December 2009
Issue: 76

This is always a busy, yet exciting time of the year. It's often filled with traditions, hope, beliefs and anticipation. It's also includes one of my favorite activities. No, not the arrival of Santa. The Yankee Swap! Now, just like in Silent Auctions--there are "no friends" for me in this pursuit--it's everyone for themselves. May the best person get what they want.

A well played Yankee Swap is filled with strategy. There can be no obvious wrapping. A lottery ticket, gift card or CD should be well disguised, say in a beer box that has a few bricks placed at the bottom. We all know bigger and heavier is a better gift, right? Or the gift that is "wrapped" in a paper bag looks like someone put no effort into it but rather it contains the hottest item of the year like a Snugglie!

Plus, you must have lots stealing. None of this "I don't want to hurt so-and-so's feelings". Steal, but do it strategically. Watch for what your sister-in-law or father is desperate to go home with. Then you steal it so they then have to steal it back and keep the game flowing. Lots of cheering and booing makes for more fun too.

Several months in advance, we start thinking about what the hottest items will be this Christmas. Sometimes I end up with a really good item and sometimes it's "a keeper" (meaning no one's going to steal that from you!). Every so often "a keeper" shows up the next year, to make a repeat performance, such as the Austin Powers action figure from a few years ago.

If you have any favorite strategies, please share. I'm always looking to sharpen my Yankee Swap skills.

Have a wonderful holiday season with your friends and family. May 2010 be a prosperous New Year!

Paula Signature

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From Bill's Corner...

If earning somewhat safe, high income is your objective, then you're going to want to read this month's column. 

One of the most challenging issues over the last few years has been to get "income" for retirees.  After a little research, we've been able to come up with an old investment that may spark some interest for many investors.  This month's focus is Master Limited Partnerships or MLPs

Right now, MLPs offer investors two things: double-digit, tax-advantaged yields and strong growth potential.  The MLP industry benchmark, which is the Alerian MLP Index, has been up as much as 50 percent this year.  Income yields are soaring into the double digits.

MLPs are limited partnerships (LP) that trade on the major exchanges just like any stock. These partnerships must receive at least 90 percent of its income from what the IRS calls "qualifying" sources.  Qualifying sources include all sorts of activities related to the production, processing or transportation of natural resources like oil, natural gas and coal.

Most MLPs are involved in the energy business, but, only have small exposure to commodity prices.  Why?  The most common business line for MLPs is the ownership of midstream assets such as pipelines, storage facilities and gas processing facilities. Think of MLPs as the toll-takers earning fees on volume that pass through their assets.  They rarely take ownership of the commodities; they just collect fees.

MLPs don't pay any corporate-level tax. These partnerships pass through the majority of their income to investors. Each investor is responsible for paying tax on their share of distributions received.  Big tax opportunities arise when you own MLPs. Because of depreciation allowance, 80 to 90 percent of the distribution you receive from a typical MLP is considered a return of capital by the IRS.   Therefore, you don't pay taxes immediately on this portion of the distribution.  Return of capital payments serve to reduce your cost basis. You're not taxed on the return of capital until you sell your position. In other words, 80 to 90 percent of the distribution you receive from the MLP is tax-deferred.

Is there any downside? Yes.  There a bad companies, and there are bad MLPs.  When MLPs surge, Wall Street pumps out a lot of junk.  So, beware and buy quality MLPs!

MLPs are quirky.  You'll get a K-1 form come tax time.  The K-1 details the split between regular income distributions and return of capital distributions. The details can be confusing.  You'll have to file additional forms with your annual return.  The K-1 forms usually arrive late.  So expect to file extensions.

Another flaw, MLPs may not work well in IRAs.  Limitations exist on the favorable tax treatment for US-listed partnerships and limited liability companies held in tax-advantaged accounts such as IRAs and other qualified plans.  The reason is that the IRS classifies some of the payments from MLPs as unrelated business taxable income (UBTI).

MLPs may be quirky, but, investors may gain tax-advantaged yields and strong recession-resistant growth potential.  Today, many of the MLPs listed on the Alerian MLP Index yield double digits. The group offers capital gain potential as well; the total return on the Alerian MLP Index has trounced the broader market over a trailing 10-year period, returning 13.9 percent annualized against a near 4 percent annualized decline for the S&P.  Final disclaimer, "Past performance does not guarantee future results".
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In This Issue
From Bill's Corner...
Time to Share. Create a Buzz.
7 companies that may not see 2020
Watch timing of donations and income
Questions for a Financial Planner
Unwrap these financial education shopping tips this holiday season
Top 10 pet-friendly cities
About us
Time to Share. Create a Buzz.

Now, more than ever, we need to shake things up. Now, more than ever, we need a different way of thinking, a useful way to focus and the energy to turn the game around.

One of my favorite authors, Seth Godin, has created a new ebook--What Matters Now, and it's free. Download it now.

Here are more than seventy big thinkers, each sharing an idea for you to think about as we head into the new year. From bestselling author Elizabeth Gilbert to brilliant tech thinker Kevin Kelly, from publisher Tim O'Reilly to radio host Dave Ramsey, there are some important people riffing about important ideas here. The ebook includes Tom Peters, Jackie Huba and Jason Fried, along with Gina Trapani, Bill Taylor and Alan Webber.

Have fun. Here's to a year with ideas even bigger than these.
7 companies that may not see 2020

The recession has exposed a lot of companies' weaknesses, and in a slow-growth decade, the weak won't survive. Here's why some experts say Sears, Palm and a few more are in big trouble.

Watch timing of donations and income

If you are looking for ways to cut your tax bill, watch your timing.

Read on...

Questions for a Financial Planner

How can you tell if an adviser is trustworthy? Question everything. The adviser, after all, works for you. The first question: Are you a fiduciary?

Read on...

Unwrap these financial education shopping tips this holiday season...

1. Plan a budget: Allot money for each person you are shopping for. Try to make a list of what you want to buy people before you start shopping. Going shopping with the list will help you stay on track and not over spend on extra gifts.

Read on...

Top 10 pet-friendly cities

The best places to eat, stay and play with your furry mates.

Read on...
About us

WH Cornerstone Investments, LLC provides wealth management services to a select group of clients. Regardless of their background or future vision, all of our clients commit to a plan that targets their long-term financial growth and stability. While some of our clients concentrate on one part of their investment strategy, others opt for a more holistic approach.

WH Cornerstone clients demand customized objective, expert advice, which they know can come only from a firm that is truly independent-a firm not tied to financial institutions. As an independent Registered Investment Advisory firm, we are fee-only and therefore free from any outside institutional influence.


Paula Harris and Bill Harris, CFP
WH Cornerstone Investments

Sound, visionary stewardship