As the New Year approaches The Cryden Team wishes you all the best in 2007. We look forward to hearing from you in the New Year.

The Cryden Team - David, Steve & Stephen

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The holiday season is a time for family. From our family to yours, we wish you a very happy holiday season.

The Cryden Team - David, Steve & Stephen


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The following is an excerpt from Eric Tyson & Ray Brown's book, "Home Buying For Dummies". As our real estate market transitions from a seller's market to a buyer's market, it is important to understand the differences and how best to capitalize on your real estate decisions. Enjoy. -David-

If you really want a home and you know that other offers will be made, here's how to improve your chances of winning in a multiple-offer situation:

Use comparable sales data to predetermine the upper limit of what you'll pay. Don't get caught up by the excitement of a bidding war and let your emotions override your common sense. Be sure that you know how to determine fair market value. Set no matter what limits on the amount that you'll bid. Otherwise, you could grossly overpay.

Put yourself in the sellers' position. The sellers don't care how long you've been looking for a home or how little you can afford to pay. Faced with several offers, sellers select the offer that gives them the best combination of price, terms, and contingencies of sale. Find out what the sellers' needs are before making your offer. Their self-interest invariably prevails. A higher purchase price isn't the only way to sweeten a deal. If you have the money, you could make a 25 or 30 percent down payment so the sellers know that your loan will surely be approved. You could offer to give the sellers an extra-long close of escrow so they have plenty of time to find another home. You could also offer to buy the home "as is" so the sellers won't have to pay for any corrective work. If you do this, however, make your offer contingent upon your approval of inspection reports so you can get out of the deal if the house needs too much work.

Make your best offer initially. Buyers who win bidding contests, in the words of Civil War General Nathan Bedford Forrest, get there "firstest with the mostest." If you want the house, don't hold back on a multiple-offer situation: You may never get a chance to make your best offer.

Get preapproved for a loan. Informed sellers worry about the financial strength of prospective buyers. They don't want to waste their time on buyers who can't qualify for a loan. All other things being equal, if you're preapproved for a loan, you should prevail over buyers who aren't. That way, you also know that you aren't wasting your time and money on a house that you can't qualify to buy.

Don't make your offer subject to the sale of another home. If you own a house that you must sell in order to get the down payment for your new home, you're in trouble. You'll most likely be competing with other buyers who don't have that limitation. The sellers have enough problems selling their house without worrying about you selling yours. Why should they take your offer if they can accept one without a subject-to-sale contingency in it? Offers made subject to sale of another house get no respect.

If you must sell in order to buy, put your old house on the market before seriously looking for a new home. Ideally you'll have a ratified offer on your old house before making an offer to buy a new place. Then, even with a subject-to-sale clause, your negotiating position will be much stronger. And you won't waste time worrying about how much money you'll have when and if your house sells. Stipulate a long close of escrow on the old house and the right to rent it back for several months after the sale so that you'll have adequate lead time to buy your new home.

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The following is an excerpt from Eric Tyson & Ray Brown's book, "Home Buying For Dummies". As our real estate market transitions from a seller's market to a buyer's market, it is important to understand the differences and how best to capitalize on your real estate decisions. Enjoy. -David-

In the late 80's, many California home buyers complained bitterly about sellers taking unfair advantage of them. Given the frenzied seller's market at that time, it wasn't unusual for owners of a well-priced house to receive multiple offers on it while their agent was still nailing up the For Sale sign. (Slight exaggeration, but you get the point.)

Five years later, the hobnailed boot was on the other foot. Instead of a supply-demand imbalance, there was a demand-supply imbalance. The anguished screams now came from the sellers who were complaining about buyers taking unfair advantage of them.

The playing field usually isn't level. A perfectly balanced market that favors neither buyer nor seller is rare. The market is always in a state of flux.

The party in the weaker position always characterizes the market as 'bad." Because you are a seeker of wisdom and truth, don't kid yourself. The market is, in reality neither good nor bad. The market is impersonal. The market is the market. Moaning and groaning about unfair market dynamics won't help you if you're caught in a seller's market any more than complaining helps sellers caught in the viselike grip of a buyer's market.

Negotiating from a position of weakness. Newly listed homes that are priced to sell often generate multiple offers in a seller's market. But even when the market is not a seller's market, a well-priced, attractive new listing may draw multiple offers.

Unless you absolutely must have a particular home, and price is no object, be very careful about entering a bidding war. Such auctions can drive the price of a home above its fair market value. That situation is great for the seller, but it is financially deadly for you. We don't want you to overpay.


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Every year at this time, I make a list of things that I need to do before the end of December. Most of this list pertains to tax planning.

Here's a short list of things you might consider doing:

1. Pay your entire property tax bill before the end of the year, not just the first installment.

2. If you've reached your 2006 medical deductible, try to have any medical treatments or services done before the year end, including refilling prescriptions. (As you know, you start with new deductibles at the first of the year).

3. Pay any California income taxes due for 2006. (California income taxes are deductible on your Federal tax return).

4. Consult with your financial planner and accountant to make sure there isn't anything you've missed from your 2006 tax planning which needs to be finished prior to the year end.

5. Open your Keogh plan prior to the end of the year. (This will allow you to include any investments on your 2006 return).

6. Make sure to get all of your charitable donations for 2006 fully-planned and completed before year end.

7. Do your 2006 Roth IRA conversions before year end. (You cannot do Roth IRA conversions for 2006 after the first of the year; you can, however, make 2006 Roth IRA contributions until the mid-April tax filing deadline next year).

8. Sell any stocks on which you plan to take a loss, prior to the year end.

9. If you own a business, you can purchase equipment and supplies for next year before the end of this year.

10. When applicable and feasible, push any income or capital gain into 2007 in order to prevent them from ending up on your 2006 return. (Waiting one month will put off the taxes for one year).

As always, please consult your tax advisor prior to implementing tax strategies.

On behalf of my team, Steve, Stephen & myself, we would like to take the opportunity to wish you and yours a very happy and safe Thanksgiving holiday.

Best wishes,

David W. Cryden, CFP®

Here's my annual tip for keeping one of your largest investments in good shape; it may be one of the more basic tips I've written, but it will be relevant every year at this time.

Asset protection comes in many sizes, shapes, and forms. With fall here, and winter around the corner, here are a few thoughts about protecting your home:

· Clean out your drains by removing all debris from them, then check your drains for clogs by running water through them to make sure nothing is stuck somewhere in the system.

· Check your roof for leaks. I suggest doing this now before you find yourself calling for help in the middle of a downpour, only to learn that all of the roofers are busy.

· Clear debris away from the pathways where water runs through your property, so it doesn't dam up during heavy storms.

· Clear debris and branches away from your roof. In heavy weather or winds, they can clog drains or actually damage the roof by falling on it or rubbing against it.

· Have your chimney inspected for dangerous deposits that could cause blockage of smoke leaving the house or even a chimney fire.

· Make sure your heater has a safety inspection and that its air filters are clean.

· Since real estate had such an unusually strong run, I suggest that you go over your policy with your agent to make sure it still covers the current value of your home and the costs of potential repairs or replacement; additionally, review your liability coverage with your agent, as nearly all investors and homeowners have a substantially higher net worth to protect.

Lastly, here's a money saving tip: Reduce the length of the time you water your garden; as the days shorten and the temperatures decline, you'll need to water your garden and lawn less.


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Many people have been ineligible to convert Traditional IRAs to Roth IRAs because their incomes are too high. Under the Tax Increase Prevention Act of 2005, the $100,000 income limitation for the conversion of a Traditional IRA to Roth IRA will be eliminated in 2010. During 2010, any individual - regardless of their income - can convert their Traditional IRA to a Roth IRA.

Becoming eligible to covert from a Traditional IRA to Roth IRA doesn't necessarily mean that it makes sense to do so. If it does make sense to do the conversion, it may not make sense to convert all of your Traditional IRA. For example, let's say you have $750,000 in your Traditional IRA. By converting to a Roth IRA, you may be subject to Federal taxes of $262,500. On top of this, you may very well have to pay state income taxes, too. If you happen to do the conversion in 2010, the law allows you to split the taxes (under certain circumstances): 50% in 2011 and 50% in 2012. This may provide you with some degree of tax-deferral.

I've always felt that having at least some money in a Roth IRA allows for tax planning in the future. Providing that you've followed all of the IRS rules pertaining to Roth IRAs, you'd have a pot of money that could be accessed without taxation; this could come in handy at times, over the years, when your taxes are high.

Converting a Traditional IRA to a Roth IRA could also be used as a last-minute estate strategy. By converting a Traditional IRA to a Roth IRA shortly before a person's passing, the estate will incur income taxes on the transaction. Income tax rates are lower than estate tax rates; therefore, the conversion could be used as a tool to lower the tax rate you will have to pay by converting the asset to income in the current year. If done properly, this late (or "deathbed") estate and tax planning strategy can save some people a great deal of money by lowering the tax rate they pay on these assets.

Before doing any of the above, make sure to consult your financial advisor, tax planner or estate planning attorney.

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Many of you have read my tips over the years. Often I talk about how many of us need maximize your retirement plan distributions to be able to retire comfortably. If you read my weekly tip from July 9, 2006, you'll see what I mean by needing to maximize your annual retirement plan contributions.

Here are five common types of retirement plans where the annual contribution limits will go up in 2007.

By planning ahead, you can budget to maximize your plan immediately after the New Year strikes. It's much easier to fully contribute to your plan if you have all 12 months of the year to do so.

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Many people, who own a home here on the Central Coast and have an investment or retirement portfolio, are now millionaires. While being a millionaire today isn't the same as it was in the 1960's, it is certainly a lot of money when compared to most Americans.

Having a substantial net worth means you need to be more vigilant about protecting your assets from losses. One way that you could theoretically lose some - or all - of your net worth would be as an unfavorable legal action or lawsuit.

One way to add a layer of protection against unfavorable judgments is though an insurance policy called an umbrella liability policy. Most people carry homeowners and automobile policies. Generally, when you purchase an umbrella liability policy, you end up with the combined coverage of your existing policy and your umbrella.

As an example, let's say you carry $300,000 in auto liability coverage and you purchase a $1,000,000 umbrella policy. If you had an incident with your automobile, you'd have a combined coverage of $1,300,000. The same would be true of your homeowner's policy.

Some attorneys will advise that your liability coverage minimally be equal to your net worth; others might advise that you carry coverage that equals your net worth plus what it might earn three years out. The reason for this is that, sometimes, legal matters can take several years to come to closure. You'd want your insurance to be able to cover the net worth plus the three-years' growth.

All of the umbrella policies that I've seen start with $1million in coverage. You can increase them by increments of $1million. They are not terribly expensive, relative to what you are protecting or to other types of policies.

I advise that you might want to consult your attorney before buying an umbrella insurance policy, or shortly thereafter, to make sure you have the proper amount of coverage for your unique circumstances.

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Yesterday was a rather remarkable day in a somewhat subtle way. Two very contrary things have happened, both on October 19th.

On October 19, 1987, the stock market crashed; the Dow Jones 30 industrials dropped over 22% in just one single day. The Index closed that very difficult and strange day at 1,738.74; this marked the single largest drop in the Index ever, as viewed in percentage terms, and it still holds true today.

On October 19, 2006, the Dow Jones 30 Industrials closed over 12,000 for the first time ever; obviously, it hit a new high yesterday.

Over the nineteen years since the Crash of 1987, the Dow Jones 30 Industrials have averaged 10.71% per year. That’s about what common stocks have averaged for many decades.

It’s rather amazing that a single day could hold such extreme contrasts in performance. Either way, this gives us some long term perspective on what markets generally have averaged and have continued to average over the long haul. While there’s no guarantee they will do so in the future, there’s reason to reflect on this for perspective.

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Many people have loaned money to builders through trust deeds over the past five years or so, the notion being that they would be paid double-digit returns while having a secured position on the property.

Despite popular belief that real estate has very little risk, the reality is that it does - and, like all investments, it's cyclical.

We're now seeing less activity in the real estate markets, pretty much nationwide; there are also lower rates of appreciation being experienced in many markets. In addition to this, builders are beginning to provide incentives to entice people to buy their new homes. These incentives can include add-on or upgrade allowances or even a promise to lower the price you are paying if it drops to others prior to your escrow closing.

These things are part of the cycle called "consolidation" in a real estate market that has been strong for quite a few years. It is possible that real estate could stagnate, or even see a lowering in value over the next few years, as it strives to get back to a better valuation. Stagnation would allow time for incomes and rents to rise to create better value. A reduction in value could help accomplish the same thing. I think we may see a combination of all of the above.

If you've been loaning your money out in the form of trust deeds or are considering doing so, you may want to be very careful about what's currently on loan or any future loans you make. If I am correct, there will be builders who have too much debt and can't service that debt load when their homes don't sell in a slower market; some may not even be able to finish building some of them.

I know there are retirees who have put a fair amount of their net worth into these loans and can't afford to own the real estate which is backing up these loans without getting the income they need. In addition, there may be properties that people end up with as a result of a loan going into foreclosure that isn't even a finished product. They'd then need to build out the home or try to sell it to a more solvent builder at who knows what price?

The moral of today's story is to pay attention to what's happening in real estate and beware of trust deeds to builders in a slowing real estate market.

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The smart way to sell your property is the pleasure-pleasure-panic pricing method. You can sell your house quickly and get the highest possible price by using this method. The secret of success is to establish a very realistic asking price for your house when you first place it on the market.

The correct way to establish an asking price is to analyze houses comparable to yours in size, age, condition, and location - both houses that are currently on the market and those that have sold within the past six months. Don't be misled by the asking prices; many sellers use four-phase pricing. Sale prices, not asking prices, determine fair market value.

Here's how the pleasure-pleasure-panic pricing method works. Milt and Judy have spent the last three months looking at houses on the market in their price range. They're educated buyers; they know how to distinguish between a well-priced house and an over-priced house.

Judy and Milt nearly bought a great house a couple of months ago. It had all the features they wanted and was fairly priced, to boot. However, Milt didn't realize how well priced it was because he'd just started the education process. While Milt was haggling over the price and terms of sale, the seller accepted a better offer. Judy still blames him for losing their dream home.

They're spending today the same way they've spent the previous 11 Sundays, touring what seems like an endless series of newly listed over-priced homes. Then Judy and Milt trudge into your first open house and pleasure-pleasure-panic kicks into gear.

Pleasure #1: Judy and Milt love your property. It's the best place they've seen in the past three months. They could live in your house happily ever after. Their eyes start to sparkle.

Pleasure #2: Milt and Judy can't believe their eyes when they look at the asking price on your listing statement. By now, they know the property values every bit as well as their agent. Your house is definitely priced to sell. Their hands start to tremble.

Panic: Judy and Milt see another couple entering your house. They've seen these folks at many other open houses during the past couple of months. That familiarity is not a coincidence. The other couple obviously wants to buy a house in the same neighborhood and price range.

Judy and Milt stare at each other in horror. If they love your house and know that it's well priced, so will the other couple. Their deodorants fail when they realize that if they don't act quickly, the other couple will snap up the house. Milt tells their agent to write up a full-asking-price offer. Judy kicks Milt in the shin and instructs the agent to go $500 over the asking price just to be safe. Milt agrees. He doesn't want to be a two-time loser.

That scenario explains how pleasure-pleasure-panic pricing creates a seller's market even in the midst of a buyer's market. This approach puts intense pressure on buyers to perform quickly.

Don't be surprised if you get several purchase offers, including some that are equal to or over the full asking price, as soon as your house hits the market - if your house is priced right. After your property has been given broad, immediate market exposure, spirited competition forces buyers to pay top dollar for your house. This method works almost every time.

This week's Weekly Tip Newsletter is from "House Selling for Dummies" by Eric Tyson and Ray Brown, reprinted by kind permission of San Francisco columnist Ray Brown, a frequent guest on our show.

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Every now and then, I see letters from lawyers' offices instructing us to change account ownership from an individual to a trust, or to change beneficiary information on retirement accounts, as a result of setting up a new trust.

When these come across my desk, I often wonder how much the client was charged for servicing work that we probably could have done for them free of charge, had we simply been supplied with the trust document.

This might be a good time to remind people of services that we are available to help with, free of charge:

• Financial Planning (for example, if you want a second opinion about outside investments or insurance policies not held through us)
  
  
• Retirement Planning (including Traditional and Roth IRAs, Tax-Sheltered Annuities, setting up company retirement plans like Simple IRAs or SEP IRAs, and estimates to help you set retirement goals and how to reach them)
  
  
• Insurance or Risk Management Planning (Life, Health, Disability and Long-Term Care)
  
  
• Money Market Funds (including ordering additional checks or changing banking information)
  
  
• Address changes (changing mailing addresses or physical addresses)
  
  
• Registration changes (for example, re-register an existing individual account to ownership of a trust, or to change a name due to marriage or divorce)
  
  
• Beneficiary changes (it's important to keep your beneficiary information up-to-date on your retirement accounts)
  
  
• Automatic Investment Plans (to invest new money on a regular basis into an existing account)
  
  
• Systematic Withdrawals (to withdraw money from an existing account on a regular basis)
  

These are but a few of the areas of assistance we provide to our clients as a part of our complete financial planning package.

So see your attorney to set up your trust, then contact us to make the necessary changes to your securities accounts.

This week's tip is from Steve Armas, Senior Team Member/Registered Representative, who handles most servicing requests.

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Did you know that the life expectancy of Americans has risen to nearly 80-years-old? As we grow older, our propensity for illness increases; with that, our need for insurance that exceeds traditional medical insurance policy coverage also increases. Most medical policies will not cover long-term care costs, such as housing in a skilled nursing facility or in-home residential care, which are the needs that will be most important in our later years.

As our life expectancy increases, so too does the cost of long-term care. In 2005, the average cost of a nursing home was $203 per day, that's nearly $75,000 annually. A well written long-term care policy will protect your physical, emotional and financial health. Prepare for your future today with a long-term care policy that will take the uncertainty out of your later years.

So the next time you think about saving for the future, remember to protect yourself and your assets for the future as well.

This week's Weekly Tip was written by Stephen Hiltscher, our Client Services Team Member/Registered Representative.

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Everyday, we are hit with headlines from the new services telling us of all the problems in the world. I can't recall a single day without a headline talking about some trouble, somewhere. I don’t think there will ever be a day when there isn't something wrong in the world; we have 6 billion people living on this planet, so the odds of there being a problem somewhere are very high.

If you stop to think about this, and how it might or might not affect your investment decisions, some of you may realize that these daily or intermediate-term occurrences generally shouldn't affect your long-term investment results. The reason for this is simple: There has always been something going on that could affect your investments over the short-term. Investors who do not panic and stay the course in well-managed portfolios have, more often than not, been well-rewarded; those who react to short-term dislocations in the world or financial markets have, far more often than not, been hurt by their decisions.

In this world in which we live, it's easy to worry day-to-day about your investments. The facts seem to support taking the long-term view and realizing that many world events actually present good investment opportunities, rather than panicky selling situations. Keep this in mind the next time you begin to worry about your investments; hopefully, this new perspective on world events may be reassuring to you.

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I heard a sad story this week about a very active elderly couple. They lived in a town in Southern California where they were known throughout the community.

Their house caught on fire one night. It turns out that they hadn't checked the batteries in their smoke detectors for years; the batteries were dead and, consequently, the couple died of smoke inhalation.

The worst part is that an annual changing of the batteries in their smoke detectors would likely have saved their lives.

As a result of this, their community has started a program where the batteries of the smoke detectors in the houses of the elderly are being checked regularly so this doesn't ever happen again.

Please be sure to change the batteries in your smoke detectors every year. (I change mine every January).

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Historically, the month of September has been the worst month of the year for the financial markets; it is difficult to say why, it has just been that way.

The next couple of weeks are a time when some companies might pre-announce any changes in their guidance or financial expectations, so it could be a period when we see some market volatility.

In addition, some portfolio managers do what's called "window dressing" at the end of a calendar quarter. (This is where they sell holdings they don't want the public to see in their portfolios at the end of a quarter). Window dressing can also create short-term market volatility, as large blocks of a stock are bought or sold; this can impact an individual holding or an overall financial market.

Anytime the Federal Reserve Board (FRB) meets, you have the potential for their decisions to affect the financial markets. The next FRB meeting is scheduled for September 20, 2006. This meeting, as with all others, could see the FRB keeping interest rates at 5-1/4% or they could continue to raise them; either decision would likely have an impact on the financial markets.

Finally, people come back from their vacations after Labor Day weekend and begin to look at their portfolios with an eye toward the end of the year; this could also have an impact on the markets, as there could be pent-up emotions affecting decisions that are made in September.

Any combination of the above issues could be part of the reason that the financial markets tend not to do well in September.

My feeling is that a true investor should not consider a tough September anything more than another buying opportunity in your long-term investment plan.

Keep your focus on your long-term goals while continuing to take advantage of short-term investing opportunities.

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President Bush just signed into law a little-known tax provision allowing non-spouses to inherit
401(k)’s without having to pay taxes immediately. (The new law goes into effect in 2007.)

What does it mean?

• A spouse can inherit a 401(k) and delay taxation as if the money had been accumulated in their name. This means that income taxes on the distributions from the account can be put off for years. If they inherited the 401(k) account in their early 50’s, they would not be required to withdraw money until they were 70-½ years old. This would allow for nearly 20 years of tax-deferred growth until the mandatory minimum required distributions are begun.
  
  
• The new law allows for a non-spousal beneficiary to inherit a 401(k), which they could then rollover to their own IRA. The law says that you have to assume the age of the 401(k) owner. If that person were 50-years old at the time of their death, you could wait until they would have been 70-½ before you are required to take distributions. This, too, could allow for many years of tax-deferred growth.

The comparison is that (now) a non-spousal beneficiary is not allowed to defer distributions for many years; sometimes, they are required to withdraw or distribute an entire 401(k) within a five-year period or even all at once. Much of this money can end up in a higher tax bracket, potentially costing the beneficiary far more in taxes than under this new law.

Before acting upon the new law, make sure you consult your tax advisor or financial advisor so that you understand the best tax planning option available to you under the law.

There were several other laws passed recently which are beneficial to retirement account owners. I'll be discussing them over the coming months.

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We have decided to do something we haven't done in four years:

We are taking a break this week, but be sure to check back next week for a new Weekly Tip from David W. Cryden, Certified Financial Planner™!

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The decision by the Federal Reserve Board (FRB) to leave interest rates unchanged this week was the first time they'd met and not increased interest rates in more than two years! The significance of this cannot be understated.

After lowering short-term interest rates to one-percent just a couple of years ago, the FRB seems to finally feel that they've increased them to where they see the economy slowing enough to help keep inflation at bay. (This, of course, is one of the primary goals of the FRB.) While they did not say that they are neutral, or that the next move would be to lower rates, the mere fact that they took a pause is a good sign.

The financial markets were expecting this action (or lack thereof) and, therefore, were essentially flat when the FRB made their decision. Generally, the financial markets do what's called "pricing in" the anticipated action of the FRB or other issues, like higher oil prices. This is why, many times, nothing happens on the day an action occurs in the economy (like the FRB not raising rates again). Interestingly enough, the day when the Dow rose more than 200 points was when it “priced in” this week’s FRB activity.

People with loans, like home equity lines of credit, should benefit by this week's FRB decision. If the FRB decides to go to a neutral position, the financial markets should react favorably. At some point, the next step for the FRB would be to consider lowering rates, if the economy slows too much; that should be good for both bonds and stocks.

In the meantime, I take this week's decision by the FRB positively. I look forward to the day when they say that they are neutral, and the day that they state they are going to begin lowering short-term rates; those days are probably months (or more) down the road.

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The greatest asset most Americans will ever have is their ability to earn a living. Using the income created by their abilities, Americans pay for day-to-day living, put their children through school, and invest for their short-, intermediate- and long-term needs.

If a person averaged $50,000 per year over a 45-year career, they would earn a total of $2,250,000. That is a lot of money. Earning potential of this kind needs protection, and the best way to do that is to buy disability insurance.

Disability insurance is a type of insurance that provides regular periodic payments when the insured is unable to work, due to illness or injury, as verified by a medical doctor; in effect, it is replacing all or part of your income. A good disability policy will pay at least two-thirds of your earnings until you are 65 years old.

Many Americans do not have any disability insurance - or very little. Is it really worth risking everything you could earn over your lifetime in order to save a few insurance premium dollars?

You protect your car, home and health with insurance; there is no reason in the world not to protect your lifetime-income earning potential, as well.

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About two months, ago I wrote a Tip of the Week about Americans falling short of the resources they'll need in retirement. The article focused on how a large number of people are running out of time to do anything constructive about properly preparing for their retirement.

Let's take a look at another chapter in the story to get a sense of what you might need in retirement.

If you save $1million dollars towards your retirement, what might it generate for you in income, once you leave the workforce?

I use a simple formula to determine how much money you should be able to draw from an investment portfolio that has a moderate risk factor. That formula says that you should be able to withdraw between 4% and 6% of the value of your account annually as income while still being able to have some growth of principal over a long period of years.

Taking that concept a step further, it means you should be able to increase your income over time as the value of your account slowly increases. The objective is to be able to increase your income, thereby having it help you keep up with inflation.

So, what would $1million buy you in retirement?

• A 4% draw on $1million is a $40,000 income
• A 5% draw on $1million is a $50,000 income
• And, a 6% draw on $1million is a $60,000 income

Keep in mind that, unless you are planning to retire soon, the income I just reviewed will likely be reduced in value, due to inflation in the years ahead; this means that you might very well need even more than $1million to have the same income as above.

The moral to today's story is simple: Most people simply cannot over-invest when it comes to saving for their retirement; in fact, most are still not doing enough. Remember, when investing, time is either your ally or enemy; that choice is up to you.

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On Wednesday, July 19, 2006, our new Federal Reserve Chairman, Ben Bernanke, signaled that the economy was moderating and the inflation picture seems to be in decent shape.

These two points sent the stock markets screaming higher; the Dow Jones 30 Industrials, the NASDAQ 100, and the S&P 500 were all up nearly 2% for the day.

The importance of these points is that he was saying the 17 one-quarter-point interest rate bumps over the past two years were doing their job. I think he was also saying that the end of the current interest rate tightening cycle could be near an end. When that happens, the most likely scenario would be to shift to what's called a "neutral bias". The Federal Reserve Board is in “watch and wait” mode; they could keep rates at whatever point they are indefinitely or they could change them, based on the economy and inflation.

The other thing that I felt was important here is that he said inflation could be in the 2%- to 2-½% range over the next 18 months. This is lower than the 3.1% that inflation has averaged since 1925.

In addition, I feel that, as soon as the tensions in the Middle East settle down, we could see oil drop by a few dollars per barrel.

While I like to say that “I have a crystal ball but can't read it,” I do think that news like this should be good for the financial markets.

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The financial markets have not experienced a correction in nearly four years. This is not normal. In fact, the financial markets might normally have had two or three corrections over the course of a four year period. (A correction in the financial markets is defined as a drop of 10% off the recent highs of the market.)

What's causing the recent drop and volatility in the market?

1. Rising interest rates. The Federal Reserve Board is raising interest rates to slow a strong economy. Over the past two years, they've increased the Federal Funds rate from one percent to five and a quarter percent. I believe they are getting close to the end of this tightening cycle. This would be an indication that they believe they've got inflation where they want it. This next phase should be a "neutral". There would be no bias to increasing rates of decreasing rates. They would simply be in a wait and see mode.

2. High oil prices. There is a tremendous amount of growth occurring all over the world. This growth is fueling higher demand which is pushing up the price of oil. There is also geopolitical pressure in the Middle East and from North Korea which is also pushing oil prices higher. History shows that these types of troubles tend to come and go over time. However, while they occur, they create fear and speculation in the commodities markets.

3. Inflation. There is higher inflation today then there was a few years ago. This is creating fear in the financial markets. Inflation is a cyclical thing which has been extraordinarily low the past 10 years or so. It's not surprising to see it increase off those lows; particularly given all the growth worldwide. The real issue is how well the Fed and others manage the increased economic pressures. I believe their steady slow increase in interest rates is a good way to approach it.

Is it now time to invest? I can say that I've been adding to my portfolio the past two weeks. In fact, I am putting money to work today to take advantage of the lower pricing. I like to add to my portfolio whenever the markets drop five percent. So, for every five percent drop, I like to add money whenever I can. Now would be a time that fits that model.

If you've got any questions, please feel free to give me a call.

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I wrote the following over three years ago for my August 20, 2002, Tip of the Week. The factors I cited as potentially creating more risks in the hot real estate market have finally come into play. Interestingly enough, it took a long time for them to arrive and begin to have an impact.

Here's what I wrote then:

"What in the world could ever slow down the hot real estate market?

Clearly many things can slow or stop a hot real estate market. Here are three issues to consider:

· An absence of qualified buyers as prices escalate.

· Competition from other investment opportunities that display more acceptable valuations.

· Higher interest rates.

The argument for higher interest rates is very plausible. Interest rates will most likely increase some as the economy improves. Higher interest rates should mean higher mortgage rates. More costly mortgages inevitably make real estate more expensive, without seeing another penny increase in prices.

Combining higher mortgage rates with the already higher real estate prices may be the double whammy that slows, what some consider to be, a real estate market that's already too hot."

When you look at investment markets, it seems you'll find that they take far longer for cycles to complete themselves than you might expect. The markets, no matter which, tend to overshoot themselves on the short or the long side. On top of that, you can't always tell when this will happen.

This is one of many reasons why it is so very tough to do market timing over long periods of time successfully. As always, I suggest investing for the long term with money that matches that time horizon. Let time be your ally, not your enemy.

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We all have personal items we don't ever want to lose or have stolen. Generally using a safe deposit box at the bank or a safe at home is the best choice.

Did you know that a safe deposit box is not guaranteed by the FDIC? Unlike your bank accounts, you have no protection against any problem that could arise with your safe deposit box. If the bank were to accidentally destroy the contents or the box, you'd be out of luck.

You might want to ask your homeowner's insurance agent if you have coverage in case such an event occurs.

Another alternative is to put a really good safe in your home. You can buy personal safes for all kinds of purposes. There are safes that guard against fire or provide security. There are safes that are specifically for multimedia items, i.e., data disks. Safes may do the job in many cases but are not foolproof. You will want to be very diligent when buying a safe; a one size does not fit all.

When trying to protect your valuables, be it, documents or jewelry, take your time and do a good job. If you don't you may very well regret it for a long, long time.

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The credit scoring methodology most lenders use today was developed by Fair, Isaac and Co., Inc. It's called - surprise, surprise - a FICO Score. FICO scores range from a low of 400 to a maximum of 900.

Freddie Mac analyzed a broad sampling of 25,000 loans made by the Federal Housing Administration (FHA). It found that borrowers with FICO scores of 660 or more are highly unlikely to default on their mortgages. These credit-worthy borrowers will be rewarded with lower loan-origination fees and mortgage interest rates. Conversely, a FICO score of 620 or less is a strong indication that a borrower's credit reputation is not acceptable. As a result, borrowers with low FICO scores will be charged higher loan-origination fees and mortgage interest rates to compensate for their loans' higher risk of default

This week's Weekly Tip Newsletter is from "Mortgages for Dummies" by Eric Tyson and Ray Brown, reprinted by kind permission of San Francisco columnist Ray Brown, a frequent guest on our show.

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According to information provided by the Federal Home Loan Mortgage Corporation (Freddie Mac), credit scores developed by analyzing borrowers' credit histories will serve as a bridge between traditional underwriting and automated underwriting systems. Studies conducted by Freddie Mac have proved that, when used in conjunction with current manual underwriting practices, credit scores are excellent predictors of mortgage-loan performance.

Credit scores have nothing to do with a borrower's age, race, gender, religion, national origin, or marital status. Your credit score is determined by analyzing your record of paying debts. The following factors are considered:

• Public records pertaining to credit. A search of public records in the county recorder's office shows whether you have ever declared bankruptcy. It also indicates whether legal claims have ever been filed against property you own to secure payment of money owed for delinquent loans, lawsuits, or judgments.
  
  
• Outstanding balance against available credit limits. What is the balance due on mortgages and consumer installment debt such as car loans, charge accounts, and credit cards? Outstanding balances that exceed 80 percent of your available credit limits put you in the category of high-risk borrower.
  
  
• The age of open delinquent accounts. Another indicator of higher risk is whether you have been or are currently 60 or more days delinquent on your credit card or charge account debt or other loan payments.
  
  
• Recent inquiries generated by a borrower seeking credit. Having four or more applicant-generated credit inquiries in the past year indicates that you may need a slew of new loans or credit cards because you've maxed out your current ones. From a lender's perspective, that's an alarming development.

This week's Weekly Tip Newsletter is from "Mortgages for Dummies" by Eric Tyson and Ray Brown, reprinted by kind permission of San Francisco columnist Ray Brown, a frequent guest on our show.

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Recent studies show that many Americans are falling short of saving enough money for retirement. These studies show that between 40% and 66% of Americans are not saving enough for a comfortable retirement.

There are many reasons why this is occurring in our society; here are a few that you should consider as you reflect on your own retirement savings and plans:

• Many companies are doing away with (or are not establishing) traditional pension plans, known as “Defined Benefit Plans”, which pay a retired employee a monthly income.
  
  
• Social Security is likely to be taxed more, as Baby Boomers begin retiring in the next few years. I believe that those with the means to retire will receive less benefit from Social Security, as the system gets stretched.
  
  
• Companies are relying on employees to do their own retirement savings through 401Ks, 403bs, and Simple IRA plans. This is a trend that has been growing for the past 15 years.
  
  
• People are living much longer than ever before. The prospect for longer life expectancies continues to grow, which increases the amount of money they will need in retirement.
  
  
• There will be continued competition from the global workforce that may keep people's incomes from rising as quickly as prior generations.
  
  
• Medicare and medical costs are rising, which will inevitably come back to the American public in the form of more expenses or taxes.

Note: You'll find more information on this topic in an article in the Los Angeles Times (Business section; June 7, 2006).

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Using a catchy gambling expression can get one in trouble, if you're in the investment business (in fact, the last thing I would do with people's money is gamble…I just couldn't help the play on words when coming up with the title of today's Tip of the Week).

All punning aside, blue chip stocks are known for being the largest companies in the world who also happen to be consistently profitable and are able to pay a regular quarterly dividend.

As a result of their size, long history and regular dividends, blue chip stocks also tend to be more stable in tough markets. That's partly because they are not likely to fall off the face of the planet; in addition, if you're not getting any appreciation out of a stock over the short term, you are at least being paid a regular dividend or income you can spend or reinvest.

Last week, there was an article in the Los Angeles Times Business section which discussed the fact that domestic blue chip stocks have been out of favor with investors over the past couple of years. The interesting thing about this is that many blue chip stocks have seen terrific performance over the past few years, in a business sense. They have been doing a great job at increasing their profits, yet the price of their stock has not grown relative to the increase in profit and value; in many cases, it has declined.

They say the way to make money is to “Buy low and sell high.” In the case of domestic blue chip stocks, you not only get to invest in a sector of the economy that's not been hot, you add a sector to your portfolio that provides balance to the growth stocks or bonds you may already own.

I suggest considering adding to your blue chip portfolio through a well-managed mutual fund. If you'd like to discuss this, give me a call.


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Nearly four years ago, I wrote a little bit about there being down days in any financial market; well, last week marked one of the few down weeks we've experienced in the long bull-run we'd had since October 2002. Here are a couple of simple thoughts on this:

1. We're going to have ups and downs in the financial markets. That's one of the few things I'd guarantee. Going three and one half years without a true correction is highly unusual.

2. It isn't healthy for any investment to simply go "up," or without some adjustments; I consider the current adjustments as a healthy sign for the financial markets. It's important for securities pricing to be as close to being in line with their true values as possible.

3. There are still things that can create short-term problems; there have always been potential issues, and there will always be the potential for issues to arise.

4. Keep your focus on the long term, not the short term. Reacting to short term market fluctuations can often create more problems than solutions.

5. The growth of the economy is what matters in the long term; therefore, the best things to watch (as a long term investor) are the long term trends of the economy. Right now, we have a strong world economy. That's not a bad problem to have.

6. When the markets do drop in value, consider adding to your investments.


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Does it matter how your money is managed when you are making regular withdrawals in retirement?

The answer is absolutely!

For years, many people have said, “All you have to do is buy an index fund because many investment professionals can't beat them.”

At times, that may be true over the short-term; however, if you understand an index fund, you'll know it may not be true over the long-term.

Index funds mimic the market, so when the market rises, your fund goes up in value; conversely, your fund will drop in value when the market drops (again, it should mimic the market's drop).

Long-term investing success includes avoiding losses. If your index fund is as volatile as the market (because it is mimicking it), your account is likely to lose as much as the market itself. If (on top of these market losses) you are withdrawing money to live, you risk having your principal drop in value more than you'd prefer or can afford. Combining a 20% market loss with a 6% withdrawal means your index fund might drop a total of 26% in value; conversely, if you have a managed fund that drops 10% in a down market (rather than 20%), you are only down 16% (as opposed to 26% in the index fund). Over many years, you may see your index fund account drop to very low levels or even become completely drained when combining withdrawals with market losses.

The lesson here is to be aware that index funds mimic the market. They can't be invested in a way to reduce volatility or risk like a fully-managed fund can be handled. This could cause you great harm under the wrong circumstances.


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The following was a Tip of the Week I wrote in October of 2002, shortly after the financial markets bottomed, ending the bear market of March 2000 - October 2002.

Tip of The Week - October 15, 2002

"The financial markets have come roaring back from their bottoms over the past week. Does this mean we have the beginnings of a new bull market? Will it mean the end of down days? Are we off to the races? The answers to these are pretty simple; maybe, no, and probably not.

Does this mean we have the beginnings of a new bull market?

This could be the end of the two and a half year old bear market. Only after a clear pattern of growth has re-established itself will it become clear that a new bull market has arrived. So, interestingly enough, we won't even know the bull has arrived until we are well in it again.

Will it mean the end of down days?

There will be down days in any market, bull or bear. Therefore, you can't or shouldn't try to interpret too much in any short-term move (i.e., sell-offs after huge runs to the plus side, like the past week, are not always indications of anything in the bigger picture).

Are we off to the races?

Since the recession we experienced was the weakest in decades, it's not likely the new period of economic expansion will be a barnburner. More so, I expect we could see more moderate sustainable growth. In my opinion, this is healthier for long term growth. I believe this should also result in moderate more average returns in the financial markets.

Whether we are in a new bull market now or not, keep your ears and eyes tuned to the signs of continued economic growth. This is what should lead the way to better days ahead. Many economists believe we are getting very close, I agree."

May 12, 2006

It's interesting to review this tip, as it really applied then and (in many respects) applies today, May 12, 2006.

The bear market did end in October 2002 with the beginning of the current bull market. The NASDAQ was truly overvalued at its peak and is only 50% of that value six years later. The Dow, not as overvalued as the 2000 NASDAQ, is almost at a new all-time high.

We will see more down markets in our lifetime. Economics and corporate growth will be the real long-term catalyst to a company's increase in value. We'll always have a better view on our investment choices using hindsight rather than foresight.

These basic investment lessons can serve as a valuable tool in keeping a balanced perspective with your long-term investment dollars.


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Do you have an IRA or 401k account that isn't performing as well as it could be? Are you tired of an investment company's high annual fees? A transfer of assets might be just what your portfolio needs. Here are some of the intricacies you may encounter with a transfer of assets.

Some investment companies allocate resources to retaining your account; in fact, many companies have actual Conservation Departments that are only dedicated to retaining assets. The idea is to make it difficult to transfer your assets, thereby frustrating the investor into leaving the assets where they are. Some of their conservation efforts may include:

- High transfer fees (for example, one firm assesses a $95 fee to transfer a full brokerage account).

- Strange rules explicit to their own accounts (for example, another firm requires the shareholder to call and request that their assets be sold and the proceeds placed in a cash account before they can be transferred out, despite the fact that you have already provided signed and Signature-Guaranteed written instructions to do so).

- Poor or ambiguous service (for example, requesting the original paperwork then rejecting it with the claim that they need additional forms which they neglected to mention when first contacted about initiating the transfer).

Before you decide that a transfer of your retirement plan assets is right for you, give David Cryden a call to discuss any possible fees that may be associated with the transaction and how we can be of help. We do a huge number of these transfers every year and know all the ins-and-outs of the process and various company requirements.

This week's tip is from Stephen Hiltscher, Client Service Associate/Registered Representative, who handles many client requests, including transfer of assets.


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This time of year, many people complain about the amount they pay in taxes; it's understandable, as taxes take money out of their pockets and put it in the government's coffers instead. There's an old cliché that comes up during tax time:

"So you're paying a lot in taxes. Don't complain; at least you made money."

I, like everyone else, try to minimize what I pay each year; the best way to do so is through proper tax planning. If you want to save money on your tax bill, the time to start your planning is now; I can't be more specific than that. In fact, the time to start planning was the end of last year; that way, you had all of 2006 to explore the possibilities for saving taxes. Most people begin tax planning in the last quarter of the year for that year; but, by then, you've got almost no time left to actually do much real work.

Here are a few things you can start thinking about to save tax money in 2006.

1. Is your income going to be the same this year, or will it change?

2. If your income will be different, how can you adjust your tax strategies to achieve the best possible outcome?

3. Should I incur expenses this year that will reduce my tax bill? Or, are they better saved for the future?

4. Am I paying enough through tax withholding or estimated quarterly taxes? Am I paying too much through tax withholding or estimated quarterly taxes?

5. Have I discussed my 2006 tax planning with my tax preparer, accountant, and financial advisor?

6. Are there any changes in the tax laws that will affect me?

This is just a partial list that I hope will get you thinking about 2006 tax savings and planning. None of this is particularly new information; however, if you do use it, it could very well be a truly beneficial plan of action.

As I say every year, "The time to start tax planning is now!"


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A client of ours recently passed away, leaving a stock account worth approximately $150,000. After his passing, we found out that he had established a Trust but hadn't notified us of its existence; this (in turn) created a problem for his beneficiaries who, as such, wanted to immediately claim his account but couldn't because the stocks were owned by the deceased individual, not by his Trust. If the account had been reregistered into his Trust while he was alive, they would have been able to simply change the Trustee information; now, they may have to go through probate to claim the account.

If you have a Trust, or if you are thinking about establishing a Trust, check with your legal advisor about which of your assets should be registered into it and what beneficiary designations should be used for your retirement accounts.

After your Trust has been set up, contact our office about reregistering your assets into it. We will also need a copy of the Trust document. (As a reminder, account registration changes are part of the no-fee services that we offer our clients).

Take a little time today to make sure your accounts are registered correctly; this may save some time and money down the road.

Finally, before doing anything, make sure to consult with your attorney or legal advisor.

This week's tip is from Steve Armas, Senior Team Member/Registered Representative, who handles many of the account servicing requests.


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The 2005 tax-filing deadline is nearly upon us. With the traditional deadline date of April 15th falling on a Saturday, the last day to make contributions to your retirement accounts for 2005 has been extended to Monday, April 17th.

For Tax Year 2005, the Traditional and Roth IRA contribution limit is $4,000 (with a $500 “catch-up” for individuals aged 50-years and older).

If you need to make any last minute investments, act now to maximize your potential tax savings.

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In life, we often learn from others’ mistakes; I think you can all learn from this one. (While this tip is not purely financial in nature, it can save you money and a lot of hassles).

There has been a lot of building going on in our neighborhood and, as a result, many of the critters that lived in the fields where the construction is going on are now moving to new homes.

We had the misfortune of having either rats or large field mice relocate into our home. They decided they liked the garage where the dog food is kept, as well as the attic and walls. In an effort to eliminate this problem, we set traps, better protected the dog food and closed every opening we could find. They still came back so we put out some bait, which did its job; unfortunately, they ate the bait and went back to their nests in the wall, then died there and started to smell, but we didn’t know exactly where they were.

Due to the overwhelming stench, we have been forced to move out of our bedroom for what could be up to three weeks. We had to pay a friend’