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Journey with DWM to
What's Next
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Some economists say "up" and some say "down". The truth is, no one knows the future. But affluent, enlightened investors recognize that DWM strategies perform in up markets and protect in down markets. Regardless of what the future holds, with DWM, savvy investors are ready for what's next. | |
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Income Taxes: Any Chance for Simplicity? | |
By now, most Americans have been stuck indoors wrestling for some period of time with their taxes. It's one of the rites of spring. Even though 60% of Americans hire tax preparer and additional 22% use tax software, virtually 100% of Americans feel they spend too much time assembling all their data.
And, it's not getting any easier. For even though current discussion is about possible increased tax rates, the real issue, according to Nina Olson, "national taxpayer advocate", is complexity. In fact, Douglas Shuman, the head of the Internal Revenue Service gets someone else to do his taxes.
The federal tax code was enacted in 1913 and was 400 pages long. Today, it is 70,000 pages and getting bigger. The recent health -care related provisions, for example, will add thousands of pages to the code.
Back in 1976, Congress created the watchdog service called the national taxpayer advocate. Each year, the advocate issues a report to Congress begging for a simplified system. Unfortunately, every wrinkle in the tax code represents a favor to some group. Politicians use the tax code to encourage things they like. Repeal very seldom happens. A typical provision has passionate defenders who benefit from it and few opponents.
So, the mess gets even messier. Happy April 15th.
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Detterbeck Wealth Management
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Palatine, IL 60067
847.359.6262
Charleston, SC 29401
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Consumer Spending: Early Adopters Get Their iPad | |
Saturday, April 3rd was the first day iPad was on the market. Lines formed overnight at Apple stores across the country, including Charleston's King Street location. Apple said it sold 300,000 units that day. Apple iPad users downloaded more than one million apps from the App Store and more than 250,000 electronic books from the iBookstore. And, the consumption has kept going since then.
With all the hoopla, we wondered: Do anyone really need one of these?
According to Slate Magazine's Farhad Manjoo, "You don't need one. But once you try one, you won't be able to resist."
The iPad may be best described as a gigantic iPod Touch. It's easier to stash and carry than most laptops, weighing just 1.5 pounds. It can't hold as much as a laptop and it only has a touch-screen keyboard. It has no phone and it's nearly three times the size of the Apple iPhone. It doesn't fit in your pocket.
Accordingly, some reviewers don't like the iPad. Mr. Manjoo, indicates that these folks argue that the iPad is the Paris Hilton of PCs; undeniably glitzy but of no discernible utility. It appears to fill no obvious role in life-if you have a computer and a phone, why do you need it?
Manjoo agrees that you don't need it. According to him, the iPad is a luxury and, at the same time, the best media consumption device ever made. "There is no better machine to use on the couch, the bed or in the bathroom". He makes the excellent point that neither the laptop nor the phone is especially well-suited for use while lying down or lounging. The speed and touch interface make it a breakthrough leisure device.
The iPad will undoubtedly give a big boost to e-book sales. You can read a lot more things on the iPad than on the Kindle. Furthermore, Apple's pricing model for e-books is much more attractive to the publishing industry; publishers get to set their price and Apple gets 30%.
The Apple iPad is also a great purchase for those "early adopters". Yes, they pay a little extra typically to be the first to own the new tablet. But, according to Rob Walker in the New York Times, the "consumer-culture gods consider them heroic figures, idolized far and wide by marketers and business gurus."
So, who knows, maybe a year from now, Apple will introduce a new, cheaper and decisively better iPad. But, for now, the early adopters seem to have real first on-the-block bragging rights for another great American product; something we don't need but won't be able to live without.
For more information, click here |
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Bailout-Financial Reform |
We need financial reform. And, passage shouldn't be as acrimonious as Health Care. Barry Ritholtz of the "Big Picture" states it this way: "While banks have succeeded in buying Congress, I think their attempts to stop a major overhaul of financial regulation will be far more difficult. Political opponents will paint anti-reformers as pro-banks and anti-family."
Ritholtz recently recapped major areas he feels requiring overhaul and his suggestions:
1. The Rating Agencies. "Their pay for play model is a debacle".
2. Derivatives Must Be Regulated like all Financial Products. "Put derivatives on exchanges; require disclosure, transparency, and capital requirements."
3. Regulate Non Bank lenders like Banks. "If you loan money, you must be regulated like a bank."
4. Reinstate Net Capital Leverage Rules. "Reinstate the former 12-1 leverage rules."
5. Eliminate Too Big to Fail. George Schultz said, "If they are too big to fail, make them smaller."
6. Do not give the Federal Reserve MORE Authority. "Fed should focus on monetary policy."
7. Stop Regulatory Forum Shopping. "One regulator is needed."
8. Overhaul the SEC. "Make them less of a law firm and more of a finance shop.
9. Reform Compensation. "We need to end the system of privatized gains and socialized losses."
Let's hope the White House and Congress moves forward on financial reform. Our country needs it desperately to prevent the next meltdown from occurring.
For more information, click here. |
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Housing: Rent or Buy? | |
Most of us have always owned our own home. But, these days, for some, renting may be an option to consider.
Two big differences are in play these days. First, there is no guarantee than you will be building equity in the new house. Second, rental prices can be a bargain.
For example, take two houses of similar size and quality-one for sale and one for rent-in the same neighborhood or comparable neighborhoods. Take the price of the house for sale and divide that by the total cost of renting the other house for a year. For example, a $500,000 house that could rent for $2,000 per month. The result is 20.833 ($500,000/$24,000). If the result is greater than 20, odds are the price of the house will probably be dropping. Historically, 15 has been the general average price-to-rent ratio over time, though that number is dropping.
At DWM, we've used a rule of thumb for years that the cost of owning a house is roughly 8% to 10% of the value of the house. So, e.g., 9% of $500,000 is $45,000. This represents mortgage interest, taxes, insurance, maintenance and the opportunity costs at 6% for your equity in the owned house. Until the last couple of years, that 9% "'cost" figure could be reduced by income tax benefits and by the appreciation of the house, which might have been 3 or 4% annually in the 80's and 90's or in the double digits in the early 2000's until the bottom fell out in 2006/2007. In the short run, we can't count on appreciation.
In addition, it is currently a renter's market. In 2009, rent reductions averaged 5.8% nationwide, according to real estate investment services firm Marcus and Millichap.
However, if you plan to stay in the new house for a decade or more and it has a "low price to rent ratio" as described above, you might consider buying even if the monthly payment is higher than renting. The transaction costs of buying and selling will be amortized over a longer period and, by being an owner, you have the right to paint or even knock down a wall in the place every now and then.
For more information; click here. |
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