much lower or tax brackets changed to reflect the economy in the future. We don’t know and there is no reason to pay taxes now when we do not have to.

The other argument calls for paying the taxes from the tax-deferred account assets. The problem is that causes the portfolio to drop considerably and there is no guarantee that future investment growth will bring the new Roth account close to where it was when it was a regular IRA. Certainly it took years to grow assets in the tax-deferred IRA and there may be less years to do the same.

The rush to pay taxes when you do not have to is a phenomenon not understood by this writer and his tax professional friends.

The regular IRA tax deferred account has many benefits including spousal rollover and a beneficiary tax-deferred benefit that can preserve assets far down the road.

Advocates of a Roth conversion also fail to discuss the loss of purchasing power through inflation. Those investors who don’t convert but pay taxes on the required minimum distribution are doing it with cheaper tomorrow dollars because of inflation. A dollar a  few years  down the road, or even next year, is cheaper than today’s dollar.

Don’t rush into a Roth conversion just because you hear or read that the rich are doing it. The rich may be getting some darn poor financial advice.

Questions call Paul @ 877 783 7080 or write him at pstanley@westminsterfinancial.com. Share this blog with someone who cares about their money.

 

That Was The Week That Was-2nd Week November

• Monday last was just the beginning of the markets back tracking giving up 37 points on the Dow as the dollar strengthened against all currencies except the yen and gold kept on a climbing.
• What metal if you missed the gold rush? How about silver, according to CNBC. Seems silver, which has more uses than gold in manufacturing, is trailing historical values.
• In my inflation blog November 8th I wrote the  QE2 Fed policy wasn’t making us any friends overseas and seems I was  right. The prez got an earful on his visit to India from world leaders who own U.S. dollars and/or seeing the price of oil pop. Germany, who else, is at the head of this parade.
• From a Morgan Stanley recent report reprinted in MarketWatch.com November 9th: ’ Our analysis indicated that China’s economic shift toward domestic consumption and away from investment is beginning and will likely prove a mega-trend through 2020, supporting our economist’s views that China is entering a golden age for consumption.’  Get this? 
• Wedge Partners analyst Brian Blair issued a stunning forecast on Apple’s prospects in 2011. Boiled down he said he thinks Apple is the best positioned company in the tech sector and thinks the firm can sell 100M iPhones and 48M iPads next year. Mama mia! ‘
• WSJ weekend edition extolled the virtues of utilities. The experts say money managers and investors are snapping up shares as they’ve finally realized the growth potential in a ‘green world.’ We’ve been saying that for over a year and have been buying utility mutual funds & stocks for our clients.
• 
• Longevity in your family? The Bobby Layne Retirement Plan called for him to die when the money ran out. But, new products called longevity insurance can guarantee income starting at age 85. You don’t get anything now but at a certain senior age you start getting fixed income checks for the rest of your life. Watch my coming blog for more details on this very interesting product.
• Tuesday markets off 60 points on the Dow as concerns over European banks. Ireland stand first to fall as the WSJ reports that bad loans dominate at what were once sleepy banks lured into a world of bad debt and speculation. Expect more through the holidays. Dollar strengthens.
• Same day same WSJ report commodities continue to surge as strong demand from emerging markets are pushing prices higher. Copper, gold and cotton at all time high’s while the U.S. Department of Agriculture cut its harvest estimates for soybeans and corn. This is just the beginning, dear reader. 
•   Reason #1 I don’t cruise. For four days last week Carnival luxury liner without power being towed to nearest port. Passengers eating pop tarts and Spam. ‘nuff said?
• Is Bernanke’s QE2 over before it starts? Seems many traders believe it is. The engine to spur the markets may have pooped out.
• Wha’s with Cisco? The tech giant posts big numbers and then gives glum guidance. CEO Chambers said the company would power through what the company believes are short term challenges. After the weak guidance 13 tech companies saw their stock price lowered.
• Let me see if I have this right. A bunch of nitwits in government and banking threw the global economy into the toilet and the Administration of both parties bailed them out. Now a Deficit Panel has a White Paper that demands the American public pay for it by slashing Social Security, increasing the gas tax and eliminating the deduction of mortgage interest.  (Sounds fair to me, how about you?)
• China’s markets fall 5% as fears of rate increases to combat inflation spook investors. Fallout will continue until sense returns.
• Mark Hulbert reports in MarketWatch.com that Cisco’s stock spanked for reporting sales to grow more slowly. Price of share now undervalued according to Prudent Speculator editor Buckingham. (If this doesn’t define 2010 markets I don’t know what does.)
• Silver, according to ETF Tremds, the hot metal du jour.  
• The prez can’t get a trade agreement with S. Korea. Restrictions by the Koreans only allowed 6000 U.S. cars to be sold while the Koreans sold close to 500,000 in the United States.
• Gee-20 says manana to deal with economic imbalances such as currency wars. Leaders at the Seoul conference brushed off the president and agreed to next years summit to develop an imbalance assessment. (Can someone tell me why else they were there? Anyone?)
• Markets fell hard Friday on China growth worries (it’s always something), as all stocks and commodities took a substantial hit. Still stocks look like the only game in town according to Zacks.com as corporate earnings were positive almost 4-1 over companies that did not meet expectations, the S&P is trading at a modest PE of 13.1; the bond rally appears to be ending and signs that the small investor is coming slowly back is always encouraging.
• The General Motors stock offering expects to issue 365 million shares or raise $10 billion. According to James Stewart at WSJ.com at the stated high end of the IPO the shares are a great deal. Even China’s car maker SAIC is finalizing a plan to buy shares at the IPO price.
• Finally, it was a lousy week that started that way and just got worse. The Koreans gave the president the bum’s rush using his recent election losses to renege on a deal that would have allowed more cars to be sold in their country. Traders got gutless as China’s rate hike and metals sold off more than expected. Even Saturday Night got into the act making fun of the president and the Koreans in the opening set.

Questions call Paul @ 877 783 7080 or write him at pstanley@westminsterfinancial.com. Share this blog with someone who cares about their money.