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 Personal Money Planning'se-Newsletter for January 30, 2010 (to look at past issues, click here) |
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Stats & Tidbits |
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American auto sales...
were down in 2009. 13.2 million vehicles were sold in 2008 vs. 10.4 million sold in 2009.
Chinese auto sales...
were 12.7 million in 2009. This is the first time ever than any country outsold the USA in a single year period.
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Disclosure |
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This newsletter is produced by Gary Silverman, dba Personal Money Planning, a registered investment advisor located in Wichita Falls, Texas.
Information in this newsletter is believed to provide accurate and authoritative information in regards to the subject matter covered. However, the accuracy, timeliness, or applicability of the information is not guaranteed and is provided with the understanding that we are not rendering legal, accounting, tax, or other professional advice or services.
This publication should not be construed by any consumer and/or prospective client as Personal Money Planning's solicitation to effect, or attempt to effect transactions in securities, or the rendering of personalized investment advice for compensation, over the Internet. Nor should links provided to other sites be construed as the recommendation of the services or products mentioned on those sites. If such services are required, the help of a competent professional should be sought.
Remember that past performance may not be indicative of future results. Therefore, you should not assume that the future performance of any specific investment, investment strategy, or product made reference to (directly or indirectly) on this Website will be profitable or equal to indicated performance levels. Different types of investment involve varying degrees of risk, and there can be no assurance that any specific investment will either be suitable or profitable for your investment portfolio.
Historical performance results for investment indexes and categories generally do not reflect the deduction of transaction or custodial charges or the deduction of an investment management fee, the incurrence of which would have the effect of decreasing historical performance results.
A copy of Personal Money Planning's current written disclosure statement discussing Personal Money Planning's business operations, services, and fees (known as an ADV Part II) is available from Personal Money Planning upon written request (and can be downloaded from our web site).
Personal Money Planning does not make any representations or warranties as to the accuracy, timeliness, suitability, completeness, or relevance of any information prepared by any unaffiliated third party, whether linked to Personal Money Planning's web site or incorporated herein, and takes no responsibility therefore. All such information is provided solely for convenience purposes only and all users thereof should be guided accordingly.
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Stocks: a Long-Term Investment
We all know that stocks are supposed to be a long-term investment. Yet I am regularly asked by people if there is a stock or stock fund that they can invest in for a week, month, or year that will make them a lot of money fast.
(The answer, by the way, is that yes I have a lot of ideas, but those ideas could also lose you a lot of money. Fast.)
We also all know what stocks did in 2008, and especially from October of '08 through March of '09: They fell like a rock.
But over the 20 year span of January 1990 through December 2009, the S&P 500 had an average annual total return of +8.2% per year. This despite some rather large set-backs:
- Starting July 16, 1990, the index fell 19.9% in three months
- In the over 30 months that began March 24 of 2000, the S&P 500 fell close to 50%
- And in the recent market malaise that started October 2007, it dropped over 56%
So, indeed, over shorter time-frames that can last years, stocks are a gamble. But over the longer-term, stocks continue to deliver good long-term returns.
Gary Silverman, CFP |
| course announcement |
Roth Conversion Seminar |
Okay, we've got the seminar details finalized:
Mark your calendars for Thursday, February 18 from 5:30 p.m.-7:30 p.m.
Gary will be discussing the new 2010 Roth Conversion, explaining what it is, and helping you decide if it is right for you.
David Welch, a local CPA, will be giving a 2010 Tax Update.
The location will be at the new Courtyard by Marriott Wichita Falls off of Lawrence Road across from Walmart and behind Jack-in-the-Box.
Please RSVP to (940) 692-6885 or e-mail me at Gary@PersonalMoneyPlanning.com. This will help us ensure we have enough refreshments and handouts.
If you missed last time, this is your chance. If you came last time, you're welcome to come back for a refresher. And, of course, let your friends know. |
| gary's Sunday newspaper column |
Sunday Newspaper Articles You May Have Missed |
From the last few issues of the Wichita Falls Times Record News
Investing Part 3 - Risk Revisited
This article continues the discussion of risk with a few scenarios that demonstrate the role risk takes in your monetary and mental health.
Investing Part 4 - Building Your Allocation
Once you know your investment goals, what's next? Determining the mix of investments in your portfolio, for one...
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| article links from |
The Economist |
From the January issues
After surviving the exploding pop of a global asset bubble, are we inflating a new one? The Economist notes that bubbles start with easy credit offered by central banks, and the credit has seldom been easier than it is today--from the central bankers, at least, who are maintaining official short-term interest rates below 1% in much of the developed world. With currency pegs, many emerging markets are importing these easy-money policies.
Where to look for the next bubble? Emerging markets like Brazil, China and Indonesia have seen their stock markets double in value over the past 12 months. The article notes that bubbles typically start with a good growth story, and right now, these markets are that story. But for now, this article suggests we can only speculate a growing bubble, as they are often hard to spot except in retrospect. (7 Jan. 2010, p. 69)
Fear of the Dragon
http://www.economist.com/businessfinance/displaystory.cfm?story_id=15213305
China's exports fell by around 17% in 2009, but since other countries slumped even more, the Middle Kingdom overtook Germany as the world's largest exporter. Its share of world exports now equals almost 10%--and Chinese imports make up 19% of the total imports into the U.S. Lower incomes encouraged consumers to trade down to cheaper goods, which benefited China, and there is talk that unlike Japan, China's move to more expensive luxury goods will be accompanied by continued domination of the lower-cost market. The factories on the prosperous coast will shift to the more expensive trade, while the impoverished inner provinces of China will continue to churn out cheaper goods with low-cost labor.
Can this continue? A working paper by the International Monetary Fund calculated that if China continues to remain as dependent on exports as it has in the past and sustain an annual GDP growth of 8%, its share of world exports would have to rise to about 17% by 2020. Look for more protectionist pressures around the world before that happens. (9 Jan. 2010, p. 73)
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TAX INFORMATION RELATED TO HAITI DONATIONS |
Ten Facts About Claiming Donations Made to Haiti
If you are donating to charities providing earthquake relief in Haiti, you may be able to claim those donations on your 2009 tax return. Here are 10 important facts the Internal Revenue Service wants you to know about this special provision.
- A new law allows you to claim donations for Haitian relief on your 2009 tax return, which you will be filing this year.
- The contributions must be made specifically for the relief of victims in areas affected by the Jan. 12 earthquake in Haiti.
- To be eligible for a deduction on the 2009 tax return, donations must be made after Jan. 11, 2010 and before March 1, 2010.
- In order to be deductible, contributions must be made to qualified charities and can not be designated for the benefit of specific individuals or families.
- The new law applies only to cash contributions.
- Cash contributions made by text message, check, credit card or debit card may be claimed on your federal tax return.
- You must itemize your deductions in order to claim these donations on your tax return.
- You have the option of deducting these contributions on either your 2009 or 2010 tax return, but not both.
- Contributions made to foreign organizations generally are not deductible. You can find out more about organizations helping Haitian earthquake victims from agencies such as the U.S. Agency for International Development ( www.usaid.gov).
- Federal law requires that you keep a record of any deductible donations you make. For donations by text message, a telephone bill will meet the record-keeping requirement if it shows the name of the organization receiving your donation, the date of the contribution, and the amount given. For cash contributions made by other means, be sure to keep a bank record, such as a cancelled check or a receipt from the charity. Receipts should show the name of the charity, the date and amount of the contribution.
For more information see IRS Publication 526, Charitable Contributions and Publication 3833 , Disaster Relief: Providing Assistance through Charitable Organizations. To determine if an organization is a qualified charity visit IRS.gov, keyword "Search for Charities". Note that some organizations, such as churches or governments, may be qualified even though they are not listed on IRS.gov. |
| from gary's facebook page |
Stuff you may have missed on Facebook |
 Gary has a Facebook page where he regularly sends out links and notes during the week. This section repeats those that are still pertinent to our readers. Even if you are one of his Facebook "friends" you could have missed one or more of these, so you may want to peruse through them, just to make sure.
Protecting yourself Online
Enjoy Facebook, but protect yourself. Check out this article about changing your privacy settings so you can do just that. (Funny thing, Facebook has marked this as "abusive", so my Facebook friends cannot access the link from there, but I have it here.)
http://www.readwriteweb.com/archives/the_3_facebook_settings_every_user_should_check_now.php
Protecting Your Money
Did you know thieves can slide a skimmer device over the real ATM slot to steal your bank information? Here's an article that shows the devices and gives a few tips on what to look for, before you swipe.
http://www.krebsonsecurity.com/2010/01/would-you-have-spotted-the-fraud/
Informative Financial Planning website
The Financial Planning Association's website covers many aspects to help you plan your financial life-with articles on risk tolerance, college planning, retirement, and more.
http://www.fpaforfinancialplanning.org/
U.S. Navy's response to the tragedy in Haiti
While it takes a few days to get these huge ships to where they need to go, once they get there they provide a complete self-contained resource. Water, power, medical, heavy equipment, air resources, construction battalions, etc. Go Navy!
http://www.navy.mil/haiti/index.html
The passing of an extraordinary woman
Miep Gies defied Nazi occupiers by hiding Anne Frank's family for two years and saved Anne's diary. She may not have thought of herself as a hero, but many others certainly did.
http://www.npr.org/templates/story/story.php?storyId=122469287&ft=1&f=1001
The Lighter Side
I couldn't pass up this article: "Cobra Venom Erases Arthritis Symptoms." I was thinking, "Yeah, so does playing with a live grenade or stepping in front of a bus." Apparently, though, they are not referring to death.
http://news.discovery.com/animals/cobra-venom-arthritis-pain-relief.html
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parting thoughts
The Big Two-Thirds
What happens when you try to make capitalism painless
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General Motors, Ford, and Chrysler...for more years than I can remember (probably because it began long before I was born) these three automakers were the pride of America. Recent events have turned two of them into failures. In case you missed it, GM and Chrysler died and were reborn. We call it bankruptcy. Yet it was a strange sort of bankruptcy.
Normally when a company goes bankrupt, the people who they owe money to are taken care of first. This time, the lenders who held the companies' bonds were told to step aside so that jobs could be preserved. The bond holders were considered greedy for wanting to get as much of their money back as possible since the return of their funds would result in the loss of more car manufacturing jobs. Safeguarding those jobs aggravated the main culprit of this mess--capacity.
You see, the automobile industry was already producing more cars than people wanted to buy. The car companies then had to discount their prices in order to entice consumers to buy what they considered to be inferior products. This only works in the short-run. Longer term they either need to make their cars more desirable than the competition or reduce production to the level that they can sell. To just keep reducing the prices will end up destroying profits and the company as well.
Again, normally, if the competition doesn't give in and demand doesn't rise, someone is going to go out of business. Unless, that is, they are considered to be too big to fail by some higher power. This was the case of the government's bailout of these car manufacturers. They stepped in, pushed bond holders aside, and protected as many jobs as possible.
This kept production higher than the demand, and the problem continued. There were possible remedies initiated, like paying folks to take the cars off the lot through a rebate of some sort. Even more "helpful" to creating demand was the destruction of the trade-ins so that there was less supply of older cars to interfere with new car sales.
I guess this would all work out eventually if everything else stayed the same. However the other world-wide car manufacturers seem to have not gotten the hint: Instead, they continue to improve and innovate faster than Detroit can.
Complicating matters is the problem of getting people to plunk down 20, 30 or 40 thousand dollars. After all, there are many still out of work, and even the employed are skeptical of the current jobless recovery.
Maybe I'm missing something here, but deciding that the Big Two-Thirds are too big to fail is not preventing failure. It's just picking who might succeed at the detriment of others. Or, worse, it is stretching out the pain, like the slow walk into a chilly lake. Some prefer it to taking the plunge. But you just trade a quick shock for a long agony.
Either way, you still get wet and cold.
Selfishly, I too didn't want the automakers to have to suffer defeat in the normal way. I was fairly certain that Chrysler would have been toast, and GM would have created a cascading series of layoffs that would have done-in hundreds of smaller companies. In my judgment these bailouts limited my clients' exposure to the pain.
Still, I know that's how capitalism works. You get to enjoy the thrill of victory only as long as you are also willing to expose yourself to the possibility of experiencing the agony of defeat.
That's all, for now.
Gary
Gary Silverman, CFP
Personal Money Planning
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©2008 Personal Money Planning. All rights are reserved by Personal Money Planning and content may not be reproduced, disseminated, or transferred in any form or by any means, except with the prior written permission of Personal Money Planning unless specifically noted. (Permission is not difficult to obtain.) The one exception is for downloading and printing information this newsletter for general education by the original recipient. |
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